In introducing last year's Budget I informed the House that the imposition of a substantial burden of fresh taxation had been avoided only with very great difficulty. This year the task has been much easier. In the twelve months which ended on 31st March last the yield of revenue exceeded anticipations and it proved possible, in spite of the fact that supplementary estimates for fairly large amounts had to be introduced, to keep expenditure below the level for which provision was made. The consequence was that, while in accordance with the principle which has been adopted in all our Budgets for the past five years borrowing took place for the purpose of defraying charges of an abnormal and non-recurrent or capital nature, there was an excess of normal revenue over normal expenditure amounting to about £250,000. The tax which most substantially exceeded anticipations was the excise duty on beer. Deputies may remember that in the year 1928-29 the brewers' credit was shortened by a month, with the result that in that particular year thirteen months' duty was collected. It was expected that in 1929-30 the yield would be down by some £420,000. This estimate took account of the fact that in the past year only twelve months' duty would be payable and that some further decline in consumption was probable. On 31st March, however, it was found that the actual produce of the excise duty on beer had, during the preceding twelve months, fallen by only £296,000, so that the estimate was exceeded by no less than £124,000. The extra tax received under this head last year was somewhat in the nature of a windfall. It resulted from an increase in the export trade in beer and a consequent increase in the duty-paid stocks of beer held by brewers in the Saorstát. A few years ago the Saorstát suffered substantial losses of revenue attributable, not to decreased consumption at home, but to the fact that brewers here considered it expedient to reduce their stocks. Last year's returns show the effect of a reversal of the process.
The yield of spirit duty, both Excise and Customs, in 1929-30 was above the estimate by about £36,000. Twelve months ago I had the pleasure of informing the House that in the financial year 1928-29 the produce of the tax on spirits had exceeded the amount obtained in the previous year by nearly £100,000. The increased return was then ascribed by the Revenue Commissioners mainly to a somewhat general use of whiskey as a specific for influenza, in an epidemic which occurred fifteen or eighteen months ago. Accordingly, in view of the fact that a recurrence of the epidemic could not be counted on, and in view of the fact that since the establishment of the Saorstát the consumption of spirits had shown a marked tendency to fall, I estimated in last year's Budget for a drop of £164,000 in the revenue from spirits. The fall actually shown at the end of the year proved to be no more than £128,000. I think the conclusion may fairly be drawn that the decline in the consumption of spirits has now practically ceased. In the years 1924-25 and 1925-26 the decline was very great indeed, representing in the former year a revenue loss of almost £550,000, and in the latter year a further loss of over £400,000. In the two years 1926-27 and 1927-28, taken together, the fall in revenue was £106,000, while in the two years 1928-29 and 1929-30, taken together, it was only about £30,000. As regards beer also, the decline in consumption has become very much slower and seems likely, in the course of another year or two, to be definitely arrested.
The revenue obtained from the duty on sugar and sugar confectionery, though £10,000 more than in the previous year, was still short of the estimate by over £50,000. The yield of the tobacco duty rose in the year 1928-29 by £200,000 as compared with the year 1927-28, largely in consequence of abnormal withdrawals from bond caused by a rumour that an increased duty was to be imposed in last year's Budget. It fell again during the year 1929-30 by £218,000 to a figure little over the yield in 1927-28. The lesson of last year's return taken in conjunction with the returns for the three previous years seems to be that the tax on tobacco may be depended on to give a steady return with a certain tendency to rise. That the upward tendency is so slight in spite of the increase of smoking amongst women would seem to indicate that the duty at present levied on tobacco is about as high as the commodity will bear, and that any additional impost would result in some restriction of consumption.
The duties on matches again gave a slightly increased return, as indeed they have done every year since 1926-27. It is interesting to note that while the total revenue from matches was £136,000 last year as against £127,000 in the year 1926-27, the tax paid on imported matches fell in the interval from £39,000 to £30,000. The revenue returns for the years 1926-27 to 1929-30, inclusive, show that so far as matches are concerned the home manufacturer is steadily driving foreign competitors from the Saorstát market.
It was expected that the duty on motor vehicles and tyres would produce £500,000. The estimate was exceeded by £14,000. In this connection it may be mentioned that road-tax produced £868,000 in 1929-30—an increase of £256,000 in three years. There is no ground for believing that the return either to the Exchequer or to the Road Fund from the taxes on motor vehicles has become stabilised. On the contrary, it may be taken that the number of motors in use will continue to increase for a considerable time and that we have here one of our few steadily expanding sources of revenue.
In the past financial year the yield of the betting duty was £204,000, which was an increase of £22,000 as compared with the previous year. The improved return in all probability was due mainly to better enforcement of the law. This particular tax is one in respect of which it is difficult to prevent frauds against the Exchequer. Indeed, wholesale evasion can only be avoided by extraordinary vigilance on the part of the revenue officers. Fortunately, they have during the past year or two succeeded in making detections which have led to penalties calculated to make the most stout-hearted defaulter quail. On the whole, the betting duty has proved to be a satisfactory method of obtaining public revenue. If it inflicted any damage on horse-racing in the Saorstát, it is likely that that damage will be more than made good by the introduction of the totalisator, which is one of the incidental results of the imposition of a tax on betting.
The yield of the entertainments tax was up by almost £20,000. This welcome rise was, no doubt, due to the advent of the talking pictures, which have given the duty, for the time being at any rate, the character of an expanding source of revenue.
The import duty on wireless apparatus produced over £30,000, an increase of nearly £4,000 on the sum obtained in the previous year. When this tax was first imposed four years ago it was anticipated that it would produce about £20,000 per annum; it has ever since showed an upward trend, and it may now be safely stated that it is not likely in future to yield less than £30,000 per annum. When the tax was first levied it was indicated that the proceeds, together with the amount obtained from annual licence duties, would be devoted to giving an extended and improved broadcasting service. When the new high-power station has been erected I think the whole amount will definitely be required for that purpose.
The revenue obtained from stamp duties was down by £54,000 as compared with the previous year and was £19,000 below the estimate. About half of the decline occurred in the last quarter of the financial year, being largely due, no doubt, to the decreased number of transactions and the fall of prices in the stock market.
The yield from income-tax together with super-tax and sur-tax was £3,966,000, or just £16,000 more than the estimate.
Looking at the revenue figures for the year 1929-30 as a whole, the impression to be gathered is that the yield of Saorstát taxation has to a very great extent become stabilised. The return from various duties will, no doubt, continue to fluctuate up and down, but there is no longer any sign of the considerable shrinkage which for a few years was a disquieting feature of our financial outlook.
With the exception of the duties on motor vehicles and perhaps on entertainments, few of our taxes are likely to give us increasing yields in the next year or two. On the other hand, except in the case of the definitely protective duties, returns, if they decline at all, will decline only slightly.
During the year 1929-30 the dead-weight burden of public debt was not very greatly increased, but considerable sums had to be borrowed to enable advances to be made to the Local Loan Fund, the Shannon Power Fund and the Electricity Supply Board. No issue of National Loan was made during the period under review because of the unfavourable conditions existing in the money market. The amounts which were required for capital advances or for abnormal and non-recurrent expenditure were found mainly by the sale of Savings Certificates, by discounting bills and by obtaining ways and means advances from departmental funds. During the year 1929-30 the amount due by the Exchequer in respect of Savings Certificates increased by almost £800,000; the amount due in respect of bills discounted, and ways and means advances increased by over £1,400,000.
At 31st March last the public debt outstanding, calculated on the basis adopted in previous Budget statements, was £25,218,000, made up as follows:—
|
£ |
|
|
1st National Loan |
8,407,000 |
|
2nd National Loan |
6,867,000 |
|
5% Compensation Stock |
913,000 |
|
Savings Certificates |
4,810,000 |
|
Free State Bills |
2,050,000 |
|
Ways and Means Advances |
1,181,000 |
|
Telephone Capital Advances |
801,000 |
|
Miscellaneous Advances |
189,000 |
In order to find the figure showing the dead-weight burden of our national debt it is necessary to deduct from the gross figure of £25,218,000 already mentioned certain Exchequer assets totalling £11,215,000, of which the following are the principal items:—
|
£ |
|
|
Exchequer Balance |
363,000 |
|
National Loan Sinking Fund unspent balance |
197,000 |
|
Advances to the Unemployment Fund |
563,000 |
|
Advances to the Road Fund |
640,000 |
|
Advances to the Shannon Fund |
5,496,000 |
|
Advances to the Electricity Supply Board |
957,000 |
|
Advances to the Local Loans Fund |
1,416,000 |
|
Advances to the National City Bank in connection with Guaranteed Loans |
100,000 |
|
Advances for the Purchase of Creameries |
627,000 |
When the aggregate of these, together with other smaller items, has been deducted from the gross total of National debt already given we get a net figure of £14,003,000. This may be compared with £13,983,000 last year and £13,584,000 at 31st March, 1928. That the increase in the net total of the liabilities of the State has been so small during the past financial year is due, first, to the fact that a Budget surplus was realised and, secondly, to the fact that there are such ample sinking fund provisions in connection with 1st and 2nd National Loan, Compensation Stock, Telephone Capital Advances and so forth.
In order to give the House figures comparable with the figures set out in previous Budget statements, I have left out of account the amounts due in respect of the Dáil Eireann Loans and the sum which is being repaid to the British Government by means of the annuity of £250,000 authorised by the Damage to Property (Compensation) (Amendment) Act, 1926. Even if allowance were made for these items it would be found that the entire dead-weight burden of State indebtedness was well under £20,000,000. The debt to the British Government is less than £5,000,000. The outstanding liability in respect of the Dáil Eireann Internal Loan is only about £60,000. So far as the Dáil Eireann External Loans are concerned it is difficult to form an exact estimate of the amount which will have to be disbursed in order to repay the subscribers in so far as repayment may prove to be practicable. Taking everything into account, it is not likely that the Saorstát will be involved in a charge amounting to more than £500,000 in connection with the repayment of the Dáil Eireann External Loans, allowance being made for interest.
There is, however, another item of State indebtedness which has now begun to assume considerable proportions and which was not referred to in previous Budget statements. It is the liability in respect of Land Stock issued under Sections 5. 25 and 52 of the Land Act of 1923 and Sections 42 and 46 of the Land Act of 1927. Section 5 of the Act of 1923 sets up a costs fund amounting to 2 per cent. of the total purchase money advanced under the Act. The fund is used to recoup vendors, incumbrancers and other claimants in whole or in part for the costs of sales. It consists of 4½ per cent. land bonds for the interest on which and the redemption of which the Exchequer is solely responsible.
Section 25 of the Land Act of 1923 provides that the State shall contribute to the price of tenanted land purchased under the Act an addition equal to ten per cent. of the standard price for which the tenant is liable. This contribution by the State is analogous to the "bonus" under the Land Act of 1903. It is made by the issue of land bonds for the service of which the Exchequer is responsible. The contribution made by the State under Section 52 of the Land Act of 1923 represents one-eleventh of the price of land taken over by the Land Commission which had been originally purchased by means of advances made by the National Land Bank. The contribution under Section 42 of the Land Act of 1927 is made in those cases in which the Land Commission purchases land for the use of owners of uneconomic holdings, landless men and other suitable persons, and resells the land at a lesser price to tenants of the class mentioned. The excess of the purchase price over the resale price represents a contribution by the State and becomes a State liability. The contribution under Section 46 of the Land Act of 1927 arises in the case of lands purchased by co-operative farming societies in 1920 and 1921. The Land Commission having taken over such lands may, with the consent of the Minister for Finance, resell them to the tenant purchasers at prices below the purchase price. The difference represents a State contribution and gives rise to a State liability for the interest on land bonds and for their redemption.
All payments under the Land Acts, 1923-27, are made by the issue of 4½ per cent. land bonds at par. The State, of course, accepts a contingent liability in respect of the capital and interest of all land bonds issued, but it accepts a direct liability in respect of the land bonds issued under the five sections just mentioned for the purpose of contributions to price and advances to the costs fund. The amount of such bonds outstanding is now £780,000, and that sum must be added to the figures of debt already given. Consequently, neglecting for the moment the Dáil Eireann Loans and the sums payable to the British Government under the Damage to Property (Compensation) (Amendment) Act, 1927, we find that the gross total of the public debt of the Saorstát is £25,998,000, while the dead-weight burden which remains after allowing for Exchequer assets is £14,783,000. If our liability to the British Government and our liability in respect of the Dáil Eireann loans is added, we get a total net liability of £20,250,000 or £20,300,000, or thereabouts, which is less than one year's tax revenue. This figure is not likely to grow very much, because within another year or two the abnormal, as distinct from the definitely capital items, will practically disappear from our estimates of expenditure. Our existing provisions under various heads for sinking fund are such that if they were to continue undiminished and if no new dead-weight debt were incurred, then at the end of fifteen years we should, reckoning interest at 5 per cent., have no net liability in the way of national debt except that represented by the annuity of £250,000 to the British Government. All other indebtedness not counterbalanced by repayable advances like those to the Electricity Supply Board or Unemployment Fund would have been wiped out. For the next few years the fresh liabilities imposed through the operation of the Land Acts of 1923 and 1927 will probably be sufficient to prevent the sinking funds from reducing the net indebtedness of the State, and afterwards certain sinking fund payments will automatically come to an end. Nevertheless, it is almost certain that the aggregate of our dead-weight debt will not rise above £21,000,000. Possibly it will not even reach it. In these circumstances, I am satisfied that our next issue of National Loan ought to be made under conditions which will require the smallest possible increase in our annual appropriation for sinking fund. It is doubtful if there is any other country in which the provision made annually for the repayment of debt is such a high proportion of the net sum outstanding as is the case in the Saorstát.
Our arrangements for redemption of debt are so ample that we have made it a practice in fixing the level of taxation to allow for the element of over-estimation in the estimates of expenditure and to refrain from budgeting for more than a nominal surplus. We take the view, however, that even if a substantial surplus is realised in a particular year, as it was last year, it should not be carried forward, but should go to the reduction or limitation of debt. If, on the other hand, there should ever chance to be a deficit it ought not to be carried forward either. It should be met by increasing the public debt, every care being taken to see that a deficit rarely occurs, and that when it does it is trivial in amount. Normally, a financial year should end with a small surplus. The objection to carrying forward a surplus is that if such a practice were adopted there would be a temptation to withhold payments due in a particular financial year till after 31st March, so that there might be a paper surplus which could be brought in to obviate the imposition in the next year of fresh taxation though, in fact, such taxation had become doubly necessary by reason of the liabilities wrongly carried over. The existing practice encourages the prompt settlement of liabilities, because a surplus in one year does not ease the task of budgeting for the next, and delay in making payments would simply create a crop of difficulties. The practice of making each year stand by itself from the budgeting point of view must, however, on the whole have the result of adding appreciably to the sums actually available for the redemption of debt. It is impossible, without risking a series of deficits which would damage the national credit, to estimate both expenditure and revenue so closely that there will not frequently be a surplus of some consequence.
In this fact we have an additional reason for keeping the sinking fund provisions in connection with our next issue of National Loan as low as possible. In it we have also a reason for continuing our practice of borrowing, not only for capital expenditure of a reproductive character and for the purpose of making repayable advances of various kinds, but also to defray certain abnormal and non-recurrent charges, such as the payment of compensation for damage to property during the Anglo-Irish War and the Civil War and the cost of restoring public buildings damaged and destroyed during the same period. If we were to meet such exceptional and disappearing heads of expenditure, especially those arising out of the troubles connected with the establishment of the Saorstát, from the proceeds of taxation, the position would be that the taxpayer was being loaded with war charges, while the State was redeeming debt by the addition of Budget surplus to sinking fund at a rate which promised to leave practically no net burden at all on the Exchequer at the end of a decade. Attempts have been made from time to time to show that we were borrowing for purposes that ought to be provided for out of taxation, and consequently were not really balancing the Budget. The almost static condition of our net national debt at a time when heavy compensation charges are still being paid is a sufficient answer. There would have been more justification for criticising us for not beginning the practice of distinguishing between normal and abnormal expenditure before the Budget of 1925-26 and thereby giving earlier relief to the taxpayer.
In order to determine the sum necessary to be raised by means of taxation in the present year, I propose, as I have already indicated, again to segregate those items of expenditure which are of a capital nature or are abnormal and non-recurrent and may properly be met out of borrowed money. The White Paper issued a few weeks ago shows that the estimated amount necessary to maintain public services and to meet necessary outlay during the current financial year is, in respect of Central Fund Services, £4,219,072, and in respect of Supply Services £21,782,928, or a total of £26,002,000. From this figure we must deduct the aggregate of the following items of expenditure which need not be met out of the proceeds of taxation:—
|
£ |
|
|
I.—Vote 8. Local Loans Fund. Provision in respect of new capital |
550,000 |
|
II.—Vote 11. Public Works and Buildings, £195,000 out of a net total of £336,090 in respect of sites, buildings, new works, alterations and additions; compensation in lieu of restoration of lands taken over under emergency powers and compensation for premises commandeered by the Army |
195,000 |
|
III.—Vote 14. Property Losses Compensation, the entire provision |
252,000 |
|
IV.—Vote 52. Department of Agriculture. Sub-head F. 6, provision for a capital grant to University College, Cork |
29,500 |
|
V.—Vote 53, Forestry. One half of the total provision for the acquisition of land for forestry and cultural operations |
26,500 |
|
VI.—Vote 55. The Land Commission Subhead J, that part of the provision of £211,300 for the improvement of the estates which will be recovered from the tenant purchasers, less repayments appropriated in aid of the Vote |
43,000 |
|
VII.—Vote 63. Wireless Broadcasting. Provision for new High Power Station |
47,000 |
|
VIII.—Central Fund Services. Provision for the repayment of Dáil Eireann Internal Loan |
60,000 |
The total of these items is £1,203,000. When that sum has been deducted from the gross aggregate estimate of expenditure we get a figure of £24,799,000, representing all the items of expenditure which must be met out of the proceeds of taxation or other normal revenue. We are still, however, dealing with a gross figure from which, as we know from experience, a certain deduction may safely be made in respect of the element of over-estimation. Deputies are aware that the estimates of expenditure for the current year were prepared in the departments four or five months ago, and after alternations resulting from scrutiny by the Department of Finance, were sent for printing two months before the end of the last financial year. If the Estimates were not yet in print and were open for revision, it would be found that even already in respect of the purposes for which various sub-heads were inserted, circumstances have so changed that it would be wise to alter upwards or downwards the amounts approved in January or February last. Before the end of the financial year so many other changes that could not have been foreseen will take place that numerous sub-heads which were most carefully measured before being inserted in the Estimates will prove to be either inadequate or excessive for the purposes to which they relate. The only way in which a department could secure that infallible estimating, which certain critics seem to desire, would be to allow itself a good margin so as to obviate the danger of a shortage and then definitely set out to spend up to the limit of its estimate, making a special spurt, if necessary, in the month of March. If such a course were adopted the complaints about over-estimation which we sometimes hear would doubtless fade away, but taxation would increase.
What happens at present is that Departments seek under each of the six hundred or more separate sub-heads into which the Estimates are divided an amount which they deem to be sufficient to pay for the service to which the particular sub-head relates. They take the view that while the ideal thing would be to have in a sub-head just enough money to meet necessary and unavoidable charges on the object for which the sub-head provides, it is better to risk an excess than a deficiency. They act upon this view not merely or mainly in order to avoid coming to the Dáil with too many supplementary estimates, but because our whole financial system would be thrown out of gear if we approached the position in which it was not certain that the Dáil knew, before considering the Budget, the full requirements of Departments. Inevitably, in a great many of the six hundred sub-heads money remains unspent at the end of each financial year and, although a certain number of sub-heads prove inadequate, the total of the supplementary votes presented to the Dáil is never nearly sufficient to balance the aggregate of the surpluses. There remains, therefore, at the end of the year, scattered throughout the various votes, a great sum, the expenditure of which has been authorised by the Dáil, but which it has proved unnecessary to use.
Since we have already, as I have indicated, very substantial provisions for the redemption of debt, it would be unjustifiable to impose taxation in order to bring this large amount into the Exchequer merely to create a Budget surplus. For the past five years I have, for budgetary purposes, reduced the total estimate of normal expenditure by the amount which it was believed fairly represented the element of over-estimation. In April, 1928, I fixed the amount which could reasonably be allowed for over-estimation, together with savings, at £600,000, a figure which proved to be sufficiently near the mark. Last year, because the estimates submitted by Departments had been so rudely and drastically pruned, I considered it impossible to count on nearly so large a margin. I accordingly fixed the amount to be allowed for over-estimation and savings at £435,000, which was about two and a half per cent. of the estimate for all normal supply services after deducting fixed grants on which no saving could be effected and in respect of which no over-estimation could arise. The figure of £435,000 proved to be too small. By careful checking of expenditure during the year it was found possible to save an additional £140,000, which, along with the improved yield of certain taxes, including the beer duty, was responsible for the good Budget surplus which was realised. I propose, therefore, to raise the figure to be allowed in the present year in respect of over-estimation and savings to £575,000. When this amount is deducted from £24,799,000, the gross aggregate of the estimates for normal supply services, we get a net total of £24,224,000. This is the amount which will actually be spent during the present year, and must be entirely provided out of the proceeds of taxation or other normal revenue.
Turning again to the White Paper, we find it estimated that taxation at the rates at present in force will produce a revenue of £20,551,000. Non-tax revenue will amount to £3,706,000, making total revenue for the year £24,257,000. From this must be deducted a sum of £20,000 included in the miscellaneous non-tax revenue, which represents repayments of advances made out of borrowed moneys to Agricultural Credit Societies. The estimated aggregate of normal tax and non-tax revenue is, therefore, £24,237,000. When that figure is compared with £24,224,000, the total normal expenditure to be defrayed during the year, we find that the Budget will balance with a nominal surplus of £13,000. The position, therefore, is as it was twelve months ago, that there is no need to increase taxation and no possibility of remitting taxation, except by way of very slight adjustment.
The net estimate of expenditure on supply services of a normal kind— that is, services that must be paid for out of revenue—is up this year by £245,000. This increase is due partly to the fact that the pruning of estimates last year resulted, in certain cases, only in postponing for twelve months expenditure such as outlay on the painting and repair of buildings, partly to the inauguration of the Gaedhealtacht housing scheme, which will cost £66,000, partly to the increase in the number of old age pensioners, which has added £40,000 to the estimate as compared with last year's original figure, partly to the operation of incremental scales in the civil service and police, and partly to a variety of minor increases in services. The estimates for the normal Central Fund services also show an increase this year of £14,000 as compared with the estimates for 1929-30. Apart from an increase in the payment to the Road Fund the cause here is that some additional provision is made for the service of debt in view of the fact that there will definitely be an issue of National Loan this year. Having regard to these increased draws upon the Exchequer, I think it is highly satisfactory to find that no additional taxation is required.
While I believe it will be possible to balance the Budget again next year without throwing additional burdens upon the public, such a result can only be achieved by continuing to practise strict economy and seek for savings in every direction. It will be an indication of the difficulties before us if I mention that amongst the items of miscellaneous non-tax revenue which I have treated as normal are two amounting together to £280,000 which will not recur. One of them is £100,000 which will be received from the National City Bank in completion of its repayment of a sum of £300,000 advanced to it out of revenue some years ago for the purpose of enabling it to make advances under the Trade Loans Guarantee Act. The other item is a sum of £180,000 which it is proposed to take from the Interest Account of the Post Office Savings Bank. It has long been the practice of the British Government, acting under Section 14 of the Customs Inland Revenue and Savings Bank Act of 1877, to appropriate for the Exchequer as ordinary revenue part of the excess of the gross amount of interest accruing in each year from securities held by the British Post Office Savings Bank over the interest paid and credited to depositors in respect of that year. The Statute requires provision to an extent to be determined by the Treasury to be made against depreciation. The whole of the surplus interest arising in any year is not, therefore, appropriated. In the years immediately following the European War, up to and including the year 1925-26, the appropriation for the benefit of the Exchequer was limited to one-half of the surplus of interest accrued to the Bank over the interest credited and paid to depositors. It is now no longer necessary to make provision on such a scale against depreciation and the share appropriated by the British Exchequer has since 1926-27 been increased to a proportion which appears to be 75 per cent.
Since the Saorstát Post Office Savings Bank was established surplus interest has been accumulating and no part of it has yet been taken for the Exchequer. The amount accumulated at
|
31st December, 1923, was |
£4,986 |
|
at 31st December, 1924 |
£12,747 |
|
,, 31st December, 1925 |
£45,620 |
|
,, 31st December, 1926 |
£88,344 |
|
,, 31st December, 1927 |
£130,494 |
|
,, 31st December, 1928 |
£187,759 |
The accounts for the year ended 31st December, 1929, have not yet been made up but are in course of preparation. It is clear, however, that the surplus interest accrued up to the end of the year 1929 will not be less than £240,000. The sum which it is proposed to take into the Exchequer is, therefore, 75 per cent. of the total amount which has been permitted to accumulate. The remaining £60,000 will be allowed to stand over as provision against possible future depreciation.
The sum of £280,000 supplied by the National City Bank's repayment and by the Savings Bank from surplus interest will not be available next year and the gap will have to be filled (if fresh taxation is to be avoided) either by an improvement in the yield of existing taxation or by a corresponding reduction of expenditure. It is the policy of the present Government to avoid the imposition of fresh burdens on industry and agriculture. If production can be stimulated, existing sources of revenue will gradually expand and new services may then be undertaken by the State without hindering or preventing further economic progress. We believe, however, that the Saorstát ought not at this stage to set out to rival the social services of much more highly developed countries, and thereby run the risk of smothering economic growth under ever-growing public burdens. On the contrary, we think that the right line of advance is to give agriculture and industry the opportunity of developing so that the country may later on be able to afford social services on a scale comparable with that of any other country.
But the stage in which great and striking economies might be looked for has now passed. Equally, the time when people could reasonably hope that important new services might be squeezed into the Estimates without involving the imposition of fresh burdens on the public has gone by. Such savings as may be effected in the future will be relatively small in amount and hard to achieve. The bulk of the estimated expenditure of £26,002,000 may be divided into two categories. In the first is comprised unavoidable expenditure; in the second expenditure which except in times of crisis neither the Dáil nor the electorate would consent to abolish or even reduce. In the latter class is included outlay not only on various social services, but also expenditure on certain economic objects such as the encouragement of agriculture. The expenditure shown in the Estimates for 1930-31 which may be classed as unavoidable is that incurred on the following:—
|
£ |
|
|
Education |
4,968,000 |
|
Post Office |
2,455,000 |
|
Service of Debt |
2,100,000 |
|
Superannuation |
2,065,000 |
|
Police and Prisons |
1,884,000 |
|
Army |
1,574,000 |
|
Collection of Revenue |
727,000 |
|
Judicial Salaries and Pensions and Administration of Justice |
407,000 |
These figures, of course, include the allied services which are shown at the foot of part 2 of each vote in the Volume of Estimates, the necessary eliminations being made to prevent any item being counted twice.
In regard to some of the headings mentioned there will be little tendency to deny that the expenditure is unavoidable and is not capable of arbitrary or even speedy reduction. Interest on public debt must be paid punctually and in full, and the provision for redemption promised when the money was borrowed must also be made. Post Office services must clearly be maintained on something like the present scale. Throughout the world more and more money is being expended on education. The Saorstát cannot afford to reduce materially its outlay on the training of its future citizens. Revenue must be collected if Government is to be carried on at all. Our expenditure on prisons and police, on judicial salaries and the machinery of the courts is not only on a very much more modest scale than prevailed in the area of the Saorstát during the British occupation but is hardly capable of further reduction until we reach a state of affairs in which, for example, the ordinary resident in a rural parish will go straight to tell the police if he hears that poteen is being made in the next townland, or will be prepared to protect the bailiff who is seizing his neighbour's cattle for a debt to, say, the grocer in the nearest town. As regards the expenditure on superannuation allowances, it is clear that retired public servants cannot be denied the pensions they were promised when they entered Government employment. I think it will be agreed by most people that expenditure on the Army cannot safely be reduced below the figure at which it now stands, at any rate until the possibility of internal armed attack on the State has completely disappeared. Even then it is questionable whether much further reduction would be justifiable until the sanctions of international law and institutions like the League of Nations have grown more powerful than they are now. Taking a general view, the expenditure at present being incurred under the eight headings I have just mentioned is unavoidable and not capable of appreciable reduction. It totals £16,180,000, from which must be deducted appropriations-in-aid amounting to £320,000, leaving a net £15,860,000. To this figure might be added the aggregate of certain expenditure which is unavoidable, because its stoppage by the State would only throw additional burdens on local ratepayers. It includes:—
|
£ |
|
|
Local Taxation Grants |
1,054,000 |
|
Payment to Road Fund |
875,000 |
|
Supplementary Agricultural Grant |
599,000 |
|
Miscellaneous Grants in Local Government Vote |
148,000 |
|
———— |
|
|
Total—£2,676,000 |
The beet sugar subsidy of £108,000 is paid under a contract which could not be set aside without payment of full compensation to the owners of the factory. The total expenditure, which may, generally speaking, be regarded as unavoidable and irreducible, therefore amounts to £18,644,000 in all.
We now come to expenditure for the reduction of which there would not be public support and is no public demand. The items are as follows:—
|
£ |
|
|
Old Age Pensions |
2,776,000 |
|
Housing Grant |
219,000 |
|
Department of Agriculture |
647,000 |
|
Land Commission |
767,000 |
|
Fisheries and Gaeltacht |
87,000 |
|
Forestry |
66,000 |
|
Drainage Schemes |
49,000 |
The total of these services is £4,611,000, from which must be deducted appropriations in aid amounting to £298,000, leaving a net total of £4,313,000. In respect of several of these services, so far from there being any support for a reduction of expenditure, there is constant and strong pressure for increased outlay. There is, therefore, no possibility of finding relief for the taxpayer in them. We have now a total of £22,957,000, representing expenditure which it is almost impossible for a Government, looking out for sound economies, to touch.
There is certain other expenditure which may be left out of account when we are seeking for means of reducing the burden of taxation, because it is defrayed out of borrowed money. The chief items are:—
|
£ |
|
|
Local Loans Advance |
550,000 |
|
Property Losses Compensation |
252,000 |
|
High Power Broadcasting Station |
50,000 |
|
Dáil Loan Repayment |
60,000 |
|
———— |
|
|
Total—£912,000 |
To amounts already mentioned must be added the annuity of £600,000 which is payable to the British Local Loans Fund and against which revenue flows into our Exchequer. Thus we get an aggregate figure of £24,469,000, which is for all practical purposes outside the field of economy. The cost of national health insurance and of unemployment insurance, taken jointly, after deducting appropriations-in-aid, is £559,000. Both services have been misrepresented and are misunderstood in the country. Consequently, a proposal to abolish them would have certain support. But if such a measure were carried out, not only should we destroy social services of great value and of a kind which nearly all up-to-date countries have found it necessary to adopt, but we should cast considerable burdens on the boards of health throughout the country. Allowing for the moment, however, that they may be the subject of substantial pruning or of abolition, we find that, out of estimates of expenditure aggregating £26,002,000 for the year 1930-31, the total amount representing the field in which substantial savings might conceivably be effected is £1,533,000, and in order to save the whole of that sum it would be necessary to abolish the following, or, at any rate, to sweep them into financial oblivion: The Governor-General, the Oireachtas, the Comptroller and Auditor-General, the Office of Public Works, National Health Insurance, Unemployment Insurance, the Civil Service Commission, the State Laboratory, the Valuation Office, the Ordnance Survey, Patents Office, General Register Office, Stationery Office, the Tariff Commission, the Department of Finance, the Department of Justice, the Department of Local Government, the Department of Industry and Commerce and the Department of External Affairs, the Land Registry and Registry of Deeds, the Broadcasting service, and to stop outlay on law charges, temporary commissions, electoral expenses, marine services, railways and certain other minor services.
I showed in a previous Budget statement that even if, regardless of efficiency and legal rights, we were to cut all higher salaries to an extent that no advocate of cutting has yet suggested, reducing salaries of £800, for instance, down to £480, the entire saving that could be effected would not equal the proceeds of a tax of ¼d. per lb. on sugar.
In this connection it is worth remembering that the total pay, including bonus, of all State employees, from Ministers and Judges to messengers, charwomen and labourers, but excluding teachers, soldiers and police, amounts to only 16.5 per cent. of the total estimated expenditure, both Central Fund and Supply, for 1930-31. If post office employees, the larger part of whose pay is met out of postal revenue, are left out of account, the percentage falls to 10.45 per cent.
Though many people refuse to see it, the plain fact in regard to public expenditure and taxation is that new services, except on the most modest scale, are not likely for some time to be possible without the imposition of fresh taxation, and reduction of taxation if, in face of all the calls for increased services, it is to be effected at all, can only take the form of comparatively minor abatements. It is not proposed to make any important changes in the scheme of taxation in the present year. Appeals have been received for reliefs of various kinds, but it is considered that to create disturbance simply for the purpose of changing burdens from the shoulders of one set of people to another is not, on the whole, desirable.
For a good number of years past we have been urged to give relief to the smaller income taxpayers, particularly to those with families. It would not be possible to do so this year without imposing new taxation to make good the loss of revenue that would be incurred. If we were to levy indirect taxes for the purpose they would have to be put on articles of necessity, because duties on goods of a luxury character would give little revenue. Customs and Excise duties on articles of common use would have the effect of taxing those who were too poor to be liable to direct taxation for the benefit of people who had the good fortune to be income taxpayers. It would, of course, be possible to find the means of giving greater reliefs to smaller income taxpayers by increasing the standard rate. We do not consider that such a course should be adopted. An increase in the standard rate of income tax would have an adverse effect on firms of a type that is, unfortunately, not so numerous as it ought to be in this country, firms which are anxious to employ part of their profits for the expansion of business and for the creation of adequate reserves to enable them to face and overcome future difficulties. It is true that there are many businesses which would not be directly affected to any great extent by variations in the rate of income tax, because all profits are drawn by the owners or distributed to them and expended by them or invested outside the Saorstát. On the other hand, however, there are many businesses which an increased income tax rate would directly injure, and there are many businessmen whose attitude towards home industry would be definitely affected by variation in the income tax rate.
I believe that over a period of years enterprise and productivity will certainly be stimulated by the maintenance of the income tax at a low level. Moreover, there is reason to believe that by keeping our income tax at the 3/- rate we shall induce people of Irish origin who have left the country to return to it, and cause people who have residences both here and in England to become Saorstát residents solely in order to avoid payment of tax at the British level. This has already happened in a few cases. If it happened in a moderate additional number, enough extra revenue would be obtained to give some relief to the smaller income taxpayers without increasing the standard rate, and the country would also secure the advantage of having the income out of which the extra revenue was obtained expended in the Saorstát, with a consequent increase in employment.
It has been suggested to me by some of those members of the public who so freely proffer advice about this time of the year that the money required to give reliefs on the British scale to small income taxpayers could be obtained by levying a duty of 3d. or 4d. per gallon on petrol. This is not a proposal to which I am prepared to give serious consideration at the moment. My attitude is that nothing of a fiscal character should be allowed to happen to petrol till the De-rating Commission has reported, as it will before the end of the year.
I have been urged to exempt the trading profits of harbour authorities from liability to income tax. The matter is one which has been considered by the Ports and Harbours Tribunal appointed by the Minister for Industry and Commerce; and as the report of the Tribunal will, it is understood, be ready in the summer, I should prefer not to express a definite view as to the desirability or otherwise of giving the relief sought until the report has been published and studied. It appears to me, however, that if the trading profits of harbour authorities were exempted from income tax, the concession would have to be extended to the trading profits made by all local authorities, and by the Electricity Supply Board. It would also have to be extended to the trading profits of charitable bodies in so far as such profits were devoted to charitable purposes. Moreover, I am satisfied that if trading profits were exempted, the case for exempting the investment income of such bodies would prove to be irresistible.
In the Report of the Royal Commission on the Income Tax issued in 1920, it is indicated that the claim to charge tax on the trading profits of local authorities and charities is stronger in principle than the claim to tax investment income, because public bodies and charities may, and in certain cases do, compete with private traders. In the case of charities, exemption is already given in the case of investment income, but not in respect of trading profits, except in one special class of case. In short, there is, if anything, more to be said for exempting other classes of income than trading profits. Therefore, the proposal to exempt the trading profits of harbour authorities from tax must, I am afraid, be looked upon as practically a proposal that all income received by public bodies and by charities, including trading profits, rents and interest, should be exempt from income tax. If effect were given such a proposal, it would involve an immediate loss of £70,000 per annum. In the near future the loss would probably rise to £100,000 per annum. Without going into the merits of the claim at the moment, I am coerced to reject it, for the present at any rate, because there is no surplus from which the concession sought could be made. Various other claims for the remission or modification of charges must also be rejected for the same reason.
It is proposed to make one or two minor alterations in the law relating to income tax in order to relieve serious hardships arising in certain cases from changes in the basis of assessment made in last year's Finance Bill. The Departmental Committee have been at work on the preparation of proposals for the simplification of the income tax code. There seems to be a certain amount of misunderstanding abroad as to the nature of their task. It does not mean merely codification. The Income Tax Act of 1918 was itself a codifying Act. Our present Income Tax code comprises the 1918 Act, the Income Tax provisions of the British Finance Acts from 1919 to 1922, and those of the Saorstát Finance Acts from 1923 to 1929. The Income Tax Act of 1918 itself contains a large number of provisions which have no force in the Saorstát and others which are unsuitable to conditions in the Saorstát. It would be possible by codifying the Acts to reduce the total number of sections considerably and to make the codified Act more readily intelligible. But this of itself would not have the effect of simplifying the system, and the Committee are endeavouring to secure amendments which will make the system itself more simple and thus enable the forms to be simplified.
This is not nearly as easy a task as it seems to many people. The new system must be as effective in producing revenue as the old one and it must, if possible, be no more expensive to work. There are many obvious steps towards simplification which might be taken without hesitation if it were possible to ignore these two requirements. For example, if the principle of taxation at the source were wholly abandoned the way to a considerable degree of simplification would at once be opened, but it is a matter of very grave doubt indeed whether without it anything like the same yield of revenue could be obtained.
The taxpayer is apt to think of simplification solely by reference to the size of the form which he has to fill up. There are difficulties, however, in eliminating questions from the forms. If there were no personal reliefs the amount of matter could be very greatly reduced, but obviously we cannot simplify the forms by withdrawing the reliefs.
It is anticipated that the Committee will be able to make their report in the autumn, as special arrangements have been made to expedite the work, and a good deal of ground has already been covered. It should be possible, therefore, to have a Bill for the simplification of the income tax code prepared and passed by the Dáil before the introduction of next year's Budget.
It is intended this year to suggest only three changes in the scheme of taxation. All are of a minor character, and will not appreciably affect the figures already given.
In the first place it is proposed that the minimum duty on wine be reduced so that wines containing 25 per cent. proof spirit or less will be charged at the rate of 3/- per gallon instead of 5/-, and that similar wines imported in bottle will be charged additional duty at the rate of 2/- instead of 4/- per gallon. It is also proposed that the additional duty on sparkling wine imported in bottle shall be reduced to 12/6 per gallon. The change in the wine duty now suggested arises out of negotiations for a commercial treaty between France and the Saorstát which have been carried on at intervals since 1926. The French Government have been able to satisfy us that the duties on wine, which were increased in 1926, fell with special severity on French products, and accordingly it has been agreed to make some reduction. There is no doubt that the new scale represents a more equitable adjustment as between the different qualities of wine imported from various countries. Notes have been exchanged with the French Government defining the treatment to be accorded to our imports from France and to our exports to that country, and a commercial treaty will be concluded on the basis of the agreement set out in the notes. It secures to goods of Saorstát origin the benefits of entry into France, the French colonies and protectorates, on the minimum tariff, a concession which, in fact, is enjoyed in full by very few countries. On the other hand, we shall give France most favoured nation treatment, which does not, however, interfere with Imperial preference or the system of giving special concessions to other States of the British Commonwealth. The loss in revenue occasioned by the change in the wine duty will be about £12,000 in a full year.
It is proposed to impose one new tax. Many complaints have been addressed to the Government, particularly by traders in the country towns, about the injurious effect on many of the smaller urban areas of the great increase in recent years of the practice of hawking by means of motor vehicles. When the matter was under investigation we were struck by the curious fact that while the ordinary hawker, who operates normally with a horse-drawn vehicle, is charged a licence duty of £2 per annum, the hawker with a motor van is exempt from taxation. Those who drafted the Hawkers Act, 1888, apparently overlooked the possibility of motor cars being used for such traffic. We intend to repair their oversight. In view of the greater burden capable of being carried by the motor vehicle and of its much greater range, the motor-hawker should, as a matter of equity, be subject to heavier taxation than the hawker who, in the words of the Act, travels with a horse or other beast bearing or drawing burden. It is proposed, therefore, that the motor-hawker shall, as from 1st August next, be obliged to pay an annual licence duty of £10. The revenue obtained will, it is estimated, be approximately £3,000. Thus we shall be left with a nominal Budget surplus of £4,000.
The third change we propose will not affect the Exchequer. When the Road Tax was imposed in 1918, a reduction of 25 per cent. was allowed in favour of vehicles dating from before 1913. In 1927 we were very strongly urged to extend the concession to apply to all cars over five years old. We refused to do so on the ground that the reason for the original concession did not really apply to cars of a more recent date than 1913, and because we did not want to eat into the income of the Road Fund. Since the time the matter was last seriously discussed the income of the Road Fund has, as I have already indicated, increased by £256,000. We do not accept the view of those advocates of the concession who urge that it will actually increase the revenue of the Road Fund by substantially increasing the number of cars on the road, but we are satisfied that such loss as it may cause will not be a serious matter henceforth. We propose, therefore, that as from 1st January next the road tax shall in the case of cars over five years old be payable subject to a rebate of 25 per cent.
Two years ago it was necessary, in order to balance the Budget, to find the large sum of £700,000 by temporary expedients. That it was not necessary in last year's Budget, and is not now necessary to impose taxation, is largely the result of a very close scrutiny and a very severe limitation of expenditure. I should like again to acknowledge the help I have received in this connection from the investigations of the Economy Committee presided over by the Parliamentary Secretary to the Minister for Posts and Telegraphs. They have examined thoroughly a great part of the field of Government expenditure, and, if I have already appropriated much of the matter that would normally have formed part of their report, the credit due to them is not lessened thereby. There is no prospect that in the next few years it is going to be easy to find the full amounts required to maintain public services. The disappearance of the element of arrears from the returns of income tax will be sufficient to counteract the effect of any improvement in economic conditions unless such improvement should be quite marked. The changed habits that have gradually grown up since the high liquor duties were first imposed will prevent any great increase in the yield of the beer and spirit duties, no matter how trade and industry revive. As the protective duties achieve their purpose they will produce less revenue. But however difficult may be the replenishment of the national purse, every indication points to the conclusion that although the improvement in the country's economic health is very gradual, it is unbroken. It will be some time before better conditions can be reflected in bigger revenue. Already, however, we have reasons for pursuing our task no longer merely in a spirit of resolute confidence, but rather in a spirit of cheerful optimism. We cannot afford to slacken our efforts, but we can afford to rid our minds of anxiety.