Last year conditions the world over were bad—in some respects as bad here as elsewhere, in some better, in none worse. Unique among States we were able to extinguish our floating debt and to reduce substantially the volume of unemployment. This latter fact, coupled with the considerably increased figures for bank clearances which were noted for the year, indicates that if in common with nations everywhere we suffered a diminution in the value of our external trade, that diminution has been much more than compensated for by an extraordinary expansion in our domestic commerce.
That is not to say that the past year has been without its difficulties. Far from it. Difficulties there have been, many and varied, not merely for the Government but for the community. But they have been met and overcome by a people who were heartened and sustained by the knowledge that the old policy of drift had been definitely abandoned and that at last some conscious effort was being made to solve our economic problems and to adapt our industrial and agricultural production to the circumstances of a post-war world.
The fruits of this active and progressive policy have been realised, not merely in the field of constitutional and industrial development, but on the financial side as well. Take, for instance, our debt position. Last year our direct liabilities amounted to £38,816,000 with assets, including the Exchequer balance at the bank, to set against them to the value of £16,312,000. This year those liabilities have been reduced to £38,388,000, while our countervailing assets have been increased to £18,421,000. Similarly our contingent liability in respect of Land Bonds, Trade Loan Guarantees, and Shares and Bonds of the Agricultural Credit Corporation, stands at £23,475,000 for this year as compared with £25,370,000 for last. But from a financial and economic point of view incomparably the most far-reaching and significant change of the year has been that which has occurred in connection with the payments to Great Britain. We have rid ourselves of the burden of over £92,000,000 which was so unjustifiably and recklessly imposed upon us by the Secret Agreement of 1923. Arising out of this we have retained in this country and utilised for productive purposes no less a sum than £4,677,014, which largely accounts for the comparative ease with which the difficulties arising out of the dispute with Great Britain have been surmounted, and to a large extent also explains the astonishing buoyancy of the revenue, to which I am now going to refer.
Last year when called upon to introduce the first Budget on behalf of the Government, I approached the task with a great deal of trepidation. The revenue for the preceding year had failed to meet what must be regarded as the normal outgoings of the Exchequer by a very substantial sum and the Estimates of Revenue which had been prepared for the new year fell short of the Estimate of Expenditure by over £3,400,000. And all this before a penny had been provided for that programme of social amelioration which the Government was determined to undertake. The situation was faced, the necessary taxation to enable the Budget to be properly balanced was imposed, and in addition funds were provided, largely out of revenue, which enabled us to set aside no less a sum than £2,500,000 for special unemployment relief works, for special road works, for additional relief in respect of rates on agricultural land, and for the provision of milk for necessitous children.
Undoubtedly the task we had attempted was hazardous, and whatever prospects of success it had were drastically discounted beforehand by many critics. We were told, and the public were told, that our position was hopeless, that industry would be crushed, that revenue would dry up, and that general bankruptcy would ensue.
A year has now passed and we are able to re-examine all those doleful prophecies in the light of the realised facts. There has been no drying-up of revenue. On the contrary revenue exceeded the Estimate for almost every significant item. For instance, home-made spirits yielded £46,000 more than the Estimate, while home-made beer also gave us an excess to the amount of £157,000. In the same way sugar and sugar confectionery at £1,047,000 gave us £62,000, and tobacco at £3,762,000, £137,000 more than we anticipated. On the other hand we had expected to secure £418,000 from tea and it just failed to reach that figure at £413,698.
Before going on to deal with the Inland Revenue, I should like to say a word about tobacco. Last year we granted the complete remission of the duty on home-grown tobacco in an attempt to interest Irish farmers in this crop once more. The result surpassed our greatest expectations. Interest in tobacco growing spread like wildfire and the rate of planting was such that, if allowed to increase, our indispensable revenue from this seductive weed would end in Irish tobacco smoke. Moreover, all classes of growers, competent and incompetent, careful and careless, experienced and inexperienced, were attracted to grow tobacco, good and bad. I should like to emphasise that it is the desire of the Government to establish this industry on a firm basis. With that end in view an experimental period has been allowed during which any person who thought he could make a success of the crop might try his hand at it with the assurance that his venture would be a financial success. The number of growers, however, is now so great that the time has come to reconsider the whole position.
As I have already said, the experiment if continued on the same lavish scale as heretofore, would seriously endanger our Exchequer position, which is so largely dependent on the revenue from tobacco. Accordingly, it has been decided to impose an Excise Duty on all Irish tobacco grown after the 1st January, 1934. This duty, however, is fixed at such rates that a very high measure of protection indeed will be given to the native product. The standard rate of the duty will be 6/8 per lb. as compared with 9/4½ per lb. on foreign-grown tobacco. It will be charged on all Irish tobacco sold to manufacturers who use both the native and the foreign-grown article. As an additional concession a preferential rate of 5/6 per lb. will be charged in the case of tobacco sold to manufacturers who use only Irish tobacco for their products. It is hoped that this special reduction will encourage some people to specialise entirely in the manufacture of home-grown tobacco. I should like also to make it clear that these duties will not fall on any crop grown last year or this. It may also be well to say now that the Government is considering whether in future any limit should be placed on the acreage to be grown by any single grower.
It is felt that while these new conditions will sufficiently protect the Revenue and secure the proper regulation and control of this industry they will not impose any undue hardship upon those who are seriously engaged in it. Tobacco growing will still remain a most attractive proposition for any farmer, large or small. Those who have tried it have had a fair chance under perfectly free conditions. Before next seeding time they will have been able to satisfy themselves whether the crop is suited to their land or other circumstances, and they will be in a position to determine whether it is worth their while to continue the experiment under the new conditions.
I pass now to the Inland Revenue side, on which the yield from Income Tax, including Sur-Tax, was satisfactory at £5,301,000 as against an estimate of £5,245,000; as was the yield also from Corporation Profits Tax at £495,000 as against £450,000. The yield of £1,066,000 from Estate Duties was £64,000 below estimate; while Stamp Duties at £1,051,000 disappointed us by £19,000; as did also Excess Profits Duty at £116,000.
I should like at this stage to dilate on the position of the Excess Profits Duty. In the course of my Budget speech last year I announced a special concession to make it easier for taxpayers, who up to then had not done so, to put themselves right with the Revenue in respect of past liabilities not brought into assessment. Upwards of 1,000 taxpayers have taken steps to get the benefit of this concession. A number of cases have been settled, but, owing to pressure on the Revenue staff engaged on the work and also to pressure on accountants and others who are acting for taxpayers in connection with these settlements, a large number of these cases still remain to be disposed of. I intimated at the same time the Government's intention to increase the powers of the Revenue Commissioners in connection with the making of Excess Profits Duty assessments, and legislation accordingly was passed last year. Some have purported to doubt the effectiveness of this legislation. We are advised that in fact it was fully effective. However, we will not permit the mere suggestion of a doubt to be made the basis of a campaign to hinder the due collection of the Revenue. Accordingly it is proposed to promote further legislation this year which will place the whole position regarding Excess Profits Duty beyond peradventure. We shall also take powers to enable the Revenue Commissioners to recover Excess Profits Duty from the estates of deceased persons who were liable thereto, except in cases in which the estate has been distributed before to-morrow, (11th May).
Before I leave this matter, I think it desirable to make it quite clear that it is the considered policy of the Government to collect Excess Profits Duty from all those people who were liable to that duty during the years for which it was in force, and who have hitherto succeeded in avoiding payment. We shall ask the Oireachtas to pass any legislation which we may be advised to be necessary to secure this result. The Government has no desire that Excess Profits Duty should be collected in any case in which excess profits were in fact not made, and accordingly ample powers and rights of appeal against the amount of any assessment are provided in existing Statutes. It is desirable, therefore, that persons who endeavour to combat assessments on grounds other than the merits, should realise that any purely technical defects which may be found to exist either in the law or in the procedure of the Revenue Commissioners will be made good by fresh legislation.
Proceeding with my review of the tax yield, I should not fail to mention the special emergency duties on British products, such as coal, cement, etc., which gave us over £326,000, before I go on to refer to a very significant feature of the Customs returns.
The Dáil will remember that last year, at the instance of the Minister for Industry and Commerce, a considerable number of new duties were imposed, entirely for protective purposes. As the duties were in most cases entirely new, the Revenue Commissioners had great difficulty in forming an estimate of their fiscal effect. However, they came to the conclusion that they would bring in about £910,000. This estimate, by reason of the considerable number of articles subjected for the first time to an import duty, was somewhat conjectural, but I duly took credit for it in announcing last year's Budget.
For some obscure reason this detonated a number of very high explosives. Fierce opposition was generated against the new tariffs, and we were told that they would cripple industry, would depress the rate of real wages, would lower the standard of living and would eventuate in poverty and misery for us all. One began to wonder, indeed, whether it was not suggested that the Government was scattering all the plagues of the Apocalypse. It may be that in some cases the alarms which were expressed were genuinely experienced. If these are still felt, however, I am in a position to reassure the timorous and, paradoxically, am happy to say that the tariffs in question proved much more satisfactory to the Minister for Industry and Commerce than they did to me. We collected from them much less than half the amount estimated. They were much more protective in their effect than I had hoped, and did very much more to provide employment than they did to provide revenue.
The nett result of the various over-falls and shortfalls in the original tax estimates which I have recounted was that the total tax revenue, including the yield from the British Emergency Duties, was £23,638,000 as compared with an estimate of £23,843,000. We have to add to this the receipt from non-tax revenue which amounted to £6,352,935. This amount also includes £2,968,795 diverted from the Purchase Annuities Fund to the Exchequer, and together with the figure for the total tax revenue which I have already given, brought the total revenue for the year up to £29,990,935. I may remark parenthetically that of the £2,968,795 which I have said was diverted from the Purchase Annuities Fund to the Exchequer only about one-half was collected from tenant purchasers, the balance being provided out of ordinary Exchequer revenue.
We have now to consider the expenditure side of last year's account. It will be remembered that the Budget for that year provided for increased grants in relief of unemployment, in relief of rates on agricultural land, and towards the solution of the housing problem, as well as a considerable additional vote towards old age pensions, and an entirely new grant for milk for necessitous children. All these commitments have been duly honoured and, in addition, £1,616,000 was provided as an advance to the Guarantee Fund and £2,000,000 as a grant-in-aid for the establishment of an Emergency Fund mainly used for the payment of export subsidies and bounties. The aggregate result of these several outlays was that the total Exchequer expenditure on Central Fund and Supply Services amounted to £28,849,739. Subtracting this from the total revenue of £29,990,935, we were left with a surplus for the year of £1,141,196.
It would not be right, however, to leave the figures just at that, and a further examination of the position is necessary. What, it might be asked, would the position have been if there had been no economic dispute? It would be an impossible task to construct a hypothetical budget which would make due and proper allowance for all the factors which would have been operative in that contingency, and I shall not attempt it. We can, however, adjust the total figures which I have given for revenue and expenditure by adding to or subtracting from them the various sums which we know accrued, or payments which we know were made or withheld because of the quarrel. The result may be totally misleading because of the many and various factors of which no account will be taken, but it will give a figure which may satisfy some curious minds. After making the necessary adjustments, by deducting from the revenue side the receipts from the British Emergency Duties, from the sale of butter, and from the Purchase Annuities Fund, and first adding to the expenditure side the payments (other than land annuities) withheld from the British Government and then deducting from the new total the advance of £1,616,000 made to the Guarantee Fund and the £2,000,000 for the grant-in-aid to the Emergency Fund, we get for the adjusted revenue the figure of £26,727,140 and for the adjusted expenditure £26,941,958, leaving us with an apparent debit balance of £214,818. It is interesting to note that this debt would have been a little more than wiped out by the reduction of £250,000 in salaries of public servants which it was proposed to seek for the purposes of the last year's Budget.
So much for the year that is past. We have now to consider the position in the present. For that we must turn first of all to the figures for expenditure which appear in the White Paper which has just been circulated. It will be noted from the figures given therein that the total expenditure on Central Fund and Supply Services is taken at £30,654,220, of which £4,729,269 is for Central Fund Services and £25,924,951 for Supply.
The figure for the Supply Services includes, among others, the following notable items, totalling £3,379,800 which did not appear in the Estimates prepared by our predecessors, but for which, in order to give effect to the Government's social and economic policy, provision has now to be made:—
|
Old Age Pensions Act, 1932 |
£ |
|
(Increase over original Estimate for Old Age Pensions, 1932-33) |
479,800 |
|
Housing Grants |
£ |
|
(Increase over original provision for 1932-33 in Vote 41) |
360,000 |
|
Milk for necessitous children |
100,000 |
|
Loans for Housing Purposes |
|
|
(Increase over original provision for 1932-33). |
1,340,000 |
|
Land Bill, 1933 |
150,000 |
|
Land Bond Fund Deficiency Payments |
800,000 |
|
Damage to Property Compensation |
|
|
(New Provision) |
150,000 |
In the figure for Supply Services there is also included £2,450,000 which it is proposed to provide for the payment of export bounties and subsidies. I may also mention that in the Estimate for Central Fund expenditure a sum of £320,000 has been provided to cover the Interest and Sinking Fund charges on a new loan which we anticipate will be floated this year. This figure is offset to some extent by savings on Exchequer bills which, including those for £1,000,000 issued by our predecessors, were all redeemed at the close of the last financial year.
In addition to the items to which I have just referred, however, there are other features of the Government's policy to which effect must be given this year. That within the limits reasonably set by the resources of the community the Government of a Christian State ought to provide maintenance for all citizens who may be in want by reason of the State's inability to so order its life that work is available for those who are able and willing to undertake it, has been a cardinal principle of Fianna Fáil from its inception. This Government does not accept the contention that it is in any way responsible for the prevalence of unemployment. Unemployment was rife before it took office, concealed so far as employment registration was concerned, and cloaked over by an ingenious system of preference, but widespread and prevalent everywhere. To deal with the situation as it found it the Government last year had to adopt large scale emergency measures and to provide, out of abnormal sources of revenue, huge sums for unemployment relief. Since then the method of providing maintenance for those who are unable to find employment has been exhaustively investigated, and while the Government is not yet in a position to announce detailed proposals in this regard, the way can be seen clear to permit of the introduction of a measure to deal with this problem before the close of the present calendar year. The new proposals will go far to relieve the local authorities of burdens which many of them now find onerous, and will properly organise and fairly distribute the duty and responsibility of providing assistance for the unemployed. In order to initiate them, however, a considerable sum amounting to £450,000 nett will be required. We propose, as I have indicated, to launch the scheme and to provide for this initial expenditure this year.
Notwithstanding the fact that it has decided to bring in this new measure and to make the necessary provision for it, the Government has not for an instant lost sight of the fact that the only satisfactory solution of the unemployment problem is to be found in the provision of useful work. The Estimates already laid before the Dáil are proof of that; for in them will be found, particularly in Votes 8, 41 and 54, generous assistance amounting in all to £2,806,000, which is being provided by way of grants and loans to encourage and finance constructive expenditure as follows:—
Out of the Local Loans Fund:—
|
£ |
|
|
For Arterial Drainage Loans |
40,000 |
|
For Public Health Loans |
200,000 |
|
For Housing of Working Classes Loans |
1,000,000 |
|
For Loans under Labourers (Ireland) Acts |
500,000 |
|
For Loans under Small Dwellings Acquisition (Ireland) Acts |
200,000 |
|
For Loans under Gaeltacht Housing Acts |
40,000 |
|
For Loans under Vocational Education Act |
30,000 |
|
For Loans for Minor Works |
£ 13,000 |
|
For Loans sanctioned but not provided last year for works, mainly housing, to be executed this year |
318,000 |
|
For Contingencies |
13,000 |
|
Out of Vote 41:— |
|
|
For Grants for Housing Purposes |
370,000 |
|
Out of Vote 54:— |
|
|
For Grants for Housing Purposes in the Gaeltacht |
82,000 |
It is anticipated that the amount provided for free grants for housing purposes will be sufficient to make effective the ample provision for loans for housing which I have just detailed. In the case, however, of the loans for public health works it is considered that some further assistance to local authorities may be necessary to energise these, and to deal with the residuum of unemployment even when the housing programme in town and country is in full swing. Accordingly, in addition to the sum of £150,000 for unemployment relief which already appears in the Estimates a further £250,000 will be provided, making £400,000 for public health and relief works generally. To that will be added further provisions which will also provide employment and to which I am now going to refer.
The newspapers recently have contained references to the possible development of our turf and peat resources. Many competent authorities believe these to be very valuable, so that if properly developed they would greatly enrich our people and enable us to become much more independent of imported fuel. The Government has decided to have these possibilities exhaustively investigated and in the meantime proposes to encourage in every possible way the development and exploitation of the bogs and the use of peat and turf. With this end in view and to associate the provision of relief with a constructive purpose, it is proposed to devote the sum of £100,000 for the drainage of bogs, the construction of bog roads and minor works of a like character or ancillary thereto. It is proposed also to set aside the sum of £50,000 for the organisation and development of the peat industry, with the special object of securing improvements in the method of winning, marketing and utilising turf. The total amount thus to be provided for the initiation and encouragement of works to give employment, apart altogether from the housing grants of £452,000 and the loans for various purposes amounting to £2,354,000 already referred to, is £550,000. In that connection I should like to say further that should any sound, constructive proposal be submitted which will further develop our natural resources, improve the conditions of our people, and provide employment, the Government will consider it most sympathetically and will not reject it on the narrow ground of expense.
There remains one other minor obligation. As I have already pointed out, the provision of £100,000 which appeared in last year's Budget to provide milk for necessitous children is to be repeated. I have little doubt that there are few items of social expenditure which yield a richer return in absolute good. We propose to supplement that beneficial expenditure, and to ask the Dáil to grant the sum of £25,000 in order to provide native fuel for necessitous homes in districts where such fuel is not usually available.
That completes our programme of expenditure on Central Fund and Supply Services, which with the amounts already set out in the White Paper will amount to £31,529,220; £4,729,269 being for Central Fund Services and £26,799,951 for Supply.
I have now to consider the not less important side of the account, that which sets out how all these Services are to be paid for. And there, as the White Paper shows. I start with a grievous handicap. The total revenue for the year from tax and non-tax sources is not expected to be more than £26,440,000, representing decreases of £1,732,000 and £1,818,935 in tax and non-tax revenue, respectively. As regards non-tax revenue, the decrease will be found almost entirely among the miscellaneous items, and in that category is more than accounted for by a decline from £2,969,000 to £800,000 in the receipt from pre-Treaty land annuities. So far as tax revenue is concerned, the principal decrease in the Estimate as compared with last year is on the Customs side, and this is almost entirely due to the increasing protection and increasing employment which will be afforded by the new duties which were imposed for that purpose last year. Nevertheless, as I have said, it is estimated that the total revenue for the year will not exceed £26,440,000, which amount is to be set against the prospective expenditure of £31,529,220, leaving an apparent deficiency of £5,089,220—and we have to make these two ends meet.
This is a situation which would delight the good citizens who sent me in so many strange and novel suggestions for raising the revenue, chiefly at other people's expense, so that a tax on the old-fashioned game of beggar-my-neighbour immediately suggested itself. Some of the proposals were quite practicable; none of them, however, is required just yet. Instead we shall turn to an old and, within reasonable limits, never-failing source of assistance. I refer to over-estimation in the Supply Services. For the benefit of those Deputies who are new to the House, I should perhaps explain that this item constitutes a fund out of which needy Ministers for Finance are supposed to help themselves, and on a not ungenerous scale. My predecessor habitually had recourse to it; I had recourse to it myself last year, and I propose to have recourse to it again. Hitherto, however, it has been customary to bring in this item towards the end of the Budget statement. Then at the due moment it has been produced with great aplomb, called "Savings on Over-estimation," and planked down in front of the Dáil and the country for all to admire as a magnificent achievement in cheese-paring economy. Of course it is nothing of the sort. It is, in fact, merely an allowance which one may reasonably make for the fact that no matter how carefully they have been prepared an excessive provision is bound to creep in against some of the multitudinous items and services in the Estimates.
It is not to be thought, however, that the allowance for over-estimation can be fixed arbitrarily without due regard to the consideration that under-estimation as well as over-estimation may occur, or to the fact that in the course of the year many Supplementary Estimates will come clamouring for introduction—Supplementary Estimates which like thieves break in and steal what the Minister for Finance has carefully husbanded towards the day when he will be able to reduce taxation to zero all round and, in addition, to provide munificent pensions for all. I regret to have to announce that to-day is not that happy day. However, bearing in mind all the factors which have to be considered, I feel safe in allowing for over-estimation on the Supply Services a sum approximately equivalent to 1½ per cent. on the figure of £25,924,951 at which those services stand in the White Paper. This enables me to write down the expenditure side of the account by £388,220 and to deal with the remaining figure of £31,141,000 as a real quantity.
At this stage, before we allow the question of taxation to enter our minds, it is desirable to advert to the Exchequer position as it was at the close of the last financial year. As I have already stated, that year yielded a surplus of £1,141,000. It is considered the very best Treasury practice to devote surpluses to the reduction of debt. I propose to utilise our surplus in a manner which is as nearly related to that as twin is to twin. As I have already pointed out, among the additional services for which we have to provide this year, is the sum of £800,000 to meet a deficiency which arises in the Land Bond Fund by reason of the moratorium which has been granted in respect of the May/June gales of this year and the permanent reduction in the land annuities. Of this amount £266,000 arises from the reduction in the annuities. It is a deficiency which henceforward will recur yearly. It must be met, therefore, out of revenue. The remainder, however, is a capital liability which I propose to wipe out by taking an equivalent amount from last year's surplus, leaving a balance under that head of £607,000, which I further propose to appropriate as follows.
If it is not practicable to utilise a surplus for the reduction of debt, we may follow an equivalent course and use it to create a capital asset. Last year, out of non-recurring revenue we provided the sum of £550,000 which for many years has represented the normal contribution to the Local Loans Fund. We propose this year to follow the same course and to provide for the same purpose an equal amount out of the surplus. The provision of the two sums of £534,000 and £550,000, respectively, virtually absorbs the surplus, leaving £57,000 to be used for the general purposes of the Budget, but leaving also a further £3,560,000 to be found.
I have already pointed out that included among the additional services which we have to provide this year is the sum of £2,450,000 for export bounties and subsidies. This is an expenditure which arises out of the economic dispute with Great Britain. As against it, however, certain assets have been created. Upon the security of these we intend to borrow £1,225,000 and to use it to defray one-half the cost of the bounties. A justifiable proceeding, strictly in accordance with the principles which I laid down in last year's Budget statement.
