Private Business. - Financial Statement.

At the date of last year's Budget I should have been well content with a total revenue from taxation and otherwise of £30,191,500, but as in fact £31,034,710 poured in to us, I cannot be blamed if I find the retrospect over the past 12 months a not unagreeable one from the Exchequer Standpoint. Moreover, this result having followed the substantial tax remissions granted last year, I must claim that it is explainable only on the basis of a general increase in prosperity. This view is strengthened by the fact that in general the returns from the duties and taxes greatly surpassed our expectations. Thus, tobacco duties gave £4,422,000 against an estimate of £4,240,000; the beer duties produced £3,219,000, the highest for a number of years; motor cars and parts, £270,000; entertainments duty, £288,000, and betting duty, £194,000. Estimates were likewise exceeded by yields in respect of the duties on mineral hydrocarbon oils, matches, wheat and table waters.

In the aggregate, all the duties I have mentioned brought in £10,021,000 as against the Budget Estimate of £9,416,000. In 1935-36 they were responsible for £9,358,000. The sugar duties, from which we expected £696,000, actually gave £741,000; while the spirit duties at £2,359,000 exceeded the Estimate by £39,000. The stamp duties, and taxes on profits, property, and income, excluding excess profits duty, accounted for £7,905,000, that is £107,000 more than in the preceding year. Finally, the motor vehicle duties brought in £1,079,000.

With the possible exception of the wheat duty, all the duties and taxes with which up to this point I have been dealing are barometric in their character. Their yield rises when times are good or on the up-grade and falls when the contrary conditions prevail. For the year 1936-37, their yield was £22,105,000 as compared with £21,422,000 for 1935-36, and £20,149,000 for 1934-35. There is every reason to believe that they will be increasingly fruitful this year.

That expectation, however, does not apply to those duties which are designed to be highly protective in their effect. Yields from many of these did not differ substantially from the Estimate. With others the Estimate has not even been reached. This was the case with duties on boots and shoes, bottles, buttons, clocks and watches, sheet and plate glass, daily newspapers, knitted fabric, and tomatoes. Altogether these were estimated to bring in £225,000. Actually they brought in only £188,000. Excluding the duty on sheet and plate glass, those protective duties which I have mentioned brought in £259,000 for 1935-36, and in the year before that £305,000.

On the other side of the account, our outgoings for the Central Fund and Supply Services totalled £31,227,688. The House understands that this amount included certain capital outlays, such as the final instalment of £196,758 for the repayment of the Dáil Eireann External Loan, £100,000 being that part of the cost of the industrial alcohol factories which I am charging to borrowing, and £48,609 for property losses compensation. It also includes the sum of £312,453, which was the amount paid up on the further 499,925 £1 shares in the Industrial Credit Company taken up on behalf of the Government during the year. Nor need we forget that in framing the Budget last year I undertook if necessary to borrow one-half of the total sum actually expended on export bounties and subsidies. Including the amount provisionally reserved under this head, the expenditures which, if necessary, may be charged to borrowing amount in all to £1,637,501. If we adjust the gross figure for expenditure accordingly, the Budget for 1936-37 shows a surplus of £1,444,523.

Some may demur at certain of the expenditures, which I have classified as capital, being included amongst the amounts to be deducted from outgoings before a balance is struck, but to my mind there is only one item to which conceivably exception may be taken. I refer to the figure in respect of export bounties and subsidies. The House, I hope, will bear with me while I venture to outline my views on this particular matter.

Let me begin by saying that if in normal conditions of trade the Dáil, as settle policy, decided to subsidise our exports, it would have the unescapable obligation of providing out of current revenue the whole cost thereof. But if there arose a situation which was clearly abnormal, which interfered so greatly with the normal course of trade that in order to safeguard the productive capacity of the community, both now and in the future, extraordinary steps had to be taken; then the Government, so as to avoid the imposition of unreasonable immediate burdens, might seek to leave some part of these special measures to be defrayed later. Upon this principle I think there can be no doubt that we are justified in budgeting to defray, if necessary, some part of the cost of the export bounties and subsidies otherwise than out of revenue.

At the same time I believe that the House in general feels that the share of the burden passed on to our successors should not be unduly heavy. I think that was the point of view expressed last year by Deputy Bennett—the reference is vol. 62, col. 396, of the Official Report—when he said:—

"I might say to the Minister that the farmer does not want any portion of his relief to be a burden on posterity."

But if the propriety of the course which I have always been prepared to adopt in regard to the bounties is questioned, it can only be by those who have forgotten that the farmers and taxpayers of to-day have equitable rights in this matter also. It must be remembered that when we propose to borrow part of the Vote for these bounties and subsidies, we have standing against such borrowings certain Exchequer assets; to wit, the funded land annuity arrears. The Exchequer became entitled to these arrears by reason of the payments, totalling £4,010,847, which it made to the Guarantee Fund during the years 1932 to 1935 in respect of the funded arrears. This valuable asset has been created by present-day taxpayers. If to relieve them it is mortgaged, the future generation will, at least, not be any worse off than if it had never existed.

Naturally our right in this matter ought to be exercised with prudence and economy; for it is not by what we ourselves enjoy but by the opportunities and resources which we leave to our successors that our hopes for the nation will be realised. I have always acted upon that view. Accordingly, it will be found that, taking one year with another, our right to borrow for export bounties and subsidies has not been availed of at all—even though to 31st March last the total amount thus paid was no less than £10,585,000. Moreover, I may say that borrowing for them was wholly obviated last year. And that applies also to our total expenditure under the Vote for employment schemes.

We may, however, appraise the Budget of 1936-37 by even more rigid standards. Making provision out of revenue for the whole cost of the export bounties and subsidies, and for the whole cost of the employment schemes programme also; but borrowing £48,609 for property losses compensation £312,453 invested in the Industrial Credit Company, £100,000 out of £140,000 expended on the new industrial alcohol factories, and the final instalment of £196,758 paid in repayment of the Dáil Eireann External Loan, the year closed with a clear surplus of £464,842, a figure which not even the most rigidly orthodox or conservative can question or quibble at.

Before I come to consider the prospect for the present year it may not be inopportune, bearing in mind that the present Administration has just completed half a decade in office, to review some of the changes and developments which have taken place during that period in our public finances. While being as informative as I may, I shall endeavour to be as brief as possible.

Last year I informed the House that at the 31st March of that year our direct Exchequer obligations amounted to £55,356,678. At the corresponding date this year they were £59,520,612, according to the following details:—

FUNDED AND UNFUNDED DEBT:

£

Second National Loan

6,161,088

Third National Loan

5,621,034

Fourth National Loan

5,802,578

Conversion Loan

6,939,000

5% Compensation Stock

5,750

3½% Compensation Stock

21,606

Savings Certificates (Principal and Interest)

10,552,000

Exchequer Bills

500,000

OTHER CAPITAL LIABILITIES:

£

Under Telephone Capital Acts, 1924/1936

915,556

Under Land Acts, 1923 to 1936—Advances for Costs Fund and State Contribution to Price (including 50-55%, of tenant purchasers' liability for Land Bond Advances charged on Public Funds under Land Act, 1933)

14,883,000

Compensation Annuity under Damage to Property (Compensation) (Amendment) Act, 1926

4,519,000

Teachers' Pensions (Net Liability assumed by the Exchequer)

3,600,000

In this connection, regard must also be had to the capital value (£58,625) of certain annuities which are in dispute.

We have to set against the liabilities certain balances amounting to £4,814,615, the details of which are:—

£

Exchequer balance at bank

2,058,051

National loans sinking funds unapplied

40,355

3½ per cent. Compensation Stock Sinking Fund unapplied

10,279

Savings Certificates (Interest Charge Equalisation) Fund

2,705,930

as well as certain Exchequer advances and shareholdings to the value of £31,779,311, as follows:—

£

Unemployment Fund

16,000

Shannon Electricity Scheme Fund

5,994,130

Electricity Supply Board

4,894,570

Road Fund

1,114,055

Local Loans Fund

13,559,195

Guarantee Fund

4,010,847

Purchase of creameries

575,000

Advances to Agricultural Credit Societies

18,879

Shares of Agricultural Credit Corporation

292,118

Shares of Industrial Credit Company

804,517

Shares of Cómhlucht Siúicre Eireann, Teo.

500,000

Our balances, advances and shareholdings amount, therefore, in the aggregate to £36,593,926, and were we to take only these into account our actual net dead-weight debt at 31st March last would appear to be £22,926,686. The corresponding figure for 31st March, 1936, was £23,854,343, and at 31st March, 1932, was £22,373,502.

To make the position plain, however, it is necessary to make certain adjustments in that figure. But first, I should like to direct attention to the special significance of several of the items which appear on one or other side of the account, or which indeed no longer appear there.

The Dáil Eireann External Loan is the first of these. The Dáil will remember that in 1932 the then unredeemed balance of this loan was taken into account as a liability of £1,000,000 at the then prevailing rate on the dollar sterling exchange. The repayment of the loan, so far as the Exchequer is concerned in it, was completed by the 31st March last and, subject to minor adjustments, all our commitments to subscribers in regard to it have been liquidated for the aggregate sum of £537,000.

With regard to our liabilities arising out of public issues, it will be noted that the First National Loan, of which £8,020,280 was still in issue in March, 1932, has been replaced by £6,939,000 of 4 per cent. Conversion Loan, issued in December, 1935. The price of this loan at the close of the last financial year was £110½ per £100 stock, at which it gave a return of £3 7s. 9d. per cent. per annum, assuming that the loan will be repaid in 1957. On the other hand, towards the end of January, 1932, the quotation for the First National Loan was usually about £100½ with a yield to redemption of about £5 1s. 9d. per cent. per annum.

Then we have the Second National Loan which was issued in 1927 on terms which, to the earliest redemption date, gave a yield equivalent to £5 4s. 3d. per cent. per annum. At 31st March last the price of this loan was £113¼ per £100 stock as compared with £101¼ in January, 1932, and £97 at the date of issue; while the net yield to earliest redemption date was then £3 14s. 6d. per cent. per annum against £4 19s. 9d. in January, 1932, and £5 4s. 3d. at date of issue.

In the case of the Third National Loan, which was issued at the price of £93½ per £100 of 4½ per cent. stock, the price latterly has been about £110. This gives a yield to 1953 of £3 14s. 0d. per cent. per annum, as against £5 3s. 6d. at the end of January, 1932, when the stock could be bought at a discount of £8 per cent.

The Fourth National Loan bears interest at 3½ per cent. and was issued in December, 1933, at the price of £98 per £100 stock. Its price at the end of the financial year was £102 which, assuming redemption in 1961, gives £3 8s. 3d. per cent., while at that date the British 3½ per cent. Conversion Loan, the nearest corresponding issue, on the same assumption would yield £3 8s. 6d.

It is of particular interest to note that in January, 1932, the average yield to be got by holders of our loans was £5 1s. 6d. per cent. per annum. By the end of May, 1932, this average had fallen to £4 13s. 6d. The average yield, however, from the nearest corresponding British Government issues about that time was lower still at £4 4s. 0d. At the 31st March last the loans which have been issued under the auspices of the present Government, the 4 per cent. Conversion Loan and the 3½ per cent. Fourth National Loan, gave on the average to their present probable redemption dates about £3 8s. 0d. per cent. per annum; while the two most nearly corresponding British issues gave an average of £3 8s. 3d. These figures prove beyond denial that the State's credit has not declined during the lifetime of the present Government.

The next important item in the Schedule of State Debt is Savings Certificates (principal and interest). Under this heading our liabilities have increased from £8,151,000 to £10,552,000 in the course of the five years subsequent to March, 1932.

But it should be noted that the sums debited against us in this regard cover the principal of the certificates in issue and the interest accrued thereon to the 31st March last. Off-setting the interest charge, however, we had at that date in Savings Certificates (Interest Charge Equalisation) Fund cash, gilt-edged securities and accrued interest to the amount of £2,706,000. At the corresponding date in 1932 the figure was £696,000. As the history of the Savings Certificates (Interest Charge Equalisation) Fund is a matter of some public interest I should like to recount it briefly.

The fund was first established by the Finance Act, 1929, in order to provide for the State's liability in respect of interest accruing on certificates; and certain payments were made to it between 1929 and 1932. These, however, far from covered the accruing interest and, at the close of the financial year 1931-32, the uncovered liability therefore amounted to £425,000. In the 1932 Budget provision was made for this, together with such further interest as was estimated to accrue during 1932-33. Furthermore, we have been careful since to provide fully for our liability under this head. Thus, in the five years since March, 1932, after providing £687,000 for interest accrued on certificates repaid during that period, we have put aside to the credit of the Interest Charge Equalisation Fund £1,653,000, which, with the interest earned thereon, brought the total assets of the fund at the 31st March last up, as I have said, to £2,706,000.

We have sometimes been twitted with the fact that in latter years the value of the new Savings Certificates sold has not greatly exceeded repayments. I propose to put some facts before the House in relation to that matter, and shall begin by pointing out that almost two-thirds of the certificates encashed over the past five years belonged to the first issue, which was on sale from June, 1923, to February, 1931. The maturity period for this particular issue was originally fixed at five years, during which compound interest was earned at £5 4s. 7d. per cent. per annum. In June, 1928, this period was extended to ten years, and the rate of compound interest increased to £5 6s. 2d. per cent. per annum. The maturity period was again extended, this time to 20 years, in 1933, but the average rate of interest allowed over the second ten-year period was only £3 6s. 1d. per cent. per annum. Now, as there is no fund from which to pay off these certificates on maturity, we have had since 1932 to find, in addition to the interest charges, £1,684,000 for repayment of principal of certificates which were issued between 1923 and February, 1931. In those circumstances it is little wonder that the amount of the new certificates issued did not greatly exceed the amount of the certificates repaid.

Raising money by means of Savings Certificates is not favoured by the Exchequer, as the rate paid for money on the certificate terms is usually uneconomical, and the incidental expenses of securing subscriptions for the certificates and managing the issue are very high, while, as the holders are entitled to repayment virtually on demand, the money is held by the Exchequer practically at call. For the reasons, and because it is not in the public interest to allow an uncovered capital liability of this kind to attain such proportions as might in unforeseen circumstances create difficulties for the Exchequer, I have of deliberate policy endeavoured to keep our commitments in respect of Savings Certificates within reasonable limits. With this in view, I withdrew in May, 1933, the issue then current, which over the ten years to maturity yielded £4 2s. 9d. per cent. per annum, and replaced it by the present issue, which pays on the average only £3 1s. 5d. per cent. per annum over 12 years. Furthermore, I drastically restricted the maximum amount which might be invested in the certificates by any one holder. This restriction and the reduction in the rate of interest have had the desired effect, and while there has been some increase in our capital liabilities under this head since the 31st March, 1932, the figure for them is still under 8,000,000 mark; which, in present circumstances, I regard as satisfactory.

Before passing finally from this item of the Savings Certificates perhaps I should inform the Dáil that, at the 31st March last, the amount due to depositors in the Post Office Savings Bank was estimated at £7,810,000, as against £3,750,000 at the 31st March, 1932; while as between November, 1931, and November, 1936, the deposits of the Trustee Savings Banks here rose from £1,266,000 to £1,912,000. Moreover, in 1931-32, the aggregate figure for Savings Certificates and deposits in the Savings Banks was £13,167,000, while for 1936-37 it was £20,274,000. Thus over the past five years the savings of the petty capitalist, the small farmer, and thrifty worker, the small shopkeeper and the like, have increased by 54 per cent.

We have now to consider the Exchequer's liability under the Land Acts, 1923-1933. It will be noted that it has risen from £2,397,000 in 1932 to £14,883,000. In the main the increase is due to the reduction in the land annuities granted under the Land Acts of 1933 and 1936; by which tenant purchasers were relieved of capital obligations amounting to £12,228,000, a corresponding liability being imposed on the State instead. But for that transaction our net deadweight debt, so far from showing an increase of £553,000 as compared with 1931-32, would show a reduction of £11,675,000, and stand at only £10,699,000 or less than £3 12s. per head of population.

At this stage I must refer to other consequences of the 1933 Land Act, which as well as granting a reduction in the annuities payable under the 1923 and subsequent Acts, granted a like reduction in those payable under previous Acts. By the grant of this concession the Exchequer has lost an annual income of £1,480,000; but purchasers under the old Land Acts have been relieved of capital burdens amounting to £38,000,000.

The Act of 1933 also legalised the moratorium which had been granted in respect of certain land annuity gales accruing due in 1932 and 1933 and extended it to cover a period of three years in all. Normally the land annuities thus permitted to remain unpaid, would have been debited against the agricultural and other local taxation grants; and these would have been sequestrated for the general purposes of the Exchequer accordingly. Wherefore, the local ratepayers would have received little or nothing in 1932 and 1933 to mitigate the cost of the local services.

Now we must also note that the default in payments under the Land Acts had been increasing at an accelerating rate prior to 1932 and 1933. At the clearance of the Guarantee Fund in February, 1930, this default amounted to £498,000; but at the corresponding dates in 1931 and 1932 it had risen to £546,000 and £808,000, respectively. Nor, in view of the continuance of the world-wide depression in agriculture, and failing the enactment of the 1933 Act, could it have been expected that the accumulated default would have been less than £1,100,000 in February, 1933, and £1,450,000 a year later. Accordingly, therefore, even if the moratorium had not been granted, an amount equivalent to the accumulated arrears would have been impounded in the Guarantee Fund during the two last-mentioned years, and correspondingly a reduction in the grants-in-relief issued to the local authorities would have been made.

Thanks to the Government, these statutory reductions, whether on account of the moratorium or otherwise, did not take place. Special Exchequer provisions amounting to £1,616,000 in 1932-33, and to £1,844,847 in 1933-34, were made, so as to enable the local taxation grants to be released in those years; while, in addition, special advances totalling £550,000 were made to the local authorities during 1934-35 on the security of the funded land annuity arrears which had accrued up to and including the May-June gale, 1933.

It will be clear, therefore, that the local authorities in effect lost nothing by the provisions of the Land Act of 1933. Instead, they benefited substantially; for the special payments and advances made by the Exchequer to relieve their position amounted to £4,011,000. Moreover, since about 95 per cent. of the Exchequer grants in relief of local taxation which are hypothecated to the Guarantee Fund, is devoted to the direct relief of rates on agricultural land, the agricultural community naturally received practically the full benefit of these special payments.

It is not with this special aspect of the matter that, at this moment, I am particularly concerned, but with the fact that by the payment of £4,011,000 into the Guarantee Fund the Exchequer has secured a good title to an equivalent amount of the funded annuity arrears. So long as the campaign to prevent the payment of annuities constituted a serious menace, and so long as the Exchequer's rights in the Guarantee Fund were the subject of legal challenge, I hesitated to bring these funded arrears into account. Now, however, that there can be no longer any doubt as to the validity of the charge, or as to the ability and determination of the State, acting, of course, for the whole community, to collect the annuities, they cannot but be accounted a sound and well-secured asset, with which to the value of £4,011,000 I have credited the assets accordingly.

Before I go on to mention the position of the Local Loans Fund I should like to call the attention of the Dáil to the very substantial increase recorded in our advances to the Electricity Supply Board and the Shannon Electricity Fund since March, 1932. In that year these amounted all told to £8,785,000; by 31st March last they had increased to £10,889,000. In view of the present satisfactory financial position of the board there need be no hesitation in valuing these advances at par.

It is worthy of note that the sums advanced to the national electricity undertaking last year amounted to £408,000, that is £88,000 more than the amount by which the Exchequer balance was reduced over the same period. Indeed the Exchequer issues to meet capital expenditure during last year, including the additional investment in the Industrial Credit Company, and for the redemption of debt, including the repayment of Savings Certificates and the Dáil Eireann External Loan, together with the payments for Property Losses Compensation and to the sinking funds for the Conversion and National Loans, exceeded the aggregate amount raised by the creation of debt, and derived from the repayment of advances, by £1,124,000.

The House will note that the figure for advances to the Local Loans Fund, up to 31st March last, stands at £13,559,195, as against £2,536,237 for the corresponding date in 1932. Last year I detailed the inter-relation between the old Local Loans, the present fund, and the Exchequer. It is unnecessary for me to repeat what I said then; but in accordance therewith, I propose, as last year, to take the Local Loans figure for 31st March, 1932, as £9,071,902; the figure for 31st March, 1937, as £13,559,195, which it is, and to write up by £6,192,665 the Exchequer obligations at the end of 1931-32, making them £44,878,000.

I wish now to refer to the State's shareholding in the Industrial Credit Company, which was established under the Industrial Credit Act, 1933. This concern has a nominal capital of £5,000,000, in respect of which 1,000,000 ordinary shares of £1 each have been issued. The State's holding consists of 492,064 fully paid up shares, and 499,925 more on which 12/6 per share has been paid, the total value being £804,517, which is the figure credited under this head in the list of Exchequer assets.

The Industrial Credit Company has been very successful since it commenced business. Up to the 15th December last it had carried through capital issues amounting to £3,968,000; while at the 31st October last, after less than three years' activity, its declared net profits amounted to £77,900. No dividend has so far been paid, but out of profits the preliminary expenses of the company, amounting to £13,335, have been written off, £20,000 has been transferred to investment reserve and £25,000 to reserve for contingencies, while £11,330 has been carried forward to the current year's account. All of which reflects the company's very satisfactory position.

In connection with the more general question of industrial finance the Dáil may be interested to know that since the enactment of the Industrial Credit Act in July, 1933, the capital issues offered to the Dublin market, other than those sponsored by the Credit Company, amounted to a net cash total of £2,454,000, bringing the aggregate of capital issues for industrial and commercial purposes, made in Dublin since the passing of the Act, up to £6,422,000. In the three years which preceded that the public issues offered to the Dublin market by companies amounted to only £15,750. These figures go far to substantiate our claim that we have succeeded in creating a capital market in Dublin for Irish industrial and commercial issues.

Another asset to which I should like to refer is our holding in Comhlucht Siuicre Eireann, Teoranta. Comhlucht Siuicre Eireann, Teoranta, as is well known, owns and operates four sugar factories. One of these it purchased as a going concern from the old subsidised undertaking known as the Irish Sugar Manufacturing Company, Limited, the vast majority of the shares in which were held abroad; the three other factories, admittedly among the most efficient in Europe, it has erected since its inception. The operations of the company have so affected the national economy that, whereas in the year 1932 the total imports of sugar into the Saorstát amounted to 86,000 tons, as against a native production of only 23,000, in the year 1936 the positions were reversed, for we made 85,000 tons and imported only 27,000.

The unsatisfactory position of the sugar industry in other countries has created its own difficulties for our industry, since it has resulted in the offering of excess sugar production at cut prices wherever a market could be found for it. In consequence, world sugar prices have been so depressed that, in order to protect our market against uneconomic competition, we have had to concede a larger margin of protection, that is to say, 16/4 per cwt., than was originally contemplated. With the rise in the world price of sugar, however, the need for so large a tariff will disappear, and the protective duty can be adjusted accordingly. I may, perhaps, point out here that if, in addition to the 27,000 tons of sugar which was imported last year, we had also imported, at the prevailing world prices and present rate of customs duty, the whole of the 85,000 tons made in our own factories, we should have secured about £1,400,000 more for the Exchequer, without causing any increase in price to the consumer. The whole of this £1,400,000, with the exception of about £95,000 representing dividends and debenture charges, goes to the benefit of the beet growers and those engaged in the factories and ancillary industries.

Our holding in the sugar company consists of 500,000 ordinary shares of £1 each, on which dividends at the rate of 5 per cent. per annum have been paid for the past two years, and it represents practically the whole of the equity of the concern. In addition to the ordinary shares there are also 500,000 6 per cent. £1 preference shares, and £1,000,000 has been raised by the issue of 4 per cent. debenture stock. It will be clear that the financing of this £2,000,000 undertaking has been prudent and economical. The total of the debenture and preference charges ranking in priority to the ordinary capital only amounts to £70,000 per annum, so that the earning power of our investment being reasonably assured, it is valued at par.

The Dáil will note that this year there appears among the Exchequer liabilities for the first time a figure of £3,600,000 in respect of national school teachers' pensions, being the additional liability assumed by the State in respect of such pensions, and uncovered by assets transferred, or by increased teachers' contributions, or otherwise. The liability in question has arisen in this wise. In July, 1928, an actuarial valuation of the National School Teachers' Pension Fund as at the 31st December, 1926, disclosed a net deficiency of over £4,000,000; from which, in conjunction with other facts, it is reasonable to infer that the fund was insolvent when taken over from the British in 1922. As such a deficiency, if unregarded, must increase at compound interest, the capital assets of the fund would ultimately have been liquidated; in which event teachers would have had to content themselves with the bare and meagre pensions that the fund's contributory income would have sufficed to finance.

The position, therefore, of the teachers in this regard was very grave in 1926, and graver still in 1928, when the true position of the fund was made known. It was a matter which brooked no deferment, for each day made the position worse both for the teachers and the Exchequer. While it is not for me to blame the different interests for what took place, or did not take place, between 1928 and 1932, the fact is that a problem which could have been more easily dealt with in 1928 was left in aggravated from for us, in a much less favourable time, to face.

When, in these circumstances, we came to examine the position, we saw that if the future pensions of the vast body of the national teachers were to be made secure, the old scheme which had so hopelessly broken down must be superseded by a new one, and, naturally, the financial structure of this new scheme must have regard to the new benefits and advantages which it conferred upon the teachers.

It has also to take into account the changed circumstances of the times, not merely from the viewpoint of the teachers, but also from that of the general body of taxpayers who could not upon any ground of equity or justifiable expediency be called upon to shoulder the whole burden of making good the deficiency. Proceeding on this basis a new pensions scheme for national teachers was established with effect as from 1st April, 1934. It gave the national teachers absolute security for their pensions together with certain other benefits and easements. Against these concessions the salary scales have been revised, and the assets of the insolvent fund taken over. These latter consist of securities, yielding approximately £50,000 per annum, together with a statutory annual charge on the Church Temporalities Fund of £26,598. As the assets of the fund have been conserved, the annual income arising therefrom is appropriated yearly in aid of the charge for teachers' pensions, which it is estimated will reach a total of £560,000 per annum in due course.

To meet this charge there will be available ultimately:—(1) the annual income of £76,000 from assets of the old Pensions Fund; (2) the estimated ultimate annual saving of £226,000 due to the revision of the salary scales; and (3) the estimated ultimate annual saving of £108,000 of State grants which would have become payable had the fund been continued on the old basis. All told, however, these will come to only £410,000, and the difference between that figure and £560,000 per annum, has been taken as one of the elements in computing our new capital liability for national teachers' pensions.

I must now point out how the Exchequer has been affected by the operation of the wise and generous provisions of the Housing Act, 1932, with which I dealt very fully last year. Up to the 31st March last the Local Loans Fund had advanced to local authorities for the purposes of the 1932 Housing Act a sum of £5,560,000, of which £2,885,000 was for urban housing and £2,675,000 for rural housing. But, of the amount thus advanced, the State has assumed direct and immediate responsibility for £3,200,000, i.e., 58 per cent. of the whole liability. The amount credited to the Exchequer assets in respect of the Local Loans Fund is, accordingly, for this reason to be written down by that £3,200,000.

Account must be taken also of the moneys raised for housing independently of the Local Loans Fund. So far as can be ascertained, the amount thus borrowed and actually expended on housing to the 31st March last was £3,160,000. The State is wholly responsible for loan charges on this sum to the extent of 52 per cent.; and the Exchequer obligations accordingly must be written up by £1,640,000.

The final balance may now be struck. It places the Exchequer liabilities at £61,161,000, with off-setting assets at £33,394,000, and the net State debt at the 31st March last at £27,767,000.

The figures for 1931-32, after adjustment in respect of the local loans, were: liabilities, £44,878,000; assets, £22,848,000; and net debt, £22,030,000. It will be seen, therefore, that the net State debt has increased by £5,737,000 since March, 1932.

Attempts have been made to confuse the public mind as to the true cause of the increase in the State debt. The fact that in the greater part it has been occasioned by the State's acceptance of direct responsibility for half the burden of the annuities, has been ignored; as has also the fact that it is in another part due to the generous help which the State has given to the local authorities in connection with housing. I have no doubt that in similar fashion those who criticise the Government will endeavour to suppress the further fact that the writing-up of the Exchequer liabilities by £3,600,000 this year has been due to the additional responsibility which the State has accepted for national teachers' pensions.

It is clear in regard to all these matters that they represent only a transfer of burdens within the community; and that there has been no worsening of the position of the community as a whole. And this was particularly the position last year and in the years before when I detailed the position of the debt in relation to housing, and as it had been affected by the 1933 Land Act. Notwithstanding, however, attempts were made last year, by misusing the figure which I gave for the net State debt, to prove that our finances had been maladministered and that the community as a whole was much worse off in consequence. Indeed, as is reported in vol. 62, col. 232, of the Official Debates, it was said of us, that we were

"emulating the example of any fool who wins a sweepstake and proceeds to go on a drunken spree"

—and again, that we were

"deliberately living from day to day without any regard for the future solvency of this country."

In order to dispose of such suggestions, once and for all, and to show how unfounded and irresponsible they are, I have prepared the following account covering the financial transactions and cash operations of the Exchequer from the 1st April, 1932, to the 31st of last month:—

Between 31st March, 1932, and 31st March, 1937, there was:—

(1) RAISED FOR THE PURPOSES OF THE EXCHEQUER:

By short term Exchequer Bills, which, all but £500,000, was subsequently paid off

£5,500,000

,, Savings Certificates

3,546,000

,, Fourth National Loan

5,880,000

,, 4% Conversion Loan

187,644

,, Ways and Means Advances

400,000

,, Advances to meet Capital Expenditure under Telephone Capital Acts

337,000

15,850,644

(2) SECURED BY TRANSFER OF UNAPPLIED SINKING FUND OF FIRST NATIONAL LOAN

1,003,882

(3) RECEIVED FROM REPAYMENT OF ADVANCES:

Under the Shannon Electricity Act, 1925

132,450

Under the Unemployment Insurance Acts, Road Fund (Advances) Act, Land Act, 1923, etc., etc.

1,401,378

£18,388,354

As against these operations, the Government during the same five years has:—

£

(1) Set aside for Sinking Funds

2,731,493

(2) Paid off:

Exchequer Bills

6,000,000

Savings Certificates

2,706,000

Ways and Means Advances

400,000

Dáil Eireann External Loan

537,000

Dáil Eireann Internal Loan

26,000

(3) Provided by way of Grants-in-Aid and Advances to Local Loans Fund

4,737,000

(4) Advanced in cash to the Guarantee Fund

4,010,847

(5) Paid for:

(a) Shares in Comhlucht Siuicre Éireann, Teoranta

500,000

(b) Shares in the Industrial Credit Company

804,517

(6) Issued to meet Capital Expenditure under:

(a) Telephone Capital Acts

337,000

(b) Shannon Electricity and Electricity (Supply) Acts

2,235,835

(c) Miscellaneous Heads, as Barrow Drainage, Purchase of Land for Afforestation, Industrial Alcohol Plant

295,182

(7) Issued as Repayable Advances under Coinage Act, Unemployment Insurance Act, Land Act, 1923, and Road Fund (Advances) Act, 1926

1,443,264

and

(8) Paid for Property Losses Compensation

234,957

TOTAL

£26,999,095

It will be seen that the debit side of this account includes every item of our borrowings. On the other side, however, in order to put the statement beyond question, I have omitted certain items which might have been credited to the present Administration, as, for instance, the sum of £112,000, which was provided to enable the Dairy Disposals Board to reduce its overdraft in respect of losses incurred from 1928 to 1931. But even leaving this and other items out of account, it is clear that over the whole five years of our administration, the Exchequer repayments and capital investments and advances exceed the Exchequer receipts from borrowing, repayment of capital, etc., by no less than £8,610,000. These figures give no support to the foolish contention that this Government has been prodigal or reckless in its administration of the nation's finances. On the contrary, they prove that by prudent management our assets have been not only conserved, but even enlarged.

Let me return again to a consideration of the net State debt, and refer to the items which have occasioned the increase therein.

First, we have the reduction granted in 1933 on the land annuities payable under the 1923 and subsequent Acts, which is responsible for an increase approximately of £12,228,000. If this reduction had been granted ten years earlier, when the 1923 Land Act was passed by the Dáil, there would have accrued to the tenant-purchasers under that Act, by way of savings on their land annuity payments over that ten years, no less than £1,550,000. Here we may note that in the period from February, 1923—under the agreement signed in that month—to March, 1932, no less than £26,803,000 was paid to the British Government in respect of the old land annuities—as much as would more than twice redeem the additional capital liability imposed on the Exchequer by the reduction in the 1923 land annuities.

Then the housing campaign has been responsible for a net increase of £4,840,000 in the net debt since 1932. If this campaign had begun even in 1926, and had been prosecuted with vigour and zeal, the housing problem would have been practically solved by now. True, the net State debt might have been increased in the process, even by so much as £10,000,000. But if, in the period from 1923 to 1932, by retaining our slums we avoided increasing the State debt, we also contrived to hand over to Great Britain, in respect of Local Loans, from which housing is now so largely financed, no less than £5,871,000. If we had this sum now to add to the £11,000,000 which had been raised for housing by taxation and loans over the past five years, the financial aspect of that problem would be a simple one to-day.

The third item in the account is the Teachers' Pensions, in regard to which we have accepted commitments equivalent to a capital liability of £3,600,000. If this liability had been assumed prior to 31st March, 1932, the obligations of the Exchequer at that date must have been written up by about £3,600,000, in which case the net State debt would have stood then at £25,630,000 as compared with £27,767,000 at 31st March last. Those who may be concerned at the growth in our net State debt under this and other heads, will, however, find no consolation in the fact that between 1922 and 1932 £12,204,000 left our Exchequer for the repayment of R.I.C. pensions.

And £35,000,000 to fight a civil war.

The position as I have put it before the House in regard to (1) the annuities payable under the Saorstát Land Acts, (2) the housing problem, and (3) the pensions of national teachers, will, I am sure, bring home to all how grievous a drain the Secret Agreement of 1923 was on our resources. But the point will be emphasised when I say that between 1st April, 1923, and 31st March, 1932, there was paid away £47,839,000, which is almost twice the whole dead-weight debt contracted by the State in the 15 years of its existence.

I note that it has been recently said that in enforcing the Secret Agreement the British Government claims to have collected £22,200,000 by means of penal duties. Now, how can responsibility be imputed to this Government for that? We did not sign the Secret Agreement of 1923; nor even the document known as the Ultimate Financial Settlement—that was done in 1926. Nor did we incite and encourage the British Government to impose the penal tariffs. They had other mentors in that regard, and it is upon them that the responsibility for that £22,200,000 rests.

But one fact of great economic significance has manifested itself in connection with this £22,200,000. It is alleged that it has been collected from our people. If that be true, then it has been collected during the very trough of the deepest economic depression the world has known for some generations; a depression during which indeed we have been told to look back to the period anterior, as the Hebrews did, to the fleshpots of Egypt. Yet the condition of the people has been improving steadily; so that to-day they are much better off than during the five years which preceded the advent of the present Government.

To what is this happy condition of affairs due? I venture to ascribe it to the changes which have been made in our economy, to the enlightened social policy which has been adopted by the present Government, and, economic theories and presumptions notwithstanding, to the gain which has accrued to the country as a whole by the retention and use here of the land annuities and other moneys which were formerly sent abroad.

It is unnecessary to detail the changes in our economic life which have taken place since 1932. We have become in every way more self-supporting, self-sufficient, and self-reliant. We have given practical and effective expression to the patriotic and economic principles of Sinn Féin. We have made our people believe in themselves. And we have shown them that under this new dispensation they can care for themselves. For we have provided them with social services more nearly approaching their due need— and these on so sound a foundation that they need never be constricted or withdrawn.

In order to make the facts in regard to this aspect of the Government's policy clear, I am setting out here a table—which the House can study at leisure — showing the actual amounts expended on the social services proper, and on certain other similar services during the years 1931-32 and 1935-36. I have chosen the latter year for the comparison because it is the latest year for which the expenditure has been audited. The figures for 1931-32 state the expenditure also as audited; so that there can be no question as to the accuracy of the figures or the fairness of the comparison. I also give in the table the official Estimates of the amounts which will be expended in the year 1937-'38 on the particular services under review.

EXPENDITURE ON SOCIAL AND SIMILAR SERVICES.

Audited Expenditure for

Estimate for

1931-32

1935-36

1937-38

SOCIAL SERVICES PROPER.

£

£

£

£

£

£

Old Age Pensions

2,702,318

3,440,689

3,466,650

Unemployment Insurance and Assistance

161,204

1,508,373

1,052,280

National Health Insurance

301,955

295,670

294,084

Widows' and Orphans' Pensions

250,000

450,000

Grants for Milk for poor families

88,583

90,000

Grants for Meat for poor families

301,201

5,000

Relief Schemes or Employment Schemes

156,206

327,755

1,500,000

Improvement of Estates

155,105

484,589

708,750

Provision of allotments, etc., for unemployed

3,918

8,317

—————

3,476,788

—————

6,700,778

—————

7,575,081

TOTAL FOR RELIEF OF DISTRESS

Housing Grants:

Local Government Vote

243,510

610,850

769,432

Gaeltacht Services Vote

46,010

43,706

50,000

—————

289,520

—————

654,556

—————

819,432

TOTAL FOR HOUSING

Miscellaneous Grants in connection with Public Health (Local Government Vote)

178,301

210,069

228,155

TOTAL SOCIAL SERVICES PROPER

3,944,609

7,565,403

8,622,668

OTHER SIMILAR SERVICES.

£

£

£

£

£

£

Education:

Office of the Minister

159,329

157,061

178,188

Primary

3,622,807

3,574,217

3,599,364

Secondary

332,079

391,631

433,170

Technical

176,453

222,817

263,879

University

154,750

173,531

162,300

Erection, etc., of Schools

89,810

126,967

200,000

—————

4,535,228

—————

4,646,224

—————

4,836,901

Local Loans Fund:

Grants in Aid

570,000

Other Advances

919,000

1,000,000

Afforestation:

Cultural Operations

42,759

92,005

136,688

Other Items

17,647

117,077

16,100

Army Pensions

194,992

339,056

602,584

Agricultural Schemes in Congested Districts

37,795

35,179

38,139

TOTAL OTHER SIMILAR SERVICES

5,398,421

6,148,541

6,630,412

TOTAL SOCIAL AND OTHER SIMILAR SERVICES

9,343,030

13,713,944

15,253,080

The table shows that the total expenditure on the social services proper was £7,565,000 in 1935-36; and in the current year is expected to be £8,623,000, as against £3,945,000 in 1931-32. The difference as between the years 1931-32 and 1935-36 was £3,620,000; and as between the former year and the current year is expected to be £4,678,000.

In the same way the expenditure on the other similar services was £5,398,000 in 1931-32, as against £6,149,000 in 1935-36, and an expected expenditure of £6,630,000 for the present year. Excluding the Local Loans Fund from consideration, the increase as between 1931-32 and 1935-36 in expenditure on all the services included in the table was £4,022,000, and as between 1931-32 and the current year is estimated to be £5,480,000.

I am told that, according to recent pronouncements, not merely are the present social services to be maintained, but in a certain—shall we say, unlikely—eventuality, they are actually to be enlarged and expanded, so that according to the Minister for Agriculture an additional £17,000,000 would be required to finance them. Pensions at 65, complete derating, full-time employment for all the unemployed, etc., etc., etc., to the end of the litany, in which everybody is promised something and nobody is disregarded. And all,mirabile dictu, without increasing taxation! In fact, as a happy ending to this Grimm story, taxation is actually to be reduced.

But how like a confession of final despair is such a programme! Those responsible for it may promise anything, but their promises cost them nothing, and are worth nothing.

They fulfilled them, but you never fulfilled your promises.

For, indeed, they cannot believe that they will ever be asked to implement them. Frankly, I confess that I could not in honesty undertake to do so, neither could this Government, nor do I believe could any other Government in this or any other country. Moreover, not having the apocalyptic spirit of the Townshends and the Aberharts, I cannot even conceive how it might be done. I can only point to our social services as they have been enlarged and expanded over the past five years, and tell you what they once cost and what they are costing now.

But after all, the burden and the duty of explaining does not fall on us. It rests on the authors of this extravagant and delusive programme. They can tell us all, and I think they ought to. And tell us moreover why all these good things were not given to us when they were in power. To my mind, the whole thing smacks too much of the "damned good bargain." And that is what the intelligent people of the country are saying about it. They know that we cannot increase public expenditure enormously and at the same time reduce taxation drastically—at least, not without completely disorganising the public finances, and who then will lend the State money to be re-lent at 3 per cent.?

First joke, page 47.

Why put forward a programme that one can joke about?

Wait and see.

Since I am dealing with social services, perhaps I ought to say a word about the debt of the local authorities. The latest figures available in this connection are those for the 31st March, 1936, giving the balance of loans to local authorities then outstanding as £24,573,897. The corresponding figure at 31st March, 1932, was £15,710,711.

Most of the increase thus recorded fell under three heads, all relating to housing. These were:—£2,071,371 for loans under the Small Dwellings Acquisition Act, as against £206,896 to 31st March, 1932; loans under the Housing of the Working Classes Acts, £9,510,860, as compared with £4,099,166, in 1932; and loans for the Labourers Acts, £6,960,700, as against £5,515,745 in 1932. Thus over the four years, out of a total increase of £8,863,186 housing accounts for £8,721,124; while increase under the Public Health Acts amount to only £206,567; the increases under all the remaining heads being insignificant.

Now most of those who have touched on this matter of the indebtedness of local authorities have ignored the fact that the State has completely indemnified the local authorities in respect of a large part of their expenditure on housing since 1932. When this is taken into account, it becomes clear that the net increase of local debt is in fact much less than the gross figures which I have given. For instance, of an increase of £5,411,694 for the Housing of the Working Classes Acts, the State, under the 1932 Act is, or will be responsible in due course for £2,885,000. The same applies to the borrowings for the Labourers Acts, where the State pays for £1,110,000 out of an increase of £1,444,955. Therefore, under these two heads, the net increase in the liability of the local authorities for loans is only £2,861,649, as against the gross figure of £6,856,649 with which they have been debited.

Furthermore, the increase in net liability is not an increase in dead-weight debt. It is offset by the value of the rents which the local authorities derive from their house property. Even if these do not cover quite all the outgoings there is a balance left after defraying the cost of repairs, insurance and management, which is available to reduce the amount which has to be found out of rates to meet the net charges on the loans. Capitalising the rents in question on a 35 year basis at 4 per cent., the net increase since 1932 in dead-weight liability due to the Housing Acts is approximately £1,400,000.

A similar position obtains in regard to the charges held by local authorities under the Small Dwellings Acquisition Act. Experience has shown that in general these are very well-secured. During the year 1935-36, the amount in default or in arrear in respect of them did not exceed 4 per cent. of the collection. It is quite justifiable, therefore, to offset the increase of £1,864,475 in the liability for the Small Dwellings Acquisition Act, by a credit of £1,790,000 on account of the increase in mortgages held against it; giving the net increase in uncovered liability under this head at £75,000.

Altogether, the net increase in the dead weight of local debt incurred for housing in the four years ending 31st March, 1936, was only £1,475,000, as against the gross figure of £8,721,124, which is so commonly taken and mistakenly used in this connection.

Similar adjustments might be made in certain of the other items which have swollen the gross figure for local debt during the years we have been considering, but I need not bother the Dáil in regard to them. It is sufficient to show, as I have shown, that so far from the indebtedness of the local authorities in the period in question having increased by £8,863,186, the dead-weight increase could not in fact have been more than £1,617,000, which does not exceed what is normally to be expected in a progressive community.

Before going on to consider the prospects for the year, there is a certain series of statistics upon which I should like to make some observations. I refer to the figures, which are sometimes quoted, giving the net excess of external assets held by our banks over external liabilities; regarding which it was said last year—I should say by a member of the Opposition:

"The foreign assets of our banks are, so far as I can judge, the only really reliable thermometer of national wealth, and, as revealed by the Currency Commission report, they are down by £11,000,000 in the last five years."

The reference is vol. 62, col. 235.

In dealing with this statement, we must start from the earliest reliable figures bearing on this matter, and these are published in Table V of the Quarterly Statistical Bulletin of the Currency Commission for January, 1934. They relate to the March quarter, 1932. No earlier figures based on the segregation of the assets and liabilities of the banks as between those held within the Free State and those held elsewhere, are available to the public; though it may be possible to make a reasonable assumption as to the figures for the end of the preceding year. It is important to note, in this and other connections, that the figures I shall use are based on the average of sets of figures taken for a selected date in each of the three months of the quarter, and covering all of the eight shareholding banks under the Currency Act, 1927, together with the National City Bank, Limited. They are, therefore, beyond question truly representative.

Now, according to the Currency Commission's figures, the average net excess of external assets of the Irish banks during the March, 1932, quarter amounted to £82.2 millions. The figure then jumped by successive increases in the next three quarters to reach £91.9 millions for the March quarter of 1933. Shall I be accused of facetiousness if I remark that at this period "the only really reliable thermometer of national wealth" must have been in grave danger of bursting—or perhaps it was merely the fantastic thesis which was exploded. However, after March, 1933, the figure gradually fell to £83.0 millions for the December quarter of 1933—when, presumably, according to the "thermometer," the national wealth had about come back to normal.

It is clear that quite unusual causes must have been operating to effect the extremely rapid rise in the figures to March, 1933, and the equally rapid fall to December, 1933. Some of the causes were readily apparent, and I have often adverted to them in this House. But of course with no effect upon those economic hypochondriacs who go around taking their temperatures with home-made thermometers.

Is that a new industry?

Yes, but it is not up to the standard of those which have been established under this Government. I shall refer to these causes briefly again. The first of these is a matter of common knowledge. I refer to the accumulation of funds in the Suspense Account which was opened in 1932, and which amounted ultimately to £4,677,000. We may assume that these moneys were largely invested in sterling securities, and therefore figured in the external assets of the banks, occasioning a net excess under that head.

As to the second, none of us has yet forgotten the intense uneasiness in regard to money matters which permeated the world in the latter end of 1931, the whole of 1932 and part of 1933. During this period, in fear of loss and in anticipation of the moratorium which did in fact occur, large sums were withdrawn from the American banks and lodged abroad. Some of these deposits came to our banks and were responsible for a large part of the increase in the figures for the net external assets of those undertakings. When in time stability was restored to the American banking structure these moneys were repatriated, causing a large part of the decrease which we have noted.

At this period also there was another important influence operating likewise. I refer to the exchange rate between sterling and the dollar. How important it was may be gauged by the fact that whereas the average dollar-sterling exchange rate during December, 1932, i.e., three months before the banking moratorium, was 3.27, the average rate during July, 1933, was 4.64, i.e., the rate had appreciated in favour of sterling by approximately 40 per cent. in the course of these seven months. Holders of American funds in December, 1932, could, therefore, purchase sterling securities on a basis of 67 per cent. of the par rate of exchange; and, subsequently in July, 1933, could resell them and repatriate their funds on a basis of 95 per cent. of the par rate of exchange.

The facts which I have recounted as to the flow of American funds to and from this country during 1932 and 1933 ought to enforce upon us the need for caution in making assumptions as to the origin of assets held by banks. It is quite impossible, from the figures which are published from time to time by our banks, to say to what extent they do in fact represent funds held to the credit of our nationals, or how much of the accounted assets represents foreign funds entrusted to our institutions for safe-keeping.

The conversion of the British War Loan announced in June, 1932, was a third factor which influenced bank figures for external assets. The State, and other Saorstát holders, accepted redemption or realised their holdings and placed the money on deposit with the banks to swell their already large sterling assets. The reinvestment of these moneys, which in the case of certain very large holders was not completed until 1934, later led to a substantial fall; and this position was reflected in the bank figures for the first two quarters of 1934, which declined from £83,000,000 in December, 1933, to £81,500,000 and £79,000,000 respectively.

During 1934 a new influence also began to manifest itself with the rise in Stock Exchange values. For investors who, having realised their holdings and cut their losses had placed their liquid capital on deposit during the slump, began once more to take an interest in the markets; so that deposits tended to be withdrawn again for the purchase of external securities, especially in London. There also came into play at this time, a new factor of great weight, and from the point of view of our own general economy of even greater significance than the others. I refer to the great industrial developments which have been the fruit of the Government's policy. The inevitable consequence has been a considerable increase in the imports of constructional goods, machinery, raw materials, etc., as well as an additional demand for consumption goods by workers engaged on capital construction work in the new industries. During the three years ended December, 1936, the amount of capital raised by public subscription to finance the industrial revival was not less than £6,277,000, while the amount secured privately might be half as much. Manifestly this internal investment operated to reduce still further the net excess of our banks' external assets from the abnormal figure which was reached in the beginning of 1933. But can it be denied that the employment of these idle funds in industry here has been of great benefit and advantage, not merely to the banks, who have found more remunerative customers, and to the private investor, but to the community as a whole?

All the causes I have referred to have operated to reduce the figure of external net assets of the Irish banks. In the light of them, how can it be said with certainty that the figure for net external assets of our banks having decreased, our foreign assets have decreased in like measure or that we are poorer in consequence, or, as was said last year, that we are "living from day to day without any regard to the solvency of the country."

But what gloss will the author of the statement that "the foreign assets of our banks are the only really reliable thermometer of national wealth" put on the further and later changes in this elusive and very complex concept which we commonly refer to as "our net external assets"?

The downward trend of the figures we have been considering continued until it reached its lowest with the average of £70,000,000 for the September quarter of 1935. Thereafter, it began to increase, being £71,300,000 for the December quarter of that year, and £72,100,000, £72,400,000, £72,000,000 for the first three quarters of 1936, culminating in a figure of £72,600,000 as the average for the last quarter of last year. What those who look on these figures as "the only really reliable thermometer of national wealth" have to say about them, I shall await with great interest. But perhaps we shall hear nothing; for I understand that it is difficult to speak when one is swallowing a "thermometer," even "the only really reliable thermometer of national wealth."

But there are two other important facts bearing on this question of the net excess external assets of the banks which I must mention. One is the position in regard to the sterling assets of the Currency Commission, mainly in the Legal Tender Note Fund, as set out in Table II of the Currency Commission Bulletin. These assets increased by no less than £3,030,000 between 31st December, 1931, and 31st December, 1936. I may say, in passing, that this increase is a manifestation of the expansion which has taken place in our internal trade and savings over the period in question. But the point I wish to stress now is that, in general, legal tender notes are issued only to the banks, and only against drafts on London. Naturally, any increase in this issue, other elements remaining constant, must occasion a draw on the external assets of the banks, and must be set against any apparent diminution thereof.

The second fact is that between 31st December, 1931, and 31st December, 1936, the sterling assets to the credit of certain Departmental funds increased by £3,770,000. This increase is likewise to be set off against any shrinkage indicated by figures for the banks' external assets.

What, finally, is the position after five years in regard to such of our external assets as are easily traceable? We have four items to go upon. There is, first of all, the figure taken from Table V of the Currency Commission's Bulletin, showing, as the average position during the March quarter of 1932, that the external assets of our banks exceeded their external liabilities by £82,200,000. We have from the same source the corresponding figure for the December quarter of 1936, that is, £72,600,000. And we have to add to that latter figure £3,030,000, being the increase in the sterling assets of the Currency Commission between December, 1931, and December, 1936; and we have to add to that again, £3,770,000, being the increase in the sterling assets held by Departmental Funds over the same period.

On these figures, the foreign assets held under the three heads I have mentioned declined by £2,800,000 between the March quarter of 1932 and the December quarter of 1936. But it is to be remembered that the figures for 1932 show that year to have been a wholly abnormal one in regard to these external assets, and that all the factors which tended to increase these during that year were operative during the first quarter of it. If we were able to get reliable returns for the banks' external assets and liabilities in the summer of 1931, I dare say that the net excess of the assets would be returned at a lower figure than for March, 1932. It is not possible, however, to get these figures, and the best we can do now is to surmise what the position was at the end of December, 1931. In my view, and speaking with every reservation, I do not think we should be justified in fixing the net excess of the banks' external assets at December, 1931, at higher than £81,000,000.

If we care to take this figure, though it may be a liberally high one, and apply it with full advertence to all I have already said regarding it, we shall find that, notwithstanding the repatriation to their countries of origin of the fugitive moneys which were lodged for safety with our banks in 1932; notwithstanding the withdrawal by our citizens for investment at home and abroad of very large sums which they had on deposit with our banks during the "slump" years of 1932, 1933 and 1934; notwithstanding the £11,000,000 which since August, 1932, has been raised and expended by the State and local authorities for housing and the considerable sums spent on public health schemes and employment schemes, and on sugar factories, electricity supply, telephones, and so on, there has been practically no change since December, 1931, in the aggregate value of such net external assets as are held by our banks, the Currency Commission, and Departmental Funds.

We may now consider the position for the current year. The White Paper which has been presented to the Dáil gives the Estimate for receipts as £31,706,000 and for expenditure as £33,624,000.

These Estimates, however, assume that the taxes and duties at the moment in force will continue to be charged during the remainder of the year, and that the total required for the Supply Services is that set forth in the volume of Estimates, with the addition of the Supplementary Estimate for External Affairs passed last week. I may say at once that these assumptions will not hold.

When it became apparent that the revenue position was favourable, the Minister for Local Government and Public Health secured acceptance for the proposition that the first charge upon any surplus there might be should be for widows and orphans. The new Widows' and Orphans' Pensions Act, giving effect to this decision, necessitates a further contribution of £200,000 per annum to the fund, raising the annual Exchequer subvention there is to £450,000. Our original supply figure of £29,270,269 is to be written up accordingly.

The Minister for Defence has secured leave of the House to introduce a Bill which will amend and extend the Army Pensions Acts, 1923 to 1932, so as to make better provision for the dependents of those who were killed, and for the personal needs of those who were wounded or incapacitated in the conflicts from Easter Week, 1916, to May, 1923. This proposal will cost not less than £40,000 per annum, and, again, we must increase the total for Supply Services to correspond.

When this Government took office in 1932, it was evident that the heavy slump in prices which had taken place on the British market in 1930 and 1931 was likely to continue for some years, with serious consequences to the dairy industry. A collapse would have meant ruin for the dairying districts and drastic measures were necessary to prevent it. Accordingly, in April, 1932, the Minister for Agriculture introduced the Dairy Produce (Price Stabilisation) Act under which, in the period which has since elapsed, £3,403,000, supplemented by a further £2,948,000 from the Export Bounties and Subsidies Vote, making £6,351,000 in all, has been provided for the assistance of the dairy industry.

To show the nature of the problem with which the Government was faced in this regard on assuming office, and as an indication of the great decline in the world value of dairy produce subsequent to 1929, the position of New Zealand butter on the British market may be instanced. The average price of that butter delivered in Great Britain fell from 173/- per cwt. in 1929, to 138/- in 1930, and 112/- in 1931. The following year the average price was 101/-, which dropped to 81/- in 1933, and to 73/- in 1934. The value advanced to 88/- in 1935, and last year the average price reached 96/-. If there had been no intervention of any kind on the part of the Government, the average butter prices received by Saorstát farmers would be, approximately, the same as those cited. They were, however, appreciably higher in fact, through the operation of the levy, bounty and subsidy system since 1932. The unavoidable measures which had to be taken to save this most important industry entailed, no doubt, some increase in the price of butter to the consumer, a fact which has been continuously before the Government.

In the course of the preparation of his Estimates, the Minister for Agriculture intimated that he desired to wipe out completely the levy on farmers' butter and to reduce to a low rate the levy on creamery butter. Provision has been made already in the Estimates to give effect to the first concession at a net cost to the Exchequer of £33,000. We have now to consider what may be done in relation to the levy on creamery butter and, in that regard, for the butter consumers also.

In dealing with this matter as it affects milk producers, the Government has first taken into consideration the fact that whereas no levy has been placed on non-creamery butter, a levy at the rate of 27/- per cwt. has been imposed on domestic sales of creamery butter from the 1st of the current month. It has been decided to refund portion of this levy at the rate of 17/- per cwt., thereby reducing the net levy to 10/- per cwt., which was the rate in force from the 1st December to 31st March last. It has also been estimated that if the provision for export bounties and subsidies were increased by an additional £350,000 this year, a reduction in the price of butter to the consumer can be secured. We propose to provide this sum, which will cover the reduction in the creamery levy, and should enable butter to be reduced at the beginning of next month by 2d. per lb. Incidentally, it may be noted that the additional subsidy will raise the gross total of the Supply Estimates to £29,860,269.

I need not point out that this figure of £29,860,269 covers many items of a capital nature which elsewhere, in framing the Budget, would not be brought into account at all. I may cite, for example, the amounts totalling £355,000 provided in the Estimates under various heads for the new airports. I have decided, after making due allowance for all contingencies, that towards the acquisition of lands for the ports, and the construction of the necessary works, we shall find £220,000 out of borrowings. Then we have £198,000 for the Industrial Alcohol Factories, for which I propose, if necessary, to borrow £50,000, as well as £49,000 for Property Losses Compensations, and £25,000, being half the amount which it is expected to spend upon new Volunteer halls.

Due to the difficulties inseparable from launching so large a programme of public works, we completed only half of our Employment Schemes schedule before the close of the last financial year. We should have been quite justified in borrowing the sum of £125,000 towards the cost of the works actually executed, but it was, in fact, not necessary to borrow. I see no good reason why the taxpayer should not secure some additional advantage this year under that head. Accordingly, out of this year's figure of £1,500,000 for Employment Schemes, I shall provisionally reserve for borrowing, as against the contingency of an insufficient surplus, the sum of £330,000.

Finally, bearing in mind what I have already said in regard to the cost of the export bounties and subsidies, I cannot see how any valid objection whatsoever can be raised if we earmark one-half of the total amount required under this head for borrowing, if necessary.

The items I have mentioned amount, in all, to £1,970,000, and by deducting them from the earlier-given figure of £29,860,269, the latter is reduced to £27,890,269.

We have now to consider the allowance to be made for over-estimation. And, in that connection, I may remind the Dáil that the art of estimation is nowhere an exact science —not even in regard to the comparatively simple matter of household expenditure; less so when we come to deal with the affairs of a business concern, and least of all in relation to the expenses of the State with its multitudinous and complicated services, administered by spending departments which are largely independent of each other in the detailed administration of the affairs for which they have particular responsibility.

Now, each Government Service is estimated for separately item by item, and the Estimate must be so framed that the Minister responsible will always be in a position to show that he has made full and contingent provision for the service concerned. Thus, every item includes some relatively substantial allowance for unforeseen contingencies.

What, then, is the Minister for Finance to do when he comes to consider the financial provision to be made during the year for all the items of all the services in question? He knows that against every single subhead there is debited a sum designed to assure that the amount asked therefor will cover not merely the probable but even the possible cost during the year. In the Volume of Estimates there are thousands of such items, each carrying its separate substantial quantum of assurance. Is he to take the simple sum of all these subheads, including their separate assurances, and, slapping the whole burden down on the taxpayer, say, "I must have the whole gross amount?"

He might justifiably adopt such a course if he had not already made full provision, say, for Sinking Funds; for, in that case, he could profitably utilise for the reduction of debt any surplus which might accrue on the year's working.

But where proper provision has already been made, as it has been made in our case, for the reduction of debt, the position is altogether different; for, then, a large surplus is not required to do what is already being done by the Sinking Funds. Though if, following a reduction in the rate of taxation, a large surplus does arise as a clear manifestation of improving economic conditions in the country, it is not to be scorned, any more than is a bountiful harvest. In this connection, I may point out also that it is only on the basis of conditions as they are at the beginning of the year that a Budget may be soundly framed, and not upon our rosy expectations as to its end. Therefore, if the public finances are soundly managed, large surpluses are the inevitable concomitants of a sound economy. But they are not to be budgeted for.

This, then, is the dilemma which confronts the Minister for Finance. He may not take the simple sum of the Estimates and Budget for that amount, or he will have an unwieldy and, I should say, unjustifiably large surplus. Nor may he under-budget. He knows, however, that the whole vast business of insurance has been based on the fact that it has been found in practice that the actual amount required to cover a large group of diversified risks is less than would be required to cover independently each separate risk in that group. But each individual element of risk has been separately and independently covered in the gross total of the Estimates with which he has to deal, and he proceeds to make allowance for that fact accordingly. The difference which past experience has shown to exist between the amount required to cover the group risk of under-estimation for the Public Services, taken as a whole, and the simple sum of each separate element of that risk, as it has already been assured against in the Estimates is the allowance which the Minister for Finance is justified in making for over-estimation when he is framing his Budget.

It should be clear from what I have said that there is no question here "of admitting a mistake of £1,000,000 in preparing the Estimates" as was suggested last year. On the contrary, each individual Estimate has been prepared, as I said, with the greatest care and is as accurate as human foresight, based on long experience, can make it.

Nor is the figure for over-estimation arbitrarily determined for the purpose of striking a balance, or closing a gap between the two sides of the Budget account. The allowance is made simply in order to avoid the imposition of unnecessary taxation. Obviously it is the duty of the Minister for Finance to make such an allowance as large as he feels it safe to do, but, of course, no larger. How large it may be depends entirely on the circumstances of the time. In periods of stress, when unforeseen circumstances may occasion unforeseen expenditure on a large scale, he will naturally be, as I was in 1932, conservative. When times improve the allowance can be enlarged; indeed, the better the times the larger the allowance may safely be. Last year I fixed it at £950,000, and the out-turn of that year has shown that the figure was far from excessive. We had the same experience in regard to 1935-36. Accordingly this year I feel justified in increasing the allowance to £1,200,000, thereby reducing the figure which this year's revenue must cover to £31,044,000.

Before I proceed to deal with the revenue position generally I should like to deal with a matter to which I referred last year, and which still causes grave concern to the Revenue Commissioners and to me. I need not emphasise how important to our Exchequer is the return which we get from income-tax and surtax. Nor need I dwell upon the ingenious shifts and devices which have been adopted from time to time to escape the incidence of these taxes. There is, however, one in particular which has been increasingly resorted to. I refer to the practice of transferring income to children. Section 20 of the Finance Act, 1922, contained certain provisions which were designed to minimise the loss arising from such a practice, but, broadly speaking, these have not been operative in relation to permanent or quasi-permanent settlements. The result has been that such settlements have been availed of to an increasing extent, whereby the loss of revenue now arising is not less than £16,000 a year. It will become much more serious if amending legislation be not introduced to curb this practice, profitable to those who adopt it, only at the expense of the ordinary taxpayer who is unwilling—maybe I should say, who is unable—to resort to devices of the kind.

I propose, therefore, to ask the Dáil to legislate to provide broadly that in future the income of an infant and unmarried child which is derived from the parent under any settlement made by the parent or as a result of a transfer of investments made by the parent should (as long as the child is an infant and unmarried and the parent is living) be treated for the purpose of income-tax and surtax as the income of the parent. The new provision may be expected to save the Exchequer about £5,000 in the present financial year, and not less than about £16,000 per annum in subsequent years.

Among the resolutions which will be submitted to the House to-day are a number which are put forward, at the instance of the Minister for Industry and Commerce and the Minister for Agriculture in pursuance of the policy of the Government, to protect and foster native industry. These will impose a number of new protective duties of a minor character, will consolidate and simplify the existing duties on clothing and wearing apparel, will amend certain of the existing duties, and abolish certain others. The net effect of the changes on the revenue will be inconsiderable, but they may bring in about £30,000 in the current year.

We may now recall that the White Paper Estimates for Tax and Non-Tax Revenue in the current year amounted to £31,706,000, to which at this stage we may add the two amounts of £5,000 and £30,000, bringing the Estimate for the year's revenue up to £31,741,000.

It is clear from this figure that for this year we may expect a comfortable surplus, a large part of which has, however, been appropriated already. For £200,000 goes, as I have said, to the Widows' and Orphans' Pensions scheme; then £40,000 is earmarked for making further provision for the dependents of members of the Irish Republican Army who were killed in the struggle from 1916 to 1923, and for combatants who were wounded or incapacitated during that period; then there is the cost of abolishing the levy on farmers' butter, which has been taken into account in compiling the Supply Estimates; and, lastly, there is £350,000 required to reduce the levy on creamery butter, and to enable its cost to the consumer to be reduced by 2d. per lb.

All told, the new concessions and mitigations which I have recounted will cost £623,000 in the present year, of which at least £431,500 must be found out of revenue. The Dáil will remember, however, that before striking the final figure of £31,044,000 for the year's expenditure we had made due allowance for that fact, and accordingly it is clear that we have still £697,000 as the unappropriated surplus for the year, which we may now dispose of.

I think it will be agreed that, judged by the standards which are in force elsewhere, our direct taxes are not so heavy as to be other than fair and equitable. I am sure, therefore, that if we appropriate virtually the whole balance of the surplus to the reduction of indirect taxation, it will meet with general acceptance.

There are, however, a couple of minor relaxations in the income-tax code which I propose first to grant. The first relates to the position of registered trade unions which assure annuities. Sub-section (2) of Section 39 of the Income Tax Act, 1918, provides that "a registered trade union which is precluded, by Act of Parliament or by its rules, from assuring to any person a sum exceeding £300 by way of gross sum, or £52 a year by way of annuity, shall be entitled to exemption from tax under Schedules A, C and D in respect of its interest and dividends which are applicable and applied solely for the purpose of provident benefits." I propose to raise the limit in the case of the annuity mentioned in the sub-section in question to £80.

The next relates to the setting-off of losses. It sometimes happens that a trader who incurs a loss in his business is unable for income-tax purposes to get the benefit of such loss as a set-off against his profits during the ensuing six years to the full extent contemplated by Section 14 of the Finance Act, 1929, owing to the fact that in some of those years his profits are, for assessment purposes, partially wiped out by allowances for the wear and tear of his plant and machinery. It is considered that a concession should be given to meet this anomaly, and the necessary provision will be embodied in the Finance Bill with effect as from the 6th April, 1936.

Last year I was able to agree, on the recommendation of the Minister for Posts and Telegraphs, to certain concessions to the public in relation to telephone charges. This year the Minister has pressed for further concessions in regard to other Post Office services, and I am glad to say that I have been able to agree to certain reductions in charges and improvements in services which are estimated to cost in all £43,000. As the Vote for the Department of Posts and Telegraphs will shortly be before the Dáil I shall leave to the Minister for Posts and Telegraphs the pleasant task of detailing the concessions which he has secured.

My views upon tea as a medium of taxation are well known though they are not shared by everybody. Indeed, when I introduced my first Budget in 1932, I think the sternest battles in the debate were waged around the proposal to put a modest duty on tea. Now, however, it is proposed to reduce as from the 14th June next the rate of the full duty on tea from 6d. to 2d. and the rate of the preferential duty from 4d. to "nil." This proposal involves a loss of revenue in the current year of £325,000 and in a full year of £375,000. It differs very little as regards the burden on the public from the total abolition of the duty, as the yield will be reduced from over £400,000 to about £40,000, and there is some reason to believe that this amount will in fact be borne by the growers. Itdoes differ, however, from total abolition of the duty in one very important respect, since it maintains an important protective effect which has been in operation for a number of years, and which has resulted in the almost complete transfer of the blending of tea for our market from London to different centres within the Saorstát. To qualify for the preferential rate of duty not only must tea be the produce of a country within the British Commonwealth of Nations, but it is also essential that it shall not have been blended before importation in any country outside the country of origin.

Among the proposals which I asked the Dáil to accept in the Budget for 1932-33 was one which I regarded as a very exceptional measure. I refer to the increase in the stamp duty on the consolidated bank note issue. When I raised the original duty on these notes to 3 per cent., I did not intend that the issuing banks, taking everything into account, would be compelled to provide this form of public currency upon terms which would be definitely unremunerative to them. Owing, however, to the changes which have taken place in money market conditions since, that position has not been maintained, and the issue is now being made and managed by the banks at a definite loss, of which some large part must of necessity be passed on to their customers. I propose, therefore, by reducing the stamp duty by 10/- per cent., that is, from £3 per cent. to £2 10s. per cent., to ease the situation to which the maintenance of the duty at the higher rate has given rise.

Deputies who are interested in the history of our sugar industry will recall that at the end of 1931 the customs duty on imported sugar was at the rate of 16/4 per cwt., or 1¾d. per lb. That was in 1931. To-day it is 18/8 per cwt., that is 2d. per lb.; while the excise duty on the home-manufactured commodity is 2/4 per cwt., that is ¼d. per lb., as against 4/8 per cwt., or ½d. per lb., at the end of 1931. Last year we reduced the customs and excise duties on sugar by 2/4 per cwt., the equivalent of ¼d. per lb. We are now, I am glad to say, in the position that as from 1st June next we can reduce the customs duty on the imported article by a further 2/4 per cwt., or ¼d. per lb., and the excise duty on home-manufactured sugar by ½ per cwt., or ?d. per lb. Comhlucht Siuicre Eireann, Teoranta, taking advantage of these remissions in duty, and supplementing them by the reduction which on its own behalf it feels called upon to make, will simultaneously reduce the duty-paid price of sugar to its customers by 2/4 per cwt., enabling a corresponding reduction of ¼d. per lb. to be made to the consumer. The Exchequer's part in this reduction will cost us £121,000 this year, and £145,000 in a full year. If the resolutions which I will recommend to the Dáil are accepted, the new rate of the customs duty as from 1st June next, therefore, will be 16/4 per cwt., or 1¾d. per lb., and the new rate of the excise duty will be ½ per cwt., or ?d. per lb.

One other remission I can grant, and that is as from to-morrow to remit completely the existing duty of 6d. per cwt. on imported wheat, which will cost the Exchequer £170,000.

The final position, therefore, for this year is that we have, first of all, a surplus providing an additional £200,000 for widows' and orphans' pensions, an extra £40,000 for wounds and disability pensions and dependents' allowances under the Army Pensions Acts, a sum of £33,000 against the remission of the levy on farmers' butter, a further sum of £350,000 for export bounties and subsidies, so as to reduce the levy on creamery butter, and to enable the price thereof to consumers to be reduced by 2d. per lb. Then, having provided for certain improvements in the Post Office services and certain reductions in charges connected therewith, granted certain relaxations of the income tax law and reduced the charges on the consolidated bank-note issue, we have also provided, as from 1st June next, for a reduction of 2/4 per cwt. in the customs duty on imported sugar and a reduction in excise duty of half that amount, so as to permit the price of sugar to the consumer to be reduced by ¼d. per lb. We are abolishing completely as from to-morrow the customs duty on wheat, and by reducing the customs duty on tea by 4d. per lb. intend that article to be by so much cheaper as from 14th June next.

I have only to say now that the facts and the figures which I have placed, not merely before this House but before the country, speak for themselves. They show that, while the needs of our people have been in every way regarded, what we have done in their behalf has been based upon a solid foundation. In the best, and in the original sense of that so often misused and misapplied word, we have been conservative. We have conserved every good thing which was passed on to us, and by prudent management and careful foresight have increased the national estate; so that to-day our little community is stronger in will, stouter in heart, more confident of its future, than it was this time five years ago.

Why do you not go to the chapel gates and tell them that?

With gratitude to Divine Providence that this should be so, I pray that the future may hold for our people further progress in the ways of peace and industry.