The financial year which closed on the 31st March last betrayed all the hopes which were founded on its auspicious opening. The ever-increasing tension between some of the more powerful States of Europe, manifested in recurrent crises which were only partially resolved by the postponement of war, had repercussions of a most disadvantageous character upon our Exchequer position. For instance, the fall in stock exchange values occasioned by the uneasy and unstable international situation, showed itself in a decline of £84,000 in the receipt from estate duties, while a decrease in the turnover of the Sweepstakes was expressed in the reduced return from stamp duties, upon which the decline in the value of stamped transactions had an additional depressing effect. Corporation profits tax was likewise disappointing, as was the yield from excise. If it were not for the fact that an unexpected and unlooked-for overplus of £562,000 on the Estimate occurred in the customs duty form imported sugar, and that there was a small excess of £28,000 in the receipt from income-tax, as well as of £18,000 from excess profits duty, the revenue from taxation would not have filled our estimate by £291,000. Thanks to these, however, the actual yield from general taxation of £24,825,000, together with £1,162,000 from motor vehicle duties, exceeded by £317,000 the original Budget estimate of £25,670,000 for the tax revenue.
The main classified yields for the year are to be found in the Estimates White Paper which was circulated some days ago; while the aggregate figures for the tax and non-tax revenues, as compared with the original Budget estimates, are to be found in Table 1 of the tables relating to the financial statement, which, following the precedent of last year, have been circulated to the House. From this table it will be seen that the total revenue from tax and non-tax sources amounted to £31,884,000, or £379,000 over the estimate.
The position as regards expenditure was not at all so favourable. As Table I shows, the issues for Central Fund Services at £4,850,000 exceeded the Budget estimate by £41,710; while on the supply side the total outlay came to £28,260,000. Thus under all heads, capital and otherwise, covered by the Budget we spent £33,110,000.
The figure I have given covers the expenditure which took place on certain capital works, such as airport construction, to defray the cost of which, as I stated last year and as Table I shows, we were prepared to borrow. The borrowings, in fact, came to be much less than I had anticipated, for the reason that progress on the capital works being slow, expenditure upon them was much less than had been budgeted for. Indeed, of such savings as were made last year a large part, no less than £1,300,000, arose in respect of services such as airport construction and defensive armaments, in which there was a large capital element. On the other hand a great deal of overspending took place upon certain recurring public services, like unemployment assistance, which ought to be, and if the public credit is to be preserved must be, paid for out of revenue. The final position is that with a total revenue of £31,884,000 and a total expenditure of £33,110,000, of which only £698,500 can be charged to borrowings, there was a deficit on last year's Budget of £527,500.
During the year with which we have been dealing certain special circumstances aggravated the demands on the Exchequer and helped to bring about the deficit. The first of these was a deficiency of £68,000 in the Appropriations-in-Aid of Vote 61 on account of unemployment assistance. It arose through certain public authorities withholding payment of moneys due under the Unemployment Assistance Acts to the Exchequer. A Bill which will fully clear up the position in that regard will be introduced in due course. Another circumstance was the intensification of expenditure upon defence which in consequence of the increasingly critical international situation has continued at an accelerating rate since last autnmn. The larger expenditure has been mainly upon increased personnel, personal allowances and equipment, and supplies of munitions rather than upon what may be described as capital armaments. It is likely to be a recurring charge against revenue of approximately £200,000 per annum. A third circumstance was the increase in the cost of unemployment assistance consequent upon the higher rates of assistance granted by the Unemployment Assistance Act of 1938. It has been estimated that the higher rates in question account for approximately £200,000 of the additional expenditure from the Vote for Unemployment Insurance and Unemployment Assistance. Between them the three factors which I have mentioned were responsible in round figures for £468,000 of increased expenditure as compared with the previous year.
The Votes for the Army and for Unemployment Insurance and Unemployment Assistance were not, unfortunately, the only services in respect of which we had increased expenditure last year. The outlay upon four Education Votes was up by £243,700, of which teachers in primary schools received £131,580. Posts and Telegraphs took £125,000 more than last year, £81,379 being in respect of remuneration. There was an increase of £122,000 in expenditure out of the Employment Schemes Vote, with increases likewise of £139,000 on Agriculture, £115,000 on Industry and Commerce, £80,000 on Local Government and Public Health, £60,000 on Old Age Pensions, £66,000 on Lands, £44,000 on Army Pensions, £32,000 on Forestry, together with smaller increases on other Votes, making, with the figures which I have just mentioned, a total increase of £1,997,000 in respect of 55 Votes.
The increases were offset to the extent of £1,437,000 by reduced spending on 17 other Votes (including £1,405,000 in respect of Export Bounties and Subsidies, £14,000 for Property Losses Compensation, £3,700 for Secret Service, £1,500 for Law Charges, £4,800 for Science and Art, and £1,800 for the Industrial and Commercial Property Registration Office), and to the further extent of £60,000, making £1,497,000 in all, by the non-repetition of certain provisions made in the previous year.
In Table II the issue for each Vote for 1938-39, as compared with the corresponding figure for the preceding year, is set out. No doubt the figures given therein will receive the careful scrutiny of the Dáil—and, may I hope, of the taxpayer. They may not console him, but at least they will tell him where his money is going.
Before I go on to deal with other aspects of our public finances I may mention that last year 38.8 per cent. of our tax revenue came from customs duties; 23.5 per cent. from excise duties; 33.2 per cent. from taxes on income, property, profits and stamped transactions; and 4.5 per cent. from motor vehicle duties; while 18.5 per cent. of our total revenue came otherwise than from taxation. It may be of interest to mention that the yield from customs duty on sugar in 1938-39 amounted to 3.6 per cent. of the total tax revenue as compared with 1.4 per cent. in 1937-38.
Last year I gave, in Table III, a statement of the financial transactions and cash operations of the Exchequer for the period from the 1st April, 1932, to 31st March, 1938. I have extended that statement to cover the period to the end of the last financial year. It will be noted that in addition to the £10,000,000 raised by the Financial Agreement Loan, there were other borrowings for the Exchequer account amounting to £9,879,000, while the Exchequer also received in repayment of former advances £187,658, making a total receipt "below the line" of £20,066,658. To this may be added £60,000 secured by capital repayments on foot of funding annuities, making a total Exchequer receipt of £20,126,658. As against these receipts the cash outgoings for capital purposes for the year 1938-39 amounted to £19,954,014, which included the £10,000,000 paid to Great Britain under the Financial Agreement; together with issues such as £453,704 set aside for Sinking Funds; £450,000 provided for Local Loans Funds; £1,042,700 issued for capital expenditure under Shannon Electricity, Electricity (Supply) and Liffey Reservoir Acts, and Telephone Capital Acts; and £27,310 issued as a repayable advance under the Coinage Act, 1926. The net position, as may be seen from the table, is that whereas at the 31st March, 1938, the payments from the Exchequer for purposes such as I have mentioned exceeded receipts by £9,047,412, the excess of payments over receipts at 31st March last was only £8,617,733.
Turning to Table IV, which constitutes a comparative statement of the capital liabilities of the State as at the 31st March of this year and last year, respectively, it will be seen that the figure for our total gross liabilities has increased from £56,834,996 to £69,038,080. These figures, it must be noted, give only the liability immediately attaching to the Exchequer in regard to stock issued by it, moneys raised, and liabilities directly contracted by it. Against the liabilities there are certain off-setting assets, among which are repayable advances to the Local Loans Fund amounting to £14,455,084. In previous Budget statements I have pointed out that most of these advances have been made to finance loans granted to local authorities to enable them to undertake housing schemes under the Housing Acts, 1932-1938. The Exchequer, however, under the provisions of these Acts is itself charged to make good to the borrowers a very large part of the capital charges in respect of these loans. Accordingly, in so far as advances to the Local Loans Fund are brought into account as an asset of the Exchequer, the value of that asset should be written down by the equivalent of the Exchequer liabilities to the local authorities concerned in the advances.
Not only, however, do liabilities attach to the Exchequer in respect of housing loans made by the Local Loans Fund, it has liabilities also in respect of the housing loans which certain local authorities, the Dublin Corporation for instance, raise from other sources. One way of bringing these likewise into account would be to write-up the figure given in Table IV for the gross liabilities of the Exchequer by £2,270,000.
The full extent of the assistance given by the Government to the local authorities in this matter of housing, however, may be expressed more conveniently by an aggregate figure covering both the writing-down of the assets appropriate to bring out the net value to the Exchequer of the Local Loans Fund advances, and the writing-up of the Exchequer liabilities necessary to represent the State's liabilities in respect of housing loans from other sources. This figure is given in a foot-note to Table IV. It will be seen there that the liability of the State at the 31st March last in respect of the outstanding indebtedness of local authorities for moneys raised under the 1932 and subsequent Housing Acts was £7,320,000 after allowing for the operation of the Sinking Funds. The total outstanding debt contracted by the local authorities for housing was £13,285,000. A year earlier the Government liability in respect of the local authorities' housing debt outstanding was £6,100,000 out of a total of £10,575,000. It may also be mentioned that the initial capital value of the liability incurred by the State up to the 31st March last in respect of the total amount, £13,780,000, originally raised by local authorities under the Acts was £7,515,000.
The figures which I have given show that at the 31st March last the Exchequer had accepted responsibility for no less than 54½ per cent. of the cost of new housing for the people. In the light of this fact it must be admitted that the State's contribution towards the solution of this problem, which is as much a matter of local as of national concern, is ample and generous. It may not be out of place in this connection to mention that, up to the 31st March last, the liability which the Government had accepted for the programme carried out by the Dublin Corporation under the 1932 and subsequent Housing Acts amounted to 43½ per cent. of the total cost to that date.
It is necessary if we are to get a fuller picture of the capital obligations of the Exchequer at the close of the last financial year to add the figure which I have given for the capital value of the State's liability under the Housing Acts to the amount set down in Table IV for the Exchequer liabilities, raising it to £76,358,000. The corresponding figure at the 31st March, 1938, was £62,934,996, and at 31st March, 1932, £44,878,000.
Against the liabilities to which I have referred we have, as already mentioned, to put certain assets. These also are enumerated in Table IV. They were valued at £38,629,895 at 31st March last, £37,497,905 at 31st March, 1938, and £22,848,000 at 31st March, 1932. Setting these amounts off against the appropriate capital liabilities for the several years I have mentioned we get the dead-weight Exchequer liability at the 31st March last as £37,728,105, and as £25,437,091 and £22,030,000 for the corresponding days in 1938 and 1932 respectively.
It will be noted that between the 31st March, 1938, and the 1st April, 1939, the dead-weight liabilities of the State increased by 48.3 per cent. Such a rate of increase must be a matter of no little concern to the Minister in charge of the Exchequer. It would be more alarming if it represented a tendency which was likely to persist with unabated intensity. The fact is, however, that 81.1 per cent. of the increase, that is to say £9,964,000, is accounted for by the Financial Settlement with Great Britain. Of the remainder, £1,220,000, or 9.9 per cent., is due to the further progress which has been made with the Government's housing programme; £335,000 or 2.7 per cent. arose in respect of certain charges which fell upon the Export Bounties and Subsidies Account—the Vote hitherto accounted for by the Minister for Finance—prior to the coming into force of the Trade Agreement with Great Britain; £120,500 or 0.98 per cent. was incurred by expenditure upon the new airports, Volunteer halls, industrial alcohol factories, and defensive equipment; £215,000 or 1.7 per cent. by expenditure upon employment schemes; £28,000 or 0.2 per cent. by property losses compensation under the Acts of 1923 to 1933; £180,000 or 1.47 per cent. mainly by the 50 per cent. reductions which are granted in respect of new annuities under the post-1923 Land Acts; and £527,500 or 4.3 per cent. has been created by the deficit on last year's Budget. The aggregate of these items has been offset to the extent of about £300,000 by National Loans Sinking Fund transactions.
It will be appreciated that three of the causes which operated to increase the dead-weight debt last year, to wit, the financial settlement, the winding-up of the Export Bounties and Subsidies Vote, and the deficit upon the Budget, were clearly abnormal. Two of them cannot possibly, and the third is very unlikely to recur. Between them, however, they accounted, as I have mentioned, for 88.1 per cent. of the increase. So far as the other factors which helped to swell the dead-weight liability are concerned, some of them, such as the expenditure on industrial alcohol factories and on property losses compensation, have disappeared or are rapidly disappearing. But others, such as the Housing Acts, employment schemes, and the Land Acts, are still, and are likely to continue to be, active—a position which cannot but be regarded with uneasiness by the Minister responsible for the public finances.
Moreover, it has to be remembered that Table IV relates to only part of the public debt. The position of the local authorities must also be taken into account. The latest reasonably complete and firm figures available in this connection relate to the year which ended on 31st March, 1938. According to them the gross indebtedness of the local authorities at that date amounted to £28,178,664 as against £26,559,938 at the corresponding date in the year preceding, and £15,710,711 at the 31st March, 1932.
As I have pointed out on other occasions, however, statements of gross indebtedness tend to give a too unfavourable picture of the financial position of the local authorities. The important figures in fact are those for their net indebtedness and net dead-weight indebtedness. Taking those out, we find that at the 31st March, 1938, the aggregate net indebtedness of the local authorities came to £18,380,485, and their net dead-weight indebtedness to £12,028,160; while at 31st March, 1937, the figures were £18,260,173 and £11,796,173 respectively; and at 31st March, 1932, £14,081,815 and £9,210,815. Bringing these sums into account we may put the dead-weight public debt (national and local) at the 31st March, 1938, at £37,465,251. The corresponding figure at the 31st March, 1932, was £31,240,815, and at the 31st March of this year I think it may be taken to have been £51,000,000, assuming an increase of about £1,250,000 in the dead-weight debt of the local authorities. On the foregoing basis theper capita dead-weight public debt of our community worked out at £10.6 in March, 1932, £12.7 in March, 1938, and £17.3 in March, 1939.
The practical importance of the dead-weight debt lies in the fact that it represent uncovered charges upon the future revenues of the State and, therefore, upon the future incomes of all citizens. The amount of the charges upon the Exchequer which arise out of it in any particular year are, accordingly, of some significance when we are reviewing the financial position for that year and the outlook for the future. In this connection, I have prepared Table V to show, for the purpose of comparison, what the charges in respect of the dead-weight public debt (national and local) may be taken to have been in the years ending the 31st March, 1932, 1938 and 1938, respectively. The table is divided into two parts. On one side are set out,inter alia, the gross annual charges falling upon the Exchequer on foot of State debt outstanding during the years I have mentioned. On the other side in respect of the same periods is given the actual income as it was being received by the Exchequer from productive assets. For any particular year the difference between the annual income as it was thus being received and the gross annual charge which was falling on the Exchequer or local authorities in respect of the public debt may be taken for all practical purposes to represent the net annual charge in respect of the dead-weight public debt then outstanding.
Turning now to the table, and taking first the figures for 1931-32 it will be noted that the gross annual charges in respect of the State debt then outstanding amounted to £3,250,190. The details given represent disbursements actually made by the Exchequer on foot of obligations admitted by it in the year. These comprise,inter alia, payments arising out of the Ultimate Financial Settlement, as the local loans annuity and such-like. The pre-1923 land annuities are not included among the charges for 1931-32, as they are taken to be completely off-set by a corresponding sum, which otherwise would figure in the Statement of Income from productive assets in respect of the purchase annuities, payable in that year, and charged upon the Guarantee Fund. As a set-off against the debt payments, the Exchequer, in the year with which we are dealing, received £1,184,412 as income from productive assets, so that in 1931-32 the true dead-weight charge in respect of outstanding debt was £2,065,778.
The statement of the annual debt charges for the year 1937-38 includes not only all the payments actually made by the Exchequer in respect of obligations accepted by it, but also claims, arising out of the Ultimate Financial Settlement, which were not admitted by the Government. The statement for that year has also to take note of a new commitment in the shape of the dead-weight annual charge which would have fallen upon the Exchequer by reason of the halving of the pre-1923 land annuities if the ultimate settlement of the dispute in regard to them had gone against the State. In strict accounting we must regard this as a live and uncovered liability at the 31st March, 1938. It amounted, as may be seen, to £1,424,690 and with other items brought the total of charges against the Exchequer up to £5,285,193. The annual income arising out of assets had increased to £1,443,791 so that the nett dead-weight debt charge on the Exchequer for 1937-38 was £3,841,402.
In the year 1938-39 the Financial Settlement with Great Britain was made, and the beneficial effects of it stand out very clearly in the statement of debt charges for that year. The items in respect of the pre-1923 land annuities, the local loans annuity, the excess stock annuity, etc., etc., have disappeared, reducing the gross charge upon the Exchequer to £3,612,596. On the other hand, the productive assets yielded an income of £1,488,921, or £304,509 more than in 1931-32. In 1938-39, therefore, the actual dead-weight charge in respect of State debt outstanding amounted to £2,123,675 as compared with £3,841,402 a year previously when the Financial Agreement with Great Britain had yet to be concluded, and £2,065,778 in 1931-32.
To complete the account for the annual charges arising out of the dead-weight public debt we must bring in those which fall on the local authorities. Assessing these at 6¼ per cent. of the dead-weight debt outstanding at 31st March, 1932, and at 6 per cent. on the amount similarly outstanding at 31st March, 1938, and of this year, we get £575,000, £721,000, £796,000, respectively. Adding these sums to the corresponding figures for the State debt, we find that the annual charges paid in respect of the outstanding dead-weight public debt (national and local) were:—
In the year ended 31st March, 1932
In the year ended 31st March, 1938
In the year ended 31st March, 1939
It is to be noted that the payment for 1938-39 did not cover a full 12 months' charges for the Financial Agreement Loan. If it had done so, then the figure for that year would have been £3,032,416. The figures which I have given show that though the dead-weight of public debt outstanding increased from £31,241,000 at 31st March, 1932, to about £51,000,000 at the 31st March last, the dead-weight annual charges thereon have increased in a much smaller proportion. They have in fact gone up from £2,640,000 to £2,919,000. In this connection, however, we have to bear in mind that the Sinking Fund conditions attached to the First National Loan were much more stringent than has been the case with subsequent issues. That fact may be taken to reflect not merely the stability of the State, but the easier credit conditions which have prevailed in latter years. It also carries the implication, however, that in regard to the reduction of debt we have followed less exacting standards than formerly.
We have now to deal with the position for the current year, in regard to which the usual White Paper of Estimates has been circulated to the Dáil. In formulating the figures given therein for revenue and for expenditure it has been necessary to proceed sometimes upon one, sometimes upon the other, of two assumptions not quite consistent with each other. The first of these assumptions has been that a major European War is likely and that it is necessary to take certain precautions against that contingency; and the second, with certain qualifications, has been that war will not, in fact, befall. The Estimate for Defence may, perhaps, be said to have been based upon the first assumption; those for most of the other Departments and for our revenues upon the second; while in regard to the Vote for Public Works, for instance, both assumptions had to be reconciled with the task of preparing Estimates which were to have a practical application in the immediate future. These considerations have to be borne in mind in relation to the figures with which we have now to deal —and above everything else it is to be remembered that the outbreak of a general conflict in Europe would render our Estimates, or indeed any Estimate that could be made here or elsewhere, of little value as a basis for public financing. Taking the figures as they have been presented, however, we find that our expenditure during the current year is likely to be of the order of £35,716,000, while our revenue on the basis of our existing rates of taxation should be about £31,130,000. How to cover the difference of £4,586,000 which exists between these two figures is the problem which we have to solve in framing the Budget for the year.
Our first consideration in that connection naturally must be to avoid the unnecessary imposition of taxation. At this stage we are precluded, I must suppose, form looking for any considerable reduction in the actual sums to be provided for the public services. As I have said so frequently in relation to public spending, economy is a virtue that is often preached but seldom practised. I have no doubt that when I finish to-day I shall be criticised for placing additional burdens on the people. I shall be told that in the year 1931-32 the total revenue amounted to £25,496,419, of which £21,286,000 came from taxation; whereas in the year which has just passed it amounted to £31,884,000, with £25,987,000 from taxation; while for the current year we are going to get from taxation—but it is too soon to go into that just now. The point is that all these millions are taken from the taxpayer for one purpose and for one purpose only, and that is to pay for the public services which the people, in so far as their representatives here in this Dáil speak for them, demand. If to-day the Minister for Finance has to get from the community so many millions more than in 1931-32, he is in that position because the public services are costing, and so far as the Dáil in regard to the Estimates for the current year has expressed itself, are to continue to cost, so much more than at that time.
Table VII which I have circulated should bring that home to us. It shows, for instance, that expenditure on old age pensions has increased from £2,702,000 in 1931-32, to £3,484,000 in 1938-39, and is likely to reach £3,506,000 this year. Similarly, as against £161,000 spent on unemployment insurance in 1931-32, there was issued last year for unemployment assistance and unemployment insurance £1,219,000, while the Estimate for 1939-40 is £1,137,000. Relief schemes and employment schemes got £156,000 in 1931-32; last year the actual issue for such schemes was £1,290,000, and £1,500,000 has been included for them in this year's Estimate. The Land Commission received £614,000 in 1931-32, it got £1,645,000 last year, and this year it wants £1,792,000. In brief, £9,780,000 was actually issued last year for what may be described as social services, as compared with an expenditure of £4,551,000 in 1931-32, and an anticipated outlay this year of £10,121,000. These services, therefore, account for over £5,500,000 of additional money in this year as compared with 1931-32.
But the increased spending has not been confined to social services only. The provision for educational services has risen form £4,690,000 in 1931-32 to £5,159,000 in 1938-39, and to an estimate of £5,318,000 for the current year. Army pensions cost £195,000 in 1931-32; they cost £588,000 last year, and will probably cost £587,000 in this. For afforestation £60,000 was expended in 1931-32, £185,000 is wanted this year. The Vote for agriculture took £375,000 in 1931-32. This year it stands at £594,000, plus £606,000 for export subsidies.