I move the motion standing on the Order Paper in my name and that of Deputy General Mulcahy:—
That the Dáil is of opinion that in view of the contents of the Majority Report of the Banking Commission steps should at once be taken—
(1) to reduce the burden of direct and indirect taxation;
(2) restrict the creation of further deadweight public debt;
(3) and so order the administration of public finance and policy as to stimulate profitable production and abolish poverty within the State.
It arises, Sir, from a request made by the Taoiseach during the discussion on his Estimate that time should be afforded to him and his colleagues to prepare themselves to deal fully with the matters touched upon in the Banking Commission Report, and matters naturally arising therefrom. I understand that that preparation has been made, and that he now feels himself in a position to deal with the issues previously raised, and which we propose to raise again to-day. It may be well, in embarking on this discussion, to turn back for a moment to the statement of the Minister for Finance, as reported in the Official Reports, column 1999, volume 75, No. 16. Concluding his speech on the Budget, he said:—
"Stringent and straitened as our position is, I believe that we can endure it so long as peace is maintained. If a widespread war comes, however, our difficulties will be intensified beyond measure. I speak now only of the reaction of such a disaster upon our finances. But there I know that with a much diminished real income, we shall be called upon to shoulder vastly increased public burdens. Moreover, the problem in that regard will be aggravated by the fact that existing sources of revenue will rapidly dry up. The stamp duties are a case in point. And it will no longer be possible to get so large a part of our requirement by customs duties upon imported goods, for we may take it that our imports will be drastically cut down. We shall have to tax what we can and where we can. Taxes upon home-produced commodities will, I feel, be greatly increased; as will the standard rates of income-tax and surtax; while all the allowances which at present mitigate the full impact of these latter upon the taxpayer will be drastically reduced."
That is the Minister's own comment on seven years of Fianna Fáil administration; that is the account he rendered of his stewardship at the end of seven years of his administration and after what he described as a great victory. He announces to us here that we are in stringent and straitened circumstances and that if an event materialises, that of a European war, over which we have no control at all, our people will be launched into unprecedented hardship; there is no roost to rob and no nest egg left—it is all gone.
It is interesting to compare that account of Fianna Fáil stewardship with the account rendered by Deputy Cosgrave when he laid down office in 1932 and when he handed over to his successor the Treasury which bore the brunt of the economic war for five weary years and furnished the material with which to pour forth an immense flood of money to cushion the blows that were directed against us by Great Britain in the course of that encounter; when he had administered the country, beginning with nothing, receiving nothing to assist him but a civil war now happily a thing long past, having cast upon his shoulders the burden of repairing the ravages of that civil war, and spending the last two years of his administration defending this country against an unprecedented economic collapse which devastated the whole world. With all that burden courageously borne he handed over an Exchequer which the present Minister for Finance was glad to describe year after year as resilient, full, and ample to meet every contingency. After seven years of that exchequer under the present Minister's control, we are informed that it is empty, that we are in straitened and stringent circumstances, and that, if those whom we have no power to control should move amongst themselves, the repercussions upon this country would be disastrous, because there would be no money in the Treasury and no resources to cushion the reactions of those outside events upon our people. Contemplating that situation I felt that we had passed beyond the stage when disaster could be avoided. But I listened with encouragement to the statement made by the leader of the Opposition, Deputy Cosgrave, that, in his judgment, there was yet time in which to take the requisite measures to restore solvency to this country which the Fianna Fáil Party has put so gravely in jeopardy. That being his opinion, I believe it is an opinion worth so much that it befits us to examine the situation now and devise the means of remedying the situation with which we are confronted.
There is in the Banking Commission Report abundant material to examine the economic state of this country. There is more than one conclusion set out in that report, because I think there were two minority reports, or even three, and, whether we agree with those conclusions or whether we do not, there should be unanimity amongst us on at least one thing, and that is, that the information contained in that report is accurate, and that the facts set out can be depended upon. Leave aside for the purpose of this discussion any of the conclusions arrived at, let us try, with the facts established, to approach the problem ourselves and accept our responsibility as the elected Legislature of the country for arriving at conclusions and showing the courage to take the requisite steps to repair the damage that has been done.
The national income of this country, arrived at on a formula set out is approximately £150,000,000 per annum at the present time. Direct taxes paid by the people, either through their rates, or through the taxes which they pay to the central Government, amount at present to approximately £38,500,000. Those taxes do not include the money borrowed for expenditure. That means that we have at present a total taxation of approximately 26 per cent of our national income. In 1929-30, the total taxes amounted to about £27,000,000, and our national income then was estimated to amount to £162,000,000, which meant that our total taxes amounted to about 16¾ per cent of our national income. The percentage of our taxation as compared with our national income has gone up by about ten per cent in the last ten years.
Now that represents direct taxation. But if we are to judge of the effect of what has happened on the taxable capacity of our people, we have also to reckon with the indirect and concealed taxation which they also have to bear. Prior to 1931, when we intended to subsidise an industry or branch of agriculture, the practice was to draw the money into the Exchequer and to pay it out of the Exchequer to the persons subsidised. But a new technique was evolved by this Government. The Exchequer was short-circuited, and the subsidy was paid directly from the consumer to the producer, and no notice is taken in the annual financial statement of that burden falling upon the tax-payer. It is nevertheless there. In respect of the wheat scheme, it amounts approximately to £2,500,000 per annum; in respect of the beet sugar scheme, according to the Minister for Finance's own estimate, it amounts to about one million pounds per annum; and, taking together, the maize-meal mixture scheme, the industrial alcohol scheme, the butter scheme, and the bacon scheme, I think I underestimate it when I say, that they together impose a total burden of £1,500,000. That gives you a total burden of concealed indirect taxation of £5,000,000, and if that be added to the total of the evident direct taxation, we find our people are asked to find annually by way of taxation £43,500,000, and that represents 29 per cent of the national income.
It is interesting to remember that the national income of Great Britain is estimated approximately at £5,000,000,000 yet her Budget falls substantially short of £1,000,000,000 per annum. The people of Great Britain are required to place at the disposal of their Government about 20 per cent. of the national income, while our people are asked to produce approximately 29 per cent. It is true, and it must be borne in mind, that Great Britain is spending vast sums of borrowed money, which must be repaid some time, but it is wise to compare, as the Taoiseach is fond of comparing, the taxable capacity of our people with that of Great Britain. If I were to make a classical multiplication, it is 66 to 1. In connection with these figures I think even the Taoiseach would admit the absurdity of the calculation that he was so fond of making not so many years ago. In addition to the concealed taxation to which I have referred, there is a further immense item, which I do not think any economist has ever undertaken to assess accurately, and that is the amount our people have to pay by way of tariffs on imported goods plus— and this is the incalculable item—the increased cost of the necessaries of life that they have to purchase, which are produced behind the protection of tariffs and quotas and which are proportionately dearer than they would be if they were imported duty free. That burden has to be borne by the consuming public and must be reckoned with when considering the burdens that the people are called upon to bear in taxation of one kind or another. If we were confronted with a position in which we had a rising burden of taxation side by side with expanding production, the creation of more and more wealth year after year, while it would be necessary to watch it with every care it would not be prima facie an alarming situation but where you have rapidly-increasing taxation with no corresponding increase in the gross output of our people then you have to realise that ultimately if that continues it will destroy the productive capacity of our people and we will get into a rapid spiral decline the natural end of which is bankruptcy with all that it connotes. I admit that our Party made one grave political error in this regard. We foresaw the situation with which we are now confronted too soon. We underestimated the abysmal ignorance of the Government and its supporters. We did not realise that men could get into their position in this country without literally knowing the A.B.C. of economics and they did not learn them until they had been two or three years in office. In the earlier days seeing the orientation of their policy we said that if that continued it meant national bankruptcy and they got kudos from going around the country saying “national bankruptcy has been prophesied but we are still here.” A lot of people began to say that Fine Gael was crying “Wolf, wolf.” The trouble was that we realised all the time that if you come to the verge of the precipice no democratic Party can pull the nation back. The only chance of saving the nation then was to get them to open their eyes to the consequences of a certain policy before they were brought to the edge of the precipice— while one's hand might still be mended although very near to the edge of the precipice—but while those in the front cried back, we now hear voices from the back cry forward.
I read the amendment on the Order Paper about "The utilisation of the credit of the nation to stimulate such development and the absorption of the unemployed worker." It does not matter how you say 9d. for 4d. It is 9d. for 4d. all the time. You can trace to 9d. for 4d. a good many of the results that have led many nations to destruction. When sections of our people with the best intentions begin to clamour for 9d. for 4d. it is because they have been brought to a situation where financial stringency has become unbearable, and looking around for some escape from the circumstances in which they find themselves and the stringency which the Minister admits they turn naturally to the plainest way and that is some form of jugglery which will provide 9d. for 4d. for everybody. I see a situation here in which saving has been put an end to by the burdens of taxation placed on our people. Saving not only means putting money into banks, saving means replacement, saving means repair, saving means restoration to the soil of the fertility the crops take out of it. It means maintaining farm buildings, fences, the re-investment of part of every year's earnings in capital replacement or enterprise. What is happening in this country? None of these replacements is provided for. We are spending all we are earning and more and it is interesting in that connection to bear in mind the statements of managers of joint stock banks in this country who express concern that in the rural branches the small farmers' deposits are being steadily depleted by individuals who are taking the money out of the banks to pay current expenditure. They are living on savings, and when those are gone their standard of living is going down and sinking to a lower standard than they enjoyed heretofore. I say now that the time has passed for covering up the dangers that confront us. It is not a responsible reply to say that any criticism of our economic activities is calculated to shake the credit of the country. The only injury that can now be done to the credit of the country is failure on the part of those responsible to face facts. It is an idle dream to imagine that those whose judgments are influenced by their estimate of our credit have their minds made up for them by what is said in Dáil Eireann. They make their own estimates and their own calculations and have at their disposal all the information we have got. If they see our country going wrong economically and becoming a bad risk then our credit is destroyed, but if they see us hitting a bad patch and directly taking the requisite measures to restore solvency and to get back on the right road, then, even though we are at the moment insolvent, we have the prospect before us of returning solvency with our credit unimpaired and such accommodation as we require to overcome the difficulties that confront us will be readily forthcoming.
It is plain to the observant that unless we correct the adverse trade balance and correct it soon we are going to have a crash. All the indications are there. We have never retained any gold in our central banks. But the same barometer is available because our joint stock banks have held external assets and by a process of calculation we can determine the net external assets. They were £72,000,000 in 1934, after American money had gone back to America, in 1935 they were £71,000,000; in 1936, £72,000,000 and remained fairly stable over that period. In 1937, they were £67,000,000 having fallen by £5,000,000 and in 1938 they were £61,000,000 a catastrophic fall. It must be borne in mind that part of that catastrophic fall was due to the determined policy of the Oireachtas to settle the difference with England by the transfer of a capital sum of £10,000,000 to Great Britain and that must be reflected in the external assets of the banks. But they have been steadily dwindling, and they are steadily dwindling, and they show no signs of coming back.
This has to be borne in mind, that were our holdings in gold they would be substantially sterile, but when we hold our resources in the form of securities in Great Britain or elsewhere, they are not only reserves on which to build credit, but they are also a valuable invisible export inasmuch as we draw dividends on them. The man who loses gold, while his economic position may be affected, his income will be unimpaired; the man who loses income-paying securities, not only finds his economic position impaired, but his income is reduced and the position of the trade balance is further aggravated. With the disappearance of every £1,000,000, our problem with regard to the balance of trade becomes more complicated.
What are the items of our invisible exports? They are, first of all, the interest on investments of the joint stock banks. Secondly, we have the remittances from emigrants. Thirdly, we have the income from the sweep stakes. Then we have the pensions payable to our people by the British Government and the income from the tourist traffic. The interest on our external investments decreases as we lose the investments. Emigrants' remittances have tended to decrease since our people ceased going to America. It is to-day thought that with the immense wave of migration that has been passing over to England in the last three years, there will come back some remittances from that source, but they will bear little or no relation to the sums that originally came from America. If the English migration is a temporary feature of our national life, that source of revenue will completely dry up in a short time.
We had recently introduced a sweepstakes Bill to guarantee the promoters of the sweepstakes against the danger of a complete collapse arising out of some international event over which we have no control. It is a fair indication of the amount of reliance we can place on the sweepstakes in the form of invisible exports. British pensions to people in this country are dwindling as these pensioners grow old and die, and that source of revenue cannot be replaced. The tourist traffic could be developed, and no doubt steps are being taken in that direction, but notwithstanding the eloquence of correspondents in the Irish Times and elsewhere, I still believe that if our latter-day patriots are going to plaster the walls of this country with “damn your concessions, England” and “to hell with Great Britain,” the tourist traffic will not continue to yield any valuable dividends for this country. If that is the kind of patriotism which we are to encourage, and if we are to keep throwing bombs in order to blow the eyes out of children in the streets of London, then I think we will have to pay for that patriotism and those people engaged in that work should have realised that before they embarked upon it.
We have seen foreign companies establishing themselves in this country during the last seven years. In so far as they draw profits from this country by way of dividends, that has to be regarded as an item of invisible imports. We have also to bear in mind that a great many old people who owned land here and sold it to the Government retained their stocks and dwelt here amongst us. But they have sent their children abroad and those children are now living in Great Britain or elsewhere. As the old people die, the ownership of their property will be transferred to people who live abroad with the result that what was an invisible export will, by that transfer, become an invisible import, thus doubling the severity of the impact upon us.
If we cannot control these items of invisible trade, there is nothing left to us but to control our visible trade and redress the balance there. To do that our only hope is to get a larger share of the British market on terms which will enable those who produce here to make a profit. I wish Deputies would bear this in mind, that the primary producers here in this country do not want big prices. What they want is big profits. If they can produce cheaply, they are quite prepared to sell competitively in any market in the world. Big prices are no concern of the producers, provided there is a constant difference between the price at which they sell and the cost of production.
We have in Great Britain a market which all the people of this State, working three eight-hour shifts per day for 365 days in the year, could not attempt to fill. We have there, happily for us, a Government which is friendly and which, for its own tactical reasons, would be very glad to draw from this country a very substantial part of its total food supply. There is no limit to the proportion of the food market in Great Britain that we could get if we were prepared to supply it constantly. But we cannot dump stuff in the summer months and dry up in the winter months. We are confronted with the astonishing situation that the British Government, having asked us to name our quota of bacon and pig products—the thing which was primarily associated with the agricultural industry—and we ourselves having named the amount which we believed we ought to be able to deliver, we find ourselves unable to fill our quota and telling Great Britain to go to our competitors and get it from them.
The fact is that we find ourselves to-day obliged to import pigs from Northern Ireland and unable to deliver to Great Britain the bacon we undertook to supply at a profitable price. That is because the Government destroyed the pig industry during the last three years. We have the unprecedented situation that this country, one of the greatest of live-stock producers, is to-day importing fat cattle from Belfast. Fat cattle have been brought from Belfast and sold in the Dublin market because we had not fat cattle to put on sale.
We have seen the export of eggs reduced from over £2,000,000 per annum to £700,000. Why was that? Because the Government over there, by their reckless disregard of the elements of agricultural economy, destroyed one branch after another of our industry and substituted what? Beet, wheat and peat. Beet has gone up the spout, peat has gone up the spout, and wheat has imposed on our people an annual burden of £2,500,000. The only people who ever got money out of wheat were the millers. They fattened on it and that is one glorious example of what the Government have done for the plain people. It is certainly the plainest Government that ever a plain people put into office.
Let us consider our debt position. A lot of Deputies here are only too fond of welcoming the creation of public debt and then forgetting all about it. But you cannot do that. Some day, somehow, you have to meet that debt and pay it, and in the meantime you have to pay interest on it. That is a very substantial item in our annual bill. Our gross debt, due in 1937, was £73,000,000. Since that, I estimate that, with the transfer of £10,000,000 which we borrowed to give to Great Britain, it must be in the neighbourhood of £85,000,000. Now, in 1924, our gross debt was £14,000,000, and we have increased it by £60,000,000 in the last 15 years. Now, gross debt is one thing, but the vital figure is that of net debt. The net debt figure, however, is extremely difficult to ascertain. In order to arrive at the amount of our net public debt we have got to subtract from the gross debt, which is readily ascertainable, the value of the assets we hold against it. What is the value of the assets we hold against it? Some of the assets which are used for the purpose of showing in the finance returns that our net debt position is only £37,000,000 are shares in the Industrial Trust Corporation. No sane man would take them if they were given away with a pound of tea. They are not worth the paper on which they are written—an underwriting establishment with a capital of £5,000,000, which, I think, of all the issues, succeeded in getting only two of them taken up, and as to the remainder of them there were large lumps left upon their hands and they are now functioning not as——