Including the Supplementary Budget of November, 1939, this is the sixth Budget which I have the honour to present to Dáil Eireann. At the outset I might, perhaps, make this comment. The nervousness of stock exchange and commodity markets traditionally associated with the pre-Budget period has for years past become a matter more of appearance than of reality. It may be that the shocks inflicted by repeated doses of severe taxation have dulled the sensory nerves of the taxpayer and reduced him to a state of coma. This condition is sometimes mistaken for acquiescence, and in no place is misconception of the position more likely to flourish than in Dáil Éireann and, I might say, Seanad Éireann also. Members of both Houses and of all Parties are so frequently importuned to lend their support to a variety of objects, each of which seems more or less worthy of Government attention, that their powers of resistance to the required increases of taxation necessarily become weakened. A similar process takes place with regard to the Minister for Finance, whose Governmental colleagues, in furthering the interests and activities of their Departments, press their views upon him so forcibly and sometimes so unitedly that his defences are continually breached. He is habitually fighting a delaying action, and that not always successful. Now, it is a bad thing for any Minister of State to find himself in such a position and in an endeavour to evoke more widespread appreciation of my difficulties and secure the sympathy and support of the Oireachtas and the public in my resistance to excessive expenditure I think it well at this stage to mention some significant figures in regard to the rapid acceleration of the burden of taxes and rates relative to the volume of agricultural and industrial production.
The expansion of taxation may be judged by the figures of Exchequer issues for Central Fund and Supply Services. These have increased from an actual figure of £33,110,000 for 1938-39 to an estimated figure of £49,977,000 for 1944-45, an increase of 51 per cent. In the same period expenditure by local authorities, that is, net expenditure from revenue (excluding county agricultural committees and vocational education committees), less amounts derived from Government sources, has risen from £7,464,000 to an estimated £9,600,000 for the current year, an increase of 28½ per cent.
Increased taxation must be considered against the general economic background. Between 1938-39 and 1942-43 (the latest period for which the statistics are available) the gross output of agriculture has risen in value by 61 per cent. but the value of net output of agriculture (or the value added to the materials by the agricultural process) had increased considerably more—by 87 per cent. —because of the decline in the volume and value of materials. This increase in the net value of output of agriculture was due principally to a marked increase in agricultural prices—which have nearly doubled since the outbreak of war. There has also been an increase of 9 per cent. in the net volume of output although the gross volume has fallen by 8 to 10 per cent. Between 1938 and 1942 the value of net output of industries producing transportable goods (which normally cover roughly 80 per cent. of total industrial output) increased by £4,748,000, or by 19 per cent. while the volume has declined by 21 per cent. The value of net output of agriculture together with "transportable" industry has increased by 63 per cent. between 1938-39 and 1942-43. On account of the exclusion from these figures of the building industry, in this country as in others normally the most important non-agricultural industry, this figure exaggerates the increase in the value of industrial and agricultural production. State-aided building (new and reconstruction) has been reduced in volume by nearly four-fifths since before the war but, taking account of repair work, the volume of production may be in the neighbourhood of one-half of its pre-war level. In 1943 as compared with 1938 the value of imports declined by 37 per cent. and the volume declined by 71 per cent. The value of exports increased by 13 per cent. but the volume declined by 47 per cent.
These various economic indices tend to show that there has not been a disproportionate increase in actual taxation as compared with taxable capacity in certain parts of our economy but there are large professional and other groups of various kinds, representing a substantial part of the population, whose income has either remained stationary or contracted. On these, burdened as they are with the high cost of living which does not affect the farming community to the same extent, the pressure of current rates of taxation falls with particular severity. It is regrettable that a large part of such additional production as there has been in war years has had to be shorn off by increased taxes and rates, especially as such addition was to a material extent at the expense of capital.
It is not surprising in the circumstances that the financial year just closed was remarkable for the heavy yield of revenue, which at £43,780,000 was £4,052,000 in excess of the previous year, despite the fact that the last Budget effected only very minor alterations in taxation. The inroads on the taxpayer were most marked in regard to property and income-tax, including sur-tax, which was up by nearly £1,500,000 in the year and by corporation profits tax, which increased by over £1,000,000. The growth in yield of the latter duty has been remarkable. From £591,000 in the last complete financial year before the war the yield has grown to £3,781,000 in the last 12 months, being over £500,000 in excess of the estimate. The only important head of revenue to show a decline as compared with the previous year was motor vehicle duties which were down by £93,000. This fall scarcely needs to be explained.
The return for customs and excise was also beyond expectations and in regard to the former we are again mainly indebted to tobacco which, at £9,081,000, yielded us £1,112,000 more than in the previous year. This is a new record. The pipe of peace helps to finance our neutrality and I am setting users of the weed a still higher target for the coming year, no less than £9,250,000; I count on them to smoke, snuff or chew their way to this objective.
The position in regard to tobacco leaf, however, gives us some reason for apprehension. Our stocks are not considerable and we are finding difficulty in securing from the United States the necessary permits to enable Irish manufacturers to purchase and export to this country the supplies of leaf required to meet our minimum needs. There has been a decline in the American acreage under leaf and in recent years various crop restrictions and marketing quotas have been imposed by Governmental agency. In the coming year growers are to be allowed by the War Food Administration an increase in acreage of 10 per cent. and in the amount of leaf marketed of 20 per cent. How far this will help us is not clear. The growth in the armed forces of the United Nations and the full employment of their civilian population, as well as the conditions of strain under which many are forced to live, have resulted in an unprecedented expansion in the demand for this popular and, I suppose we may still call it, cheap narcotic. While smokers here cannot get all they want, there is still a fair supply available, but in a year's time manufacturers' stocks of the leaf in this country will be dangerously low unless there is some favourable development in the meantime. Tobacco, like whiskey, mellows and improves with age, at any rate up to a certain point, and the present big expansion in world consumption is being met, to a large extent, by drawing on reserve stocks.
The enhanced yield from tobacco duty in the past year was in some measure due to an increase in imports of foreign-manufactured cigarettes. These supplies have helped to alleviate the prevailing shortage, but they cannot provide any significant relief from the difficulties to which I have referred, and moreover, no assurance can be given that such imports will be maintained.
I would like to refer briefly to the concession under which certain gifts of imported tobacco are admitted free of duty. I granted this in the hope that it would meet cases of hardship and would not be abused. From an examination of some such imports, I am afraid that exemption is being claimed on parcels of tobacco represented to be gifts, the despatch of which is not unsolicited and the cost of which does not fall on the sender. If this abuse continues, and certainly if it increases, I shall feel obliged to consider the withdrawal of the concession.
Tobacco contributes about four-fifths of the revenue from customs duties and that must be my excuse for having dwelt on it at some length. Practically all other heads of customs revenue showed a decline last year, the greatest being in clothing and apparel which fell away, as was indeed to be expected, by over £250,000.
The supremacy of tobacco on the customs side is matched by that of beer and spirits on the excise side. The two together returned us in 1943-44 no less than £6,299,000, which is £1,000,000 in excess of the previous year's contribution. In conformity with this movement, the entertainments and betting duties also showed a certain liveliness. How far the last-named will be affected in the coming year by the further restrictions on racing fixtures announced for this country and the United Kingdom I cannot say at present. Entertainments will also be affected by poorer transport facilities, but the determination to seek them out will, it is hoped, triumph over all obstacles.
As Deputies will see by turning to the first of the tables issued in connection with the Financial Statement, the deficit for the year just closed worked out at £529,000 as against £3,555,000 anticipated. Though the expenditure, like the revenue, reached a new record at £45,009,000, it was not as great as was anticipated. This was mainly because of shortage of many of the materials required by the various Departments. The realised deficit was small but, as against this, it must be remembered that we treat as ordinary revenue the whole of the receipts from land purchase annuities and from death duties. The former, at £1,768,000 for the year, contain a large capital element—in the neighbourhood of £700,000. These annuities will, of course, lapse after a time and the capital element in them now should more appropriately be applied to capital purposes, or set aside in a special fund, the income from which would be utilised by later Finance Ministers to compensate for the falling off in these annuities in subsequent years.
The Exchequer returns issued on the 31st March last which, of course, do not distinguish between normal and abnormal expenditure show the difference between Exchequer issues for Central Fund and Supply Services and Exchequer tax and non-tax revenue to be £1,229,000. Similar figures for recent years have been: 1942-43, £3,317,000, and 1941-42, £3,644,000. The total of these differences in the years 1939-40 to 1943-44, inclusive, amounts to £13,330,000, which had to be financed altogether by borrowing. To this figure should be added a payment in 1942-43 of £1,054,000 under the Insurance (Amendment) Act, 1938, and £80,000 discount on the issue of loans, bringing the total up to the large sum of £14,464,000.
Table III of the tables circulated to-day relates to capital liabilities and assets and shows gross State liabilities as at 31st March last of £82,865,000, and assets, including the Exchequer balance, of £37,013,000. Variations on either side of the account during the year were inconsiderable, the chief movement being a repayment of £1,200,000, made by the Local Loans Fund to the Exchequer, consequent on repayment of earlier advances made by that fund to local authorities. This repayment helped to ease the problem of Exchequer financing during the year. Further easement was provided by the rise in net subscriptions to Savings Certificates to £790,000 as compared with £515,000 in the previous year.
To the gross capital liabilities of the State, just mentioned, is to be added £9,447,000, representing the estimated capital value of the State liability for the Exchequer contributions payable under the Housing (Financial and Miscellaneous Provisions) Act, 1932, towards the annual loan charges of local authorities on account of moneys borrowed for housing. This brings the total to £92,312,000.
The gross indebtedness of local authorities on 31st March, 1943, amounted to £37,493,000. If we allow for the value of State contributions towards housing and for certain electricity and technical instruction loans, the net debt outstanding was £24,069,000, an increase of £1,302,000 on the previous year.
Assuming an increase of £500,000 in the case of local authorities during last year, the aggregate gross liabilities of the State and local authorities on 31st March, 1944, was £130,305,000, an amount which is offset by the assets referred to.
I may mention here our liability to depositors in the Post Office Savings Bank and to trustee savings banks, which amounted on 31st March last to £24,562,000. This figure, which includes £2,435,000 in respect of trustee savings banks, represents an increase of £5,352,000 over the corresponding figure for last year.
Our total indebtedness in respect of Savings Certificates, inclusive of accrued interest, is estimated as on 31st March, 1944, at £13,300,000, or £1,068,000 in excess of the liability at 31st March, 1943.
On the 31st March last, there were approximately 505,000 depositors in the Post Office Savings Bank and 31,000 in the trustee savings banks, while the number of Savings Certificate holders was about 236,000.
Deputies have, no doubt, seen some of our recent special publicity designed to reach those who are not already availing themselves of the facilities afforded by our savings institutions. We are utilising all available advertising media, including the radio, cinema, daily and weekly newspapers and periodicals and notices and posters in public places and buildings. Apart from my desire to absorb any excess purchasing power with a view to curbing inflation, it is hoped that, by this means, the formation of habits of thirft, especially amongst the young, may be further developed and intensified.
We may now turn to the White Paper Estimates of receipts and expenditure for the year ending 31st March, 1945. As will, of course, be appreciated, an element of conjecture always enters into these Estimates and this year the element is larger than usual. Hitherto, we have proceeded on the assumption that no major disturbance would arise affecting our economy and this assumption has been abundantly justified. The recent curtailment of coal and other supplies and of land and sea transport and communications has, however, somewhat obscured the outlook for the next 11 months of the financial year. Both our import and export trades are bound to be severely affected if the additional restrictions continue over all this period, or are intensified. The home trade, too, is bound to suffer, with consequent curtailment of earnings and profits, leading to reduced receipts from direct and indirect taxes.
In the case of all dutiable commodities, I am, however, assuming that both supply and consumption will continue at around existing levels and any serious disturbance of this assumption would react unfavourably on the yield of revenue.
It is hoped that we will be able to retain in operation our reduced, but still serviceable, fleet of merchant vessels. The total of Irish registered ships lost since the outbreak of war amounts to 30,000 gross registered tons, with 135 lives. The courage and endurance of our sailors who face many perils deserve our admiration. They have brought us essential imports in critical times. We owe it to them and to the other vessels engaged in cross-Channel services that despite all the obstacles in the way of trade, it has been found possible during the past few years to maintain our imports, and, particularly, imports of wheat, on what must, in the circumstances, be regarded as a reasonably satisfactory level, though the shortage of tonnage made it impossible to import adequate quantities of fertilisers and other essential commodities. The credit for this satisfactory result must be shared with the various private trading interests concerned and with the emergency companies set up by the Government.
The last three years have seen the foundations laid of an Irish oceangoing mercantile marine through the formation of Irish Shipping, Limited. The success of this new venture, in face of many difficulties, is a cause of no little pride and is a tribute to the enterprise of the board of the company. These gentlemen who, with commendable public spirit, have refused during the emergency to accept remuneration, have not contented themselves with the ordinary functions of a shipping company but have courageously extended their activities into the field of war risks and marine insurance. As a result, the country has been saved large sums of money which would, otherwise, have gone abroad; freight and insurance rates have been reduced, thus helping to keep down the cost of living; and the company has established itself as a marine underwriting concern of high standing. In addition, much-needed employment has been provided in the unloading and servicing of the company's ships and the company has contributed substantial sums in harbour dues to various port authorities, without which they could scarcely have carried on. As has already been announced, the Government hope that Irish Shipping, Limited, will be able to continue after the war and maintain a modern fleet.
In saying this, I do not belittle the efforts of the other shipping companies trading to or from this country which were in existence long before the war. The numerous vessels engaged in the coasting and cross-Channel services have performed, and are performing, an invaluable function, as are the three shipping companies which for nearly three years have maintained a service to Iberian ports and so helped to keep up supplies of essential imports. Apart from this, the latter three companies have co-operated in forming Irish Shipping; they manage its ships and their managing directors are members of its board. After the war, I hope to see this fruitful co-operation continued and extended, to the advantage of all concerned.
On the basis of existing taxation, our estimate of tax revenue receipts into the Exchequer for 1944-45 is £39,050,000, as compared with an actual receipt of £37,168,000 for 1943-44, an increase of £1,882,000. Customs revenue is expected to rise by £217,000 to £11,605,000, which is very gratifying, especially as it shows a drop under practically all heads except tobacco. The greatest loss is in the sugar group, from which we received £241,000 in 1943-44 but can expect only £140,000 in 1944-45. The duty on imported sugar is likely to show a decrease owing to lower clearances of sugar imported from the British West Indies in the coming year. I have already said that I rely on tobacco for a yield of £9,250,000. As regards oil, the yield of duty in 1943-44 was fairly satisfactory, though considerably below that of previous years. We hope that imports will be maintained in the current year.
Our stocks of home-made spirits are ample to meet demands for home consumption and to allow exports slightly under the average of pre-war years. Traders, however, are experiencing difficulty in maintaining supplies and, I am afraid, export smuggling is, to some extent, to blame. We expect to improve on this position.
Portuguese brandy has replaced the vanished French variety. Rum stocks are low and must be used sparingly. Imports of gin have ceased but we are producing here a fair proportion of our requirements.
Our bonded stocks of wine are good but include considerable quantities which are somewhat inferior in quality to that in normal use here, and may be held as a speculation in the hope that export restrictions will be removed.
Excise prospects for the coming year have been rated high, the estimated Exchequer receipt, at £8,780,000, being over £750,000 in excess of last year's yield. Beer, spirits, betting and entertainments will, between them, provide £7,030,000 out of the expected total.
The consumption of the former two items has shown rather marked expansion in the last 12 months, after some hesitancy in earlier periods when the effects of the heavy increase in taxation were still being felt. These effects now seem to have worn off and the consumer has returned to his beverage, if not with zest, at any rate, we hope, with satisfaction.
The yield of entertainment duty will be affected to some extent by the fact that all of Lent in 1945 will fall within the financial year. As regards the excise duty on sugar, a substantial rise is expected in view of the considerable increase in home production during the campaign recently closed. This increase is fortunate, because further imported supplies of sugar are not likely to be available during the year.
Inland revenue prospects for 1944-45 may be gauged from the fact that the estimated Exchequer receipt, at £18,215,000, assumes an improvement of £982,000 on the preceding year. Income-tax is expected to attain a new record figure of £11,510,000. An increase in commercial profits generally is being counted on, but this assumption may be seriously upset if the acute trading difficulties which have recently arisen become accentuated or prolonged. Surtax and supertax, which yielded £612,000 in the year just closed, are expected to be slightly less in the current year at £570,000. In conformity with the expected upward trend in profits, the yield of corporation profits tax has been put at the high figure of £4,060,000 or £279,000 in excess of the previous year's yield.
The particulars of non-tax revenue, as set out in the White Paper, show as regards the Post Office an expected improvement in all sections—postal, telegraph and telephone. As the Minister for Posts and Telegraphs explained in the course of the recent Dáil debate on his Estimate, the restrictions of communications may have a serious effect on income if continued over a period. I share his hope that they will be shortlived.
The land purchase annuities estimated receipt is practically stationary at £1,750,000. The machinery of the Guarantee Fund, of course, enables the Exchequer to collect the full amount due annually, but it is regrettable that, even during these recent years of comparative prosperity for agriculture, the amount of arrears outstanding has been only gradually reduced. Farmers are receiving prices for their products which leave a good margin of net income and those of them who are in debt to public authorities in any way should try to clear the amounts which they owe as soon as possible.
While there has been a considerable reduction in the arrears of annuities during the emergency, from £1,228,500 on 31st January, 1940, to £664,500 on 31st January, 1944, the reduction would have been much greater if the debtors, in general, had measured their repayments by their increased earnings. The index number of agricultural prices has increased from an average of 105 in 1939 to 183 in 1943. The guaranteed price for wheat at 55/- a barrel is high enough to justify the cultivation of "marginal" land and must be quite remunerative for farmers working good wheat-growing land. Dairy farmers are now receiving 10½d. a gallon for milk in summer and 1/- a gallon in winter for milk supplied to creameries as compared with 5.4d. a gallon in 1939-40, and, though production costs have increased, the current price represents a substantial net gain to those who receive the main part of their income from dairying.
The Minister for Lands agrees with me that the present favourable opportunity of bringing their payments up to date must be fully utilised by farmers who are in arrear with their payments to the Land Commission. They should make every effort, therefore, to clear all arrears during the current year. As a class, they have got off lightly in the matter of taxation, and this, with the halving of the annuities, leaves them no excuse for non-payment.
Surplus income from the Central Bank of Ireland is expected to show an increase of £20,000 at £300,000 in the coming year and, amongst other items of non-tax revenue, I propose to take £100,000, as on previous occasions, from the Road Fund. The annuity payable to the Exchequer by the fund under the Road Fund (Advances) Act, 1926, has ceased and, as this relieves it of a considerable annual liability, there would, perhaps, be less excuse than ever for omitting our annual foray on the fund.
On the expenditure side, the main items arise in Supply Services, the details of which are set forth in the volume presented to the Dáil on 10th March last. The estimated cost of the services is £44,983,000, to which has to be added provision for Supplementary Estimates of £180,000 for the Department of Supplies in respect of wheat subsidy; £34,000 for the Department of Local Government in respect of the provision of cheap footwear, and £33,000 for the Department of Industry and Commerce in respect of mineral development. The original net provision for Supply Services in 1943-44 was £40,696,000, and, as compared with this figure, the Estimate for the coming year is thus up by £4,500,000. This substantial rise is spread over practically all Departments of State and is regretted by no one more than by the Minister for Finance. I have tried to keep the increase within bounds and it will, no doubt, be the subject in each case of detailed discussion and criticism during the debates on the individual Estimates. Even these figures, considerable as they are, contain no provision for further Supplementary Estimates, and experience has shown that a number of these arise before the end of a financial year. The increase of that number in recent years will, I trust, disappear with the emergency.
In my last Budget address, I referred to the great increase in the demands of our social services upon the Exchequer. With the prolongation of the war, conditions of necessity and hardship upon the poorer classes of our citizens have tended to become more marked, and provision is now being made for supplemental allowances to persons dependent in greater or less degree on old age, blind and widows' and orphans' pensions and on national health disablement benefit who are in straitened circumstances and who are not within the scope of the scheme of food allowances. So far as certain of these classes are concerned, 25 per cent. of the expenditure involved will be borne by the local authorities, the remaining 75 per cent. falling on the Exchequer. Grants towards the provision of assistance in kind to persons in receipt of home assistance and towards the supply of fuel to necessitous families will continue to be made.
Owing to the complicated administrative arrangements required in connection with the new scheme of children's allowances, it will not be possible to bring this service into operation until the 1st August next, so that the expenditure, apart from administration, to be provided for in the present year will be £1,500,000. The cost in a full year is estimated at £2,250,000.
Bonus concessions to State employees, i.e., civil servants, teachers and Gárdaí, will cost £969,000 in the present year as against £635,000 last year.
The Exchequer burden in respect of food and fuel subsidies is estimated at £3,176,000. The cost last year was about £2,564,000.
In all, the special provisions in the various State services to meet the increase in the cost of living may conservatively be put this year at over £7,000,000. This figure does not include the cost of children's allowances, which is meant to be a permanent social service. I think it may fairly be claimed, therefore, that we are making every effort, even to the extent of straining our means, to mitigate the effects of the emergency upon our citizens.
While employment is plentiful in agriculture, the problem of providing and stimulating industrial employment in the difficult circumstances created by the ever increasing shortage of supplies continues to be a source of concern to the Government. As I mentioned last year, a big effort is being made to develop the native resources of the country and to turn to account their employment possibilities. In connection with the production of turf alone, an expenditure of not less than £970,000 is being provided for this year. In view of the steadily deteriorating position in regard to imports of fuel, it is believed that this expenditure will prove to be of a most fruitful kind.
It is probable that no industry in the country has been more severely hit by the war than the building trade, which, in normal times, provides such widespread employment, and I can only say that the Government has made provision for all State works which it is anticipated can be carried through, having regard to the supplies position. The provision for new construction in the Vote for public works and buildings at £850,000 represents an increase of £270,000 over last year's figure. The increased provision is almost entirely due to works at the Shannon airport. It is clear that the complete development of this airport, on which much money has already been spent, will be extremely costly, but it must be realised that the airport has to be established and equipped on modern lines if it is to attain, after the war, the importance as a centre of international civil aviation for which we hope.
No substantial provision will be necessary in the present year for arterial drainage, but the Government's intentions with regard to a comprehensive scheme for the whole country have been made clear, and I need not enlarge on them. A start has already been made, pending the enactment of the necessary legislation, by the establishment of river discharge and rainfall gauges throughout the country, an essential to the initiation of any comprehensive scheme, and by the carrying out of certain surveys. It is not yet possible to estimate what rate of progress can be hoped for, as much will depend upon the availability of machinery and the speed at which surveys can be completed.
As I mentioned just now, provision is being made in the Budget for expenditure of £33,000 on mineral development supplementary to the £21,800 already included in the Estimate for Industry and Commerce. The company specially set up under legislation in 1941 to prospect for, and develop, minerals, other than coal, has concentrated on the production of phosphates in County Clare and pyrites at Avoca, and has provided a useful supplement to our limited supplies of superphosphates. The company will receive advances of £50,000 in the current year, and, probably, also prospecting grants, to continue and expand the production of these minerals. Full provision would have been made in the original Estimate were it not that the statutory limit on advances to the company would thereby be exceeded. Legislation will, however, shortly be introduced to authorise additional advances beyond the existing limit of £160,000 and to merge with this company the company which was set up at the same time to develop our coal deposits. Authority will be sought for extending the limit of advances to the combined companies to £400,000, which is expected to cover their requirements up to the end of 1945-46.
It is hardly necessary for me to say that the Government are alive to the difficulties with which the country is likely to be faced in regard to employment in the post-emergency period, when the demobilisation of the Defence Forces and the return of men and women who have been employed outside the State is likely to raise many problems. A Special Committee of the Cabinet has for some time past been engaged, in consultation with the Government Departments concerned, in the examination of schemes calculated to provide employment on a wide basis for both urban and rural workers. Apart altogether from considerations of employment, the war years have had the result of creating substantial arrears of maintenance which will have to be overtaken on public works of all kinds, and also of hindering the development of services of national importance. I need hardly enlarge, for example, upon what yet remains to be done before housing requirements throughout the country as a whole can be regarded as adequately met. It will, perhaps, be sufficient to say in this regard that increased activities on the part of local authorities under the Housing of the Working Classes Acts and the Labourers Acts, with consequential heavy demands on the Exchequer for housing grants and contributions to loan charges, must be expected.
It is clear also that national school accommodation of a proper standard is lacking in some places, and as soon as circumstances permit a scheme for the improvement or replacement of existing schools which are unsatisfactory, either as regards adequacy of accommodation or otherwise, will be put in hand, provided sufficient local assistance is forthcoming.
Afforestation is another service to which the Government have devoted considerable attention. I am aware that the view has sometimes been held that progress in this direction has been too slow, and that the service has been cramped by lack of funds, but I am afraid that criticism of this kind has been based to some extent on the belief that the development of forestry is merely a matter of planting more trees. The planting of trees, either for scenic reasons or for shelter belts, is, of course, always to be recommended, and is not too difficult a matter, but economic afforestation—and afforestation on a national scale must be relatively economic if it is to be justified— involves problems of which critics of our rate of progress are not always aware. It is not enough, for example, that land in a particular district should be available. Not only must land be suitable for planting, but it must be available in sufficient area to permit of the establishment of an economic unit, and it must be available at a reasonable price. From the point of view of a sound national afforestation policy, the formation of plantations in an indiscriminate way might be little more than a waste of the taxpayers' money. I only mention these points to indicate that, if progress on this important national service has seemed slow, this has not been due to any disinclination on the part of the Government to make money available. The effect of the emergency has been particularly marked on normal forestry development operations, as, in addition to any difficulties which may exist in regard to the acquisition of land, fencing materials, tools, seed and plants have been in short supply. At the instance of the Government, however, steps are being taken by the creation of nursery stocks and the building up of supplies of seed, and by such other measures as are in present circumstances feasible, to secure that the annual programme will proceed to be expanded to the maximum as rapidly as possible after the emergency.
The development of the tourist industry will, it may properly be anticipated, afford scope for increased activity which will have a social as well as an economic value. Here, again, the Government are encouraging, by the grant of financial assistance, the promotion of suitable schemes for the improvement in particular of the amenities of our holiday resorts. It will, of course, be realised that something more than Government help is necessary to make a tourist centre everything it ought to be, but I have no doubt that local effort and co-operation will be forthcoming in full measure as circumstances may require.
Neither last year nor the year before was the Central Fund called upon to make any advance to the Electricity Supply Board. In so far as new capital expenditure is being financed temporarily out of the board's own reserves, there is only a postponement of recourse to the Central Fund, but the basic position since 1941 is that development has been severely limited by emergency conditions. Lack of equipment has held up the commencement of generation from the Liffey. Increasing fuel difficulties, aggravated by water scarcity in the Shannon, have prevented the full utilisation of existing capacity. Industrial and domestic consumption has had to be severely curtailed. A wide and varied programme of development will be initiated as soon as equipment becomes available after the war. The plans are already prepared, and authorising legislation will shortly be introduced.
In the first place, it will be necessary to provide for a considerable expansion of demand within the area already served by the board's network. For several years before the emergency, the "natural increase" in demand for current was of the order of 31,000,000 units per annum. From a total of 43,000,000 units in 1929-30, consumption had risen to 357,000,000 units in 1941-42. In 1942-43, however, consumption had, perforce, to be held down at the level of 1940-41. But the restrictions on the use of electricity and on the connection of new consumers are creating a reservoir of demand which will, eventually, be released to swell the normal annual increase. The board consider it wise to provide for an upward surge which will bring total consumption to the level of 800,000,000 units within ten years of the end of the emergency.
To meet this rise in demand, additional generating plant will be required. The calls on the system were such that, had conditions permitted, generating capacity would have been augmented already, not only by the bringing into service of the Liffey works but also by the construction of a turf-burning station at Clonsast, for which financial provision was made in the 1941 legislation. These projects will be speedily brought to completion as soon as the necessary machinery and equipment can be secured. But the 30,000,000 units which the Liffey will yield, even when supplemented by the 90,000,000 to be provided by Clonsast, will go only a small way towards meeting anticipated post-war needs. Some new stations of greater capacity will be required, including further hydro-electric developments, estimated before the war to cost £3,000,000, which would, if carried out, increase capacity by 200,000,000 units. These works and others incidental to normal development will entail advances from the Central Fund which may amount to £7,500,000 within a few years from the end of the emergency.
The plans for early execution by the board in the post-war period do not stop there. The Government have approved a comprehensive scheme for the extension of electrical services to the rural community, generally. Not only will electricity bring to rural dwellers the benefits of good lighting in homes and outbuildings and the amenities of domestic appliances, radio, etc., but it will also take much of the drudgery out of farm life by providing motive power in the farmyard for such purposes as driving threshing and milking machines, pumping water, grinding corn, etc. Rural life should become more attractive and farmers will, moreover, be enabled to secure that reduction in costs which is so essential if our agricultural produce is to meet successfully the competition to which it will be exposed in export markets after the war.
The financial aspects of rural electrification are important. At pre-war prices, the capital cost has been estimated at £20,000,000. Approximately half the rural community could be connected on a basis which would yield an economic return but, in order to extend the supply even further, the Government propose to provide a subsidy. This commitment is expected to involve the provision by the Exchequer of up to 50 per cent. of the total cost of the scheme (i.e., of as much ultimately as £10,000,000) free of any conditions as to interest or repayment. The remainder of the cost will be financed by the ordinary method of advances.
There is thus in view, in the post-war period, the provision by the Exchequer of a total of some £27,500,000 for the Electricity Supply Board, of which up to £10,000,000 will represent a subsidy to rural electrification, costing the taxpayer, even on a 3 per cent. basis, about £500,000 a year for a period of more than 30 years. Already, since the inauguration of the Shannon scheme, the Exchequer has advanced £13.6 million towards electricity development.
The foregoing services indicate the wide scope of the Government plans for post-war development, and I do not propose to dwell further on this subject beyond saying that, in addition to such schemes, it may be taken that building and constructional projects of many kinds—in relation, for instance, to hospitals and public health services—the initiation of which has had to be deferred, will be prosecuted with vigour. All these schemes will be costly and the extent to which they can be adopted will, of course, depend on the rate of easement which is to be hoped for in the supplies position, but it is the Government's intention to take all such measures as may be found practicable to promote them or to encourage their promotion during what will probably be a difficult transitional period.
At this stage, I may say that all the foregoing programme is based on certain assumptions, namely, that the cost of Defence Services will, after the war, be very radically reduced and that emergency services, such as food and fuel allowances and subsidies, will practically disappear. The country cannot carry the double burden of emergency services and post-war development, and I would not be doing my duty as Finance Minister if I did not declare that such twin burdens would be insupportable. Our existing debt is of large proportions and its annual service absorbs more than £4,000,000. Further borrowing inescapably means further taxation and, unless our burdens lighten, as I have indicated, in other directions, our contemplated post-war developments must be substantially curtailed.
It is no light thing to have embarked at this stage on a most extensive and costly scheme of family allowances, with a permanent addition to the annual burden of taxation of £2,250,000. Many thought, and still think, that such an ambitious scheme should have been held over until our future economic position had become clearer after the war.
Last year I referred to the increase in the numbers and cost of the Civil Service between January, 1939, and January, 1942. Census returns for January, 1943, reveal, as I anticipated, a further considerable rise. During the year to January, 1943, the number of established and unestablished personnel increased by 905. As compared with January, 1939, there was an increase of 2,306. The rise in all-in costs as between 1942 and 1943 amounted to £310,000, and between 1939 and 1943 to £967,000. The all-in cost of the Service as at 1st January, 1943, was at the rate of £6,866,000 a year. This expansion is sufficient to be in itself, and still more in its implication, a cause of uneasiness. The growth of the Civil Service since 1939 is largely due to emergency conditions but, unless the trend of public opinion and of public policy is reversed, there cannot be that considerable retrenchment which we should expect when the emergency ends.
Though I spoke on the growth of the Civil Service a year ago, I make no apology for referring to it again today, because I regard it as a matter in which members of Dáil Eireann have a responsibility as well as a duty. First let me stress the truth, which, though axiomatic, seems often to be overlooked, that increased State activity is bound to produce an increase in the organisation through which the State directs its activities, that is, in the Civil Service. I wish Deputies would realise this when they are tempted to press the Government to establish a new service or expand an old one. He who wills the end wills the means: if it is our will to go on expanding the area of State action, then, if we are logical, we must admit our responsibility for the consequent expansion in the Civil Service. We are not behaving reasonably or honestly if we clamour for the action and complain of the consequences.
I must confess that it is the expansion of State activity itself rather than the effect of that expansion on the numbers and cost of the Civil Service that causes me greater concern. Though none of us consciously desires it, we are, as I said last year, drifting steadily towards the all-powerful State. In modern conditions, it is difficult to avoid this drift, and there are spheres which at one time Governments never thought of entering but which, for one reason or another, they have felt called upon to enter and make their own. Still, there are limits to this process which the State cannot go beyond without injury to the common good. It must respect the rights of its citizens; it must avoid courses of action which tend to destroy or seriously lessen incentives to the legitimate enterprise of individuals and groups, and it ought not to assume functions which, granted reasonable initiative, industry and co-operation, its citizens could perform with equal or greater efficiency for themselves.
Judged by these standards, how does our State stand? It has respected the fundamental rights of citizens and, in this regard, bears comparison with any State in the world. On the other hand, I feel that an impartial examination of State policy leads to the conclusion that some things are being done which tend unduly to lessen incentives to enterprise and that the State has in several matters taken upon itself functions which had better be left to the individual or co-operative action of citizens. It would not be fair to conclude that successive Irish Governments have been avid for power; their fault has been rather that, often in response to the pressure of public opinion, they were too ready to assume that the common good required the intervention of the State. The intervention has often brought some direct benefit to the community, or an important section of it, but, on reflection, it seems to me that the benefit has in too many instances been bought at the expense of some degree of demoralisation. As a result, we are on the whole, I fear, a less self-reliant people than we were a quarter of a century ago.
I recognise that this phenomenon is not peculiar to Ireland. The encroachment of government on the sphere of the individual or, to put it in another way, the abdication of the human person in favour of the State, has gone much farther in some countries and has involved the forfeiture of essential human rights. But, if we are on the same road, there is not much comfort in the thought that we have not travelled as far on it as others. That we have travelled dangerously far is made clear by many signs. For example, we require an army of State officials and police to induce or compel various classes of citizens to act in accordance with their own and the public interest in such obvious matters as respect for public property, tillage and weeding of land, sale of food in hygienic conditions, proper grading and packing of produce, etc. The same lack of public spirit and even of active self-interest leaves entirely to the State such tasks as the enforcement of Orders against profiteering and black markets. Another symptom of the evil is the limited extent of agricultural co-operation and the almost complete absence of a co-operative movement in the towns. No considerable class in the community is free from this tendency to look to the State to do for it what, without question, it could and ought to do for itself in my opinion.
In all this we are tolerating and even promoting a state of things in which real freedom can never be secure and ultimately cannot survive. It is futile to expect that our democratic institutions can save us if we continue on this road: the forms of democracy can coexist with the reality of servitude; they can even be used to promote servitude. I wonder whether in this country we do not sometimes unthinkingly use them so; for instance, when we encourage the people, as I fear we all have at some time or other done, to rely on the State more than on their own efforts. We must try to change all this, and the members of this House can do more, perhaps, than any other body of men to change it by preaching self-reliance, turning the people's thoughts from what the State might do for them to what they can do for themselves, insisting on the truth that only a self-reliant and enterprising people can be truly a free people.
Deputies will not, I hope, think that these matters are inappropriate in a Budget speech. They have important implications from the standpoint of economics and of State finance. The expenditure for which I have to make provision is inflated in consequence of the undue dependence on State action of which I have spoken, and our whole economic future may be imperilled by the relative absence among us of the spirit of self-reliance and co-operation. Within a few years after the war is ended, our agricultural and manufacturing industries will have to meet more intense competition than ever before from countries which, under the pressure of war-time needs, have immensely expanded their productive capacity. That will be a critical period for us, more critical in essence than these years of war in some ways, and to get through safely we shall need drastically to reduce our expenditure and to apply ourselves with intelligence and enthusiasm to our various tasks. Above all, as a country of small holdings, we shall have to recognise the vital need of co-operation in the widest sense of the term in our agriculture. Our chief competitors will be countries where the average farmer has what we would regard as a large tract of land. They enjoy to an extent to which we cannot attain the advantages of mechanised farming. If we are to hold our own against them, we shall require to combine a skill at least equal to theirs, and the careful and tireless industry which is the characteristic virtue of the good farmer with the thorough co-operation which can in some measure off-set the disadvantages of small scale production.
Reverting to our survey of the 1944-45 finances, the Supply Services contain, as in former years, provision for capital and abnormal expenditure usually met by borrowing. All the items of this character are set out in the Table Explanatory of the Budget, and include £394,000 in respect of various capital works and equipment for the Army. An expenditure in the coming year of £542,000 which is contemplated on airports covers the acquisition of land, the erection of buildings and the provision of meteorological equipment, all on a large scale. It is proposed to borrow £319,000 of this sum. Of the £96,000 devoted to the acquisition of land and cultural operations for forestry, it is proposed to borrow £43,000, and in regard to employment and emergency schemes which were combined a year ago in a single Vote I am borrowing one-fourth of £1,250,000.
The total of these capital items comes to £1,069,000, which has to be deducted in the usual way from the aggregate figure of Supply Services (including the three Supplementary Estimates already referred to totalling £247,000) to determine the amount chargeable against the Budget. The resultant figure is £44,161,000, to which we have to add £4,994,000 for Central Fund Services, making a total of £49,155,000.
To meet this national bill we have the proceeds of tax revenue estimated at £39,050,000 and of non-tax revenue estimated at £6,585,000. These figures, which are given in the White Paper, are prepared on the basis of existing rates of tax and charge. The total revenue thus comes to £45,635,000 or £3,520,000 less than the estimated expenditure chargeable against the Budget. I do not consider it feasible in the existing circumstances to bridge this gap by additional taxation. Existing imposts are heavy. There is not, so far as I am aware, any new source of revenue waiting to be tapped that would provide the Exchequer with a substantial amount of fresh income. A purchase tax would add appreciably to the already high cost of living. A bicycle tax would be most unwelcome to large sections of the community, though it might have a security aspect which would compensate for the financial loss. The year has been singularly barren of other suggestions for taxation. Shops have been mentioned to me and auctioneers are described as tax-worthy, but the difficult times ahead make me loath to add to existing burdens. We have not here conditions of growing national income and full employment such as obtain in the United Kingdom, and, due to an appreciable extent to causes outside our control, we are burdened with a higher cost of living. Our economic difficulties are becoming more acute. The lack of raw materials, fuels, chemical and other products, machinery and machine parts is more pronounced now than ever. It will take the combined efforts of all sections of the community to avoid economic dislocation on a large scale and a fresh dose of taxation is not the type of lubricant desired for such a situation.
The House, as well as the country, will, I hope, be relieved to hear that no fresh impositions are to be proposed to-day. There are, however, certain adjustments in regard to income-tax and corporation profits tax which I am submitting to the Committee.
The passing of the Children's Allowances Act, 1944, necessitates an alteration in the scheme of deduction in repect of children granted by the Income Tax Acts. Very broadly, the position is that, under the Children's Allowances Act, a parent gets an allowance of 2/6 a week in respect of each of his children under the age of 16 in excess of two. At present, the income-tax deduction granted to the parent in computing his taxable income is £60 for each eligible child under the age of 16. It is proposed, accordingly, to reduce the deduction for each such child in excess of two from £60 to £40. In the current year, however, since allowances under the Children's Allowances Act will be payable as from 1st August only, the reduction will be from £60 to £47. The allowances payable under the Children's Allowances Act will not be reckoned in computing the income of the parent for the purpose of assessment to income-tax. A resolution to give effect to these proposals will be submitted to the Committee to-day. It is estimated that the gain in the yield of income-tax will be about £45,000 in the current year and from £90,000 to £100,000 in future years.
A provision of the Income Tax Act of 1918 has been interpreted in the British courts as having the effect of enabling the lessee of leased machinery to claim the usual allowance for wear and tear of such machinery in cases in which the burden of the wear and tear does not fall on him but is, in fact, borne by the lessor. Having regard to the manner in which the relevant section is phrased, our courts would probably feel obliged to adopt a similar view of its effect. The British Parliament has legislated to remove the anomaly. I propose to do the same, and a Financial Resolution on the subject will be submitted to the Committee.
In the Finance Act of 1942, authority was given to the Revenue Commissioners by Section 3 to grant special allowances to concerns which erected buildings or installed plant or machinery for production during the emergency of commodities which, prior to the emergency, were not produced commercially within the State, the reason being that such buildings and plant might be of very little value when normal conditions are restored. The section as it stands has proved to be too narrow. For example, commodities which were produced commercially within the State in the past may now be produced by plant of a type the use of which might not be commercially possible in normal times; or a shipping company may purchase for the importation of goods which are urgently needed a vessel which, at the end of the war, may have little more than scrap value. The Finance Bill will include a clause to extend the powers of the Revenue Commissioners so as to enable them to make reasonable allowances in cases of the type to which I have referred. The clause will have effect for income-tax purposes as from 1939-40, inclusive, and will consequently apply to all corporation profits tax (including excess corporation profits tax) periods as from the beginning of the emergency.
Section 22 of the Finance Act, 1920, enables an individual who, by reason of old age or infirmity, is compelled to rely on the services of a daughter whom he maintains, to claim a deduction of £25 in computing for income-tax purposes the amount of his taxable income. It has been brought to my notice that in certain types of infirmity the services of a son rather than a daughter are needed, and I propose to include in the Finance Bill a clause to extend the scope of the existing section accordingly.
There will be some other provisions relating to the income-tax but as they are mainly of a technical character and do not involve any alterations in existing practice, they are not matters of general interest and I need not refer to them at the moment.
I feel obliged to take steps to counter certain devices which some companies are adopting to reduce the amount of their profits chargeable to excess corporation profits tax. One device which is becoming common in the case of family and director-controlled companies, i.e., companies in which the directors hold more than 50 per cent. of the shares carrying voting rights, is to increase the number of directors and also to increase the directors' remuneration. For example, in a family concern a man will arrange to have his wife and daughter appointed directors at salaries of anything up to £1,000 a year each. There has been one case in which six directors were in receipt of an aggregate of about £600 per annum in the standard period and, following a resolution passed in November, 1941, their aggregate remuneration was increased to £6,000 per annum as from December, 1940, although there is no suggestion that there has been any appreciable increase in the directors' duties.
Another device which is being adopted on a considerable scale is to form new companies, with a nominal capital, to take over parts of an existing business. For example, a company, which already has a substantial standard, forms one, two or three new companies with a capital of anything from £100 upwards. All the shares of the new companies are held either by the parent company or by the directors of the parent company (itself a director-controlled company). Parts of the existing business are transferred to the new companies, each of which is then entitled, though the capital in each of them is trivial, to the minimum standard of £2,500.
One more device which has recently been brought to my notice is something like this: A company has an issued capital of, say, £25,000. It goes into liquidation, and the liquidator sells the business to a new company for, say, £80,000. The business remains exactly the same, the proprietorship remains exactly the same, and the purchase consideration consists wholly of shares in the new company, no fresh capital whatever being introduced. The new company, nevertheless, claims a standard of 10½ per cent. on the figure of £80,000 capital. It is not clear that a claim in this type of case will succeed under the existing law, but I consider it necessary to legislate to safeguard the position, because, if the device were to succeed, it might be resorted to widely.
Resolutions will be submitted to the Committee to-day to enable legislation to be introduced to counter these devices. The legislation will necessarily be complicated and difficult; but I shall not shrink either now or in the future from asking the Dáil to confer on the Revenue authorities the necessary powers to enable them to ensure that full effect is given to the intentions of the Legislature with regard to the taxation of excess profits arising from the emergency with which the country is faced.
Of the adjustments proposed to-day, the only one with an appreciable effect on the revenue is that relating to income-tax deductions in respect of children, which gives us an additional £45,000 in the current year. This will be supplemented by the sum of £100,000 which I already mentioned, as coming from the Road Fund. These additions result in the lowering of the estimated deficit for the year 1944-45 to £3,375,000.
It may be objected that we are increasing expenditure without any serious increase in taxation. This is exactly what is happening, and it should please the expansionists if it does not satisfy anyone else. In recent years, however, we have been blessed with revenue yields far in excess of anticipations, and these have helped to reduce borrowings much below anticipated levels. Even if things do not work out that way in the current year, I think our financial structure is capable of bearing the strain. Not that I wish to see inaugurated here a policy of deficit economy which finds favour in some quarters.
As the figures which I quoted earlier show, we have had some sizeable deficits in the past, and they have contributed their part to the undesirable process of inflation that has been going on. Before referring to this matter in greater detail, however, I wish to dispose of items relating to the Budget by mentioning the contingent liability about to be undertaken this year by the Exchequer under the provisions of the Transport Bill which is at present before Dáil Eireann. Under that Bill, as Deputies are aware, it is proposed that the Minister for Finance shall give a guarantee in respect of redeemable debenture stock to be issued by the new transport company up to a maximum amount of £16,000,000. The guarantee will extend to both principal and interest. The amount of debenture stock to be issued by the new company for the purpose of exchange for stock of the Great Southern Railways Company and of the Dublin United Transport Company will be £9,875,556, bearing interest at 3 per cent. per annum in accordance with the specific provisions of the Bill. The stock will be redeemable not earlier than the 30th June, 1955, nor later than the 30th June, 1960, and, under the guarantee, the State assumes contingent obligations in respect of the capital sums due on redemption and also in respect of each of the half-yearly interest payments, amounting to £148,133.
In addition to the issue of this 3 per cent. debenture stock to stockholders in the dissolved companies, the company will have power, subject to Ministerial sanction, to issue for its general purposes debenture stock up to a total of £6,124,444 which will bear a rate of interest, not exceeding 3 per cent. per annum, to be approved by the Minister for Finance and, so far as the company exercises this power, the debenture stock will be guaranteed by the State as to both principal and interest.
It is intended that the Oireachtas shall have full information in regard to the giving of such guarantees in respect of debenture stock issued by the new transport undertaking, and the Bill contains provisions for the laying of detailed annual statements before both Houses. Moreover, in the event of its becoming necessary to provide public moneys in fulfilment of the guarantee, and if the company does not repay the moneys so advanced within 12 months, it will be necessary for the Minister for Finance to introduce a Vote in the Dáil for the amount in question so that the matter can receive full discussion.
Under the terms of the Bill, the new company is obliged to maintain a fund for the redemption of its guaranteed debenture stock and it is hoped that the company will be able to make substantial allocations to this fund not only out of surplus net revenue but also out of the proceeds of the disposal from time to time of any of the capital assets of the undertaking. I should also like to make it clear that, in the event of the State being called upon to fulfil its guarantee, any sum so provided shall be by way of an advance made to the company, which shall be responsible for the repayment of this debt to the Exchequer in accordance with terms to be arranged by the Minister for Finance.
The giving of this guarantee, which has become necessary for the protection and development of an essential undertaking, is one of the most important single financial transactions that has taken place in the history of the State. No Minister for Finance can assume without misgiving such a heavy liability—however contingent it may be and however hopeful he is of the prospects of rail and road transport in this country. In the present circumstances, when the impact of emergency conditions on transport is more severe than ever and may, indeed, grow worse, no Minister in my place can be free from anxiety that the Exchequer may be in the shadow of coming obligations arising from this guarantee. That is a possibility which must not be forgotten in any preview of public expenditure during the financial years that lie immediately ahead.
In order that Deputies may understand the relative importance of the addition to the contingent liabilities of the State involved in the issue of debenture stock by the new Transport Bill, I should mention that, at the 31st March last, the total amount of guarantees secured by the Central Fund were somewhat more than £51,000,000. Included in that figure is a sum of over £15,000,000 in respect of land bonds of all series issued for State contributions and the Costs Fund, the service of which is provided from annual Votes and might thus properly be included in the direct public debt. On that basis, the total contingent liabilities arising out of guarantees given by the State are at present of the order of £36,000,000. If the full amount of guaranteed debenture stock authorised by the new Bill, viz., £16,000,000, is issued by the company, it will represent an increase of 44 per cent in the total contingent liabilities of the State. Both absolutely and relatively, this transaction is, obviously, one of outstanding importance.
This measure of assistance will, I hope, help to provide cheap and efficient transport service for the public. Such service is particularly essential to agriculture, beset, as the latter is, with many problems, present and future. It is anomalous that, even in the middle of a war boom, we are still paying heavy subsidies to help the industry. Increased output per acre and per unit of labour is needed to overcome existing handicaps and to improve the low return on capital. For this purpose, more and better machinery and equipment, more fertilisers and, generally, a more intensive use of the natural or induced fertility of the soil is desired. On the dairying side, improvement in milk yields is long overdue and, to this end, the avoidable losses caused by retention of poor milkers in herds, inadequate winter feeding and by disease of one kind or other must be eliminated. This will require the provision of cheaper and wider veterinary services which would also be at the disposal of those who raise horses, pigs, poultry, etc. We may anticipate in the period immediately after the war opportunities of expanding our markets, temporarily at any rate. There is, certainly, going to be a great shortage of foodstuffs, seeds and live stock in Europe for several years after the end of hostilities. Any special types of production for which we are naturally fitted should be developed on efficient lines if we are to take full advantage of the situation then offering, and if we are to contribute our share to the rebuilding of Europe. Agricultural education must play its part in fostering our development as well as research work into animal and plant diseases. The investment of capital in land must be encouraged and for this purpose agricultural credit must be available.
This expansionist programme is already involving some increased charges on the Exchequer and will, in future, involve more, but I am prepared to take on the burden in the belief that, given a full measure of cooperation from the many interests concerned, it will turn out ultimately to the national benefit. The main service, however, that the Government can render to agriculture is to remove the obstacles, whatever they are, in the way of good farming. After that, the issue depends on the energy of the farmer. Industries which provided the instruments of production for the farmer will have to do so more efficiently and more cheaply in the post-war period and so relieve agriculture of the burden of additional costs which had to be borne when they were still in the early stages.
Agriculture has generally accounted for about 80 per cent. of our total exports. On these exports our strong creditor position has been built up and on their continuance at a high level we must remain dependent for the paying for the vast quantities of essential imports that will be required in the post-war period. Overhead charges and other costs of agricultural production must, accordingly, be kept as low as possible. We must also change our somewhat urban outlook and not seek to pile up too many of the amenities and luxuries in the towns, to the detriment, and sometimes at the expense of, the rural dweller. By making the towns too attractive and neglecting the country or adding to its financial burdens we can ony hasten rural depopulation. The electricity scheme to which I have referred will help to redress the balance in favour of the countryside to some extent. But the foundations of a sound rural economy in this country are a skilled body of farmers and farm workers, well-equipped farms, enlightened methods of marketing and the development of co-operative principles and practice. Without these we cannot permanently improve our position in external markets or even hold what we have in the face of competition from countries whose agricultural efficiency has improved under the impact of war conditions.
As regards the general monetary situation, I spoke at some length on this occasion a year ago about various aspects of the problem of inflation and of the policy that was necessary to restrict this evil to the narrowest compass compatible with the necessities of our situation in the difficult conditions imposed by war. It is inevitable that, during a world-wide conflict, the pressure of inflationary forces should become steadily more acute according as the duration of the war is extended and I can only note with regret that, in spite of our constant efforts to hold inflation in check, we have had to witness during the past year a further deterioration of our position in this respect. The total monetary circulation of the country in the form of notes and coin was 79 per cent. above pre-war at the end of March, 1943, and had increased to 104 per cent. above pre-war at the end of March, 1944. The actual increase during the past year was, however, slightly less than in the year to March, 1943. The rise in bank deposits has, throughout the war, been on a more moderate scale, the amount having been 38 per cent. above pre-war for the March quarter of 1943 and 55 per cent. above pre-war for the March quarter of 1944.
The expansion in the aggregate volume of money is not, however, our major problem in this connection. There is reason to believe that it has been offset in part by a diminution in the velocity of circulation. Bank debits, for example, for 1943 show only the moderate increase of 23 per cent. above 1939. A substantial fraction of the note issue is, probably, not in effective circulation but is lying idle as a means of conserving savings. It would be very much in the public interest, and wiser from the standpoint of the individuals concerned, if they refrained from the practice of hoarding notes and put their savings into the banks or the Post Office.
In general, it seems that such increase as has occurred in the supply of money has been rather an effect than a cause of inflationary forces. The active factor in inflation has been the upward movement of prices. The rise of agricultural prices, in particular, was at a marked rate from the early stages of the war. During the past year, the agricultural price index has again shown a strong forward movement, having advanced from 78 per cent. above pre-war at March, 1943, to 100 per cent. above pre-war at the most recent available date. A year ago, the cost of living index was 58 per cent. above pre-war; to-day that figure has advanced to 71 per cent.
The pressure of these increasing costs on the community has made it necessary, through the machinery of the tribunals established for that purpose, to allow emergency bonuses of limited extent to those sections of the workers who could least afford to meet the growing subsistence charges. In creases in the wages of agricultural workers have also been granted by the Agricultural Wages Board for the same reason.
The Stock Exchange is another sphere in which the influence of inflationary forces has been somewhat in evidence. The security prices index published in the Irish Trade Journal shows an advance of 24 per cent. at March, 1944, above August, 1939, for ordinary stocks and shares.
The trends indicated by the figures I have given are the result of a great complex of factors for which, apart from external forces outside our control, responsibility is shared in varying degrees between different elements in the community. In its machinery for price regulation and profit and wage restriction, the Government has taken important action to combat inflation and, in doing so, has often been obliged to incur some unpopularity with limited sections through its determination to promote the general good. The results I have mentioned show that, if it has erred at all, the Government has erred by taking measures milder than could have been justified by the situation.
No State measures, however, according to our conception of society, can suffice to preserve a healthy situation without the continued, whole-hearted co-operation of citizens and organisations in ensuring within their own spheres that the sacrifices necessarily entailed by the war are borne with due patience and that demands are not pressed to an unreasonable degree for higher prices and wages which could only have the effect of aggravating the national difficulties. In determining the policy of the present time, we should keep in mind the problems that will, assuredly, confront us at the termination of the war. We cannot hope to find these problems susceptible in all respects of our own domestic control, but it is for that reason all the more important that, where the discretion rests with us, we should prepare now for confronting the post-war difficulties rather by preventing the further spread of inflation than by choosing the momentarily easy course of yielding to it with the certain prospect of having to submit to painful consequences hereafter.
The rise in prices of commodities of our own production has now advanced to such a degree that it is imperative to resist by every legitimate means in our power any further continuance of this movement. The level already attained, being almost double that of pre-war, can only be prejudicial to the outlook for post-war export trade.
There is an equal need for safeguarding our position by maintaining a rigid check on increases of remuneration. It is a common error to view this matter in the light of reports of current high earnings of labour in Great Britain. It is not sufficiently understood that increases in British wage rates during the war have been very much more moderate than increases in British earnings. The aggregate earnings, unlike the wage rates, reflect the results of piece-work and of long periods of overtime, with consequent high output of goods. The increases obtained in this country have been almost entirely under the serious head of wage rates and are not in general associated with higher output. This is a consideration which cannot be too strongly stressed. If we can succeed in maintaining a reasonable stability in these matters for the remainder of the war period, we shall, in that way, make the most effective contribution in our power for adjusting ourselves to the requirements of the post-war international situation.
Some progress is, apparently, being made abroad towards a measure of agreement on the future operation of international monetary exchanges, but it is, as yet, too early to conjecture what its significance may be from the standpoint of the interests of this country. Our large stake in external trade gives us material reason for hoping that successful means will be found for ensuring the smooth working in the future of the world's principal exchanges.
In the meantime we can best promote that result and assist our own satisfactory relationship with the external agencies concerned by refusing to allow the temporary exigencies of wartime to cause avoidable derangement of our price and wage structure and by thus facilitating our eventual resumption of international trade relations on a favourable currency basis.
I have told you something of our plans for the future and, at the same time, I have uttered what I consider a timely and necessary note of warning. In conclusion, it may not be out of place to refer to the fact that, during its term of office, the Government has been acting as well as planning. Since 1932, a total of nearly 85,000 new houses has been built, with the aid of State grants and State advances by local authorities and by private persons, while over 30,000 houses have been reconstructed with State assistance. The total expenditure involved has been in the neighbourhood of £39,000,000 of which free Government grants accounted up to the present for £7,000,000. Apart from this, we have spent over £6,500,000 on county, fever and mental hospitals and on the provision of public health institutions, while, on other public health works, over £4,000,000 has been expended. No other State that I know of has been so generous in the measure of its assistance to the various important elements in our social welfare and we hope that, in these and other ways, we will continue to promote the happy and healthy conditions which all of us desire.