In his Budget speech last year my predecessor estimated the deficit for 1945-46 at £3,707,000. However, although supplementary estimates introduced during the year totalled nearly £4,000,000 we finished with a deficit of only £1,742,000. This result was due to two causes: Revenue exceeding expectations by £2,870,000 and Expenditure on all services being less than the total of original and Supplementary Estimates by £3,371,450. There were substantial increases in customs revenue from petrol, tobacco, wine and spirits; in excise revenue from beer, spirits, betting and entertainments; and in the yields from estate duties, income tax, including surtax, corporation profits tax, stamp duties and motor vehicle duties.
On the expenditure side the principal over-estimate was in the Vote of £3,000,000 for the alleviation of distress in Europe. We did our utmost to spend the total Vote but were able to spend only £1,350,000. A special committee of high officials was given the task of supervising the purchase and despatch of supplies, but they did not succeed in delivering the full amount owing to transport and other difficulties. We knew that the people were as anxious as the Government to bring succour to the unfortunate peoples of Europe, not only from humanitarian motives, but as a token of thanksgiving to Almighty God for having preserved our nation, which suffered so much itself from war and famine in the past, from the scourge and lash of modern war and its aftermath of pestilence and famine. This year we are providing £3,000,000 for the same purpose, and with the disappearance of some of the difficulties we are hopeful of being able to deliver the full amount of supplies this year and thus help to rescue from starvation some of the helpless victims on the Continent.
FINANCIAL YEAR, 1946-47.
The Volume of Estimates shows the expenditure anticipated for Supply Services this year, including the £3,000,000 for the Alleviation of Distress in Europe, is £47,766,000, which is £263,000 more than the expenditure last year. Central Fund Services will cost £5,724,000, which is £313,000 more than last year; the main part of the increase being additional payments to the Road Fund, due to heavier receipts from motor vehicle duties. The two services total £53,490,000 of which I propose to borrow £682,000 for items of capital, etc., expenditure included in the estimates for Supply Services. These items are: Forestry £40,000, Airports £400,000, Defence Works, £42,000, Employment and Emergency Schemes £200,000. Having deducted these sums, I have to meet an expenditure of £52,808,000.
As will be seen from the White Paper circulated to the Dáil a few days ago on the Estimates of Receipts and Expenditure for the year ending 31st March, 1947, we estimate the receipts from non-tax revenue as £7,310,000 and from tax revenue, on the basis of the rates at present in force, as £48,240,000. Adding the two together we get a sum of £55,550,000 which gives a surplus of £2,742,000 over the estimated expenditure on the non-capital portions of Supply and Central Fund Services. To this surplus I have to add a saving of £180,000 on the flour subsidy this year which is due to the increase in the extraction to 90 per cent. This gives a total surplus of £2,922,000.
I have certain proposals to make regarding the allocation of the £2,922,000, all of which are very desirable in the public interest, but which would cost more than this amount. I propose, therefore, to raise another £740,000 by taking it from where it will inflict little hardship with the amount of money in circulation and with shortage of supplies: an additional 12/6 per proof gallon on whiskey estimated to yield £440,000 and an additional 100 per cent. on wines estimated to yield £300,000. This will mean an extra duty of 1¾d. per glass on whiskey which is 25 degrees under proof strength, 6d. per bottle on the lightest wines and 2/7 per bottle on champagne. Adding the additional £740,000 from whiskey and wine to the surplus of £2,922,000 we get a sum of £3,662,000 to distribute.
As Deputies are aware, there is an excise duty of ?d. per lb., or 8/2 per cwt., on sugar and a customs duty of 2½d. per lb., or 23/4 per cwt. I propose to abolish these duties from the 1st June next. With the co-operation of the sugar company this will mean a reduction of 1d. per lb. in the price of sugar. The cost to the Exchequer is £600,000 this year and £720,000 in a full year.
Turf is costing the consumers in the non-turf areas 64/- per ton. This is undoubtedly a high price, but we were very fortunate in having a home produced fuel at any price during the war. It is hoped that with extended development, more equipment and improved transport, ample supplies of machine-won turf will be available at a much lower price before many years. I propose to reduce the price in the non-turf areas from 64/- to 54/- per ton as from the 1st June next. This will cost the Exchequer £250,000 this year.
The income tax payers, who include a large number of skilled tradesmen and some labourers, are paying an increase of 66 per cent. on the pre-war standard rate of tax. I propose to reduce this somewhat, but still to leave an addition of 44 per cent. over pre-war. This means a reduction in the standard rate of 1/- in the £, that is, from 7/6 to 6/6. The rates of surtax will remain the same as last year. This relief will cost £1,200,000 this year and £1,600,000 in a full year.
It is hoped that the reduction in income tax will give an impetus to the promotion of industry and employment. This relief will raise considerably the effective salaries and wages of income tax payers and should not be left out of account when comparing the sums paid weekly and annually here with States where the income tax is much heavier and payable on much smaller incomes.
In addition to lowering the standard rate of income tax, I propose to give certain concessions in order to encourage the extension of mining and the undertaking of scientific research in industry. It is estimated that the two reliefs will cost about £10,000. As the matter is somewhat complicated I would ask the Deputies to await a full statement in the Finance Bill. I may say now, however, in regard to mining that sums will rank for relief which are expended on the construction of works which are likely to be worth little or nothing when the mines have ceased to operate, and in relation to scientific research that where expense is incurred on research in connection with the trade, it may be claimed as an expense to be deducted from the assessment of trading profits. Where necessary, capital expenditure as well as revenue expenditure on research will be covered.
It is also proposed in the Finance Bill to exempt from income tax wound and disability pensions granted under the Army Pensions Act, 1946, such as pensions to members of the Defence Forces who, on discharge, were suffering from tuberculosis aggravated by, but not attributable to, service with the forces. All wound and disability pensions granted under the Army Pensions Acts, 1923 to 1946, will then be exempt from income tax.
Another section in the Finance Bill will provide that in computing for the purposes of income tax relief the six years' period for carrying forward a loss in any trade, profession or vocation the years 1939-40 to 1945-46 will not be counted. This relief will remedy hardship where a business was badly hit owing to the circumstances of the emergency.
A provision will be inserted in the Finance Bill to modernise the form of the decree prescribed for cases where proceedings in revenue matters are taken in the High Court or the Circuit Court. The proceedings I have in mind are proceedings for the recovery of a tax which is due and payable and is collectable for the benefit of the Central Fund. The proposed provision will be so framed as to take away the defects and archaisms appearing in the present form of the decree.
It is proposed that the excess corporation profits tax be abolished as from the 1st January, 1947. This will have no effect on this year's Budget. As the tax in 1947-48 will be collected on excess profits made up to the end of 1946, its amount will depend on the excess profits made during this calendar year. From the point of view of the general welfare of the community, it would be better if there were no excess profits and that prices should fall accordingly. This tax, of course, was never intended to go on forever; and as it adversely affects new businesses in comparison with old-established concerns with a high pre-war rate of profit, its abolition will, I believe, encourage the development of new industries and the extension of existing concerns. It is by the growth of enterprise that a greater output of goods and keener competition will be encouraged. Reasonable competition with a plentiful supply of goods is the best means of reducing price levels.
It is not my intention to put into this year's Finance Bill any relieving provision in respect of stock held by traders on the 31st December, 1946, which may not realise the value placed upon it. This will be a matter for next year's Finance Bill. I wish to make it clear now, however, that it is proposed that any relief given in this connection should be by way of repayment. Companies who desire to claim relief will be required to show, among other things, to the satisfaction of the Revenue Commissioners, the amount of stock on hands at the 31st day of December, 1946.
In 1941 a new tax, described as excess surtax, was introduced with the excess corporation profits tax to which it was meant to be complementary. It imposed a duty on excess trading profits arising to individuals, as distinct from companies. As the excess corporation profits tax is being brought to an end as from 1st January, 1947, it will not be necessary next year to impose excess surtax for the year of assessment 1947-48.
I am putting forward a proposal in relation to corporation profits tax and excess corporation profits tax which is covered by Financial Resolution No. 8. Under the existing law an assessment to corporation profits tax or excess corporation profits tax can be raised at any time within six years after the end of the chargeable accounting period. The law is different for income tax. An assessment to income tax or surtax may be made at any time, except in the special case of assessments on the executors or administrators of deceased persons, so long as the year of assessment is not earlier than 1922-23. There is no limit as to the time. I am proposing that the time limit for making corporation profits tax or excess corporation profits tax assessments be removed, but the proposal will affect only accounting periods ending on or after the 1st January, 1941. It was from that date that under the provisions of the Finance Act, 1941, the charge to excess corporation profits tax and the increased incidence of "ordinary" corporation profits tax came into force. The abolition of the time limit is required so as to ensure that profits will not escape taxation by mere effluxion of time.
Having made provision for the reliefs on sugar, turf and income tax, and having made promises which will affect future budgets adversely, and a few which, I hope, will have the opposite effect, I am still left, out of the surplus of £3,662,000, with a balance of £1,602,000.
Since 1943 petrol and fuel oil have borne the heavy tax of 1/3 per gallon. As about 80 per cent. of these fuels are used in road haulage and public passenger vehicles, their price substantially affects the cost of living. The ordinary consumer and the user of public road transport have ultimately to pay in the price of goods, fares and freights, not only the tax, but the usual overheads and profits on the tax. I propose in order to help the consumer to reduce the tax on mineral hydrocarbon light oil and hydrocarbon oil, other sorts, by 6d. per gallon as from the 1st June next. This will cost the Exchequer £470,000 this year, but the public have the right to expect that the aggregate prices of goods and services of which petrol prices are a factor will be reduced by more than this amount.
For a number of years a grant of £2 per child has been given in the Gaeltacht when children attending school show that they are native speakers of Irish. This grant is only given up to 14 years of age. It is proposed to extend the age limit to 16, provided the children are attending school and live with their parents, and to increase the grant from £2 to £5 per child. This will cost a sum of £40,000 this year. Much as I dislike the spending of public money I hope this grant, conscientiously earned, will increase from year to year. I appeal particularly to the parents in the Gaeltacht and the Breac-Ghaeltacht to regard it as their national duty to protect and extend our national language until it becomes spoken generally throughout the land.
The Minister for Posts and Telegraphs recently announced improvements in rural postal deliveries. These improvements will cost the Exchequer £20,000 this year.
There is one duty which has been operative for some years which, as well as being difficult to collect and costly to administer, is a cause of irritation and a source of dishonest practices; the entertainments duty on céilithe and dances. Charitable and educational organisations are entitled to a rebate of the duty provided they keep their expenses within 30 per cent. of their takings, which, judging from the correspondence regarding the matter, they find difficult. The incentive to evasion of this tax by organisations who want to raise funds, often for desirable local objects, causes bad feeling between the revenue officials, who are only carrying out their duty conscientiously, and the public generally, particularly the younger people. I feel that the duty tends to promote dishonest practices and impedes local initiative, and I propose to abolish it as from 1st August. This will cost £65,000 this year and £94,000 in a full year. This figure, however, is offset by a reduction in travelling and other expenses of the customs and excise officials whilst visiting céilithe and dances—and occasionally the District Courts—and also the expenses of the clerical staff in Dublin who deal with the voluminous correspondence and complaints regarding the duty. The abolition of the duty should result in a reduction of the admission charges by approximately 20 per cent.
RATES ON AGRICULTURAL LAND.
I propose to use £1,000,000 of the £1,007,000 available after giving the reliefs I have mentioned towards enabling farmers of over £20 valuation to increase the wages of their workers, and to give complementary benefits to farmers of smaller valuations, utilising for these purposes the machinery of the local rating authorities. This extra £1,000,000, when added to the existing agricultural grant of £1,870,000 will make a total of £2,870,000, leaving only £2,530,000 to be borne by farmers out of a total rate assessment this year of £5,400,000 on agricultural land.
Under the new scheme of allocation, for which legislation will be necessary, the total £2,870,000 will be distributed as follows:—
(1) Relief of three-fifths of the general rate on agricultural land in the case of land valuations not exceeding £20 and on the first £20 valuation of larger holdings;
(2) relief of one-fifth of the general rate on that part of the valuation above £20; and
(3) in addition to this one-fifth relief, and employment allowance of 10/- in the £ on valuations above £20, subject to the limitation that the amount of the allowance shall not exceed either £6 10s. 0d. for each man at work or male relative engaged on the land during the whole of the preceding calendar year, or the balance of the rates on the valuation over £20, whichever is less.
Credit vouchers will be issued this year to each occupier in respect of any excess of the relief on the new basis over the amount of the allowances to which he is entitled at present, and no occupier will have to pay more rates this year in respect of agricultural land than he would have had to pay had the new scheme not been brought into operation.
I want to make it clear that the wage-subsidy part of the new scheme is intended to last only for this year and next year. During these years, agricultural machinery, artificial fertilisers, lime and concentrates should become more plentiful and fall in price; items like repairs and horse-shoeing should also become cheaper; and, most important of all, improved farm buildings, better attention to the soil and to farmyard manure, to proper seeding, breeding, cultivation and care of stock, should increase output per acre and output per worker very considerably, thus rendering unnecessary for the prosperity of the farming community either a cumbersome wage subsidy, or the present high prices of agricultural produce. Even when the wage subsidy comes to an end in two years' time, the Government will be as interested as the farmers in keeping local rates within reasonable bounds seeing that it will have to find through State taxation three-fifths of the rates on the first £20 valuation of agricultural land and one-fifth of the rates on the valuations above £20.
It will be seen from the figures I have given that after deducting certain capital items, which are to be met by borrowing, all expenditure devoted to current goods and services to be consumed and paid for during the year, including the £3,000,000 for the alleviation of distress in Europe, is being met out of current revenue, leaving a small surplus of £7,000.
I wish to point out that I have not provided out of taxation for additional proposals which existing Departments or perhaps a new Department might make during the year. In this transitional year when every encouragement should be given to production and some relief to the taxpayer and consumer, it would be unwise to tax to meet contingencies which have not yet arisen and which cannot be estimated with any degree of accuracy. I am hopeful that if they do arise it will be in consequence of improved economic conditions and increased national income, which will add to the revenue yields for which we have estimated and justify the expenditure involved.
[PART II.]
Having discussed and made provision for the non-capital elements of the Exchequer account, I wish to deal now with the capital side, that is, the expenditure from which our people will reap benefits in the years to come rather than in the present year. I wish also to outline the means by which I propose to raise the necessary funds for capital development, and to refer to some of the broader aspects of the national economy.
NATIONAL INCOME.
Two months ago there were presented to the Oireachtas the statistics of national income and expenditure for the years 1938-1944. This publication was prepared by statisticians bent on giving the truth about the main features of our economic life, so far as it is possible to measure them. They did an excellent piece of work, which has received much favourable notice at home and abroad. I hope this publication will be studied by those who are interested in the cultural life of our people as well as by those who are interested primarily in its economic aspects; for, though we might become prosperous without any gain in contentment, perhaps even with a lowering of our cultural standards, it would be hard in modern times to raise these standards—based as they should be on the best of our national traditions and on our own language—except on the solid foundation of a higher real standard of living attained through an increased annual volume of net output.
What are our chances of raising the output of farm and factory? The fact that last year both increased appreciably, in spite of all the difficulties with which we had to contend, gives encouragement for the future. It is estimated that the net volume of agricultural output increased in 1945 by 7½ per cent. over 1944 and the net volume of industrial output by 10.9 per cent.
I have received figures amending and extending Table 12, page 37, of the National Income Statistics, which relates to agricultural and industrial output. Revised figures for 1944 and provisional figures for 1945 are now available.
The value at current prices of gross agricultural output was £96.8 million in 1944 and £104.7 million in 1945. The value of net agricultural output was £89.6 million in 1944 and £97.2 million in 1945. Net industrial output was valued at £42.1 million in 1944 and at £46.0 million in 1945.
The figures for volume of output, which are got by converting all value figures to 1938 prices, are:—
|
Gross Agricultural Output |
1944 |
£47.0 million |
|
Gross Agricultural Output |
1945 |
£50.7 million |
|
Net Agricultural Output |
1944 |
£42.9 million |
|
Net Agricultural Output |
1945 |
£46.1 million |
|
Net Industrial Output |
1944 |
£27.5 million |
|
Net Industrial Output |
1945 |
£30.5 million |
For agriculture and industry combined, the value of net output at current prices was £131.7 million in 1944, and £143.2 million in 1945. The corresponding volume figures are:—
|
1944 |
£70.4 million |
|
1945 |
£76.6 million |
It is very satisfactory to note that the volume of net agricultural output—that is, the amount farmers produce less the materials they buy from non-farmers —increased during the difficult war period from £41.1 million in 1938 to £46.1 million in 1945, measured in 1938 prices. Our farmers deserve the heartiest congratulations on this achievement. The value of the net agricultural output went up between 1938 and 1945 from £41.1 million to £97.2 million. With intelligent use of their savings during the last few years to improve their soil, farm buildings and stock, our farmers can ensure for themselves and their children a better income than the normal income enjoyed by themselves or by their fathers; and they can also ensure for the nation a good output of farm products at reasonable prices. By the way, an excellent use for £474,000 of their 1945 income of £97.2 million would be to pay off the arrears of land annuities outstanding on the 31st January this year. I hope the Land Commission will, if necessary, use vigorous methods to collect these arrears as it is most unfair to the big majority of farmers who pay promptly to allow a minority to fall behind with their annuities.
It will be noted that net industrial output stood only 14 per cent. lower in 1945 than in 1938 and was 10.9 per cent. up on 1944. I hope that our industrialists will rapidly extend their activities and increase their efficiency in the coming years, particularly in the production and processing of basic materials from home sources, in order that our people may have a secure supply of the essentials of life at reasonable prices. Our consumption of industrial products fell during the war because we had not reached this position by 1939. It obviously would have fallen much lower if the big expansion in industry which took place in the preceding years had not been accomplished.
FOREIGN TRADE AND FOREIGN ASSETS.
As well as the home output of goods increasing last year, imports increased by 43 per cent. in volume and by 44 per cent. in value. From £28.2 million worth in 1944 they rose to £40.7 million in 1945. Exports increased by 21 per cent. in volume and by 19 per cent. in value, namely, from £29.6 million to £35.2 million. There was an import surplus in visible trade of £5,500,000 compared with an export surplus of £1,500,000 in 1944. The import surplus for January and February of this year was higher than for the same two months of last year.
Although our import figures have improved we are very far from obtaining all we could afford to buy on the basis of our current earnings, when both visible and invisible balances are taken into account, for in 1945 we increased our foreign balances, largely sterling assets, by £33.5 million. The total addition to our foreign balances since 1939 is of the order of £140,000,000, which represents the goods delivered and the services rendered for which we did not get a current return in goods and services.
I wish to make this comment on our external assets: it was this Government's policy before the war to build up the internal assets of the State even though that entailed a reduction in our external assets for the purchase of equipment and materials for capital development. It was the force of circumstances and not the will of the Government which operated to increase them during the war. We shall as far as possible pursue our pre-war policy regarding them in the future. Personally, I hope that some time nations will agree not to vie with each other to increase their external assets. All cannot increase at the same time; for every credit there must also be a debit. The essence of a just and reasonable international trade aim is that it should be capable of universal application without injury to any nation. If we only had the rule that every nation must purchase from abroad, in some fixed accounting period, the full amount of its current exports of goods and services, including interest due on loans and investments, under penalty that any surplus would be distributed for International Red Cross relief or to those who unwillingly had current deficits, there would be an end to bitter trade wars and debt controversies, and each nation could operate its trade policy to suit the welfare of its own people without detriment to the welfare of others.
INTERNAL SAVINGS AND DEBT.
Important items in the national balance sheet are the figures for public debt and internal savings. It is sometimes held that the level of internal State debt is of little importance because the interest is a transfer payment between nationals; but from the point of view of Exchequer financing and social accountancy, it is very important to watch carefully the growth of public debt, State and local.
The State now owes £95,000,000 of which £9.3 million is the capitalised value of the housing subsidy. £37,000,000 is productive debt, which gives a fair return to the Exchequer. The other £58,000,000 is dead weight debt, from which no return is derived in relief of the annual charges for interest and sinking fund. State debt rose by £18.7 million between March, 1939, and March, 1946.
The gross debt of local authorities was £36.3 million at the end of March, 1945. But after deductions were made in respect of State contributions for housing and certain other items, the net debt was £23.37 million. The liabilities of local authorities increased by about £2.7 million during the last financial year, so that their total net debt now stands at £26,000,000. A large part of this net debt has been incurred on housing and public improvements, which add to the rateable valuations and the local authorities' annual income from rents and rates.
The latest figures for the people's savings and liquid resources are:—
Bank deposits, £212.7 million—increase over 1939, £96.3 million.
Post Office Savings Bank and Trustee Savings Banks, £39.2 million—increase over 1939, £27.3 million.
Savings certificates, £15.7 million— increase over 1939, £4.7 million.
Notes and coin held by the public, £32,000,000 — increase over 1939, £20,000,000.
Total liquid resources and savings of the public, £299.6 million—increase over 1939, £148.3 million.
NATIONAL DEBT COMPARISONS.
It is of interest to compare the amount and rate of growth of our State debt, and the ratio of debt to national income, with similar figures for other States, as these relationships have important social and economic implications.
In the United States of America the national debt is 1? times and in Great Britain 2? times the national income. In Ireland the gross State debt is only ? of the national income.
Sweden's national debt trebled since 1939; that of Switzerland and New Zealand roughly doubled. Of the major belligerents, the national debt of Great Britain trebled, and that of the United States increased sixfold. We added less than ¼ to ours.
Had we increased our debt during the war at the same rate per head as Great Britain we would have added £1,080,000,000 to it, and instead of owing £95,000,000 we would now owe £1,170,000,000.
I have not given these figures and comparisons to induce the complacent feeling that all is well with our social-economic fabric, or that we are richer than other peoples. Far from it. I have assembled them to show that this State, judged even by 19th century standards, is not overburdened with debt, and has at least as good a credit position as other States about which we hear a good deal from time to time; also to show that if as a community we use our resources prudently, if we have the will to produce the necessary goods, we have the means to buy the equipment. The level of our internal debt is low and the level of our external assets high. By our success in maintaining neutrality in World War II we were spared the devastation suffered by other countries. Nevertheless, the scarcity of vital supplies during the war years bore heavily on an economy which still bears the marks of our struggle for political and economic freedom. The deficiencies in our economy are not recorded in the Exchequer accounts, but they can be seen in the extent to which our capital development and output lag behind those of countries with a long exercise of freedom, and in our statistics of population, unemployment and emigration. But let me add that whatever happened in the past, if we fail to make progress in the future we will have nobody but ourselves to blame.
UNEMPLOYMENT AND EMIGRATION.
The greatest social evil from which this nation suffered during the past century was the drain of emigration. While we made some progress in the years before the recent war to stem the drain, the stoppage of development, due to shortages of imported plant and material, threw many people out of work and led large numbers to emigrate, mainly to England, between 1939 and the end of 1945. Deducting the number who came in during these years from the number who went out, we get a net emigration figure of 78,600 up to the end of 1945. In addition to those who emigrated and have not yet returned we had an average of 60,700 unemployed during 1945. As a rough working assumption we might take it that if all who emigrated came home the average number of our unemployed would stand at about twice its present average, or, say, 130,000.
These figures indicate the outstanding social and economic problem of the day. It is a problem which must be overcome if we are to build a nation completely free, worthy of the endurance of this generation and of the sacrifices of our fathers. The task is a difficult one, but it is within our capabilities if we try hard enough and are determined to succeed.
If we have deficiencies to-day, we have also assets not to be found in balance sheets. The nation has gained self-confidence. It is justly proud of its achievements. We are more united on national, economic and social policy than most nations, and than ever before in our history. It is now generally agreed that our objective should be to secure out of our own resources for all our people who wish to remain at home, a reasonable supply of food, fuel, clothing and shelter, and ever-increasing opportunities for cultural development, based on our own language and on the best traditions of our race. I wish I could add self-sufficiency in mechanical transport, tractors, and motive fuel to the list. But an approach to that, too, is coming, I hope.
To make progress towards our objective we must apply ourselves energetically to building up additional capital resources and producing an increased output of goods and services, doing our utmost to make sure that no man who is fit and willing to help is left idle.
Now that equipment and raw materials are gradually becoming available we must proceed vigorously with our programme for drainage, farm improvements, turf, rural electrification, hospitals, school and university buildings, housing, sewerage, water schemes, re-afforestation, roads, harbours, airports and for industrial and agricultural research and many other types of development.
CAPITAL ISSUES APPROVED.
It will be seen from the White Paper that we propose to borrow £400,000 for capital development by Bord na Móna this year. This organisation is producing an excellent fuel—machine-won turf —at a reasonable price. I hope it will be able to enlarge its operations and expand production much more rapidly than was anticipitated when the post-war programme was being drawn up some years ago.
Another capital item is the advance of £1,000,000 to the Electricity Supply Board, which is now engaged in a variety of projects including the preliminary work for rural electrification. It is still not possible to calculate what rural electrification will cost but it will be very much higher than the £20,000,000 estimated on the basis of 1939 prices. Even though the scheme will be costly on the Exchequer the sooner it is completed the better it will be for the comfort of rural dwellers and the output of agricultural produce.
The electric motor is one of the greatest gifts of science to the stock-feeding and dairy farmer. It makes possible also the development of local industries which are economic to operate in small units when the handy electric motor can be used to drive the machine. The Electricity Supply Board did excellent work during the war in keeping up the output of electricity. Their greatest difficulty was their production units which depended upon foreign fuel. I hope that with the building of turf-fired stations and the development of the Liffey, the Erne and other rivers we will in future be independent of foreign fuel supplies for the production of electric power.
It is estimated that the Tourist Board want £350,000 new capital this year for the development of tourist facilities. It is to be hoped, however, that private enterprise will grasp every opportunity for the extension and improvement of accommodation and recreational facilities for holiday-makers, and so render unnecessary any large investments directly by the State. This is an industry which must expand in the coming years to cater for our own holiday-makers as well as for tourists from abroad. A sure way of killing its development would be an attempt on the part of those engaged in it to make undue profits. Here the long view is the sound view.
The rapid advances which are being made in international air transport and the various air agreements which have been completed during the past year, make it very important that the development of our airports should be completed as rapidly as possible. This work is now in hand, and a sum of £610,000 is being provided in the Supply Estimates for the capital expenditure on airports anticipated this year. We are also making provision for £800,000 for planes and equipment. It is expected that there will be a big extension this year in the activities of Aer Lingus; we will provide 60 per cent. of the capital and British interests 40 per cent. The organisation of this joint company will serve the interests of both countries and will provide cheaper and more efficient air transport for both English and Irish travellers, than two competing companies could possibly have done on an economic basis. As has already been announced, Aer Rianta hopes to start its transatlantic service this year.
Colucht Groighe Naisiúnta na hEireann has recently been registered and a sum of £100,000 is indicated in our capital requirements with which to purchase shares in the new company and so provide it with funds for the development of the stud.
For many kinds of development projects materials are procurable at home, though with existing equipment they are often costly to win and process. The Government is determined to get ahead with the work as quickly as possible making the best use of the available equipment and material. If, however, we are to do the work without placing an undue burden on our children we must do it as economically as possible, employee and employer, borrower and lender, co-operating to give the best possible service for the lowest reasonable reward. The less energy spent by each section in seeking greater rewards for itself, which must ultimately be paid by the remainder of the community in taxes or prices, the greater will be the energy available for improving permanently the lot of all sections, including itself.
FINANCE.
This leads me to the main point of this part of my speech—finance. I want to raise money for capital purposes. I want for the sake of those who have to repay it—that is the community, all sections of it—to get it at the lowest price it is possible to obtain it, in present circumstances, without ill effects on our political and economic life.
Let me reply at this stage to suggestions which I am sure will be advanced: either that we should borrow all the money we require from the banks or that we should alter the law to enable the Exchequer itself to create money. It must be realised that borrowing from the banks swells the volume of money in the hands of the people as surely as the creation and issue of money by the State. At this moment the community as a whole has enough money to buy the available goods. Any appreciable increase in either bank credit or State deficit, borrowed, minted or printed, which did not bring additional goods on the market, would only tend to raise the existing price level, unless it were counteracted by increased savings. Our financial problem to-day is not a shortage of money and a surplus of goods; I wish it were as simple as that. It is the problem of how at the same time and with the fewest possible controls, to induce saving in the proper directions, and to induce spending in the proper directions; how to reduce the pressure of money on goods in short supply, and how to promote the spending of money to employ the men who are without work, in the creation of additional goods and additional capital wealth.
I propose for the capital items detailed in Part III of the White Paper and for the other purposes to which I shall refer later, to raise money during the coming year by the following means:—
(1) By the issue to the public of a long-term loan at a maximum of 2½ per cent.
(2) By borrowing through the Post Office Savings Bank and Trustee Savings Banks. In this connection I propose, as from 1st January, 1947, to decrease the rate of interest to 2 per cent. on sums up to £300 and on the first £300 of each deposit over that amount; on the excess over £300 the rate of interest will be reduced to 1¼ per cent. There will be no change in the existing rate of 2½ per cent. on Post Office and Trustee Savings Banks' Deposits in respect of this calendar year.
(3) By borrowing through a new issue of lower-yielding Savings Certificates. The existing issue is being withdrawn as from to-day.
(4) By the issue of three months' Exchequer Bills to the commercial banks which they have agreed to discount at 1? per cent. per annum. These bills will be issued from time to time during the year only if additional ways and means advances are required to supplement the inflow of revenue and of loans from the public.
The combination of means for obtaining money which I have outlined will enable me to make long-term loans to local authorities and to State and semi-State organisations for capital development, at a rate of 2½ per cent. per annum. Future loans issued to these bodies from the Exchequer or Local Loans Fund will bear this rate of interest, and may in appropriate cases have repayment periods as long as 50 years. It should be noted that a weekly payment of 1/4 will repay £100 at 2½ per cent. interest in 50 years, and that it takes a weekly payment of 2/1½ to repay £100 under the present terms of 4¼ per cent. for 35 years. This reduction of 37 per cent. in annual charges will assist local authorities in building houses to let at reasonable rents, provided, of course, they get the co-operation of the master builders and the trades unions regarding three other vital elements of cost; profits, wages and output.
Before dealing with the other purposes for which I propose to borrow, I wish to point out that if our outstanding loans could be converted to a 2½ per cent. basis immediately, we would be able to borrow £25,000,000 without increasing the amount appropriated for loan charges which this year are costing the taxpayer £4.89 million. We cannot, of course, convert outstanding loans until their first redemption dates arrive; but we can, if there is a legitimate and pressing need for borrowing, borrow with the knowledge that the burden of interest and sinking fund charges is becoming relatively lighter. Debt charges are 9.1 per cent. of this Budget and were 11.2 per cent. of the 1939 Budget. They will become much easier to bear if we pursue policies which have the effect of keeping such charges down whilst increasing our national income.
TRANSITION DEVELOPMENT FUND.
Of all the means by which the national income can be increased, the most obvious is to use for this purpose the energy and skill of those now seeking employment. It is more obvious, but not so immediately effective, as would be an increase in the output of those already engaged in agriculture and industry. It is, however, socially urgent; and despite all the difficulties and financial cost involved, it must be tackled with the greatest vigour in this post-war period of transition.
It may be argued that now is the wrong time to do work when prices are high, and that local authorities and State and semi-State companies, would be crippled by undertaking development before prices fall.
To meet this difficulty of the present abnormal level of costs, I propose to set up a Transition Development Fund to operate during the next two financial years, out of which contributions will be made towards the extra capital expenses of State organisations and local authorities, which are attributable to post-war transitional difficulties such as high prices of materials and shortage of equipment. I also propose for this year to meet out of the fund any surplus expenditure on development work which Departments did not anticipate would be possible when their Estimates were being prepared last December. By the time the transitional period is over and prices have fallen, we will, I hope, be well on the move and can then accelerate much more rapidly than if we had remained stationary. For this fund I propose to borrow, if necessary. up to £5,000,000 this year. Issues from the fund will be made as rapidly as possible when suitable projects are put forward. Priority will be given to projects from the Gaeltacht and large urban areas in which desirable schemes might otherwise be postponed because of transitional difficulties. There is plenty of desirable work in every area of the country, work which will pay dividends in increased productivity, better health and more comfort, if the schemes are properly organised and a good output is given.
In the Finance Bill I shall bring forward a clause legalising the establishment of the Transition Development Fund for two years; and, if it is approved, introduce an Estimate to the Dáil for a maximum sum of £5,000,000 for this year. Detailed public announcements will be made later by various Departments as to grants which will be made available from the fund. At this stage I will give two illustrations as to how the fund might be used. The first is farm improvements. Although in the Estimate for Employment and Emergency Schemes we provided an additional £50,000 this year, bringing the total up to £400,000, more applications than we expected have come in. I propose to meet the additional applications out of the fund. The second is housing. It is very difficult to foretell in the disturbed state of the world what the prices and supplies of materials are likely to be over the next two years. It is proposed, therefore, not to alter the existing standard subsidies to local authorities for housing but if reasonable tenders are made for the erection of houses on the basis of the current cost of available materials and methods of construction, to add to the normal subsidy a grant out of the Transition Development Fund. If the tenders are reasonable the grant will be sufficient to keep the rents of new workers' dwellings at a reasonable figure, having regard to the level of current wages. If in particular cases houses cannot be completed at once owing to shortage of certain materials, local authorities will be encouraged to complete them as far as the supply of materials will allow, and the capital charges on the outlay will be borne by the fund until they can be completed.
In conclusion, I wish to say that with the co-operation of spending authorities on the lines I have suggested, with efficient and strict management, and with the co-operation of the men employed on the work in giving good output, I feel confident we can make a good start this year on our post-war programme for developing this portion of the country to be a somewhat worthier home for our people. We have no certainty of success, of course; but, as they used say in Armagh, nothing beats a try. Buailimis faoi'n obair, in ainm Dé.
