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Dáil Éireann debate -
Wednesday, 2 May 1951

Vol. 125 No. 13

Financial Statement. - Budget, 1951.

1. ECONOMIC SURVEY

I propose this year to preface my budgetary proposals with a brief outline of the economic and financial conditions in which they are being introduced and which they in turn will influence. So far as the recent past is concerned I am greatly facilitated by the National Income and Expenditure Tables published at the beginning of March by the Central Statistics Office. While our information in this respect is reasonably comprehensive and reliable, it is particularly hazardous this year to venture predictions about the future. We are going through an anxious period and until, as we pray, the clouds pass we must expect to encounter difficulties and reverses in our economic life. In these unsettled conditions financial policy must necessarily be somewhat tentative but capable of adjustment should there be a further disimprovement in the economic situation.

The broad purpose of my survey is to see whether all is well with the sources on which we depend for the maintenance of consumption and investment at their present levels and whether we are so ordering our affairs that, given normal conditions, we could reasonably expect to maintain in the future the standards of living set up in the immediate past.

PRODUCTION

I shall begin with home production, which is the primary source of our income and wealth. Gross agricultural output had by 1949 virtually regained the 1938 volume. Last year, bad weather affected the output of crops and turf and, as a result of the decline under these headings, total output fell short of the 1949 level. There was an improvement in the production of live stock and live-stock products. The turf campaign and the improved prices for wheat and beet mark the Government's desire that production of these crops should be greatly increased this year. Viewed in relation to our export potential, the increase in the population of cattle and sheep revealed by the January, 1951, live-stock census is encouraging, but satisfaction is tempered by the drop in the number of pigs.

In industry, the improvement recorded in recent years continues. The expansion has been pretty general. For some industries, such as hosiery, textiles, engineering, confectionery, footwear and bacon-curing, 1950 was a year of marked activity. As might be expected, there has been an enormous expansion in recent years in the output of industries supplying materials for house-building and furnishing.

If supplies of raw materials for agriculture and industry can be maintained, production can be still further expanded, but present prospects are not altogether reassuring. Increased output is particularly necessary in agriculture because of the urgent desirability of an increase in our exports, four-fifths of which are derived from the land.

EMPLOYMENT

Employment in industry has followed the same upward trend as output. There are now over 133,000 persons employed in the transportable goods industries as compared with under 100,000 persons in 1938 — an increase of one-third. In insurable occupations generally, the average weekly number employed has risen from 416,000 in 1938 to 490,000 in 1950 — an increase of 74,000. The secular downward trend in agricultural employment continues but since 1943 new openings in other occupations have more than made up for the fall in the numbers engaged on the land. To this extent a significant contribution has been made towards solving the problem of emigration though at some cost from a purely economic standpoint.

EARNINGS

Earnings per worker have doubled since 1938 and have thus outpaced the rise in the cost of living. The index of weekly earnings for October, 1950, was 201.7, related to 100 for October, 1938. In agriculture the improvement in wages since pre-war has been relatively greater than in industry and there is now a better balance between employment conditions in agriculture and industry. In many industrial and service occupations wage rates are higher than they are in Britain. Recent wage awards have unfortunately tended generally to increase the differential. I refer later to the need for moderation on the part of all sections of the community—employers and employees alike — in the pursuit of higher monetary incomes unrelated to increases in output.

PRICES AND MONETARY SITUATION

The stresses to which our economy is at present subject arise largely from increased prices and these in turn are due in the main to external circumstances. After a period of virtual stability import prices took an upward turn last summer when we began to experience the delayed impact of devaluation, later reinforced by the effects of rearmament and the stockpiling associated with it. There is reason to fear that we have not yet experienced the full consequences of the increased international demand for basic commodities. Concurrently with the rise in import prices there has occurred an increase in our trade deficit; the return for our exports, though it also has increased, has advanced less than the cost of our imports. When what we produce for export does not go as far as before towards paying for our import needs we suffer, as a nation, a reduction in the standard of living we can afford. Increases in remuneration offer no escape from this unwelcome development; indeed, they can only accelerate the process of inflation and cause social injustice as between those able to improve or maintain their position and those who cannot enlarge their incomes and are therefore forced to assume an undue burden of hardship. For this reason, the Government ask for restraint in the putting forward of wage and salary claims and have taken measures intended to limit price increases to those justified by increases in costs.

The rise in import prices has naturally had an effect on wholesale prices and on agricultural prices, which have gone up by 14 per cent. and 8 per cent., respectively, as compared with a year ago. Increased prices and incomes, and the scale of national expenditure associated with them, have had marked reactions on our economy. The level of bank advances and the monetary circulation has also increased. During 1950-51 bank advances in Ireland rose by over £19,000,000. Bank investments increased by almost £6,000,000 as a direct result of subscriptions by the banks to the Exchequer Bonds issue and the taking up of Dublin Corporation stock. That much of the new credit was spent on imports is shown by the fact that the sterling holdings of the banks decreased by nearly £19,000,000, bank deposits — including those on public accounts — going up by approximately £12,000,000. The increase in certain prices and the greater volume of transactions to be financed account for the rise in the total circulation of notes and coin from £55.1 million on the 1st April, 1950, to £58.1 million, or 5 per cent. more, at the 31st March, last. In present circumstances it is desirable that the banks, while continuing to finance capital projects, the laying-in of essential stocks, and normal import requirements, should discourage any merely speculative or excessive borrowing.

NATIONAL INCOME

The national income for 1950 has been provisionally estimated at £363,000,000 as compared with £352,000,000 for 1949 and £334,000,000 for 1948. In part, these figures represent merely a monetary change. But they contain some solid element of improvement in the real standard of income of the community of which the rise in output and in consumption is the direct evidence. Of the national income of £363,000,000, agriculture contributes £104,000,000, industry £86,000,000, distribution and transport £70,000,000, other internal sources £80,000,000, making a total of £340,000,000, the balance coming from outside, £10,000,000 of it in the form of emigrants' remittances. Non-agricultural income is distributed as between salaries, wages and pensions on the one hand and profits, interest and rent on the other as to roughly two-thirds and one-third; wage-earners are now getting a larger share of the national income than in 1938.

CONSUMPTION

In 1950 we were consuming over 25 per cent. more than in 1938. Between 1938 and 1949 there was an increase in the consumption of food of 12 per cent., of drink and tobacco of 16 per cent., of clothing of 10 per cent. Purchases of other goods have increased even more markedly. I might instance motor cars, bicycles, wireless sets and household goods of various kind, including carpets and furniture.

The material improvement in our mode of life since 1938 is in itself highly satisfactory, but as our agricultural output is still not above pre-war and our exports are only at pre-war level, one may wonder whether we can sustain such a greatly improved standard of living as we enjoyed in 1950. This is the crucial question to which I shall devote the remainder of this survey. It is true that industrial output has increased and that the tourist trade has developed since 1938 so that it has become a mainstay of our economy. But a full answer to the question whether as a nation we are living beyond our means depends on a consideration of our balance of payments, present and prospective. A deficit in the balance of payments is a means of adding to our current resources — a means open to us because we have been able to finance additional imports by drawing on our sterling assets and incurring dollar indebtedness. Deficits in the balance of payments cannot, however, be sustained for more than a short period; they involve an initial loss of purchasing power over imports owing to the depletion of external capital and the income derived from it. Unless we are building up our productive capacity to an adequate degree, so that by increasing our exports or reducing our imports we can within a few years equalise our external receipts and payments, we must inevitably suffer a decline in our living standards. Our external credits are far from being inexhaustible; they can be used up now only at the expense of the future unless they are used for productive purposes.

TRADE AND PAYMENTS

It is provisionally estimated that there was a deficit in 1950 in the balance of payments of about £30,000,000 as compared with £10,000,000 in 1949 and £20,000,000 in 1948. It is prima facie disquieting that the approach to equilibrium indicated by the 1949 figure suffered such a drastic reverse in 1950. Before any conclusions are formed, however, the causes of the 1950 deficit must be carefully analysed.

It may be said at once that the widening of the gap between external receipts and payments in 1950 was due primarily to increased outlay on imports—£160,000,000 as compared with £130,000,000. Exports increased from £61,000,000 to £72,000,000 but there was some decline in net invisible receipts; tourism in particular yielded less because our own expenditure abroad was exceptionally heavy on account of Holy Year pilgrimages. The import increase of £30,000,000 was the result, almost equally, of larger quantities and higher prices. An analysis of the trade returns shows that producers' capital goods increased by £2,000,000; imports of food, drink and tobacco by £2.4 million, tea, sugar and tobacco being the main items; other imports for direct consumption, including petrol and household coal, accounted for a further £3,000,000. The main increase, however, was in materials for industry imports of which rose by £22,000,000 in 1950. This is the category that includes textile materials which were up by £4.3 million, wheat up by £2.1 million and a wide variety of other goods intended, when processed, to be sold to the domestic consumer.

The increased imports of currants and raisins, raw cocoa and sugar were, however, destined to a considerable extent to become ingredients in exports of confectionery, chocolate crumb, jams and preserved fruit which taken together rose by £4.2 million last year. The analysis shows that we are importing necessaries rather than frivolities and the only question is whether we can afford to keep spending on imports on the 1950 scale. For the answer to this we must look at the total pool of goods and services resulting from retained home production and imports and see whether we are devoting enough to investment and consuming no more than our current production entitles us to do.

This is an appropriate point to introduce the term "inflation". The classical definition, in popular language, is "too much money chasing too few goods" and, therefore, driving up prices. In our circumstances the definition might be re-formulated as "too much money attracting too much imports," since over-spending by the public and the State is able to find an outlet in purchases from abroad financed not from income but from our past accumulations. In a state of normality, we should be able to live on our income and indeed save enough of it for capital purposes not only to maintain but actually to increase our production and, therefore, our standard of living.

It is still proper and eminently reasonable to draw on our external assets if thereby we speed up the process of capital development at home. What is abnormal and, if it persists, can be seriously damaging, is to use up our external resources for consumption purposes. Have we being doing that?

INVESTMENT AND STOCKPILING

What we did in 1950 was to add to the current resources available for investment or consumption by realising sterling assets and incurring dollar indebtedness to pay for imports we could not otherwise buy. But, as I have indicated, we need not be concerned about external disinvestment which is balanced by a net increase in productive capital outlay at home. Indeed, last year I went so far as to say that, even if this outlay were not fully productive, some net loss of external purchasing power might be regarded as a premium worth paying for the expansion of employment and the greater economic and social security which domestic investment might afford. It has been estimated by the Central Statistics Office that the increase in external disinvestment of £20,000,000 in 1950 as compared with 1949 has been accompanied by a net addition of £6,500,000 to physical capital at home. The whole of the balance of £13,500,000 was not, I am glad to say, dissipated in consumption. There was, indeed, a loss to the economy owing to the relatively greater increase in import than in export prices; this loss has been estimated at about £8,000,000. There is evidence that most, if not all, of the remaining £5,500,000 of the increase is represented by additions to stocks or advance purchases of such necessaries as sugar, tea, maize, fertilisers, tobacco, building materials, textiles, chemicals, rubber and household goods. As regards both the additional home investment and the increases in stocks, we have value to show for the increase in the deficit. The position is, however, far from satisfactory inasmuch as the basic £10,000,000 deficit of 1949 was repeated in 1950 and the disimprovement in the terms of trade in that year has also still to be made good.

The difficulties of the present time may, however, be exceptional and as time goes on a better balance will, I hope, be achieved between our earnings from abroad and our necessary external outlay. It is reasonable to expect both an expansion in our agricultural exports and better prices for them. It is also possible that net tourist receipts will be greater this year. When the accumulation of stocks has ceased expenditure on imports should decline. The rise in import prices should, in due course, expend itself. It would, however, be optimistic to expect an early reduction in the trade deficit. The outlook for 1951 is, I fear, that the deficit may be even greater than in 1950.

The present position on external account is by no means satisfactory, and if it continues to develop unfavourably the application of corrective measures will be called for. At the moment these might be premature. It is not so long since we were forced to accumulate surpluses on the balance of payments because of a shortage of imports. While the materials are still available it is right that the State and private individuals should proceed with productive capital development to the utmost extent possible. It is, however, also desirable that the public should transfer to the State for the purposes of its capital development programme a greater share of the purchasing power now being expended on the less essential consumer goods. I concede that a substantial reduction in taxation on incomes would be a valuable stimulus to savings and investment, but the way to this is not clear. Only if the gap in the balance of payments is narrowed so that external disinvestment is balanced by additional home investment — rather than by excessive consumption — can we be satisfied that as a nation we are making ends meet and not wasting our past accumulations. One of the great benefits conferred by the possession of external assets is ability to ride out periods like the present of exceptional difficulty and stress, but this external mass of manæuvre is the mainstay of our economic independence.

CONCLUSION

The general purpose of this broad survey was to examine the extent of the resources available to us from our own production and from imports and to see whether we are making the best use of these resources. The conclusion to which the analysis leads is that, while the extra external disinvestment we incurred in 1950 was balanced as to roughly two-thirds by new home investment and increased stocks, there still continues to be a substantial use of past savings merely to lever up standards of consumption. Making all allowance for the exceptional conditions now obtaining it is to be feared that we are not producing and earning enough to pay our way. The implication is obvious. We cannot have both consumption and capital development on the present scale unless we save more and produce more. Additional saving would ease the congestion that now exists and causes consumer demand to seek an outlet in imports. It would relieve the pressure on the balance of payments and help to confine external disinvestment — or surplus imports—to what is needed for home development or stockpiling. Additional home development would itself promote an increase in production and thus yield new resources to satisfy consumption permanently on a higher level and enable our exports to be expanded to close in time the gap in the balance of payments. It is to these ends that our economic policy should be directed, and the Budget should help and not hinder their attainment.

II. CURRENT BUDGET

FINANCIAL YEAR 1950-51

Without increasing taxation and after providing £600,000 for Supplementary Estimates I expected to finish last year with a surplus of £28,000 odd. As things turned out my expectations were too modest in regard to all three items — expenditure, revenue and surplus.

The original estimate of current expenditure was in fact exceeded by £1,394,000, the total coming to £77,070,000 as against the estimate of £75,676,000. Part of the uncovenanted increase was due to purchases of reserve stocks (£520,000) but the main causes were the persistence of Córas Iompair Eireann losses and the heavier burden of bread subsidy.

The resilience of the revenue was, however, equal to the strain. Customs duties yielded £1,510,000 more than I expected, corporation profits tax £148,000 more and death duties a further £100,000 so that despite a shortfall in income-tax receipts, which were delayed by the bank strike, the net sum collected by the Revenue Commissioners exceeded the Budget estimate by £1,219,000. Road tax receipts, too, were better than had been anticipated. Non-tax revenue also surpassed our original expectations. This gratifying buoyancy of the revenue yielded in all a net addition of £1,651,000 to the Budget figures and resulted in a surplus of revenue over current expenditure of £286,000, which helped in a small way to finance the capital programme. The result can be viewed with particular satisfaction because of the accumulation of reserve stocks out of current revenue.

FINANCIAL YEAR 1951-52

In the White Paper of Receipts and Expenditure for the current year non-capital expenditure is estimated at a total of £81,361,000 — £10,405,000 for Central Fund Services and £70,956,000 odd for Supply Services other than those classified as Capital Services. The Central Fund Services are up by £702,000 as compared with actual issues in 1950-51 or by £889,000 when allowance is made for the capital provided for the Industrial Credit Company last year. Disregarding certain offsets, two items are mainly responsible for the increase. Service of debt is up by £691,000 because a full year's provision has to be made for interest and Sinking Fund on the 3½ per cent. Exchequer Bonds issued last September and a further 30 years' annuity has to be provided for in respect of this year's £12,080,000 for Capital Services. Secondly, issues to the Road Fund are expected to reach £3,000,000 as compared with last year's £2,814,000 because of the expanding revenue from motor vehicle duties.

The estimate for non-capital Supply Services shows an increase of £3,401,000 over the comparable outlay in 1950-51. Ignoring the provision for reserve stocks the main increases are for Defence, Health Services, Old Age Pensions, Posts and Telegraphs and Industry and Commerce. Included in the estimated expenditure of £70,956,000 is £1,793,000 for the purchase of reserve stocks by various Departments, e.g., Posts and Telegraphs, Defence, Justice, Health, the Stationery Office and Gaeltacht Services.

Full provision has been made, in addition, for normal purchases and for the maintenance of customary stocks, so that the £1,793,000 is intended to create a true reserve as a provision both against higher prices and possible shortages. It is not, as Deputies will agree, a charrge that I could reasonably expect the taxpayer to assume this year. The expenditure on these stocks should be charged against revenue according as the reserves are in fact, drawn upon. This will be a matter for review in connection with future Budgets, but, so far as this year is concerned, I can appropriately deduct the whole of the provision, thus reducing the estimate of current expenditure to £79,568,000.

On the other hand, if this year's Budget is to be framed with some approach to the prudence that the economic situation demands, I must anticipate that current expenditure in the year will exceed the original estimate. Last year, as I have already mentioned, the excess amounted to almost £1.4 million. This year it will be somewhat greater. As already announced, the Social Welfare (Insurance) Bill provides increases in old age and blind pensions and further substantial modifications of the means test, and a beginning must be made this year to meet these and other expenditures of social security. A mother and child scheme, which will come into operation in this financial year, necessitates outlay greater than the sum already in the Estimates. A Bill now before the House envisages increased grants for the Tourist Board. I have, therefore, decided that I should add at least £1,500,000 to the estimates of expenditure, not indeed to be on the safe side but as a minimum precaution. I must utter a warning against any facile assumption that this provides me with a reserve into which I can dip to meet the demands that are being pressed upon me from various quarters. The £1,500,000 must be regarded as already fully committed and any additional expenditure must entail corresponding increases in taxes or other charges.

The expenditure figure thus becomes £81,068,000. Revenue at existing rates of taxation is estimated in the White Paper at £80,482,000 so that I am £586,000 short. The estimated tax revenue — £70,490,000 — shows an increase of £2,772,000 over 1950-51. Under the heading of customs I expect to get £905,000 more. I may say here a few words about tobacco, which is the mainstay of customs revenue. Following successive relaxations, control over releases from bond was wholly removed last July and clearances since have shown a sustained increase. Imports of manufactured tobacco have fallen almost to the pre-war level. This fact alone should prove, if proof were needed, that cigarettes are now freely available to the consumer. They are, moreover, gaining somewhat in popularity as against pipe tobacco. From income-tax (including sur-tax) I hope for an extra £1,394,000 partly because of the increase in the number and carnings of taxpayers and partly because we shall be taking in payments due last year which were delayed by the bank strike.

Non-tax revenue is estimated at £9,992,000, or £354,000 more than last year's receipts. The increase is mainly in Post Office revenue and is due to normal expansion of business and recent increases in certain postal charges which form part of a plan to redress the serious discrepancy between Post Office costs and receipts and restore commercial solvency. Despite every effort to secure economy and greater efficiency in the operation of its services the Department of Posts and Telegraphs has in recent years been operating at a loss. The cost of maintaining its services has grown. Wages have increased substantially; other working costs have risen, including those affected by devaluation; and additional capital expenditure has had to be incurred in extending and improving services. It is traditionally the Department's policy to make its services pay for themselves on a commercial basis and, to achieve this, increases in charges have become necessary. The Irish Post Office is not alone in having to take this step. Other administrations have recently been obliged to revise their charges or are preparing to do so.

The deficit of £586,000 will be reduced to £286,000 by a contribution of £300,000 from the Road Fund. This is less than I am entitled to take having regard to the additional revenue produced by the 1947 increases in motor vehicle duties, but I have exercised restraint in consideration of the commencement this year of repayment by the fund of post-war advances by the Exchequer.

I now come to what Deputies and the public outside are no doubt anxious to hear: how I propose to meet this deficit of £286,000. It inevitably entails additional taxation, but to ease the new burden I propose to accord certain reliefs, the net result being, I hope, at least an approximation to equity. I shall deal first with the additional imposts.

PETROL AND OILS

Consumption of petrol rose from 45,500,000 gallons in 1948-49 to an estimated 62,500,000 last year. During the year imports increased in value by over £1,000,000, and we are now spending on motor spirit alone at the rate of over £4,000,000 a year, part of it representing dollar outlay. Registrations of new private cars reached a peak of 17,524 in 1950, making for the last three years the remarkable total of 45,552. It would seem that the rise of duty from 9d. to 1/2 per gallon, imposed in 1948, has in no way hindered the increasing use of motor transport.

I feel, therefore, that I can safely propose to raise the customs duties on petrol and oil from 1/2 to 1/4 a gallon, with a consequential increase in the complementary excise duties. The increase will become effective immediately, but in order that there may be no additional burden in respect of petrol purchased for and used in agricultural tractors and farm engines a concurrent Order increasing the repayment of duty from 6d. to 8d. per gallon in such cases will be made. The price of petrol in Dublin should not exceed 3/0¼d. a gallon (1d. more in the country) which still compares favourably with 3/6 in Britain and with the prices obtaining in many continental countries. The additional yield this year is estimated at £600,000.

DEATH DUTIES

I am also proposing a new scale of rates for death duties which will produce a net additional yield of £400,000 this year.

The rates at present in force were fixed by the Finance Act, 1941. Estates of a net value not exceeding £100 are exempt. From £100 to £500 the duty is 1 per cent. and the rates then increase by stages up to a maximum rate of 41.6 per cent. for estates exceeding £400,000 in net value.

I propose, first of all, to raise the exemption limit from £100 to £2,000. Secondly, I propose to reduce the rates for estates from £2,000 to £7,500. In the range £2,000 to £3,000 the present rate is 3 per cent.; it will be reduced to 1 per cent. For estates from £3,000 to £5,000 the existing rate of 3 per cent. will be lowered to 2 per cent.; and for estates between £5,000 and £7,500 the present rate of 4 per cent. will become 3 per cent.

To make up for these reliefs, which will exempt the majority of estates from duty and reduce its incidence on many more, I am proposing steeper rates in the higher ranges. The increase will affect estates over £12,500, the duty rising to a maximum of 53 per cent. for estates over £250,000.

An adjustment as regards legacy and succession duties is a necessary corollary to the change in estate duties. Legacy or succession duty is at present chargeable only if the net value of the estate exceeds £1,000. The proposed raising of the exemption limit from £100 to £2,000 for estate duty would result in there being cases between £1,000 and £2,000 which would be exempt from estate duty but would be liable to legacy or succession duty. I propose to avoid this anomaly by making £2,000 the exemption limit also for these duties. The existing provision for marginal relief will also be adjusted.

A further matter affecting death duties also needs attention. There are various provisions in the Finance Acts under which securities, chiefly Government securities, may be issued on the basis that neither the capital nor the interest shall be liable to any taxation so long as it is shown that the securities are in the beneficial ownership of a person who is neither domiciled nor ordinarily resident in the State. The object is to encourage foreign investors to take up and hold such securities, and the tax exemption is intended for them alone. It was decided recently, however, by the court in another country, where corresponding provisions are in operation, that the exemption applied irrespective of the domicile or ordinary residence at death of the deceased person, once the successor in title was neither domiciled nor ordinarily resident in the country. If this decision were applied to our circumstances, it would mean that securities which form part of the estate of an Irishman who had lived here all his life and which would properly be chargeable, would be exempt from duty merely because the person succeeding to the securities was a foreigner. This, of course, was never intended and it is proposed to put the matter beyond doubt by a provision in the Finance Bill confirming the original intention and preserving long-established practice.

INCOME-TAX

The increased duty on petrol and oils and the revised scale of death duties in the higher ranges are the only additional taxes proposed. I now come to the reliefs. In 1948, I promised to endeavour to ease the burden of income-tax and improve the personal reliefs at the earliest possible moment. I took action in the following year when I had the standard rate of income-tax reduced by 6d. in the £ at an estimated cost, in a full year, of £1,000,000. Provision was also made in 1949 for an increase in the dependent relative allowance from £25 to £50; for an increase in the housekeeper allowance from £45 to £100; and for the granting of a child allowance in respect of a year of assessment if the child was living at any time during that year — and not merely if the child was living at the beginning of the year. These improvements in the allowances and the lowering of the rate by 6d. in the £ meant a loss to the Exchequer of approximately £1,200,000 in a full year.

Again last year I referred to the question of revising the personal allowances and said I would give it priority if circumstances permitted. While I should have liked to recommend to the House an all-round improvement in allowances, it is unfortunately not possible to do so because of the serious loss of revenue involved. I have decided that the best thing to do is to give relief where it is most needed — to the married man, especially the married man with children. I propose, therefore, that the allowance for a married man should be raised by £20, which will bring it to £280. I also propose that the deduction in respect of a child should be increased by £20. The deduction will in future stand at £80 for a first or second child and at £63 for any subsequent child (for whom a weekly cash allowance, not subject to tax, is available under the Children's Allowances Acts). The necessary provisions will be included in the Finance Bill.

A couple of examples will illustrate how my proposals will work in practice. A married man who has two children and who is earning an annual £600 will find his tax bill reduced from £16 5s. 0d. to £6 10s. 0d. If the married man has £700 per annum earned income and has three children he will be called upon to pay £9 5s. 3d. in place of £28 5s. 6d. — that is, his bill will be reduced by £19 0s. 3d.

These two increases in the income-tax allowances will, it is estimated, cost £374,000 this year. They will have the effect of removing many thousands of cases from the tax rolls.

I have also given some thought to the position of elderly people with small or comparatively small investment incomes representing a lifetime's savings. I am prepared to regard the annual yield these investments produce as tantamount to earned income. My proposal is that a special income-tax allowance be granted of one-fifth of the total income — that is, from investments or from any other source — of persons of the age of 65 years or upwards whose total income is not in excess of £500. As regards any earned income included in the total, the new allowance will be in substitution for, and not in addition to the existing earned income relief. In the case of a married couple this special allowance may be accorded where either the husband or his wife (living with him) has reached the age of 65. In such a case, however, the combined total income must come within the limit prescribed. Where the total income exceeds the limit, marginal relief may be allowed. This new allowance will, it is estimated, cost the Exchequer £32,000 in the current year.

There is an old provision in the income-tax code by virtue of which a registered trade union may be exempted from tax on interest and dividends applied solely for the purpose of provident benefits. The exemption may be given if the trade union is precluded by its rules from assuring to any person an annuity in excess of a certain maximum, now £80 a year. Following representations received I propose to have the limit raised to £130 in this year's Finance Bill. The cost may be disregarded, as this measure will not have the effect of extending relief to any trade union which has not already enjoyed it.

The Finance Act, 1927, contained a section enabling the Government to enter into arrangements with foreign Governments for the reciprocal relief from taxation of profits derived from the business of shipping. The section which gave legal effect to such arrangements was amended in 1936 so as to include profits from air transport. This provision as amended is not appropriate to present circumstances; for one thing, while it covers income-tax it does not extend to corporation profits tax. I propose to have an up-to-date enabling section inserted in this year's Finance Bill. In so far as relief from foreign taxes would be afforded, the development of our overseas transport would be aided considerably by the conclusion of international agreements under the proposed section.

STAMP DUTIES

In my Budget speech last year I referred to the 5 per cent. stamp duty imposed by the Finance (No. 2) Act, 1947, on transfers or leases of houses and lands. I expressed regred that I was unable to propose any alteration in the incidence of the duty but under took that the matter would be reviewed again before the next Budget. Deputies may recall, incidentally, that subsection (6) of Section 6 of the Housing (Amendment) Act, 1950 — which was passed in August, after the Finance Act — provided for a reduction of the stamp duty rate from 5 per cent. to 1 per cent. in connection with any transfer or lease of a house qualifying for a grant on first sale under the main provisions of the same section.

I now propose, as regards the types of case still affected by the 5 per cent. duty, that that rate should be reduced to 3 per cent. of the amount or value of the consideration.

A minor point arises in this connection. Where the amount or value of the consideration exceeds £500 and does not exceed £1,000 the existing law provides a graduated scale finishing on the note that, where the amount or value is £1,000 but not more, the duty chargeable is £50 — in other words, at the rate of 5 per cent. This graduated scale will require consequential amendment so that it will go up, not to 5 per cent., but to 3 per cent.

Provision for these changes will appear in the Finance Bill and they will come into effect on the 1st August next or the date of the passing of the Finance Act, whichever is the later day. It is estimated that, this year, the cost of bringing down the rate as proposed will run to £233,000. I am not proposing this year any alteration in the 25 per cent. rate.

The Finance Act, 1947, doubled the stamp duties chargeable under the First Schedule to the Stamp Act, 1891, on conveyances or transfers of stocks or marketable securities. The doubling of the duties meant an increase in the rate from 1 per cent. to 2 per cent. I now propose that the rate of duty should be reduced to its original 1 per cent. as regards conveyances or transfers of any stock or marketable security issued, whether before or after the passing of the Finance Act, by an Irish company. This relief will operate as on and from the 1st August next, or, should it occur later, the date of the passing of the Finance Act.

It has been represented strongly to me that, if a reduction were effected as now proposed, it would give a notable impetus to investment in Irish securities generally and would improve the market for new issues. I am, therefore, taking this step in the hope that it will add to the attractiveness of Irish securities and encourage Irish investors to invest their capital in them rather than outside the country.

I should, perhaps, stress that this relief will not effect transfers of shares in external companies, except in a limited field for which it is considered desirable to make special provision. As regards external companies, the reduction in the rate will apply only where shares are transferred on branch registers established by such companies in this country.

The relief will cost roughly £25,000 this year.

ENTERTAINMENTS DUTY

The yield of duty under this head shows a continuous and satisfactory upward trend which discounts suggestions that the entertainment industry has passed its peak. I have carefully considered various representations made to me, but I cannot discern that in general any sufficient case exists for review of the various scales of duty or, in particular, of the concession to rural areas, save in one respect. This concession was designed solely to improve social amenities in the more sparsely populated districts, but there is evidence that in some cases it is being availed of deliberately to attract custom from other areas or for the purpose of holding the more expensive type of formal dance. In so far as the concession was intended for local enjoyment, I think it wrong that it should be exploited for profit, and I therefore propose to take power in the Finance Bill to charge all dances in tax-free areas where the price of admission exceeds 3/9. This will leave free of duty the normal dance in the village hall, as originally intended. Another anomaly which will be rectified in the Bill is the case of the town in which the population exceeds the limit of 500 solely because the census figure includes the total of the inmates of an institution of some kind. Power will be taken to deduct this figure so as to give such a town the benefit of the concession. In both these cases the effect on revenue yield will be inconsiderable.

EFFECT OF TAX CHANGES

The new imposts, for which financial resolutions will be moved, will bring in £1,000,000 this year, while the reliefs proposed will cost £664,000. The net addition to the revenue this year will, accordingly, be £336,000, and setting this against the deficit of £286,000, the modest surplus of £50,000 emerges.

III. CAPITAL BUDGET

GENERAL

The Capital Budget presented last year provided for an expenditure of £34,000,000. Actual expenditure amounted to £24.6 million; the reasons for the shortfall will appear later. For 1951-52, the Capital Budget is £29.4 million, for which provision is made as follows, actual expenditure in 1950-51 being given for comparison:—

1951/2 (estimate)

1950/51 (actual)

£ million

£ million

Voted Capital Ser- vices

12.08

8.09

Capital Issues “below the line”

16.63

14.08

Loan repayment re- issued to Local Authorities

0.72

0.62

Depletion of Transition Development Fund balance

1.63

Capital for Industrial Credit Company

0.19

29.43

24.61

The objects of the expenditure are shown in the following table:—

1951/52 (estimate)

1950/51 (actual)

£ million

£ million

Housing

11.73

11.06

Public Health: Sanitary Services

0.78

0.69

Hospitals

0.24

0.09

Agricultural Development

5.16

3.13

Electricity Development

4.75

4.60

Turf Development

1.10

1.04

Telephone System

2.00

1.80

Schools and other State buildings

1.17

0.71

Afforestation

0.85

0.43

Fisheries and Mineral development

0.11

0.10

Transport

1.54

0.77

Industrial Credit

0.19

29.43

24.61

The full extent of public cutlay on capital works is not revealed by these figures. Last year, for instance, Dublin and Cork Corporations spent over £4,000,000 from their own resources, mainly on housing. They will be spending on a similar scale this year but not, I expect, without some aid from State sources. The port authorities of these two boroughs spent over £900,000. Account has also to be taken of the expenditure of the Electricity Supply Board from depreciation and other internal funds (£1.1 million last year) and the outlay on hospitals financed by the realisation of investments of the Hospitals Trust Fund (£2.2 million). Thus, under these heads, capital expenditure was incurred last year on public projects of over £8,000,000 in addition to the £24.6 million which the State financed directly. It is likely that experience this year will be similar.

It will be noted from the table that this year again the biggest items in the State Capital Budget are housing and agricultural and power development, electricity and turf coming within the latter term. I shall refer briefly to what was achieved under these heads in 1950-51 and explain the provisions for the current year.

HOUSING

Although local authorities over-estimated their financial requirements, progress in house-building last year was unprecedented. Nearly 8,000 houses were completed by local authorities as compared with the previous highest output of 6,931 in 1938-39 and with 5,299 in 1949-50. The improvement was not achieved at the expense of any lessening in the volume of work in progress; the average number of dwellings in course of erection was also higher than in the previous financial year.

Provision has been made for the maintenance of local authority housing on the same scale as last year. The amount included for this purpose in the figure of £11.7 million is £9.9 million of which £7.3 million will take the form of loans from the Local Loans Fund and £2.6 million will be grants from voted moneys. With the winding-up of the Transition Development Fund a third source of funds has disappeared, thus reducing somewhat the complexity of housing finance while maintaining the scale of State assistance.

Of the balance of £1.8 million, £1,762,000 represents grants for private housing and £54,000 a grant to Bord na Móna towards the cost of a new housing scheme for turf workers. Last year the provision for grants for private persons — £1,675,000 — was fully utilised. The number of private houses completed with the aid of State grants was 4,300, which was well up to expectations and compares with a figure of 2,650 in the previous year. The estimate for the current year is 5,000 so that, on present expectations, local authorities and private persons, with State assistance, will complete between them approximately 13,000 houses this year.

State assistance for housing does not end with the provision of grants and loans for the erection of new houses; substantial contributions are being made by the Exchequer to local authorities to meet loan charges on debt incurred for housing. Approximately £900,000 is provided in the current Budget for this purpose.

I referred in last year's Budget statement to the need for distributing more equitably the burden of housing costs as between the Exchequer, local authorities and tenants. It is satisfactory that in the course of last year there was a marked extension of differential renting systems which have now been adopted by 29 local authorities.

During the past year there was evidence that local authority housing costs were becoming stabilised in both urban and rural areas, the increase in cost since 1939 being about 150 per cent. in rural areas and 190 per cent. in urban areas. The cost of private building, however, increased last year. The heavy demand for raw materials generated by world rearmament and stockpiling will inevitably result in a rise in building costs which will be accentuated by recent wage increases.

The housing programme which we hope to carry through this year is of such proportions that even in normal times there would be a risk of increased costs arising from the heavy demand on labour and materials. In present conditions, the risk is much greater and while the efforts made to build up stocks of essential building materials may lessen the effects of higher prices, a continuance of the present trend would greatly increase the burden which the housing programme places on tenants, ratepayers and taxpayers.

AGRICULTURAL DEVELOPMENT

Expenditure on agricultural development last year was only half of the original estimate. This is accounted for mainly by the fact that expenditure on the land rehabilitation project was less than anticipated. The progress of this scheme was retarded by a number of factors. It proved extremely difficult to secure delivery from abroad of specialised drainage equipment, especially excavators. Another cause of delay was difficulty in procuring suitable drainage pipes. Expenditure on arterial drainage was also somewhat lower than expected because of difficulties in connection with the supply of machinery. Generally, however, the most important cause of delay was the bad weather experienced during about nine months of the year 1950-51.

It is expected that expenditure on the land project will reach £2,500,000 this year. Some at least of the difficulties which impeded the work last year have been surmounted. Delivery of machines, especially of the excavator type, is improving, and contractors are showing a greater willingness to participate in the scheme. It is expected that suitable pipes of domestic manufacture will soon be in plentiful supply. To allay any misapprehension that may exist, I should say that farmers can rest assured that their land valuations cannot be increased as a result of improvements under the land project.

Apart from drainage works, assistance is being provided under the land project for the liming and fertilising of land. Considerable progress has been made in the spreading of fertilisers since the introduction of the fertiliser credit scheme in September last. The transport subsidy recently introduced should bring about the more extensive use of limestone, particularly as a suitable small-type spreader is now available.

In addition to the drainage which is being done under the land project over £2,000,000 is being provided for arterial and local authority drainage. Expenditure on the latter is estimated at £1,220,000. The more urgent works have now been completed and this accounts partly for the lower provision this year. In framing the Estimate regard was also had to the undesirability of interfering with the supply of labour for turf production. Total expenditure on these works since the Local Authorities (Works) Act was passed in 1949 amounts to £2,925,000.

The balance of the provision for agricultural development this year is made up of grants for poultry and egg production and for the construction and improvement of farm buildings. There is also a provision of £50,000 for the National Stud.

Before passing from agriculture I should mention that within the last two years additional capital of £300,000 has been made available to the Agricultural Credit Corporation from the American Loan Counterpart Fund. In addition to the sum of £100,000 provided from this source in 1949-50, £100,000 was made available last year and a similar sum in the last few weeks. The provision of this extra capital makes it possible for the enterprising farmers to obtain credit facilities at very reasonable rates to enable them to increase the productivity of their farms. It is satisfactory to know that farmers are availing of these facilities to a greater extent.

ELECTRICITY DEVELOPMENT

The State has now invested almost £30,000,000 in electricity development since the start of the Shannon scheme but, although generating capacity is being constantly added to the demand for current continually threatens to outpace it. It was only because of the very heavy rainfall last year that rationing was avoided. Production amounted to 970,000,000 units, an increase of about 24 per cent. over the preceding year.

Gross capital outlay by the Electricity Supply Board in 1951-52 is estimated at about £6,000,000; of which £4,750,000 will be met by Exchequer advances and the balance by temporary borrowings from depreciation reserves and superannuation funds. Nearly half the total outlay will again be devoted to the expansion of generating capacity, the expenditure being incurred mainly on the River Erne scheme, a new steam station at Ringsend and the turf-burning station at Allenwood. In the course of last year the Cliff station on the Erne was put in commission and the Portarlington turf-burning station was completed. It is expected that in the present year a section of the turf-burning plant at Allenwood and another station on the Erne will be brought into service.

Progress is continuing with rural electrification. Last year, 15,803 new rural subscribers were connected as compared with 13,688 the year before. The total number of rural subscribers is now over 40,000. The question of the early extension of electricity to the western seaboard is being specially examined by the Electricity Supply Board.

TURF DEVELOPMENT

A slightly larger provision is being made for advances to Bord na Móna than the amount issued last year. The provision covers advances for the erection of houses for turf workers as well as for the production of machinewon turf by Bord na Móna. It is expected that the output will amount to 350,000 tons as against 250,000 tons last year. The increase will be wholly absorbed by the two generating stations at Clonsast and Allenwood. Industrial and domestic users must, therefore, look for any increased requirements to the private producer and, to a lesser extent, to a special scheme being operated by Bord an Móna for which working capital of £271,000 is provided in the Vote for Industry and Commerce. Outlay will continue to be incurred this year by Bord na Móna on drainage works and the laying down of railways to give access to bogs which are being prepared for machine cutting at a later stage.

The amount advanced to Bord na Móna for development purposes has already reached £4,593,000, of which £183,000 has been repaid, leaving £4,410,000 outstanding. Interest is being paid on roughly £200,000 of pre-1946 advances. The advances made under the 1946 and 1950 Acts for the first development scheme are interest-free for a five-year period which will end next month, when the question of charging interest will arise for consideration. The five-year interest relief for advances under the 1950 Act for the second scheme will not expire until 1955.

TELEPHONE DEVELOPMENT

The £2,000,000 provided for capital expenditure on the telephone system is needed for the further improvement of the system. There will be comparatively heavy expenditure on underground cables, including work on the Dublin-Cork cable and its offshoots and on the Dublin-Belfast cable. Extensions of the automatic system are contemplated and further progress will be made in the linking-up of new subscribers. Provision has also been made for building up stocks of materials.

TRANSPORT

As time does not permit me to deal with the other items in the capital programme, I shall end this brief exposition with some remarks about transport. Issues for transport were lower than was expected last year mainly because the resources of the Road Fund proved to be sufficient to meet the demands made upon it and borrowing from the Exchequer was unnecessary. This year £500,000 has been entered as the extent of possible borrowing by the fund.

Advances were, however, made to Córas Iompair Éireann last year to meet debenture interest payments, the amount being £433,000, and provision is made for similar advances this year to the amount of £477,000. These advances the concern is liable to repay but if it does not do so within a year the amount has to be made good to the Central Fund by a Vote provision. This procedure is intended to call attention to the default and does not absolve Córas Iompair Éireann of its repayment liability. Without prejudicing the issue, doubt may be expressed whether the board will be in a position to repay the advances made last year. In fact, these advances did not represent the full measure of the assistance accorded by the State to this undertaking, as it was found necessary to introduce a Supplementary Estimate to provide £980,000 to meet its operating losses and revenue charges, apart from debenture interest. It is questionable whether Córas Iompair Éireann can in the immediate future attain a position in which it will be able to meet all its operating expenses and discharge as well the interest on transport stock. The board has a statutory duty—

"so to conduct its undertaking as to secure, as soon as may be, that, taking one year with another, the revenue shall be not less than sufficient to meet the charges properly chargeable to it".

This duty will, I hope, be discharged with the utmost expedition.

STATE DEBT

The financing of last year's capital programme resulted in a net addition of £20.5 million to the internal State debt which is brought up to £22.1 million by the increase during the year in the capital liability for housing loan charges. During the year the liability for dollar borrowings, in other words our external debt, increased by £17.8 million, so that the gross capital liabilities of the State— including the housing charges liability —increased from £152.4 million to £192.3 million or by £39.9 million. To set against the external debt, however, we have the assets of the American Loan Counterpart Fund and the remainder of the proceeds of dollar borrowings held in the Central Bank. The increase in the internal debt is balanced by capital expenditure in the year.

Assets held in State enterprises in the form of shares and repayable advances yielded a return last year of 3.2 per cent. as compared with an average rate of interest on long-term debt outstanding of 3.3 per cent. This approach to equality is due almost entirely to the return on money invested in electricity development. A considerable proportion of the State investment programme relates to projects which are not productive in the financial sense such as housing, hospitals and sanitary services. These, however, yield social benefits and, it is hoped, will eventually result in an improvement in productivity. Other schemes, such as land reclamation and improvement, which are designed to achieve an increase in production on a long-term basis also yield little or no direct return to the Exchequer. If the objectives are realised, a resultant increase in national income should offset the burden of debt charges. The growth of State expenditure on capital projects which are not directly remunerative carries with it the risk that the increased debt charges will entail a net addition to taxation. The total amount required for the service of debt in 1951-52 is estimated at £7.35 million, which is an increase of approximately £0.85 million over last year.

NATIONAL LOAN CONVERSIONS

As already announced, the Government have decided to avail of their option to redeem four National Loans next July—the 5 per cent. Second, of which the outstanding dollar portion was redeemed last November; the 4½ per cent Third; the 4 per cent. Conversion Loan and the 4 per cent. Exchequer Bonds. Stockholders will be given an opportunity of exchanging their holdings for stock of a new Government loan on terms which will be announced about a month before the redemption date and which, I hope, will be found attractive.

The only previous conversion was that of the First National Loan in 1935, of which approximately £7,000,000 was then outstanding. On this occasion the total amount of stock involved is almost £21,000,000. In view of the size of the forthcoming operation it is most desirable that it should be carried through successfully, by which I mean that the new stock should be accepted by existing stockholders in preference to cash. The replacement of the existing stocks by a new issue on terms more closely attuned to the present market rate would result in a saving to the Exchequer and, therefore, to the taxpayer and would obviate the need for finding new money to cover redemptions. I trust that stockholders will avail themselves of the conversion offer and thus assist in the reduction of the charge on taxpayers for the service of debt and at the same time show their appreciation of the excellent security afforded by Irish Government stock. Facilities similar to those provided in the National Loan (Conversion) Act, 1935, for trustees, executors and administrators will again be accorded so as to ease any technical difficulties in the way of accepting the conversion offer. The necessary legislation will be introduced at an early date.

SOURCES OF FINANCE

Exchequer issues of £22.3 million were required to finance the capital investment programme last year. Of this sum, £21.7 million was obtained by borrowing, the balance being found by the reissue of loan repayments, by drawing down the Exchequer balance and by using the surplus on current account. The greater part of this £21.7 million was obtained through the issue of 3½ per cent. Exchequer Bonds last September and by drawing on new deposits in the Post Office Savings Bank, the balance of £7,500,000 being obtained from the American Loan Counterpart Fund. To meet this year's requirements it is estimated that a net sum of £28.7 million will have to be found. It will be necessary to seek again public subscriptions to a national loan. It is earnestly hoped that these subscriptions and savings through the Post Office Savings Bank and Savings Certificates will provide all, or, at any rate, most, of our requirements. It may be necessary to have recourse to the American Loan Counterpart Fund, but it is desirable that this should be moderate; in present conditions, the release of monetary resources, which are the financial counterpart of goods already received and absorbed into the economy, is inflationary. It is preferable that counterpart moneys should be withheld until such time as they can be released without the same danger as now exists of adding to inflationary forces.

SAVINGS

I must, therefore, sound again the note struck at the beginning of my speech by emphasising the critical importance at the present time of increased savings. They are essential for national development on lines on which there is a general agreement. No one interested in the improvement of our social and economic conditions would suggest that the State capital programme should be abandoned. While some may advocate curtailment, many will share the view that it should be pressed forward with all possible speed because of the uncertainties of the future. To make room for State spending on the present scale, however, the public must be prepared to abstain to a greater extent from spending. Overspending by the nation as a whole could only increase the rate of external disinvestment for unproductive purposes. In other countries where private savings are deficient, it is necessary to impose taxes to make up for the saving that the public ought to do. I feel that we are not yet constrained to adopt this expedient. It is preferable that means of stimulating voluntary savings should first be fully tried. The Government have, therefore, decided to organise an intensive campaign to promote savings, especially amongst those of the younger generation who have not yet been properly initiated in the habit of thrift. It is hoped to enlist the support and enthusiasm of educational bodies, trade unions and other voluntary organisations in this campaign.

It is highly desirable that there should be a widespread and significant response. Apart from the security they afford the individual, savings are of vital importance from the national standpoint. The present capital programme may be endangered if a greater proportion of our current resources is not diverted to investment by voluntary abstention from spending. Increased savings are an alternative much preferable to increased taxation or increased restrictions and they are the best means not only of preventing serious damage to our economy but of ensuring in the future a higher standard of living.

SUSPENSION OF MARSHALL AID

Finally, I have an announcement to make about Marshall Aid. For some time past discussions have been proceeding between the United States Government and the Irish Government on the question whether, in existing international conditions, dollar aid to Ireland should be continued. These discussions have been part of a general review by the United States Government, accompanied by similar inter-governmental discussions, of the necessity for further special American assistance to the various countries participating in the E.R.P.

As a result of the discussions, which have recently been concluded, it has been agreed by the United States and Irish Governments that dollar allotments to Ireland under the Marshall Plan should be suspended. We, in this country, are well aware that the United States Government and people have during the past six months assumed new obligations and burdens, great in amount and extensive in scope, which affect their domestic economy and involve the provision of exceptional assistance to countries abroad in respect of supplies and financial aid for military and strategic purposes. In such circumstances, it became inevitable that economic aid of the kind contemplated under the Marshall Plan would be reduced and that dollar allotments would have to be suspended in the case of those countries which no longer can claim to have a vitally compelling need for dollar assistance in that form. The improvement during the past six months or so in the central dollar and gold reserves of the sterling area and in the balance of payments between the sterling area and the dollar area has been such that at the present time compelling reasons no longer exist to justify the continuance of E.C.A. allotments to Ireland. In the course of the discussions to which I have referred it was mutually understood that this is suspension, and not termination, of aid and that, if circumstances change, the question of resumption of American aid to Ireland can, and will be, considered.

The total allotments made to Ireland by E.C.A. prior to the suspension of aid, which is now formally announced by both Governments, have been $146.2 million, of which $128.2 million have been allocated as loan and $18,000,000 as grant. The dollars still outstanding under these allotments will continue to be available for this country until fully expended on transactions approved by E.C.A. under their regulations. As at a recent date, the amount of imports delivered to this country under E.C.A. procurement authorisations was over $139,000,000, so that about $7,000,000 are still in the pipe-line. In addition to these outstanding dollars available from allotments, E.C.A. will, notwithstanding the suspension of aid now announced, continue to provide dollar funds for technical assistance projects in Ireland.

At this juncture, when, for the reasons stated, the flow of E.C.A. dollars to this country has been suspended, it is right and proper to express, and to repeat what has been said before on other occasions, the deep gratitude of the Irish Government and people to the Government and people of the United States for the generous dollar assistance afforded to this country since April, 1948. By reason of this assistance, many difficulties have been overcome, beneficial results to our economy have been secured and we have been enabled to play our part in the great plan, so finely conceived by the United States of America, for the recovery and readjustment of Western Europe.

This help from such a source provides, indeed, just one more evidence of the ties of friendship which exist between our people and the American people. In any expression of appreciation of the contribution afforded to us under the Marshall Plan our thanks are due to the Ambassador, Mr. George Garrett, whose able and kindly interest in our needs and problems was so valuable in the initiation and development of aid for Ireland. Credit must also be given, in full measure, to Dr. Joseph Carrigan, to his successor, Mr. Paul Miller, and to their colleagues in the E.C.A. Mission, whose cooperation, advice and assistance have always been given in unstinted fashion and to our great advantage.

The suspension of American aid means that, in so far as our own dollar earnings are insufficient, we shall procure the foreign exchange necessary to pay for our essential imports from the dollar area by converting sterling through the mechanism of the sterling area dollar pool. Importers and others wishing to make payments to the dollar area will, as heretofore, continue to make applications to the exchange control for the necessary approvals before undertaking any commitments. Approvals which have already been given for pending transactions involving dollars will, of course, stand and the applicants need not reopen these matters on account of the suspension of aid. As for the future we, in common with other sterling-area countries, will need to plan and programme our dollar needs carefully, bearing in mind the many uncertainties in the world situation and the continued necessity to maintain strict control over dollar expenditure. Similarly, we must in our own interest strenuously endeavour to increase our dollar earnings. I emphasised these objectives in my Budget speech last year in dealing with the situation likely to arise as a result of the then anticipated reduction in the amount of E.C.A. allotments to this country and, obviously, such remarks are all the more important and relevant when aid has, in fact, been suspended.

I think that shook some people.

Yes, look at them, they are trembling. Anyhow, it has shaken the Labour Party.

Make the welkin ring now.

Deputy MacEntee has his summer suit on.

Once upon a time in a far away country an enemy of the people was being led out to execution by a firing squad. It was raining heavily and he said to the captain of the squad: "Is it not unreasonable to march me out in such weather?" The captain of the squad said: "It is not so bad for you, but think of us; we have to walk back again." It is those who are likely to return here after the general election which we are told is now pending who have to worry about the financial position revealed by the Minister's statement. It is the Deputies on the other side who can laugh.

We have to consider this statement in relation to what the Minister has told us—that our agricultural output last year fell below pre-war level, that the prospects of industry maintaining its rate of development are not reassuring, that the deficit in our external trade which reached alarming proportions last year is likely to be greater this year and that the aid we have been receiving heretofore from the United States of America under the Marshall Plan has now ceased. These are rather alarming announcements and not all the skill of the Minister in interpolating them with the other parts of his Budget can conceal them from the people here. They must not be concealed.

May I say right away that I am personally greatly relieved that on this occasion the Minister made no reference in his Budget statement either to economy or retrenchment? Deputies will remember that in his first Budget statement, Mr. McGilligan, the present Minister for Finance, announced that economy and retrenchment were to be the key-notes of his policy. In his second statement, in 1949, he still thought it necessary to make some less vehement assertion of his adherence to the principles of economy and retrenchment. In his third Budget statement, in 1950, there was still, as he saw it, some necessity for a brief reference to the need for economy and retrenchment. This year it is gone. Economy and retrenchment have been discarded. In order to maintain the growing level of Government expenditure and to help them to overcome their inability to raise the money they are trying to borrow, it is the public who have to spend less; it is the public who have to save more. Economy and retrenchment have ceased to be watchwords for the Government. They are now becoming orders for the ordinary working people of this country. Because the Minister was unable or did not try or failed to apply his policy of retrenchment and economy, because the cost of Government administration has in three years increased by £25,000,000, or 40 per cent., because the State debt has more than doubled in that period, the public have to cut their spending, the public have to save, the public have to be satisfied with a lower level of consumption, so that the rake's progress of Government expenditure can be continued.

It may be no harm at this stage to remind some of the Deputies opposite what they promised to do. If rumour does not speak once more with a lying tongue——

Doom and disaster— that is what you promised.

It is what we foretold.

The outlook is gloomy for you.

If rumour does not speak with a lying tongue, Deputies will shortly be going back to the constituents who elected them. I wonder will they on this occasion give the same undertakings, the same pledges, as they gave before? In 1947, Deputy Mulcahy, now Minister for Education, was the Leader of Fine Gael and in a formal pronouncement of the policy of that Party, made at Clonmel on February 4th, he said they had clearly defined objectives, (1) the cost of living must be reduced, (2) Government extravagance must be stopped and (3) taxation must be cut as part of the effort to reduce the cost of living.

The present Taoiseach, then Deputy Costello, speaking in his constituency on January 5th of that year, said: "The cost of Government is completely out of proportion to the national income," and he went on to say that while the public were being exhorted to curtail their expenditure, nothing was being done to reduce State expenditure. "The cost of Government is completely out of proportion to the national income." In 1947 the audited cost of Government was 19 per cent. of the estimated national income of that year. In 1950 it was 26 per cent. In 1951 it will be higher still.

Deputies opposite, when giving these pledges or announcing these intentions to the people whom they asked to vote for them, must have had in mind that some curtailment in expenditure was practicable and that it was, not merely practicable, but desirable if the object of lowering the cost of living was also to be realised. Do they not think, now that the Government is coming to the end of its term, now that they have to go back again to those unfortunate people whom they deluded in 1947 and 1948, that they should give some explanation of the reason for their failure to fulfil their pledges? The Leaders of Fine Gael, who in 1947 pledged themselves to reduce Government expenditure, the present Minister for Finance who, in his first statement in this House, said that economy and retrenchment would be the key-notes of his policy, will have to offer, or will be made to give, some explanation of the fact that the cost of Government administration is now 40 per cent. higher than it was in the year before they came into office. In so far as they allege that in that year there was extracted from the people's pockets in taxation more than the people could afford to give, let them face the fact that the amount which was extracted last year from the same people exceeded by £12,000,000 the amount extracted in 1947.

The explanation of the difference between the £12,000,000 increase in taxation and the £25,000,000 increase in the cost of services is to be found in the enormous expansion in the State debt which occurred in the same period. This year, the Government wants still more money to meet the estimated further increase in the cost of administration. In the coming 12 months, another £2,250,000 is required. £300,000 of that is to be got from the Road Fund, £250,000 from increased taxation and the Minister for Finance has discovered a good excuse for borrowing the balance, £1,700,000.

For how long does the Minister for Finance think it is possible for this State to keep expanding its debt at the rate we are going? Between 1922 and 1948, in the 26 years since the Irish Free State Government first began to control the finances of this area, despite all the capital cost of the civil war, about which Deputies opposite used to be so eloquent, despite all the development in housing and hospitals, all the progressive expenditure initiated by Fianna Fáil before the war, despite the heavy financial burdens that had to be carried during the war years and the many abnormal expenditures that had to be faced then, in that period of 26 years the debt of this State rose year by year gradually to a total of £95,500,000. In 26 years the State debt rose gradually to that level. In four years you have doubled it. To the end of last year, to that total of £95,000,000 another £81,000,000 of debt has already been added. A further £28,000,000 is to go on this year. For how long do you think it is possible for this State to keep adding to its debt in that way when, as the Minister admitted, the investment is not expanding and is unlikely to expand the national production in a corresponding degree?

If we are going to have, as the Minister said, the prospect of diminishing industrial progress this year, if we have to face the fact that agricultural output has again fallen below pre-war level, if we have to face the prospect of a heavy increase in the deficit on external trade this year, if the exceptional facility which this Government and no previous Government enjoyed of having available to them an enormous pool of money resulting from Marshall Aid has now to cease, is it practicable to continue the policy, the extravagant policy, that the Minister for Finance has been pursuing? Must there not be at some stage a dropping of the political cowardice which has characterised his policy from the beginning and some realistic facing of the country's problems?

Under the administration of this Government, in three years, the State debt was increased, as I have said, by £81,000,000. The public of this country did not save that amount of money in that period. In the Table of National Income and Expenditure to which the Minister referred there is set out for each of these years the total of all the savings of our people over that period, all the personal savings of private individuals, all the undistributed profits of corporations, all the additions to the various funds of public authorities, and the aggregate saving through all sources over the whole period was substantially less—almost £16,000,000 less—than the total amount borrowed by the Government in that period.

It is all very well for the Minister for Finance to put upon the public the blame for the dissipation of our accumulated reserves. The public are not to blame. Whatever expansion there has been in the consumption of luxury goods, which added unnecessarily to our imports, was deliberately encouraged by the Government's policy but, over and above any such expansion, that wasting of assets and resources accumulated by good management in the past is to be attributed mainly to the reckless and thriftless policy which the Government pursued during that period.

These figures cannot be denied. You cannot put the blame for the exhaustion of our external assets upon the ordinary people when, in a period in which the community was able to save from the proceeds of all its industrial, agricultural and other activities the total of £65,000,000, the Government itself borrowed and spent £81,000,000.

Nobody here has ever objected to an intelligent programme of capital investment. We have objected to the investment of money in excuses to avoid taxation. We have objected to the investment of moneys in directions which will not directly and obviously increase national productivity, increase the resources available to the Government with which to repay the borrowing.

I think the Minister for Finance should give us some fuller explanation than has been given to us of the reason for the Government's failure to carry through the capital investment programme which was announced to the Dáil last year. We know they expanded the cost of administration. We know that when there was need to find money to pay for a larger number of civil servants or to expand the administrative organisation of any Department, the money was forthcoming without difficulty, but when it was required to finance capital development of a kind we all desire, the Government's performance fell far short of its promises.

I know that Deputies and Ministers opposite are able to conceal their failure to the public by the fact that during the past three years conditions generally were beneficial and were helping forward the recovery of the Irish economy. At no time since the beginning of the State, were conditions so favourable for expansion of output in agriculture and industry or for the development of the country's capital resources as they were during the past three years. Never before were international conditions so devoid of anything suggestive of a slump or the likelihood of a slump. Never before were there poured into this country the enormous capital resources which became available under Marshall Aid. No previous Government had the chance which this Government had of building up the national economy. It is not sufficient for Ministers to defend themselves by pointing to the fact that there has been an improvement in industrial output, in employment or in the standard of living. That would have come if they had sat back and done nothing. It there had been no Government, that would have been an inevitable consequence of the general improvement in conditions. It is what they have not done, even in the limited field in which they thought themselves they could do more, that they have to explain away.

We were all here agreed last year on the necessity of providing for a rapid expansion in the housing programme. The Government came in here last year with an Estimate providing for an expenditure of £14,000,000 on houses but they did not expend that amount. Instead of developing the housing programme to the full extent of the £14,000,000 provided in last year's Capital Budget, the total expenditure fell short of that figure by £3,000,000.

The Minister for Finance told us in his statement about the land rehabilitation scheme and about his desire to provide moneys for that scheme this year. He made some excuses for their failure last year to carry through that scheme on the scale intended. Do Deputies opposite realise how great that failure was? Do they understand that of the £3,100,000 provided in last year's Budget for the land rehabilitation project, only £566,000, one-sixth of the amount, was expended? When we come to analyse that expenditure, we find that half went in salaries to civil servants and other administrative expenditure and that less than half was paid out in a manner which benefited the farmers. Do they understand that of the money provided in last year's Budget for hospital development, for the provision of dispensaries, clinics and other projects of that kind, £417,000, less than one-fourth, was expended, that of that £417,000, only £104,000 left the Exchequer? Do they understand that of the projects administered by the Department of Agriculture, for which £6,250,000 was provided, only £3,121,000 was spent? Do they know that in the case of turf development there was again a capital investment of only two-thirds of the amount mentioned this time 12 months by the Minister?

In the case of telephone development, expenditure fell below the target by not less than £500,000. Was that capital development programme last year a fake? Was it that the Government never intended to go through with it? Was it that they could not raise the money or was it that the administrative organisation available to Ministers, this swollen organisation which is costing the State £25,000,000 more than it cost in 1947, failed to do the job?

What is the point of bringing forward another Capital Budget of the same kind this year when the Minister for Finance knows as well as I do that, with Marshall Aid stopped, with the Counterpart Fund practically exhausted, there is no source to which he can go to get money to finance it unless there is, as a result of sounder Government administration, particularly in the Department of Industry and Commerce and the Department of Agriculture, an expansion of activity in these spheres which is not likely and which the Minister for Finance himself admitted he does not expect? The prospect of agricultural development, the prospect of getting that expansion in agricultural output which three years ago we were confident was possible, has been bedevilled by the instability of the Minister. But no one man, not even the Minister for Agriculture, can be saddled with the entire responsibility for the position which has been created in that industry. The whole Government must share the responsibility. There is no Deputy in this House who does not know, or who has not learned from experience of the past three years, that no declaration of the Minister for Agriculture, relating either to the policy of the Government or his own intentions, can be trusted, that almost certainly within a month, two months or three months, a completely contrary declaration will come from the same source. How is it practicable to get in agriculture the expansion in output which is necessary if we are to maintain this rapidly growing superstructure of administration without having some consistent policy and some intelligent application of policy in that important Department?

In the case of industry, the Government may be able to excuse itself by reason of the fact that the Minister in charge of that Department was ill for a period and that his successor has not really been able as yet to get down to work. But let us face the fact that many industrial opportunities which were live possibilities in 1948 have been lost irretrievably and that they can never come back. With prices rising and with the Government making blind plunges in an effort to check the effects of the rising prices and doing more harm than good in the process, it is understandable that discontent is rampant around the country. Seven years after the war the Government is still rationing essential commodities like bread, tea, butter and sugar. We have a scarcity of butter, compelling us to import supplies from outside. We have a scarcity of fuel, one that is likely to persist, due almost entirely to Government neglect and mismanagement.

When the Government took office here in 1948, in the first speech I made as an Opposition Deputy, I told them that they were getting the country in good shape and to make sure that they would hand it back in good shape. We are not going to get it back in good shape. We are going to get it burdened with debt, with every resource of the Treasury exhausted, with every Department of State becoming accustomed to inactivity or erratic behaviour, with mounting problems which cannot be easily solved because of their neglect over a long period.

There will be, no doubt, ample opportunity of explaining these circumstances to the public. Here we are faced, however, with another Budget, another Budget which recognises the fact that, as compared with last year, the cost of the Civil Service, the cost of Government administration, has increased in that period of 12 months by £4,500,000, and that the cost of servicing the expanding debt for which the Government is responsible is imposing an additional charge of £750,000 on our people.

It is true that the Minister for Finance is able to write up his estimates of revenue from existing taxes and thus help to close the gap between revenue and expenditure. That writing up of his estimates is justifiable on the assumption that, during this year, as last year, prices are going to continue to rise and wages and salaries with them, but on no other assumption is it justifiable. It may be that experience will show that assumption to be justified. It may be that, during this year, as last year, the Minister will get more money even than he estimates because of the inflationary effects of the policy that he is applying. Whether or not that is so, it is obvious that the economy of the country has been gravely weakened, just as its finances have been confused by the policy which the Minister has followed.

I think, also, that the grave announcement which the Minister has made of the termination of Marshall Aid requires to be followed up by a far more elaborate pronouncement from him as to its effects upon the trade of the country. I do not know if it is anticipated that difficulties will arise in financing dollar imports at last year's levels. If such difficulties are anticipated, it is fair to those who are trading in these commodities to let them know the position as quickly as possible. If there is to be no longer available to the Government the Counterpart Fund from which to borrow to finance his Budget deficit as well as capital projects, from what source does he hope to get money? Is there to be further inflationary borrowing from the banks?

It is a serious matter for us to contemplate that in relation to essential imports that we must procure from the dollar area we are in the position now that we cannot procure them except by an arrangement with the British Treasury. Has any discussion taken place with the British Treasury concerning the release of dollars for our purposes? Have any assurances been sought? I asked the Minister for Finance that question here in 1948, when he agreed that we would not conduct our trade in such a manner as to involve a net draw upon the dollar resources of the sterling area. Apparently no such assurance was sought then, no such assurance was deemed necessary then, but it is clearly necessary now. Not merely is it necessary, but we must have some assurance that our weakness vis-á-vis the British Treasury consequent on the withdrawal of Marshall Aid will not be used to our detriment in any sphere. I think it is essential that the Minister for Finance should make a fuller statement on that situation before long.

I do not know if we are going to have another opportunity of discussing this Budget. The normal practice of the House, as Deputies are aware, has been for the Budget to be introduced on one day and the discussion of it adjourned until the following day. This year, whether by accident or intention, the Budget was taken on a day in a week in which the Dáil would not be meeting on the following day because it is a religious holyday. Whether the Dáil is going to meet next week or not is a secret which the members of the Government are keeping locked in their breasts.

Deputy Briscoe will tell you. He is betting on it.

I presume that the Leader of the Labour Party will be consulted. I hope that he will have sufficient regard for the dignity of that office to insist on being consulted. Whether the Deputy will be marching back again or not is another matter. If, however, the Government are, in fact, thinking of a situation arising which would prevent the House discussing this Budget adequately, then I think that the House should be so informed and arrangements made to continue the debate upon the Budget statement at greater length than would be customary normally.

I think that you have spoken on it at greater length on this occasion than formerly.

That is one of the reasons for it. I have nothing more to say. So far as the prospect of an election is concerned, we do not care whether you get out with dignity or not so long as you get out quickly.

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