I have already quoted that. I have already dealt with the use of the expression "consumption" imports throughout this document and the colouring it gives to the case it endeavours to make. The actual fact, the remarkable fact, that emerges from the available figures in comparison with pre-war figures is that there has been a reduction in the proportion of consumer imports and an increase in the production of consumer capital goods ready for use. I would refer Deputies to table 6 in this White Paper. It is in two parts. It is entitled: "Distribution of Imports according to Main Uses," the first headed "Producers' capital goods." Those figures and that table are published in the White Paper for the purpose of endeavouring to support an argument that there has been a steady decline in producer capital goods, but the White Paper fails to bring out the fact that the percentage increase in the proportion borne by producer capital goods in 1948 was over 50 per cent. up on the proportion borne in 1938. In 1938 31.3 per cent. of the total of imported goods consisted of consumer goods. Last year, 1950, it was only 25.6 per cent., and in the first six months of this year, 1951, with all the abnormalities which we know were in existence, including stockpiling, only 27.9 per cent. of the total imports consisted of consumer goods. The true facts, therefore, are that in 1938 we were consuming a higher proportion of consumer goods and a lower proportion of capital goods than in 1950 or even in the first six months of the year 1951.
I want again to refer to Table 6. In Table 6 the authors of this document have segregated, separated into categories, all the imports. Having found that 18 per cent. or less consisted of capital goods, they concluded that the balance of payments was employed, to use the expression earlier in the paper, "to boost consumer goods".
If Deputies, as a corrective to this tendentious document, the White Paper, will use the Irish Statistical Survey and look at page 37 they will find the corrective to these figures. Table D, page 37, says that for the two years, 1949 and 1950, £28.953 million of producer capital goods ready for use were imported. In the same book, in Table 4 on page 8, there will be found the domestic capital formation. Figures are there given which exclude as the table shows, increased land fertility privately paid for, and also increases in stocks. The figures for 1949 in the second last column show a depreciation of £8.4 million and net domestic capital formation £39.5 million; for 1950 a depreciation of £9,000,000 and net domestic capital formation £45,000,000. The figures of £47.9 million and £54,000,000, totalling together £101,000,000 for the two years, are the figures to be set against the deficits for the years 1949 and 1950, amounting to £40,000,000. So that, even providing for depreciation and foreign disinvestment there was a net addition to the capital of the community, excluding stocks, amounting to £45,000,000. These facts, which can be checked and verified, or disproved if the Minister can do it, clearly demonstrate that the White Paper is useless as a guide in informing public opinion on this point. As I stated, it is misleading and tendentious, suppresses facts, and does not give the true-picture. As I said at the outset, the whole purpose was to try to distort the picture, and to disparage the efforts of the last Government in its policy of productive capital investment.
The Tánaiste said that he was going on with capital development, but indicated that he was going to do it out of taxation, if he gave any indication at all about the matter. It is part of the fundamental basis of that policy and programme of capital development that it should be paid for out of borrowed money. There we part company with the Tánaiste. He borrows our programme but tries to do it in a different way, or to suggest that he will do it in a different way. The people gave their savings to us, but they would not give them to the Minister for Finance this year, or at least the Minister for Finance had not the courage this year to go to the people for a loan as Deputy McGilligan did last year.
I certainly repudiate, and I think my colleagues will repudiate, the idea of a necessity for taxation. We believe that there is no need for increased taxation at present. We believe that there is a bouyant revenue from an expanding national income. When we started our career as an inter-Party Government, we endeavoured to diagnose the economic ills of this country and we did diagnose them. We came to the conclusion that what was wrong with this country was not over-investment but under-investment in land and men. We set out to remedy that ill and we did it by means of the capital development programme. As I have stated, we were fully alive to the danger inherent in that and took the necessary precautions. We achieved the purpose by means of the capital Budget. It was necessary for Fianna Fáil to criticise us and they said: "You should not do it by means of borrowing". During the course of the general election they never said how they were going to finance these capital projects which the Minister said he is now going on with. He says he will do it out of taxation.
We repudiate the notion of putting an additional burden of wholly unnecessary taxation on the people. The instrument by which we financed the programme of productive capital expenditure was the double Budget. I assert again, as I asserted this afternoon, that when we were in Government we stood for the balancing of our current Budget, the balancing of our Budget year by year for items of ordinary current expenditure and we designed the capital Budget as part of the Estimates for the purpose of our programme and we financed that by borrowed moneys which the Irish people freely gave to us.
I directed attention earlier to the suggestion made in this White Paper that the only remedy for what the Tánaiste says is wrong with us now is, in effect, the restriction of imports. I noticed that the Tánaiste did not agree with that. I do not agree with that. I have already indicated in speeches outside the steps which can be taken to remedy it. As was indicated last year by Deputy McGilligan, when Minister for Finance, and by my colleagues in the different parties in the inter-Party Government at that time, there is no necessity for additional taxation. With the increase in the national income, there is bound to be an expanding revenue. That is what we brought about. With borrowed moneys repaid on principles of strict financial rectitude and with a balanced current Budget this country can face any financial crisis in the future. We adopted the instrument of the double Budget.
May I just put on record a quotation from a document emanating from the International Labour Office on the relation of public debt to needs? This is the quotation:—
"An expanding community will have expanding needs. It will need new schools, new streets and sewers, increased fire and police protection and so forth. If it has permitted the policy of not incurring debt and so forth, and is able to expand its total expenditures only at the rate at which current revenue increases, it will be unable to provide for those needs since the expenditures required in any one year to provide the needed facilities will far exceed the current revenue of that year. Borrowing is a means of spreading the money cost of these needs over a number of years, while making the actual outlay in a single year."
Let me quote another economist dealing with the history of the "double Budget" in Sweden. The first country to attempt to adjust its budgetary methods to a systematic economic policy was Sweden.
"The Swedish budgetary reform of 1938 has attracted so much attention that it is necessary to examine it briefly in order to grasp its purpose and to assess its applicability to the British problem. We have seen that in essence the traditional Budget (in Britain and in most other countries, many of which deliberately copied the British method) was based on ideas proper to a personal account— an extension of the idea of the King's private and personal account. As is natural in a personal account no attention was paid to questions of profit and loss, and no distinction of capital account attempted. The Swedish double Budget is an attempt to regard the public sector not as a person but as a firm or business concern. Accordingly the account is divided into a ‘current Budget', corresponding to the profit and loss account of the firm, and a ‘capital Budget' which is parallel to the capital account of a firm."
That was our policy when we initiated the capital development programme which has brought such great benefits to the country. I repeat again that there is no need for additional taxation except for the purpose of justifying the statements of the present Government from a purely political point of view. Taxation is wrong in existing circumstances. It will cripple, injure and ultimately destroy all personal initiative.
I know that the present Tánaiste is fond of taxation. On the 5th May, 1948, when Deputy McGilligan introduced his Budget the present Tánaiste, then Deputy Lemass, said it was better that people should be persuaded that instead of giving 5/4 out of every £ to the Government they should give 6/6 or 7/-; and that they should be persuaded that it is better for themselves that they should spend less at their own discretion and let the Government do the spending for them.
So far as I am concerned I will not permit this Government to do my spending for me and I will do everything in my power to prevent the Government spending the savings of the people, because this Government is profligate and unwise and because this Government is taking the wrong course in endeavouring to persuade the people that it will be possible for them to finance the huge volume of expenditure adumbrated by the Tánaiste this afternoon on capital projects out of the current savings of the people and out of taxation. It cannot be done. One can, of course, increase taxation. I know that is what the Tánaiste would like. That is the easiest way. It is a way that the Department of Finance dearly loves. It is not a way I like and it is not a way in which we will do anything to assist.
Taxation increases the cost of living: let there be no mistake about that. The Tánaiste may have found some justification for himself to-day in his speech on rising prices. I have no time to deal with that now, but I do direct his attention and the attention of the people to the appalling affect increased taxation will have by further increasing the cost of living and thereby increasing the heavy burdens the people have to bear at the present time.
I am prepared to admit that there have been certain increases in the cost of living which neither the Tánaiste nor any of his colleagues, nor I nor any of my colleagues could have stopped. This time 12 months, when we were suffering from the effects of the Korean war and the consequential dislocation of the economic fabric of the world, we were accused and castigated by the Fianna Fáil Party for not having taken steps to decrease the cost of living. Indeed we were accused by other people, too, who ought to have known better, of doing something which ought not to have been done. I was glad, therefore, to be told by the Tánaiste to-day that we actually did hold the line and did hold the cost of living down. Be that as it may, irrespective of whether or not the Tánaiste can make a case against further increases, he can make no case against a further huge increase in the cost of living by the impost of increased taxation. We repudiate the idea that there must be increased taxation. We repudiate the idea that there is any necessity for increased taxation.
We would stand behind the Tánaiste if he came here and made the case that honesty required that there should be additional taxation for the purpose of balancing the budget, and we would co-operate with him in that. But neither he nor any of his colleagues will get any co-operation from us in the expenditure of £40,000,000 on development projects to be financed out of taxation. I assert that that cannot be done. The Tánaiste knows it cannot be done. The only way in which the country can be developed, and the country must be developed, is by the method devised by us. If the Tánaiste has any spark of patriotism in him he will openly adopt that policy —the plan, the project and the machinery that we adopted for the purpose of development so successfully.
Development projects cannot be implemented out of taxation without crippling the people by gravely increasing the cost of living. When replying, will the Tánaiste tell the House how he proposes to raise this £40,000,000 which he intends to spend upon these vast projects out of taxation? There is no justification for that policy which the Tánaiste said he favoured, of mopping up the excess purchasing power and taking away from the people the right to spend their own savings and putting those savings into the hands of a profligate Government to dissipate.
We assert that the only way in which the country can be developed is by means of the capital development programme we established by means of borrowed moneys. We knew at the time that we would create a temporary deficit in the balance of payments, and part of the present deficit is undoubtedly due to that deliberate policy. We are glad of it. We are proud of it and we stand over it. Part of the present deficit is due to our deliberate policy of repatriating our external assets for the purpose of land reclamation, increasing the fertility of our soil, increasing production from our land, rural electrification, afforestation and all the other projects, including houses, schools and hospitals. We make no apology for the fact that included in that capital development programme was expenditure on housing and schools and hospitals. There is no material benefit to be gained from building houses, schools or hospitals. But there is a tremendous social benefit and all our projects were planned upon two principles: no money would be spent on any project of development unless it either yielded a minimum return, or a return in production, or gave what I describe as a social return such as houses, schools and hospitals do. The programme was given quite proper examination and priorities were established.
Steps were taken to see that inflationary tendencies were curbed, and that where there was a tendency towards consumer goods that at least domestic capital assets were increased at the same time as those consumer goods were being consumed.
We say that you can test our policy by the results of that policy. That is the best test. If, as the Tánaiste has stated to-day, he intends to continue that programme of capital development—if he is let by his colleague the Minister for Finance and if he does not ride roughshod over the Department of Finance as he has frequently done in the past—and if he is let go on with that policy, the best way to pursue that policy is the way that we did, to pursue a policy of the development of the national estate and resources at a rate in excess of what the current revenue of the citizens could sustain by taxation. Can you do that? You can only do it the way we did it, by borrowed money and not out of the current income of the people.
The Tánaiste to-day talked about savings and production. We have been talking about savings and production for some time past. This year, Deputy McGilligan, the then Minister for Finance, stated that we were going to go out on an active campaign, a nation-wide campaign for savings. There has not been a single suggestion in the last four months that the present Government are going to adopt that policy, an active campaign to acquire the savings of the people for the purpose of developing Irish industry and the land, soil and resources of Ireland. Last Saturday night I gave that as one of my concrete proposals which, if put into operation with the other proposals, would stave off any possible crisis, which, if it does not exist now, may menace us in the near or distant future.
Let us examine some of the results of our policy, and then ask the Minister to judge us by those results. If he and his colleagues judge us by those results, there is only one conclusion to come to, and that is that we were justified in our policy by those results, and that is the policy which should be carried on by the present Government. In the year 1950, exports amounted to 47 per cent. more than the 1947 exports. The proportion of our imports paid for by earnings out of exports of goods and services increased from 58 per cent. in 1938 to 65 per cent. in 1950. Our industrial production was 65 per cent. greater than pre-war. We built 20,000 houses while 1,000 people every month got new jobs in industrial employment for every month of the inter-Party Government with lower rates of tax and higher yields of revenue which flowed to the benefit of the Exchequer. In addition, the volume of domestic capital formed in 1950 was, as I have already indicated by the figures I gave earlier, 60 per cent. greater than that formed in 1938. From such capital will flow either increased revenue for those who own the capital or the rewards, immaterial though they may be, which hospitals and houses will give to the people.
There is no doubt that that capital development programme of ours ran into heavy weather last year. We were not responsible for the world prices or for the Korean war, or for the dislocation of the economic machinery caused by the sudden change-over from industrial production to wartime, or almost wartime, measures masquerading under the title of defensive measures. That storm was caused by a wind blowing from outside our shores. I believe that the causes of that trouble are temporary ones, and that there is no necessity for the lugubrious utterances of present Ministers or for the gloomy picture presented to the people in the White Paper. If we had not sustained that deficit in our balance of payments about which such clamant complaint is now made by Ministers of the present Government, would not the loss to our economy by the savage rise in import prices, through devaluation, have been all the greater? If inflation exists at the present time in this country it is not inflation of the ordinary kind. It is an inflation of our economy that has been imported from abroad. It is a cost inflation, largely, and it is only to a very insignificant extent a profit or monetary inflation.
I drew attention earlier this afternoon to the millions of money that had been invested in this country by outsiders. Is not that one of the best tributes to our economy that we could get? Over £40,000,000 came into this country in three years. As I have already said, we do not hear any gloomy utterances from either the Central Bank Report or the Minister's own document about the inflationary pressure of the foreigners' money upon our economy. It is only when we are asked to spend our own people's savings and our own money that we hear the gloomy utterances that the country is spending too much on central or local services. When we do that, the Minister for Finance, as he did last July, goes around and says "that is inflationary" and "you are living beyond your means".
What has happened about the sterling that we did not withdraw? Has not that depreciated to a very considerable extent—that sterling which we did not withdraw and which we might have withdrawn for the purpose of developing our own country, our industry and agriculture? That has depreciated by 44 per cent. since 1949. It is this, and not internal difficulties, that has been the main source of the weakening of our position in so far as our external assets are concerned.
I have never agreed, and I doubt if the present Tánaiste would, with the policy of over-liquidity practised by the Central Bank or by the commercial banks. We do not think that the level of 1939 as regards our sterling resources or sterling assets is in any way sacrosanct. I think that the present Government, or any Government which may succeed them, should take the most energetic steps to avoid further depreciation in our external assets, and if the Minister wants any statutory authority for that, and makes proper proposals in that regard, he will get co-operation from this side of the House.
There have been many queer proposals put forward by so-called financiers from time to time. The attacks made on the commercial banks, and the policy of the present Government and its tactics in connection with the White Paper, gives strength to those people who wish to press forward some outlandish financial proposals. The policy of the commercial banks in strangling trade and in restricting credit gives colour to the suggestion that they do not recognise the fact that they are not merely profit-making concerns, but that they owe a duty to the public and to the people of Ireland. They lay themselves open to attack by the policy which they are adopting at the present time.
We have faith and confidence in the future, and in the people of this country.
We took every possible advantage of every moment of the uneasy peace that existed in the three years during which we held office in order to build up the financial, industrial and agricultural economy of this country. We still believe that policy to be the best one for our people. We see no reason for the gloom. Rather, do we see reason for action and for foresight. Courage and foresight can exist side by side even in matters of financial or economic policy. This country is suffering not from over-investment, or over-expenditure, but from under-investment in profitable capital projects and from under-expenditure on increasing the fertility of the land of Ireland.
I do not think that the Tánaiste agrees that the only method, as is suggested in the White Paper, of dealing with the gap in the balance of trade is by restricting imports. That will further exacerbate the position here. The best method by which we can deal with that situation and by which we can forestall and avert another crisis, financial or otherwise, is by getting our people to save more and to increase the agricultural and industrial development of the country.
The Tánaiste, in the course of one of his speeches during the summer, said that it was hardly possible for us to achieve very much in the way of industrial exports because we were a high-cost country, from the point of view of industry. The policy of the present Government, in so far as I can see it with regard to agriculture, is to make this country a high-cost agricultural country. We have got to decrease costs and to increase exports, both industrial and agricultural.
We have got to increase agricultural exports and this is the best and the quickest method of solving the deficit in our balance of payments. We have not satisfactory results in the matter of agricultural production although, in the period during which the inter-Party Government held office, agricultural export went up 30 per cent. over what it was in the previous Government's régime. We are not satisfied that the best has been got out of the land of Ireland. We are not satisfied that we cannot increase production more and more. We have unlimited markets at the present moment for our agricultural produce if only we had such produce. Such is the way to prosperity for this country and such is the way to close the gap in our balance of payments. We will not close it as a result of the gloomy utterances made by the Central Bank or by moans and wails. However, the gap can be closed in a way that will bring greater benefit to the people of this country and in a manner that will bring about conditions of full employment. It can be closed only by savings, by hard work and, in addition, by increasing agricultural production. That can only be done by means of the policy that was adopted and put into operation, with such successful results, by the inter-Party Government—by the policy of the double Budget and by the policy of borrowing for industrial and agricultural capital purposes, which will increase production, increase employment and increase the national income of this country. Such is the policy that we recommend to the Government to-day, and such is the policy that will give confidence to the people of this country to face the future.