——and the drop in employment of which every Deputy must be aware. It is no mere coincidence that Dublin City Deputies and other Deputies throughout the country have had brought to their notice in recent weeks an increase in the amount of unemployment in their constituencies. I think it is true to say that we are experiencing now a minor form of disinflation which, if the Central Bank Report is accepted, would develop and gather momentum so as to bring about large scale unemployment and emigration and a lowering in the standard of living of our people.
I make these points so that the Government can realise the full force of what a disinflationary policy means and so that we can be quite clear and the Government can be quite clear that any such policy would mean a very real reduction in the standard of living of our people and very real hardships to many innocent men and women. I think it is necessary to stress this because the Minister for Posts and Telegraphs did, in fact, advocate some form of disinflationary pressure either by Government action or by the banks.
He did not specify what that pressure was to be, but it is implicit in any form of disinflation brought about by Government action, advocated by Government speakers or brought about by the management of the banking affairs of the country that you will have unemployment. You will have emigration increasing and you will have more and more people being subjected to hardships which, we claim, are unnecessary if a proper financial policy is adopted and if a proper, sane approach is brought to the economic conditions of the day.
We claim that it is because of the scare speeches which were made over the summer months we have now a form of disinflationery pressure in operation. I think it is fair to say that many of the hardships which have been brought to these men and women who have been put on half-time or who have been unemployed completely would not have been brought about if these speeches, which we have endeavoured to counteract in the Dáil for the last few weeks, had not been made. It conceivably could happen that if the Irish economy was to deteriorate into such a state of emergency the remedies advocated by the Central Bank should be brought into operation. It is conceivable in time of grave emergencies that some—perhaps all—of the remedies advocated by the Central Bank should be adopted by the Government of the day. We would require very strong evidence of a very real emergency for the Government to be warranted to accept the remedies proposed by the Central Bank. I believe that no such emergency exists, or there is no possibility of such an emergency existing for many years to come. It is right for us now to reject out of hand the deflationary policies advocated by the Central Bank and it is right for us to criticise the Government for endeavouring to put forward a case to the country that we were facing a real crisis.
As I have said, the problem put forward by Government speakers and by the Central Bank was on the basis of the figures giving the deficit in the balance of payments over the last few years. That deficit shows that in the last four years—from 1947 to 1950— there was a deficit of £90,000,000 odd in the balance of payments. It has been in the interpretation of the effects of that deficit that the Government and the Central Bank have gone wrong.
Even if it were possible to show that the external assets owned by this country overseas had been reduced by £90,000,000, there would still have been no cause for crisis. That is very far from being the case. It must be denied out of hand that a mere deficit in the balance of payments amounting to £90,000,000 over the last four years means automatically that the external assets of this country overseas have been reduced by that amount. It is necessary to stress this because that statement was made by the Tánaiste and the Minister for Finance in July and it was repeated again by the Taoiseach in Cork, if he is reported correctly in the papers.
In interpreting these figures I think another error has been made by the Government. It has been part of the Government case in creating this crisis atmosphere to say that the large scale imports which brought about the deficits in the balance of payments were mainly, if not wholly, comprised of consumer goods. The Minister for Posts and Telegraphs quoted in the Dáil the figure for the import over the last few years of producer capital goods ready for use to show what a small quantity of capital goods was imported during those years. I do not think it is a correct estimate of the amount of capital work in progress and the amount of goods imported to aid that capital investment programme at home to read, as the Minister for Posts and Telegraphs has read, the figures for producer capital goods ready for use. The figure—I think it was 7.6 per cent. —merely shows the total amount of imports for last year as having been capital or producer capital goods ready for use.
It must be appreciated in relation to the capital investment programme which was so tremendously accelerated over the years of the inter-Party Government that, when a capital investment programme is undertaken, it does not take the form of importing houses, hospitals or such goods as will show themselves in the category of producer capital goods ready for use. It takes the form of importing many of the raw materials for the work it is necessary to undertake and it takes the form of importing the near capital goods which are necessary for putting into the capital investment programme at home. It must be appreciated that in any large-scale capital investment programme a large portion of any given amount spent on capital investment will be spent, in fact, on wages, and that, in the case of the building trade particularly, where £1,000,000 is invested by the Government or local authorities in a housing scheme, between 40 and 60 per cent.—probably nearly 60 per cent.—of the £1,000,000 will go in wages and that, of course, will mean an increase in the consumption of the recipients of the wages and a further drain on our balance of payments position.
It must also be appreciated that one of the consequences of a large-scale capital investment programme is increased imports, not merely of producer capital goods but consumer goods and near capital goods. It is wrong to infer from the small proportion given in the break-up of the figures for imports to producer capital goods that, because that proportion is small, the rest has been spent on consumption goods. It is far from the case. Any large-scale programme of capital investment as envisaged by the previous Government and, as I hope, to be carried on by this Government, will mean a large-scale increase in raw materials for industry and agriculture, which of necessity go into the make-up of the capital investment programme.
There has been a lot of talk in this House and elsewhere about the repatriation of our sterling assets and it is important to get clear in our minds what we mean by repatriating sterling. Speeches have been made by Government speakers which appear to indicate that they believe that repatriation of sterling takes place when sterling assets are sold in England and the money is brought back here. It is not true to say that the mere sale of sterling assets in England will bring about a repatriation of these assets. The only way in which repatriation of sterling assets can take place is by deficit in the balance of payments. The only way in which we can bring back sterling at present in England and invest it here at home is by deliberately incurring a deficit in the balance of payments, by deliberately having an excess of imports over exports, and, if that fact is accepted, perhaps the Government speakers will look with less terror on the deficits which have been incurred over the past few years.
It is also important, when talking about the principles by which any Government should work when deliberately following a policy of repatriating sterling assets, to remember that there are such things as good investment and bad investment of these assets in this country. It is no justification for bringing back sterling assets if you are going to put them into a bad form of investment in this country. The Minister for Finance asked—I think he threw it out as a taunt—why we in the inter-Party Government did not buy the large Constellations and repatriate the sterling in that fashion. We did not do it because it was going to mean a bad form of investment and because it was better to leave these sterling assets where they were rather than create a drain of that nature on the Irish economy. Another principle which I think it is important to accept when dealing with this question of repatriation of sterling assets is that, as a general principle, in a time of rising world prices, it is better that these assets which are depreciating in value annually should be repatriated rather than left in England to decline in value.
There has been this deficit in the balance of payments over the past four years and, as I have said, the crisis talk has come about by reason of a false interpretation of the effect of that deficit. I think the proper test to apply when regarding a deficit of the magnitude we have seen over the past few years is the test which Deputy McGilligan, when Minister for Finance, applied in his Budget speech in 1950 when he introduced for the first time the double Budget system and launched out, for the first time on a large scale, on a capital investment programme. In Volume 120 (11) at column 1646 the then Minister said:—
"The Government favour the repatriation of sterling assets where it is clearly in the interests of domestic development. To ensure that the general standard of living of the community is at least preserved, the reduced purchasing power over imports resulting from the loss of income from the sterling investments realised should be made good by a compensating expansion in production for the home market or for export. Even if the external balance is not fully restored by increased exports or reduced imports arising from higher domestic output, some net loss of external purchasing power may be regarded as a premium worth paying for the expansion of employment and the greater economic and social security which domestic investment is expected to afford."
He then went on to say:—
"Repatriation can take place only through imports of goods and services in excess of current earnings, that is, through a deficit in the balance of payments. Only in this way can the realisation of sterling assets add to the pool of resources available."
In the next column he said:—
"Effective repatriation also takes place when bank deposits are drawn upon to pay for imports, and the sterling holdings of the commercial banks are thus reduced. It is necessary to bear in mind not only that the essential condition of repatriation is a deficit in the balance of payments, but also that the mere existence of a deficit is not evidence of the repatriation of sterling assets for domestic development."
And then later:
"It is only if the deficit in the balance of payments is accompanied by a corresponding net increase in capital outlay at home that it can be said that sterling assets are being realised for domestic development."
I would like that the test laid down by the Minister for Finance in that speech should be followed, so that some reality may be brought into the economic situation. Government speakers have been guilty of merely stressing the liabilities incurred by the State over the last few years, while they neglect to point out the assets which the creation of those liabilities makes possible. It can be demonstrated that, over the period when the deficits in the balance of payments were being incurred, much greater capital investment was taking place at home and that that capital investment—which produced goods and services, which increased the wealth of the State, which gave employment and helped to improve the standard of living at home— was made possible only by the deficits which have been lamented by Government speakers.
If we apply the test laid down by the then Minister for Finance—and I would like the Tánaiste, if he objects to that test, to say so and state its defects— we can see that last year there was a deficit in the balance of payments of £30,000,000, but to compensate for that there was domestic capital formation of £45,000,000, excluding stocks. If stocks are included, it would be very much greater. There has been the extraordinary situation, which has not been fully grasped by Government speakers, that that £30,000,000 deficit last year was not financed by drawing on the sterling external assets of the banks. The external assets in the banks on December 31st, 1949, were £241.6 millions and at the end of a year, on the 31st December, 1950, it had gone up to £245.4 millions. They were, in fact, financed by drawing on the Dollar Loan Account amounting to £20.8 millions and by the inflow of capital to this country to the extent of £13.3 millions. During that year there was no decrease in our sterling assets, there was an inflow of sterling into this country amounting to £30.3 millions and there was the incurring of dollar debt up to £20.8 millions.
If that test is applied over the period of four years during which the deficit of £90,000,000 was incurred, it can be seen that during that period net domestic capital formation increased by £178.7 millions. As I have said, it would not have been possible to have had that large-scale investment in this country and to have maintained our standard of consumption at the same time, if we had not got the deficit over those four years.
Far from being alarmed at the deficit for that period, far from trying to prove that the external assets declined during those years, if a proper valuation of what occurred in that period is made we will see that in those four years the real wealth of the nation was increased by £178.7 millions—and that during that period there was no reduction in our sterling assets. The external sterling holdings of the banks during that time increased in value and the evidence would show that there was no corresponding drop in the general sterling assets of the country as a whole for that period.
That deficit of £90,000,000 was not financed—as has been alleged by the Taoiseach and other Government speakers—by drawing on our external assets. It was financed by the creation of dollar debt amounting to £36.9 millions and by an inflow of sterling amounting to £51,000,000 during those years. I hope later to refer to the manner in which the White Paper has dealt with this inflow of sterling over those years. Every country in the world with a balance of payments problem welcomes the inflow of foreign capital to its country, in order to help alleviate that problem. The Minister and the Minister for Finance and the White Paper appear to deprecate it and appear to consider it as something which has created liabilities rather than assets. There can be little doubt that this year 1951 will see for the first time, but only for the first time, a reduction in our sterling assets. That will have been brought about because the dollar loan will have been exhausted, because the deficit in the balance of payments will have been increased and because the inflow of foreign capital will not be sufficient to make up the deficit. It must be appreciated that it is only this year—and not, as has been stressed by Government speakers, over the last four years —that we are going to have a reduction in sterling assets.
I think it is quite apparent to anybody who appreciates the realities of the situation that this year is an exceptional year and one very unlikely to recur. It is exceptional because of the large-scale stockpiling which was undertaken by business men in every form of business; it is exceptional because of the large-scale increase in import prices, which has already begun to flatten out; it is exceptional because the terms of trade moved strongly against us and the price of our agricultural exports is likely to increase and the terms of trade are likely to move once more in our favour. None of these items has been pointed out by the White Paper and no weight has been put on these exceptional circumstances. The White Paper has endeavoured to establish that this country is facing an economic crisis. It is also demonstrated from the figures given by the White Paper that the suggestion of a crisis is not warranted by those figures.
The import figures given in Table 1A of the White Paper show a steady decline from the peak period in June last and the import surplus has been going down steadily since May. It was 14.2 in May, 14 in June, 10.6 in July, 7.5 in August; it again decreased in the month of September to 5.8 millions. The Minister for Finance has endeavoured to make the point that this month of September was exceptional and that the drop in the deficit was due to the shipping strike which held up exports and imports. Since he made that speech, however, the figures for the import surplus for October which have been published show a deficit of £9.07 millions and if the average is taken for the two months September and October, as I suggest is a proper course to take, it will be seen that the import surplus for those two months is £7.3 millions.
The case that the Opposition is making against the White Paper is that it has failed to take into account the fact that the heavy increase in imports and the heavy import surplus has been steadily declining and that its figures are based on the false assumption that the large import surplus would continue. The figures since June show that there has been a steady decline in the import surplus and we claim that it is wrong to base the conclusions which the White Paper has reached on the fact that there was in the first six months of the year such a large-scale import surplus.
I further challenge the statement contained in paragraph 5 of the White Paper that there was dissipation of external resources merely to boost current consumption in the past year. I think that that statement is not borne out by the facts or by a proper appreciation of the large-scale investment programme which it was necessary to finance by means of the Budget deficit last year.
There is also another statement in the White Paper which is of a highly questionable character. Paragraph 31 states:
"If this year's deficit amounts to £70 millions, the accumulations of 1940-1946 will have been offset by subsequent realisation of sterling or by the incurring of dollar and sterling debt."
I object to the use of the words "sterling debt" in that connection. I did put down a question to the Minister for Finance to find out what was meant by the phrase "sterling debt," and he referred me to the June edition of the Trade Journal and in particular to the items under the capital account for the inflow of foreign funds into this country over those years and what the White Paper refers to as the incurring of sterling debt is, in fact, the inflow of miscellaneous funds which the Trade Journal puts on the credit side. I think it is incorrect to call this a sterling debt, a sterling liability, when, in fact, what has happened is that there has been a certain extra inflow of money into the country which has enabled us to finance the deficit in the balance of payments and has, in fact, helped to create assets in this country at the same time.
The White Paper further endeavours to establish that this country last year and in this current year was also engaged in some sort of consumer spree, that we were consuming too much and that our inport of capital goods and goods which would help to increase production in the country was too small. If a proper valuation of figures for imports of consumer goods and of other types of goods in 1950 and in 1938 is taken it will be seen that in 1938 of the total amount of imports 10.8 per cent. represented food, drink and tobacco, while in 1951 it was 10.5.
It will be seen that other imports of consumer goods in 1938 amounted to 20.5 per cent. of the total and that this was only 17.4 per cent. in 1951. In this year the figure for producer capital goods is 7.6 and it was only 7 in 1938. Materials for industry which comprised 51 per cent. of the total amount of imports in 1938 had risen to 57.9 this year. The figures demonstrate that we are not engaged in the consumer spree which, the White Paper alleges, exists. They demonstrate that we are in fact enjoying a high standard of living and that that has necessitated a great increase in our imports but that does not prove and the import figures do not prove that we are in fact consuming more proportionately than we did in 1938.
One of the purposes in the minds of the movers of these motions which are before the House at present was to get if possible a statement of Government policy. I do not think that that has met with any great success. We all welcome the Tánaiste's statement that he is in favour of the capital investment programme and the large expansion of capital investment projects. Again I trust he is not speaking for himself but for the Government, because if he is speaking for the Government it is evidence of a very recent conversion indeed to the principles of capital investment enunciated by the inter-Party Government. On July 18th last when the Minister for Finance was dealing with the problems which confronted the State, he referred to some of the matters which, he said, clamoured for discussion.
Two of these matters early on in the list of things which clamoured for discussion were, first of all, the character and adequacy of the current year's Budget and, secondly, the problem presented by an unwiedly programme of capital expenditure. One would not have thought, reading the Minister's remarks, that he was in favour of a capital investment programme which he described as unwieldy. It is, however, of interest to know that when he refers, in his recent speech in this debate, to the four problems confronting the country now, the problem of the unwieldy capital programme is left out.
It must necessarily also be a matter for surmise as to whether in reality the Government's conversion to the capital investment programme is a complete one, at any rate, as far as the Minister for Finance is concerned. I asked the Minister for Finance a couple of weeks ago if it was the intention of the Government to expend the sum of £29.4 million on items of a capital nature as had been provided for in the Budget prepared by his predecessor and his answer was "Yes". That answer must be welcomed by every side of the House. But, in answer to a supplementary question as to the spending of the American Loan Counterpart Fund, when asked if it was true that the £18.5 million which had been spent by the Government between June and October of this year was a dissipation of the American Loan Counterpart Fund, the Minister said: "Yes, it was, if it meant spending on the follies of our predecessors.""The follies of his predecessors" could only have meant the capital investment programme and, if he described that capital investment programme as folly, it is hard to appreciate the complete nature of his conversion to the principle of a capital investment programme, and his complete acceptance of the view that a large scale capital investment programme is of great necessity at the present time.
It is in the context of these remarks and these earlier speeches, and also in the context of the memory of the large advertisements which were plastered around the City of Dublin last year, which stated that the country was being put into pawn by the inter-Party Government, that we are entitled to doubt the conversion of the Minister for Finance to the capital investment programme. If he has been converted, we will all welcome it. If he does intend to spend at the rate of £29.4 million this year, we will welcome that, and if he does intend to maintain this large scale capital investment programme, he will also obtain our support. It is evidence of that conversion that we think is lacking at the present time.
Whereas we are in agreement with the Government if they intend to develop the capital projects which the last Government put into operation, we must join issue with them as to the means of financing these items of capital expenditure. It is of interest to note that the Tánaiste, in his recent statement to the House, referred to the ease with which the last Government could finance the capital investment programme. In Volume 127, No. 2, column 314, he is reported as saying:
"It is true that our predecessors were able to borrow with considerable ease because they had available to them the American Loan Counterpart Fund and whenever they ran short of cash they could borrow from that fund. That made it possible for them to maintain a level of investment by State organisations higher than the amount they were able to borrow from the public would have permitted."
I think it is fair to say that the Tánaiste was implying that we had available for disbursement the American Loan Counterpart Fund which they had not got and that things were going to be more difficult for them.
In that connection it is interesting to read the reply made by the Minister for Finance as to the amount spent out of the American Loan Counterpart Fund by the last Government and the amount spent by the present Government. The figures were given by the Minister for Finance. Between 19th January, 1949, when the proceeds of the American Loan became available for expenditure, and the 13th June, 1951, when the Government left office, the total amount spent from the proceeds of the American Loan was £18.1 million. The total amount spent between 14th June and 25th October by the present Government was £18.5 millions.
The figures given in this answer demonstrate that it took the present Government less than four months to spend what the inter-Party Government took 30 months to spend. The charges of prodigality in the expenditure of the American Loan Counterpart Fund which we witnessed over the last few years, and in more recent days also, are not borne out by the figures given by the Minister for Finance in answer to that question, and the answer demonstrates that they spent the American Loan Counterpart Fund at a rate nearly seven and a-half times faster than the inter-Party Government did.
It is also of interest to recall the remarks made by the Minister for Finance in his speech on 18th July, when he referred to the spending of the American Loan Counterpart Fund. The warning which the Minister gave at that time must be borne in mind. He said, at Volume 126, No. 12, that whatever may have been the position in theory some time ago, the release of counterpart moneys now must be regarded as having a predominantly inflationary influence.
I must endorse that statement. It is a statement which his predecessor also made. It is a statement which any prudent financier would make, that in present circumstances the expenditure of the American Loan Counterpart Fund must have a much greater inflationary effect than the expenditure of money borrowed from the public would have. It was with the realisation of that that the Government has engaged in this dissipation of the American Loan Counterpart Fund over the last four months. It is not unfair to say that that money would not have been spent by the inter-Party Government if it had been in power in the manner and at the rate at which it was spent by the present Government, because they long ago would have raised a loan in order to pay for this capital investment programme.
The Tánaiste's speech also contains statements with which I should like to take issue. He states, as reported in Volume 127, column 311, of the Official Reports:
"Our financial difficulties, I believe, are internal, not external. I believe that what is wrong is not that we have been using up our external assets but that we have been using them for the wrong purposes— that the Government has not been paying its way at home. The deficit in our balance of payments is merely a symptom of the unbalanced Budgets of recent years."
First of all, I should like to point out, in relation to that statement, that the Minister appears to be accepting the interpretation of the phrase "Budget deficit" given by the Central Bank. He is using that phrase to mean, incorrectly, I allege, payments on matters of a capital nature which are properly financed by borrowing, and the Central Bank in their report referred to, what they termed improperly, "Budget deficits", when they lumped together the total expenditure of the Government for the current year irrespective of its capital or current nature and put it side by side with the total revenue and alleged that the difference between the two was a budgetary deficit. It must be said that there were no budgetary deficits in any year in which the inter-Party Government were in power and the term as used by the Tánaiste is wrongfully used.
If, without prejudice, one does use the term "budgetary deficit" to include the difference between the total State expenditure, including capital, and the total revenue, it is true to say that they have brought about a deficit in the balance of payments. It is true to say that the large-scale investment programme of the last few years has been a deliberate item of Government policy designed to bring about a deficit in the balance of payments.
It was done deliberately with full knowledge of the consequences and, I claim, successfully, if a proper reading of the figures is made and if, instead of looking at the liability side of the balance sheet, we look at the assets that were created over this period. But it must be taken from the Tánaiste's statement that if—again to use the word without prejudice—the deficit which has existed between the current and capital expenditure of the Government and the total revenue had been made up by taxation instead of borrowing, as was the fact for the last few years, it would certainly have meant a reduction in imports and a consequent reduction in the deficit of the balance of payments.
That is the very policy we are against. If it is Government policy to reduce consumption by forcing savings on the people by means of taxation, we are against that policy. If it is their policy to finance the capital investment programme by taxing the people to do it, we are against it. If they intend to bring about forced savings on the community by taking the money out of the hands of the people which was being spent on imports, we are against that policy. It is for these reasons—the various quotations which the Ministers have given, the various statements against borrowing and the increase in the interest on State debt which they deprecated in their past speeches—that we very much doubt their full conversion to the principles of the capital investment programme.
A statement was made in this House by the Minister for Finance in which he declared that the last Government had faked and cooked the Budget. Again, I want to join issue with the Minister for Finance on that statement and to say that the Minister's predecessor had a Budget which was perfectly balanced in accordance with sound financial theory and that, if there is anything faked about the current Budget, it is the alleged deficit. I believe that the deficit which the Minister is talking about is a faked deficit because he has included, when estimating the increased expenditure for the current financial year, this sum of £3.07 millions for fuel subsidy.
It is of interest to see what the Central Bank has to say about that sum of £3,000,000 odd. It would appear that the Minister is almost more conservative in his dealings with this sum of £3,000,000 odd than the Central Bank, because page 12 of the Central Bank report referring to this item states:
"The debt position cannot be fully understood without some reference to liabilities incurred on the contingent basis. The State guaranteed bank overdraft to Fuel Importers Limited referred to in our report for the year ended 31st March, 1949, still remains undischarged so that the estimated loss of some £3,000,000 being in effect a State subsidy on fuel has not as yet made its appearance as a charge in the public accounts."
Then it makes this interesting statement:
"The capital amount is accordingly not included in the foregoing debt figures nor is the interest included in the foregoing particulars of debt service."
The Central Bank were of the opinion that this sum of £3,000,000 odd was properly to be regarded as a debt to be funded and paid back, and not to be regarded as an item to be paid for in one year. This was a debt incurred by Fuel Importers Limited over the period of the emergency, and it is bad finance to say that it should be paid back in one year and not funded, as was the intention of the last Government. I may be wrong in this point, but I should like to be corrected if I am. I think the Tánaiste, when in Opposition, suggested that this £3,000,000 odd, owing to Fuel Importers Limited over the last few years should, in fact, be funded. That was the proper policy to adopt. I suggest that it is little short of fraud to bring into the current financial year this debt which was incurred during the war years.
As to the figures given by the Taoiseach yesterday, the sum of £10,000,000 deficit for the current financial year, he estimated that there was going to be a saving of £1.5 million; there was the £1.5 million surplus which his predecessor had budgeted for and there was going to be a £2,000,000 increase in revenue. The Taoiseach deducted that the deficit therefore for the current financial year would be in the region of £5,000,000. If you exclude this £3,000,000 odd to be paid out of the current year to Fuel Importers Limited, and if you add on the £2,000,000 odd which were in the Exchequer when the present Government took office, that deficit is wiped out. I think it is correct to say that if the proper financial aspect is taken of this debt to Fuel Importers Limited, and if the Government will refrain from trying to make political capital out of the situation by falsely increasing the alleged budgetary deficit, it will be found that there is no deficit at all.
The Minister for Finance referred last July to budgetary deficits and very rightly made the following comment at column 1876 of Volume 126 of the Official Report:—
"No one with even a rudimentary acquaintance with economics should be complacent about Budget deficits in present circumstances. I think that all will concede that, in an inflationary situation, as exists in the world to-day, the least the State should do is to refrain from making things worse."
I maintain that the Government has a bounden duty to balance the Budget if there is a deficit; I maintain that the Government is neglecting its duty, if there was a faked Budget, in not balancing it. This Government came into office six weeks after the Budget was introduced. If it was a faked Budget the Government has stood over that faking for the last five months and has done nothing about it.
I think it is a fair interpretation of the situation to say that the Government is deliberately trying to muddy the waters by dragging in items which should not be brought in at all in order to cover up the increase in taxation which would have been necessary to pay the increased subsidies on wheat and milk which they themselves introduced. At any rate the Tánaiste has come forward in favour of the idea of large-scale capital investment. We welcome his statement in that regard.
I would like to see a national investment board set up—a body something on the lines of the Industrial Credit Corporation. We must keep in mind two principles in connection with the policy of capital investment. First of all we must ensure that our capital investment is of an economic character and that it is not wasteful; and, secondly, we must ensure that the other part of the capital investment programme is an investment in capital of a social character, such as houses and hospitals. During the period in which the capital investment programme is in progress and planning for the future it is essential that the various aspects of the programme should be kept under constant review.
It might be that in any Government one particularly strong Minister could bring to bear too great a pressure on the Government of the day in order to secure investment in connection with his own particular Department as a result of which the investment programme as a whole might become lopsided. For that reason I think there should be some sort of semi-independent investment board to plan the future capital investment needs of the country and to keep a vigilant eye on the current investment programme in order to ensure that investment would be made only in works that are in fact economic.
I know the Taoiseach seems to hold the opinion that such a planning authority would not be of any great assistance. The days when investment was on an insignificant level have gone. Now that investment is on such a large scale and at a time when the Government's capital investment programme is of such vital importance and plays such an important rôle in the economics of the State, I think an investment board of the kind I have suggested could perform a very useful function and play a very useful part in ensuring that the proper principles were applied and the proper plans made in relation to the policy of investment in the future.
The second principle which should be applied in the present situation in order properly to face current financial difficulties is that of borrowing. The Government should borrow for capital investment projects. They should not raise the necessary finances by means of taxation. I think the Government has failed in its duty in not floating a loan during the autumn. The Minister for Finance in the inter-Party Government announced last May when introducing the Budget that it was the intention of his Government to finance the capital investment programme by floating a loan in the autumn. So far we have had no explanation from the present Government as to why that loan has not been floated. If it is floated now and if it is a failure, as it may easily be, the fault will lie with the Government and with no one else.
I stated last July that this was a matter above Party politics. I stated that the issue of a national loan to finance the capital investment programme was a matter which should not be subjected to the Party political machines. I still maintain that is true. I think the finances of the State should not be subjected to Party political bickering. Be that as it may, we are entitled to say to-day that the present Government has created a situation in which the banks have become chary and are unwilling to lend, and in which the people have become scared of the financial situation. Should the Minister float a loan now and, should that loan prove unsuccessful, the blame can only be laid at the feet of the Government's spokesmen who have brought about this situation of semi-crisis.
The third item of any proper financial policy at present is the institution of the double Budget system introduced by the last Government. I hope that the present Minister for Finance when introducing the Budget next May, if he is still in office, will continue to bring in the double Budget so that the total amount of capital expenditure both above the line and below the line will be quite clear to the people, and so that the people will not be taxed under the supply services heading for items which come, in theory, under supply services but which are, in fact, items of a capital nature.
The fourth ingredient of a proper financial policy at the present time is one which has been singularly lacking from all the Government statements which we have heard here over the last few weeks, and that is, the great need for increasing exports. Now, it must be apparent to anyone who understands the financial situation to-day that the solution of the balance of payments problem cannot be brought about by reducing imports. By reducing imports you are merely swopping one form of inflation for another form of inflation, so that the only real solution to the long-term problem of the balance of payments is to be found by increasing exports. Our main effort under the capital investment programme should be directed towards increasing agricultural production, and, far from cutting down on investment, as has been advocated by the Central Bank, far from reducing the amount of investment at present by the Government, the amount should be increased. The only way in which we can bring the agricultural industry into a position in which its products can be properly saleable on the world markets is by investing more money in it, and by bringing down the costs of production.
I do not know why the Government has been so silent about the need of increasing our export drive. I think that we are almost in the situation in which the British found themselves shortly after the war when the members of that Government found it necessary, in speech after speech, to impress on their people the need for exports. As I say, I do not believe that we are in the same financial circumstances as the British found themselves in at that time, but the problem is still the same and the remedies to be applied are similar. It is the duty of the Government now to endeavour to see that our exports of agricultural produce are increased.
The fifth item in what I consider to be a sound financial policy is another one which has been singularly lacking from the speeches made by members of the Government in this debate, and that is the necessity for increasing the savings drive. It must be admitted, I think, that the savings drive is of the utmost importance so as to ensure that there will be available for the capital investment programme a sufficient amount of resources to help finance it. If we do not increase the savings drive we are going to put a greater strain on the balance of payments.
Again, it was singular to see that, in most countries of the world during the war, large-scale savings drives were instituted, and that nothing was being done in this country. I think it is also true to say that a savings drive is something which should be above party. The last Minister for Finance did state that the Government of that time were preparing plans to institute a large-scale savings drive throughout the country. We have heard nothing about those plans from the present Government, and we have heard little or nothing about savings from the present Government. I would like to see a reorientation of Government policy towards increasing savings, towards making the people savings-minded, and towards bringing in local authorities, schools and other institutions to aid in the savings drive.
I feel, as I have said earlier, that, if a proper and realistic approach were made to the problems of the day, there was no need for the crisis talk which we witnessed over the past few months. There is, of course, no need to be complacent about the situation. The last Government looked with legitimate pride on the increase on the standard of living which was brought about during the years it was in office. It looked with determination to the problems which confronted it. It did not endeavour to create a panic in the country, but did endeavour to point out the difficulties which confronted the people. The task of the present Government or of any Irish Government is not an easy one.
The problems needing a solution are, as we know, many. It should be the primary duty of any Irish Government to secure full employment; it should be the equal duty of any Government to bring down emigration, and it is its bounden duty to see that proper housing and proper hospital facilities are there for the people. The Government also has the task of producing a proper social security scheme, a proper mother and child scheme, and proper health services generally.
These are not easy things to do. Men of ability, with proper financial and economic theories behind them, are required to deal with these difficulties. As I have said, I do not feel that the present Government is capable of bringing about conditions of full employment, of reducing emigration, of increasing housing and hospitalisation, of increasing production, generally, in order to finance those schemes, of bringing in proper health services or a proper social security scheme. It is because I do not feel that they have that ability, that I would like Deputies to treat this motion, as was suggested by an earlier speaker, as a vote of no confidence in the Government, to ensure by their votes the defeat of the Government and the opportunity of electing a Government which will face these many problems in the same manner and with the same policies as the inter-Party Government did.