Dáil Éireann debate -
Wednesday, 2 Apr 1952

Vol. 130 No. 8

Financial Statement. - Budget, 1952.

ECONOMIC SURVEY.

Minister for Finance (Mr. MacEntee)

The early introduction of the Budget for this year is due to the urgent need to restore order in the public finances and in our general economy. These objectives will take longer than one year to attain. The second, indeed, depends largely on the initiative of individuals and cannot be achieved by budgetary action alone. But the Budget can facilitate its achievement and can at least secure that the means adopted to finance public expenditure are not such as to aggravate an already serious situation. The economic and financial setting in which this Budget has to be presented must first be sketched. Deputies and the public cannot but be aware of the nature and magnitude of the problems with which we are faced. In the forefront stands the deficit in the balance of payments. This is an effect, I should emphasise, rather than a cause; it is the expression of a number of unfavourable and adverse forces that have been at work for some years past and to which it is necessary to refer.

AGRICULTURAL PRODUCTION.

Amongst these I should place the failure of agricultural production to regain even the 1938/39 level while in Western Europe generally it is now 10 per cent. greater than before the war. The lack of progress in agricuiture in this country is undoubtedly exceptional and is difficult to understand. The prices guaranteed for Irish wheat and beet have never been low and are, in fact, among the highest in the world. Other crops, too, have been remunerative and cattle prices have been particularly attractive. Production in the aggregate, however, has failed so far to expand to meet the nation's needs. Whatever be the explanation for this it cannot be that our farmers as a whole are unpatriotic or unwilling; the experience of the war years would confound such a suggestion. In the present national emergency, which is as grave and serious as that through which he bore us from 1939 to 1945, I am sure we can again rely on the farmer to intensify his efforts and to increase production in the general interest as well as in his own. The fact is that if the living standards of farmers and the community generally are to be sustained, it can only be on the basis of a greatly expanded agricultural and industrial output.

EXPORTS.

Agricultural produce in fact is the foundation of by far the greater part of our export trade. The level of agricultural production is, as I have said, lower than pre-war. Moreover, we ourselves are consuming a greater proportion of it but are not producing a commensurate volume of other exportable goods in return. It is not surprising, therefore, that, despite some expansion in recent years in certain industrial exports, the volume of Irish merchandise exports in 1951 was only 3 per cent. above that of 1938. That is one of the root causes of our balance of payments problem.

INDUSTRIAL PRODUCTION.

The substantial increase since the war in industrial output and employment is not a spontaneous growth but is attributable to a large extent to State-financed construction works and State-aided building of houses. Not only the building and construction industry but also industries providing building materials, furniture and household equipment have expanded considerably. As the years go by and the housing problem is alleviated, some reduction in the activity of these industries can scarcely be avoided. On the other hand, there is still scope for economic production at home which would replace a proportion of our imports of consumer goods and thus alleviate our external payments problem. The industries supplying food and clothing have shared in the expansion of recent years. The difficulties recently encountered in the clothing and footwear industries are, however, responsible for the slowing down in the rate of industrial expansion in 1951.

EMPLOYMENT.

All over the world during the latter half of 1950, but particularly in the first half of 1951, an immense volume of advance purchasing took place. This was based on the belief that the prices of basic materials, which had then begun to soar, would continue their upward flight. This advance purchasing was reflected in corresponding increases in production and in stockpiling on the part of manufacturers and traders. The tide has now turned, world prices of raw materials are falling and the abnormal production and purchasing of 12 months ago are being matched by a reluctance to buy because a general fall in the price level is expected. Whether that will come or not is by no means certain, but at the moment, at any rate, buyers are not prepared to take a chance. They are holding off so that everywhere there has been a heavy slump in the textile, clothing and footwear industries. It has been particularly marked in Western Europe, in Great Britain, France and Belgium, but it has been less severe in this country than in most others. Even here, however, as elsewhere, the fall in demand and the anxiety of traders to dispose of stocks have naturally caused a reduction in new orders, and this in turn has been reflected in lower output and employment in textile, clothing and footwear industries.

The Government some time ago reinforced the protection of these industries by increases in tariffs and reductions in import quotas. The home market is now virtually reserved to the Irish manufacturer. The Government, however, cannot force consumers to buy nor is unemployment in the industries affected of the kind which, as in the case of some heavy manual occupations, may be relieved by public works. There is, however, reason to expect a recovery in activity and employment as the liquidation of stocks nears its end. Provided the price factor is favourable, trade should revive as soon as the individual need for more consumer goods in the form of clothes and footwear becomes significant and expresses itself in a resumption of individual purchasing.

Captain Cowan

I wonder if there could be a little order in the House? I find it almost impossible to follow the Minister's statement owing to the noise.

General Mulcahy

It will be harder as you go on.

Mr. MacEntee

At least it will not be as difficult as to follow Deputy Mulcahy.

The increase in industrial employment in recent years, though considerable, has merely counterbalanced the drop in the number of males engaged in agriculture. The fact is that there have not been enough openings outside agriculture to absorb both those who have left the land and the increment in the labour force due to the natural increase of population. It is obvious, therefore, that a considerable expansion in industrial production is necessary, and that, so far as practicable, our resources of labour and capital should be employed to this end. Furthermore, we must recognise that the demand of the home market for certain industrial goods is not sufficient to maintain production at an economic level. Accordingly, if these industries are to play their part in providing employment, those who are engaged in them must concern themselves not only with the home market but most urgently with the development of an export market for their products. Coupled with an increase in agricultural production for export, this would be a remedy for most of our problems.

PRODUCTION FOR EXPORT.

The export market, however, is highly competitive, so that efficiency of production and low costs, with correspondingly low export prices, are of first importance. There is no protection for us in the export market. In it we shall have to sell our goods on merit alone, the merit of giving the best possible value for the price demanded.

Mr. Dillon

Hear, hear!

Mr. MacEntee

And not a cut price either. Certain old-established Irish firms of world-wide reputation have done this consistently over the years and thereby have built up businesses of tremendous value. Other newer firms established since the drive for industrial development was begun in earnest in 1932 have likewise built up substantial export connections in recent years. There is no need to urge them to extend their efforts; for they have demonstrated already that they have the vision and the enterprise— yes and the sense of responsibility to the nation—to fulfil their obligations in this regard. But there are others who have not yet risen to the occasion, who appear to be content in the enjoyment of the home market. It is time for these to bestir themselves, first, to meet all the demands of our own people and secondly, to extend their activities abroad.

For us at the moment the vital need is to export in greater volume to every market but especially to the United States and Canada. With this need in mind Córas Tráchtála, Teoranta. has been established to provide advice and assistance in relation to the development of exports to the dollar area and that fact indicates the special importance of earning more dollars and the need for our manufacturers to order their production and to organise their exports to meet the exigent requirements of the dollar market. An increase in exports must be based on increased production. This again means a readier initiative, a more active enterprise on the part of those who direct industry and a greater willingness on the part of those who labour in it. Nor should it be overlocked that the element of cost, which is so frequently submerged in a highly-protected home market, is of predominant importance in the export trade.

EARNINGS AND PURCHASING POWER.

There was an increase of 12½ per cent. in industrial earnings during 1951, and, at the same time, a reduction in the average weekly number of hours worked. Unfortunately, output per head did not advance correspondingly. The percentage wage increases granted to agricultural workers last July ranged from 10 per cent. to 12½ per cent. and raised the level of wages in agriculture to 150 per cent. above pre-war. Incomes in other occupations advanced during the year also in anticipation of a rise in the cost of living index. The index in fact rose from 102 in November, 1950, to 114 in February last.

The rise in the cost of living was due to increased prices for imports generally and for home-produced goods, including foodstuffs. In the case of import prices the rise reflected a shift in international demand in favour of basic commodities such as metals, rubber, wool, cotton, etc., needed for rearmament. When scarcities are caused and prices are raised by rearmament programmes, the ordinary consumer is bound to suffer. He becomes the victim of the fact that much more exigent purchasers than he are bidding against him in the world's market, purchasers with whom money is no object, since they can procure it from him and his like either by open taxation or more oppressively and inequitably by inflation. In these circumstances, it is an illusion to think that compensation can be secured by way of an all-round increase in remuneration. If increases in money incomes do occur, it must be at the cost of domestic inflation and of an enlargement of the deficit in external payments.

CONSUMPTION AND SAVING.

Advances in incomes in recent years have been accompanied by disproportionate increases in consumption. This is one of the more unhealthy features of our situation and a clear appreciation of its significance is essential. It is perfectly natural and proper for consumption to increase as income rises, but what is abnormal and dangerous is the severe contraction in saving which has occurred here despite increases in income. Consumption has been increasing at the expense of savings at a time when savings have been needed on an increasing scale for capital development. In 1948, the first post-war year in which there was an approach to normality, £20,000,000 of a national income of £334,000,000 was saved. The proportion saved even then was much too low both in relation to our investment needs and to international standards. Domestic investment not covered by depreciation allowances came to £40,000,000 and the gap of £20,000,000 between savings and investment had to be met by external disinvestment. Between 1948 and 1950, national income increased in money terms by £30,000,000 but consumption increased still more, with the result that savings were reduced, both absolutely and relatively, and a still greater part of domestic investment had to be provided for by external disinvestment. In other words, as a result of the excessive increases in consumption in recent years, and the corresponding diminution in saving, the additions to internal assets which have taken place—mainly, I may say, in non-productive capital such as houses and hospitals—have been effected largely by drawing on our external investments and by incurring external liabilities. The increase in internal capital was in fact largely at the expense of a reduction in external capital. This can be seen more clearly by reference to the experience of the past two years.

SAVINGS AND EXTERNAL DISINVESTMENT, 1950/51.

Part of the increase in national income in 1949 was saved with the result that savings rose to £30,000,000 and external disinvestment was reduced to £10,000,000. In 1950, however, a marked deterioration set in. Although in that year national income in money terms increased by about £11,000,000, consumption in the same period increased by almost double this amount while savings fell by some £10,000,000 as compared with the year before. Stocks increased by about £5,000,000. Maintenance of and additions to domestic capital (including stocks) required £50,000,000 apart from depreciation allocations. Towards meeting this £50,000,000, however, only £20,000,000 of current savings were available; so that £30,000,000 had to be found by external disinvestment, which took the form mainly of an increase in foreign indebtedness, both in dollars and in sterling.

In 1951, the position worsened still further. External disinvestment, as represented by the deficit in the balance of payments, was as great as the net amount spent in maintaining and adding to domestic capital, which was £50,000,000 in 1950, and mainly because of price increases, was £10,000,000 more in 1951. Last year, therefore, even existing domestic capital had to be maintained partly at the expense of net external assets and there was thus an actual reduction in national capital. This involved not merely the elimination of national saving in 1951, despite substantial increases in money incomes in that year, but actual dissaving or consumption of capital, as well as income, by the State and the people as a whole.

IMPORTS.

A direct consequence of the great increase in consumption in recent years is the growth in imports which in 1951 reached the enormous total of £204,500,000. The increase in value over 1950 was £45,000,000, and was mostly due to increased prices. In volume, imports are now 46 per cent. above the 1938 level. This increase, I should emphasise, is in no way counterbalanced by any corresponding increase in the volume or value of our exports. On the contrary, our total receipts from abroad in 1951, by way of payment for merchandise exports, net tourist earnings, investment income, emigrants' remittances and other sources were only enough to pay for about two-thirds of our imports. We paid for the rest at the expense of our external capital. In this connection the point to note is the disturbing one that capital goods accounted for only £3,500,000 of the total increase of £45,000,000 in imports. This, however, was no novel experience; for one of the highly significant features of our import returns in recent years has been the persistent decline in the proportion of total imports represented by capital goods. The percentage has fallen from 10.8 in 1948 to 10.4 in 1949, 9.7 in 1950 and 9.3 in 1951. Imports of finished consumer goods, on the other hand, are a rising proportion of the total. They represented 27.2 per cent. of total imports in 1951, as compared with 25.5 per cent. in 1950. The main increases in imports last year were, in fact, in finished consumer goods and in materials for processing before final consumption here.

STATE EXPENDITURE.

A highly disturbing element in our economy is the continuing rise in the cost of the public services which in recent years has been very steep. Central Government outlay last year was £123.5 million, as compared with £71.1 million in 1947-48 and £34.6 million in 1938-39. State expenditure, in fact, has increased faster than national income and, as we shall see, now exceeds the people's capacity to meet it from taxation and current savings. The expansion has been mainly in subsidies and social services and latterly in capital expenditure, with which, of course, has been associated a steep and long-term increase in debt charges. Social services, health services, education, superannuation, subsidies and the service of debt between them now account for roughly three-fifths of the current outlay of public authorities. Public finance, in fact, has become predominantly concerned with redistributing the national income.

A consequence, often overlooked, of the extension of the economic and social functions of the State is an increase in costs of administration. The total number of civil servants, which was 26,775 in January, 1939, had risen to 35,287 in January, 1951. Excluding postal workers, the numbers were 14,845 and 20,150 respectively. The number of postal workers increased from 11,930 to 15,137. The cost of the Civil Service has correspondingly gone up from £5.9 million in 1938-39 to an estimate of £14.5 million for the current year, the increase being due both to expansion in numbers and increases in the rates of pay. Including the Army, the Garda Síochána and national, secondary and vocational teachers, the total remuneration paid by the State has risen from £12.8 million in 1938-39 to £30,000,000 in the current year.

THE BALANCE OF PAYMENTS.

The threads of this survey may now be gathered together. The result of the rise in consumption, both public and private, at the expense of current and even past savings, of the slowness of agriculture to recover, of the absence of any significantly greater export surplus than pre-war, and of the disproportionate increase in import prices, is a deficit of unprecedented size in our balance of payments. We had a deficit on visible trade last year of £123.1 million and the detailed estimation of "invisible" items having now been completed, I am informed by the Central Statistics Office that the overall deficit was £62,000,000.

Mr. Dillon

It has come down £4,000,000.

Mr. MacEntee

It is still £62,000,000.

Mr. Dillon

If it shrinks any more you cannot fit into it.

Mr. MacEntee

To a Deputy who could spend $5,000,000 in one afternoon, it may not mean much but it means a great deal to the country.

This deficit is no isolated phenomenon. We have had deficits every year since 1947 and the cumulative total is now roughly £150,000,000, thus virtually offsetting the external assets built up during the war years. We cannot say, however, that having, in effect, used up our war-time accumulation, and reduced our gross external reserves to less than two years' purchase of imports on the present scale, we shall now automatically settle down to living within our means. There is, unfortunately, no reason to think so, nor for believing that the balance of payments will right itself spontaneously. The opening months of this year showed virtually no improvement. Therefore, the necessary corrective measures for dealing with this urgent situation cannot be postponed; we cannot wait until it is clear that the long-term potentialities of increased agricultural and industrial output are being realised and the deficit on external account is being redressed. We must, accordingly, look into this matter further.

What is spent abroad depends basically on total expenditure at home which is itself closely related to Government outlay and personal incomes. It has been our experience for many years that 40 per cent. or more of Irish personal outlay represents expenditure on imports. We may spend a smaller total amount if imports become cheaper or we may defer purchases from abroad by drawing on stocks; but these are merely modifications of the general principle, even though it may be legitimate to expect some marginal relief in these directions in the current calendar year. Similarly, on the earnings side, while we may expect some increase in export prices the immediate outlook in agriculture would not justify us in counting upon any material increase in the quantity exported. The trade deficits for January and February of this year provide little ground for optimism and it seems clear that, without an improvement in personal savings and a reduction in inflationary Government finance, the deficit in the balance of payments will remain excessive. Allowing for a favourable turn in the terms of trade, for some drawing down of stocks and for increased tourist income, the balance of payments deficit which we faced at the beginning of 1952 was about £50,000,000. The only way, therefore, to achieve a reduction in this figure is for the Government to bring its receipts and expenditure into closer accord and for the community as a whole to save more and to spend less.

CONCLUSION.

We cannot afford the present scale of spending abroad in excess of our current external earnings. It is an unhealthy economy in which net saving has ceased, consumption has outrun income, and even existing domestic capital is being in part maintained by realising external assets. But that was the position of the Irish economy in 1951. No Government with any sense of its responsibility to the people as a whole could allow this state of affairs to continue. Having quickly reached the end of our disposable external resources, we should suddenly find ourselves unable to pay for one-third of our current imports, the employment now maintained on the basis of consuming external capital would come to an end, and an incalculable degree of economic and social hardship would follow. The enforced reduction, in fact, in our imports would not be confined to so-called non-essential consumer goods. It would cut deeply into what we have come to regard as necessities and into raw materials and capital equipment for industry and agriculture. For lack of these our whole productive organisation would run down and want and hardship and unemployment would become widespread.

I trust we shall all agree that a catastrophe such as I have indicated must be averted at no matter what cost to our present comfort and convenience. The measures which must be taken to this end can be stated very simply. First, in order to give us time to increase our capacity to pay for a high level of imports, the deficit in our external payments must be reduced to manageable dimensions. The two sides of our external account must be brought much closer together. That means trying to increase exports and reduce the need for imports by stimulating agricultural and industrial production. It means conserving and promoting our tourist industry, as provided for in recent legislation before the House. But these are, in varying degrees, long-term remedies and the problem is urgent. Therefore, for immediate and significant results, it is necessary to import less and specifically to import fewer consumer goods.

Now, at this point, let me stress that, even if sterling were freely convertible into dollars and other currencies, the present position of our balance of payments would force us to take the necessary corrective action. That action would be taken solely in our own interest, to maintain and safeguard the purchasing power of our own currency and to conserve our external reserves. The corrective action is rendered doubly necessary and doubly urgent, however, by reason of the present payments difficulties of the sterling area as a whole. Because this country sells an overwhelming proportion of our exports for sterling, because on the present pattern of our international trade almost 30 per cent. of our imports have to be paid for in currencies which to-day we can only procure in exchange for sterling, our interest in the maintenance and improvement and general acceptability of sterling as an international currency is vital. Putting it in another way, it is of special importance to us as a trading nation, that the money we receive from our principal customer should continue to be good money.

Our deficit—the deficit which we cannot afford to sustain—is, in fact, a deficit with the non-sterling world. In this way it adds directly to the drain on the central reserves of the sterling area, a drain which recently had become so heavy that these were threatened with exhaustion within a very short period indeed. If this trend had been permitted to continue unchecked, there is no doubt whatever that the position of sterling as an international medium of exchange would have been rapidly undermined and that the consequences for our standard of living would have been disastrous. These are the circumstances in which I announced a few weeks ago the Government's determination to secure that our balance of payments with the dollar area in the second half of 1952 would not show a greater deficit than $16,000,000. We shall aim, likewise, at reducing the deficit with the rest of the non-sterling world in the same half-year to £9,000,000. We must, in our own interest, endeavour to exceed these targets but the figures I have specified represent our minimum objectives.

I indicated last week the principal dollar imports which will be reduced in the second half of this year. For the proposed reduction of the deficit with the rest of the non-sterling world chief reliance must be placed on an increase in personal savings and a better balance in the Budget. Measures to reduce non-essential imports from outside the sterling area by administrative controls are under examination but the scope for action of this kind is necessarily limited and must have regard to our obligations as a member of O.E.E.C. and to our commitments to countries with which we have trade agreements. The Government is opposed to the introduction of any general system of import control. It prefers that the public should increase its saving, lend more to the Government for domestic capital development and economise as it thinks fit in its purchases of consumer goods from abroad, but especially from the non-sterling world. This is the only safe and sure way of achieving the reduction in the balance of payments deficit which the national interest demands.

I have devoted particular attention to consumption, savings and the balance of payments because these are the significant factors in our present situation and form the background to this year's Budget. It requires little thought to appreciate how unstable is the economic position and how precarious the livelihood of people who spend more than they earn and are not even maintaining the capital assets on which they rely for their current income except by running down their external assets and incurring indebtedness to foreigners.

How are we to get out of our difficulties? The road back to a healthy economy is by way of increased savings, increased home production and, for the time being, reduced imports of consumer goods. There will be no ground regained but rather an acceleration of our descent towards economic and social disaster unless (1) every individual who is in a position to do so saves a much higher proportion of his income and (2) the Government comes much closer to paying its way. It is essential that the Government should not appropriate to public purposes an excessive proportion of the national income and resources. Government expenditure financed not from the current income or savings of the community but by the injection of new money into circulation inflates the total of personal expenditure, artificially increases the demand for consumer goods and accordingly for imports, reduces the amount available for export and widens the gap in the balance of payments. As a necessary corollary to these two conditions of economic recovery there must be the greatest restraint in relation to increases in income, whether in the form of profits, wages or salaries. Our urgent need is for an increase in thrift and saving which, at the expense of a temporary and voluntary reduction in personal spending, would provide resources for the capital development which is required to sustain and increase our living standards. More spending would simply mean greater imports of consumer goods, a wider gap in the balance of payments and a more rapid depletion of external capital.

If we want economic and financial stability, if we want to ward off the depreciation in the exchange value of our currency which will be inevitable if the deficit in the balance of payments continues at the present rate, if we want to develop Ireland's productive resources and give more of our people employment and a reasonable living at home, if we want new houses, hospitals and other amenities on the present scale, our people on the average will have to save as a minimum 10 per cent. of their personal incomes. If individuals in general and the community as a whole are not prepared to deny themselves in order to attain this target, our citizens will have to forgo some of their demands on the State; for no Government can provide more than its people are prepared to pay for. Furthermore, in setting this target we must allow for those who could not afford to save as much as 10 per cent. We must have more saving on the part of those in the higher income groups. Nor may the effort be confined to individuals; corporate savings must also be increased; this will involve a cutting out of waste and a search for efficiency over the whole field of production, distribution and administration. Unless there is a revival of saving there must be a drastic curtailment of capital investment and a reduction in the general standard of living. It can only be a matter of time before the community's external reserves are reduced below danger level and the support which they now provide for our present economy is knocked away.

I know—we all know—that circumstances have been unfavourable recently to personal saving. Rising prices, especially since the outbreak of the Korean war, have made it hard to maintain former standards of living except at the expense of savings, and the result is that the future is being sacrificed to the present. The expectation of a continued rise in prices stimulated purchases of consumer goods not only in advance of need but even in excess of it. The best restorative of savings would be a fall in import and domestic prices or even the certainty that they would rise no further. Although no such certainty exists, the recent downward trend in import prices may be significant and affords ground for hope that there will be an early return to more normal habits of spending and saving. The rise in interest rates, though it inevitably creates some difficulties, is, at any rate, an encouragement to people to save. As I shall mention later, I hope, by an improvement in the terms of Savings Certificates, to revive public interest in this particular medium.

Our aim must be to stop the waste of our external reserves and confine their use to the promotion of national development beyond that for which normal current savings would provide. We can advance in wealth and income only if our current savings are adequate to meet a high level of investment and if our external resources are used solely to raise that level higher still. If we are to achieve this aim, it is not enough that personal savings should be increased. Of no less pressing importance is the restoration of a reasonable budgetary balance because Budget deficits and non-productive capital expenditure, financed by putting new money into circulation, generate additional personal spending and have a most disturbing effect on our balance of payments. In considering budgetary finance one must look at expenditure as a whole—current and capital—and on the other side at the purchasing power that can be withdrawn from the private sector, in the form of current revenue and loans, to meet it. The State can be said to play a neutral financial rôle, neither causing inflation nor deflation, only if it finances its activities out of the existing stream of private purchasing power. Let us in this context look at the outcome of the 1951 Budget.

PART II.

THE 1951-52 BUDGET.

OUTCOME OF CURRENT BUDGET, 1951-52.

The first observation to be made on the Budget for last year is that the outcome was different, very different, from what was expected or planned in May, 1951. Revenue, tax and non-tax, was then estimated at £81.1 million. It turned out to be £83.9 million, or £2.8 million more, mainly because of a rise in income-tax receipts largely due, in fact, to the collection of arrears carried over from previous years. Any satisfaction which this increase in revenue might give is, however, clouded by what happened on the expenditure side. Even on the basis of excluding from the current account all expenditure on those voted services which my predecessor listed as "capital," the charge against revenue, estimated in May, 1951, at £81.1 million, proved in fact to be £87.9 million or £6.8 million more on exactly the same basis of computation. Both these figures exclude expenditure on reserve stocks, which, estimated at £1.8 million, amounted in fact to almost a million less because of difficulty in securing supplies. There has also to be taken into account the £2.7 million paid in discharge of arrears of fuel subsidy which should have been met out of the revenue of earlier years. This brought expenditure last year to £90.6 million and, as a result, instead of the planned surplus of £50,000 on the current Budget, the outcome for 1951-52 was an actual deficit of £6.7 million

SUPPLEMENTARY ESTIMATES.

The provision made in the 1951-52 Budget for Supplementary Estimates was £1,500,000. This, according to my predecessor, was intended to cover the cost in 1951-52 of the Social Welfare (Insurance) Bill, 1950, including early increases in old age and blind pensions. It was also intended expressly to cover extra outlay on a mother and child scheme and increased grants for the Tourist Board. The Social Welfare Bill in question lapsed when Dáil Éireann was dissolved on May 7th, but the increases in old age pensions were granted under the Social Welfare Act, 1951, which was enacted last July. In addition, heavy expenditure of a current nature which had not been covered in the 1951 Budget was incurred under various heads, including payments in respect of Córas Iompair Éireann and the Great Northern Railway, increases in the pay of the Civil Service, the Army, the Garda Síochána and teachers, employment schemes, improvement of estates, agricultural grants, health services, food subsidies and the supply of fuel for necessitous families.

OUTCOME ON CAPITAL ACCOUNT, 1951-52.

Turning now to that category of expenditure described as capital, we find a similar disparity between expectation and reality. In addition to the £90.6 million which I have already mentioned and which, as I have said. was £6.7 million in excess of revenue, the Exchequer was called upon to finance further outlay of over £35,000,000. How this is made up and how much greater it was in the aggregate than was foreshadowed in May, 1951, is shown by the following figures:—

	Actual Issues	May,1951 Estimates
	£million	£million
Voted “Capital Services”	9.7	12.1
Reserve Stocks	0.9	1.8
“Below the line” issues	22.3	16.6
Repayment of National Loans	2.1	—
Total	£35.0	£30.5

It will be noted from these figures that actual "below the line" issues exceed the original estimate of requirements by £5.7 million. The specific increases, in fact, arose mainly on the advances to the Electricity Supply Board and the Local Loans Fund. In the case of the first-mentioned, the amount issued was £8.8 million as against an estimate of £4.75 million; in the case of the second, the issues totalled £9.12 million as against an estimate of £7.75 million.

AMOUNT OF BORROWINGS.

The net amount which had to be borrowed for Exchequer purposes— only £2,000,000 approximately of it being for redemption of debt—was £41,000,000, after allowing for receipts by way of loan repayments. In May, 1951, net borrowing was estimated at £29.6 million and, even though this proved to be short of the actual sum by almost £12,000,000, it was clearly expected last May to be in excess of the current savings likely to be available and to involve recourse to the American Loan Counterpart Fund.

METHODS OF FINANCE.

It is important, in view of the problem which we will have to face in the coming year, that the Dáil and the public should realise how the borrowings of £41,000,000 were raised and why the process must not, and indeed cannot, be repeated. We borrowed for Exchequer use small savings in the form of deposits in the Savings Banks and purchases of Savings Certificates. We also used the available income of the social insurance funds for ways and means advances. The net receipts from these sources were approximately £7,000,000. The American Loan Counterpart Fund provided £24,500,000. It is now exhausted. The remaining £9,500,000 we had to find by selling British Government securities of the Post Office Savings Bank and social insurance funds, replacing these securities by our own.

Mr. Dillon

You saved money in that.

Mr. MacEntee

The result is that on the Savings Bank and other funds under my control as Minister for Finance, holdings of British Government securities are now reduced to approximately £35,000,000. In view of the demand liability of over £80,000,000 which exists in respect of Post Office Savings Bank deposits and Savings Certificates it would not be right or prudent to reduce much further the portfolio of realisable external securities held against these obligations.

Some Deputies have submitted in criticism of the financial methods employed in 1951-52 that the Government did not seek a loan from the public before the decline in the gilt-edged market in the Autumn. The critics seem to forget, not only the absence of any net public saving in 1951 to which I have referred earlier, but also that arrangements had been made for the redemption or conversion of four of our National Loans, totalling almost £21,000,000, in mid-July and that, early in June, the public had subscribed a mere £250,000 to a £5,000,000 stock issue by Dublin Corporation on terms that, by market standards at the time, seemed attractive. We were fortunate, indeed, in achieving a high degree of success with the conversion operation; of the £20.6 million of stock redeemable, £16.3 million was converted at 3½ per cent.

The expedients to which we had to resort in order to finance Exchequer requirements last year were, in fact, necessitated by the disproportion between State capital outlay and savings and by the inadequacy of the taxation provision made to meet current services. Public expenditure was financed on an altogether excessive scale by the issue of new money. Total Government outlay, current and capital, came to £123.5 million, excluding issues for debt redemption. Government receipts from the public, in the form of current revenue, loan repayments and savings, came, however, only to £91.5 million. The gap of £32,000,000 was financed by putting new money in circulation—by releasing millions of loan counterpart and by issuing millions more produced by the sale of sterling securities of the Post Office Savings Bank and other funds.

It will no doubt be asked why did the present Government permit this position to develop? The explanation is simple. When we took office last June, there was but a week or two of the first quarter of the financial year to run and our immediate task was to take over the administration and to secure the passage of my predecessor's Budget. When this was done and we had time to examine the situation we found that we had inherited several very onerous commitments. Among these I will recall the arbitration awards on the claims of the Civil Service which, when extended to other State-paid personnel, eventuated in an aggregate expenditure of £3.6 million last year and is responsible for nearly £3.5 million in this; the arrears of fuel subsidy of £2.7 million; £433,000 for the repayment of advances to cover interest on Córas Iompair Éireann stock; a further £1,817,000 to cover losses of that undertaking and a liability of approximately £850,000 to health authorities. In addition to these we were committed to a huge programme of capital expenditure for which no adequate financial provision had been made.

When the attention of the Dáil was directed to the seriousness of the situation, the existence of the problem was denied and Ministers were accused of scaremongering and of panic. These circumstances alone made it quite impossible either to float a loan or to raise the necessary finance by imposing taxation. There was, accordingly, nothing to be done but to provide the necessary finance in the way I have described and to place the full facts before the Dáil at the close of the financial year as I am now doing.

From what I have said it will be clear that the financing of Government should be placed without delay on a more rational footing. This will be exceedingly difficult, as the American Loan Counterpart Fund no longer exists as a reservoir of cash for the Exchequer, but it is the only prescription that promises a return to financial health. The fevered spending of the Marshall Aid period is over; it is now a matter of urgent importance to arrange that where our expenditure is current expenditure it will be financed from taxation or other normal source of revenue and that in so far as it is of a genuine capital nature we shall endeavour to meet it out of the current savings of the Irish public. If our resources of tax receipts and savings continue to be insufficient, we shall have no option but to reduce the demands on our purse accordingly. A moderate degree of overspending by the State would be tolerable if the external disinvestment it caused were being fully matched by increased internal assets. Broadly speaking, however, the unpleasant fact is that the State's activities cannot be carried on unless the public surrenders sufficient purchasing power to finance that.

PART III.

THE 1952-53 BUDGET.

"CAPITAL" AND "CURRENT".

I come now to the financial year we have just entered. Some time ago, I indicated in reply to a parliamentary question, that a distinction would be drawn in the Budget statement between current and capital expenditure and, in a prefatory note to the Estimates for Supply Services, it was pointed out that only in the context of the Budget would a full estimate of Exchequer outlay on capital and current account be available. I am by no means satisfied that all of the voted expenditure described by the previous Government as "capital" merits that description. Even if it did—and this is an important point—it is only if savings are available for the purpose that it would be unharmful in our present economic circumstances to borrow to meet such capital outlay. The deficit we face on current and capital account combined, however, is so great and the problem of dealing with it is so serious that it seems unwise to deflect attention from it by a controversy as to whether some millions more or less in the voted services may be legitimately charged to "capital". In this Budget, therefore, I propose to present the figures on current and capital account on the same lines as were adopted by the previous Government, leaving over to a later stage in the rehabilitation of our finances the determination of the extent to which it is strictly justifiable to treat items of recurring voted expenditure as proper, even in principle, to be financed by borrowing.

THE CURRENT BUDGET, 1952-53.

Following this interim procedure, which is only to be excused by the nature and extent of our existing difficulties, our first problem, let me repeat, is to find means of meeting estimated expenditure on current account amounting to £101.7 million. This total is made up as follows:—

		£million
Central Fund Services		13.1
Supply Services	94.9
less “Capital Services” as defined by our predecessors	9.3	85.6
Add for extra cost in 1952/53 of the proposals in the Social Welfare (Insurance) Bill, 1951, and for other current services		3.0
	Total	£101.7

It will be noted that I have added £3,000,000 to the figures for expenditure set out in the White Paper and published in the newspapers this morning. It is necessary to do this because the figures as published include nothing whatever for the Social Welfare Bill now before the House or for any contingencies. No one can say that all of this £101.7 million is not current outlay and properly chargeable against revenue. I presume we may take it as common ground on all sides of the House that the current Budget must be balanced. The revenue which we estimate to have available to meet the £101.7 million is, however, only £86.6 million at existing rates of taxation. There is a gap of £15.1 million to be bridged. This can be closed only in two ways—by cutting down expenditure and by putting on additional taxation.

FOOD SUBSIDIES.

The possibilities of reducing current expenditure are, in the present state of public opinion, somewhat limited. The Central Fund services are statutory obligations which are a first charge on the income of the State. Of the remainder of current outlay a great part relates to services which cannot readily be curtailed or dispensed with. The largest item of current expenditure in which significant economies are readily possible and fully defensible is food subsidies. The magnitude of the problem they create for the Exchequer is indicated by the fact that the total estimated requirement for 1952-53 is £15,250,000 as compared with £12,500,000 (including Supplementary Estimates) for 1951-52 and less than £1,000,000 in the first year of their operation. At their present level, food subsidies may be said to absorb more than the whole of the revenue from excise duties. If they were to be abolished now, the current Budget, the "house-keeping" Budget, for the year would be balanced.

Food subsidies were first introduced here in October, 1941, to offset a prospective increase to consumers in flour and bread prices at a time when a Wages Stabilisation Order was in force and a rise in the cost of living might have caused hardship. From 1942 onwards, the retail price of butter on the home market was also artificially reduced by subsidy payments. As a result of the subsidies, and of the policy of control of remuneration, the cost-of-living index in this country was kept stable from 1943 until 1946.

Immediately after the abolition of statutory control of wages in September 1946, widespread demands followed for the restoration of the pre-war level of real wages. At the same time, prices on world markets were rising steeply as a result of the abnormal demand arising from war-time shortages. In the circumstances, tea and sugar were subsidised in November, 1947. On this occasion, however, holding-down of prices was not, as in 1941, intended primarily to protect consumers from higher prices while their incomes were controlled, but rather to stem inflation by securing voluntary restraint in demands for increased money incomes, pending a reduction in the international price level. It was thought then that the subsidies could gradually be withdrawn as the supply position eased and prices fell.

These expectations have been disappointed. Increases in the real cost of the subsidised items and bigger rations have continued to impose an intolerable burden on the Exchequer. At the same time, it has become clear that in existing conditions the subsidies cannot achieve the purpose for which they were introduced, which was, let me remind the House, by stabilising the cost-of-living index, to obviate increases in the general level of money incomes. In agriculture and industry earnings have advanced since 1938 by more than the cost of living. The food subsidies are now, in practice, nothing more than a State supplement to incomes generally, a subvention in which, however, everyone shares irrespective of needs. Furthermore, it is not possible to establish any precise point on the income scale at which an individual becomes, as a result of direct and indirect taxation, a contributor to rather than a beneficiary from food subsidies. The whole system is a wasteful and cumbersome means of conferring an indeterminate net benefit on some classes only of consumers. Because of the rigid controls that go with it, it tends to stifle enterprise, and it fosters inefficiency in industry and trade, because there is no incentive to reduce costs when they can be passed on to the taxpayer. But for the subsidies, rationing, with all the inconvenience and waste of effort which it entails, could be dropped.

The Government have given careful thought to this problem over recent months. They are satisfied that, as incomes generally have already advanced more than the cost of living and as essential foodstuffs are no longer scarce, there is now no economic or social justification for a policy of subsidising food for everybody. There is nothing to be said on any ground for fostering the illusion that food is something that can be provided cheaper for everyone at the expense of others, rather than something for which everyone who can should be expected to work and pay. The Government recognise, however, that for social service beneficiaries of all kinds and also for larger families, even amongst those in steady employment, the food subsidies do represent a net supplement to weekly income which it would not be equitable to withdraw without certain compensations which I shall specify later. Moreover, to ease the process of adjustment to real costs, it is not intended to withdraw the food subsidies completely this year. What is intended is that, with effect from the convenient date nearest to 1st July next, consumers will be charged for tea, butter and sugar at their real cost.(Interruptions.) The price of bread and flour will be raised but not to the unsubsidised level. At the same time as prices are adjusted, rationing of all foodstuffs will be abolished.

The effect of these changes—as far as can now be foreseen—will be to make the retail price of the 2lb. loaf 9d.; of flour, 4/9½ a stone; of sugar, 6½d. a lb.; and of butter, 3/10 a lb.(Interruptions.) A better flour and a whiter loaf will, however, be available to all, as the rate of extraction will be reduced from 85 per cent. to 80 per cent.

Mr. McGilligan

This requires silence.

Mr. MacEntee

In the case of tea, the actual change in price may be less than might be expected. The average cost of the blends imported by Tea Importers Limited is almost double the present retail price of 2/8 a lb. but it is possible that, with the abolition of rationing and the return of competitive selling, a variety of grades of tea at different prices will eventually appear in the shops.

COMPENSATORY INCREASES IN SOCIAL WELFARE BENEFITS.

On existing rations and at present prices, food subsidies reduce weekly expenditure per person on rationed foods by approximately 2/-. This 2/- per week has, of sourse, to be met by general taxation, that is to say, it has first to be collected from the general body of taxpayers before, by devious channels, it finds its way back to them: surely a wasteful and nonsensical procedure. The rise in retail prices consequent on the changes I have mentioned will not, however, amount to 2/-; in fact, on the average, it should work out at some 25 per cent. less, or almost 1/6 per head per week. This, then, is the outside limit of the burden that will be imposed on any individual, and, therefore, of the compensation that need be given in necessitous cases.

Mr. Dunne

That is great.

An Leas-Cheann Comhairle

Deputies will have to allow the Minister to make his speech without interruption.

Captain Cowan

I think it is a mistake to be sending around copies of a Minister's speech.

Mr. Norton

Especially as it is Butler's speech.

Mr. MacEntee

It is quite obvious that they have had something else than tea on the Opposition Bench.

Mr. Morrissey

Not on this.

Mr. MacEntee

On this basis the Government have decided to increase the old age pension by 1/6 a week and the weekly payment under the children's allowances scheme for third and subsequent children to 4/- a week. They have also decided to pay an allowance under that scheme at the rate of 2/6 a week in respect of the second child, who up to this has not been eligible. Moreover, additional benefits which will provide full compensation for the loss entailed by the reduction in subsidies will be paid to recipients of unemployment assistance. In these ways, those who would otherwise be most affected will be shielded against the rise in the retail prices of essential foods. The compensatory benefits will, of course, be additional to existing benefits and to the benefits provided for in the Social Welfare legislation now before the House.

Assuming 1st July as the operative date, it is estimated that the gross saving in 1952-53 from the subsidy reductions will be £6.67 million. The cost of the compensatory benefits for three-quarters of the year will be £2.75 million, leaving the net relief to the Exchequer £3.9 million, a worthwhile but, in relation to the gap of £15.1 million, a by no means excessive reduction in current expenditure. For the remaining £11.2 million I must resort to taxation.

It will surprise no one when I say that a sum such as I have mentioned cannot be raised under just one or two heads. In a community in which a tax on personal incomes falls on a narrow sector it is necessary to rely substantially on indirect taxation to finance public services.

TOBACCO.

It is proposed to increase the customs duty on leaf tobacco by the equivalent of 6d. on the packet of 20 cigarettes at present selling at 1/9.(Interruptions.) The Minister for Industry and Commerce has been satisfied by the manufacturers that it is necessary to allow an increase in price of 1d. a packet to cover increased cost of manufacture. These two factors will raise the price of the popular packet from 1/9 to 2/4. The increase in duty will also be reflected in the prices of pipe tobaccos of the flake and mixture varieties. Hard-pressed tobacco, however, will not be required to bear the full burden of the increase; the duty on this tobacco will be increased by only 2d. an ounce.

The increase in customs duty will enhance the value of duty-paid stocks of tobacco held by manufacturers. In order that this increase may accrue to the Exchequer I propose that an excise duty of an amount equal to the increase in the customs duty will be levied on the stocks of tobacco, whether manufactured or unmanufactured, held by the manufacturers at 5 o'clock this evening.

I have considered the position of the native tobacco manufacturers, with particular reference to the rebate of 3½d. per lb. of leaf which they have enjoyed since 1934. Having regard to the present increase following successive increases in the duty since the rebate of 3½d. was first granted, some addition to the rebate is justified. Accordingly, I propose that it should be raised to 5d. This concession will cost about £10,000 this year and will leave the net additional yield from the increased duties on tobacco at £5,500,000.

BEER.

The present duty on beer is £5 12s. per standard barrel compared with £5 in the years before the war—an increase of only 12/- on 36 gallons or 1/2d. a pint. In the light of this fact an increase in the excise duty on beer of £4 1s. per standard barrel is justifiable. It will have the effect of increasing the retail price by 3d. per pint, allowing some margin to the trade.

Mr. O. Flanagan

Now they can drink Dev's health.

An Leas-Cheann Comhairle

Deputy Flanagan must cease interrupting.

Mr. MacEntee

A corresponding increase will, of course, apply to imported beers. From these changes in the beer duty I hope to gain an extra £2,400,000 in the present year.

During the year, strong representations have been made to the Government that the smaller brewers as a class were finding it increasingly difficult to make ends meet in face of rising costs of materials and manufacture. Actually, two have succumbed and some others are in grave difficulty. The Government are concerned at the possible consequent loss of employment in areas outside Dublin, undesirable in itself and particularly so in view of the State policy of encouraging the decentralisation of industry. Some measure of relief is necessary and I think this can best be given by raising the present rebate of duty of 10/- per standard barrel on the first 5,000 barrels brewed to 30/- per standard barrel. This relief will cost the Exchequer an additional sum of approximately £40,000 in the present year, leaving the net additional revenue from beer at £2,360,000.

SPIRITS.

The duty on spirits was raised substantially in 1947. Despite this and also despite successive increases in price unconnected with taxation, current consumption is far above that of 1947. Indeed, we have to go back to the early twenties to find a level of consumption comparable with that of recent times. Since additional revenue must be raised, I feel that I must look to this source for some of it. Accordingly, the excise duty on home-produced spirits is to be increased by £1 19s. per proof gallon, with corresponding increases in imported spirits. This will raise the price of whiskey by 6d. per glass, again, as in the case of beer, allowing some margin for the trade. By this means, I expect to get an additional £1,020,000 this year.

PETROL AND OILS.

Despite last year's increase from 1/2 to 1/4 per gallon in the duty on petrol the upward trend in consumption continued, duty being paid last year on some 68,500,000 gallons as compared with 45,500,000 gallons in 1948-49 and 63,800,000 gallons in 1950-51. There has also been a spectacular increase in the registrations of motor vehicles, which numbered 99,662 in 1939, 173,234 in 1949 and 223,444 in 1951.* In the light of these figures, we may assume that petrol will readily bear an additional 4d. per gallon. As usual, the duty on hydrocarbon oil other than petrol (i.e., on diesel oil), will also be increased by 4d. These increases should give an additional £1.1 million this year.

As announced by the Minister for Industry and Commerce on the 13th February, it is proposed to adjust to the advantage of the Exchequer, but without affecting the price of petrol, the situation which has arisen from the discontinuance of the admixture of industrial alcohol with motor spirit. That portion of the cost of a gallon of motor spirit which was attributable to the blend of industrial alcohol will be replaced by an additional duty of 1½d. without causing any rise in the price of petrol. The additional duty will come into operation on the 17th April, and will bring in an extra £400,000 this year making a total additional yield of £1.5 million from the petrol and oil duties.

MOTOR VEHICLE DUTIES.

I am afraid that transport, public and private, must before long be asked to pay more towards the upkeep and improvement of the roads. It will have been observed that I am making no call on the Road Fund this year for Exchequer purposes. I am obliged to forgo the customary £300,000 because of the need for increased outlay on roads, a need so great as to render inevitable an increase in rates of motor taxation in the near future. The necessary details have not yet been settled but they will be the subject of legislation to be introduced later this year.

VALUATION OF GOODS FOR CUSTOMS PURPOSES.

Before I turn to inland revenue, there are a couple of minor matters in relation to customs duty which I would like to mention. There is some doubt whether the existing definition of value in the Finance Act, 1935, is adequate in all cases for the purpose of the charge of customs ad valorem duty on imported goods. Accordingly, I propose to re-define value in terms which will not leave any doubt that the existing practice in valuing goods for duty purposes has the sanction of law. The definition now proposed has the added advantage that it is in accordance with that contained in the Convention on the Valuation of Goods for Customs Purposes which has been adopted by practically all European countries and to which in due course it is proposed that this country should adhere.

DEPOSIT OF CUSTOMS DUTY.

Provision will be made in the Finance Bill for regularising the system of allowing delivery of goods on payment of a deposit to cover the customs duty involved and for adapting this system to cases of dispute between the importer and the customs which may be the subject of legal proceedings.

INCOME-TAX.

The specific increases in the several duties of customs and excise which I have mentioned will bring in £10.38 million. But a further £800,000 or so must be found if the estimated current outlay is to be fully covered and for this I must look to the inland revenue. It is proposed, therefore, to raise the standard rate of income-tax by one shilling, making it 7/6 in the £, but the change is to be accompanied by important reliefs in consequence of which very many taxpayers will have to pay less than when the tax was 6/6 in the £.

The income-tax law as it stands provides for a deduction from the earned income of an individual of a sum equal to one-fifth of the amount of that income but not exceeding, in the case of any individual, the sum of £300. There should be greater incentive to earn more and it is, therefore, proposed to increase the deduction to a sum equal to one-fourth of so much of the earned income as does not exceed £800 and one-fifth of so much of the earned income as exceeds that figure, subject to a maximum deduction of £400. As a consequential matter, the rate of relief afforded to persons aged 65 years or upwards, whose income may be derived in whole or in part from investments and is not over £500, will be raised from one-fifth to one-fourth.

I propose also that new reduced rates of income-tax be introduced which will lessen materially the tax payable on the lower levels of taxable incomes. Under existing law the first £100 of taxable income is chargeable to tax at one-half of the standard rate and the balance is chargeable at the full rate. My proposal is that the first £100 of taxable income shall be charged at 3/- in the £ (representing two-fifths of the standard rate), the next £100 at 6/- in the £ (representing four-fifths) and the balance at 7/6 in the £.

Taken in conjunction with the suggested increase in earned income relief, this proposal will be of notable benefit to persons in the lower and middle income ranges. Hitherto an unmarried taxpayer has been liable to tax at the full standard rate if his earnings exceed £300 per annum or £5 15s. 5d. per week. Now, he must have more than £453 per annum or £8 14s. 3d. per week before he is liable at the full rate. An unmarried worker with £453 per annum will, under the proposals, pay £45 for 1952-53. His liability as settled by my predecessor is £56 0s. 7d. for 1951-52.

For the married man, and particularly the married man with children, the improvement under the new scheme will in certain cases be even greater. Up to now a married man without children has been liable to tax at the standard rate if his earnings exceed £475 per annum or £9 2s. 8d. per week. Under the new graduation he will not be charged at the full rate unless he has more than an annual £640 or £12 6s. 2d. a week. A married man with £640 per annum will, as proposed, pay £45 for 1952-53. He pays £59 3s. 0d. for 1951-52.

A married man with three children is chargeable at the full rate for 1951-52 if his earnings amount to £754 per annum. With the new reliefs he will need to have more than £929 a year before he comes into the standard rate zone. With £929 per annum he will pay only £45 for 1952-53 as against £61 16s. 3d. for 1951-52. The income-tax bill of a married man with three children will be less for 1952-53 than for 1951-52 unless his earnings exceed £1,348 a year.

A taxpayer who maintains at his own expense a relative incapacitated by old age or infirmity or who maintains his or his wife's widowed mother may claim for income-tax purposes a deduction of £50 in respect of each person whom he so maintains. It is, however, a condition under which the deduction may be granted that the total income of the dependent relative from all sources must not be in excess of £50 a year. It has been represented to me that, following the Social Welfare Act, 1951, a person whose sole income is an old age pension of £1 a week or £52 a year will no longer rank as a dependent relative in connection with the tax deduction. The increase in rates of pensions provided for by the Social Welfare Act did not come into operation until an "appointed day" which was the 5th October, 1951. While the income-tax difficulty does not therefore affect the year 1951-52, the question will arise for the coming year 1952-53. The taxpayer's relative need not of course be drawing an old age pension at all. He may, however, possess some small means of his own. It is clear that the dependent relative's income limit for purposes of the income-tax allowance should be increased and the amount proposed in the Finance Bill will be £80.

After allowing for the cost to the Exchequer of the substantial reliefs I have mentioned, the increase in the standard rate of income-tax will, it is estimated, yield only £910,000 in the current financial year. Much of this will come out of company profits rather than from employees' remuneration.

The problem of double income-tax as between Ireland and Great Britain was dealt with some years ago by an agreement under which either country exempts from its tax income flowing from within its territory to a resident of the other country. The "double resident", that is, the person who is resident in both countries for any given year, is assessed to tax both here and in Great Britain and both countries afford their share of double taxation relief. A section was included in the Finance Act, 1933, providing, subject to certain conditions, for a special relief to double residents who, by reason of differing methods of computing tax in the two countries, would otherwise have incurred some financial loss despite allowance of the ordinary double taxation relief. During the war, compliance with the conditions laid down by the Finance Act, 1933, was not always possible. It was considered that non-compliance through circumstances arising out of the war should not entail a refusal of the special relief, so Section 2 of the Finance Act, 1941, was passed to enable the relief to be granted if the Revenue Commissioners were satisfied that, but for the war, the statutory conditions would have been fulfilled. Having regard to the length of time which has elapsed since the cessation of hostilities, it is thought that the section in the Finance Act, 1941, should now be removed from the Statute Book and I intend to move the appropriate resolution. I may add that there is no actual case which is likely to be adversely affected.

EFFECT OF TAX INCREASES.

The sum of the net yields from the increased taxation on tobacco, beer, spirits, petrol, profits and personal incomes is £11,290,000, which is only slightly more than I need. This is not a year in which any major concessions can be made, apart from those already mentioned, but there are a few reliefs which, despite our meagre resources, I think it well to accord.

ENTERTAINMENTS DUTY.

I am proposing a concession as regards entertainments duty. Dancing has been the victim of varying fortune in this regard. The duty on entertainments was first imposed in 1916 but payments for the right to take part in dances did not come within its scope until 1932. In 1946 the tax, as applied to these payments, was abolished, but was restored by my predecessor in 1949. Dancing is the only amusement which is discriminated against by levying a tax on active participants as distinct from spectators. I have never been quite convinced that the discrimination was justified by any social purpose and I propose to abolish it altogether as from the 1st August next. This will cost £100,000 in the present year.

STAMP DUTIES.

It will be recalled that in the Finance (No. 2) Act, 1947, by which the rates of stamp duty on transfers of lands and houses were increased, provision was made to relieve from the increase transfers between persons related in a certain way. The relief was restricted to cases where persons were transferring property by way of gift to their children or other younger relatives or to their brothers or sisters. It has been represented to me that hardship may be caused by restricting the relief to these particular kinds of family transactions. For example, there is no relief where children want to transfer property to their widowed mother, or where brothers and sisters want to sell their interest in the family farm to that member of the family who is remaining on to work the land. To meet these cases I propose to include in the Finance Bill a provision extending the relief to include sales as well as gifts or voluntary dispositions, and transfers from the younger to the older relatives as well as transfers in the opposite direction. This will mean that the maximum rate of duty in all these cases will be 1 per cent.

Under 1947 legislation stamp duty at the rate of 25 per cent. was imposed on transfers of lands or tenements unless the instrument contained a statement certifying that the person who became entitled to the entire beneficial interest in the property was an Irish citizen or came within one of the other classes specified in the statute. The specified classes did not include a body corporate without a share capital, incorporated in the State after the 15th October, 1947. It follows that transfers to bodies corporate of this type are chargeable with duty at the rate of 25 per cent, even though the body may be composed exclusively of Irish citizens.

Another general type of body corporate not mentioned among the classes which the legislation specifies is the body corporate incorporated in the State after the 15th October, 1947, whose issued shares are wholly or mainly in the beneficial ownership of another body corporate incorporated here after the same date, where the issued shares of this other body corporate are wholly or mainly held by Irish citizens. In other words, under the law as it stands the question of the 25 per cent. rate of stamp duty would arise in the case of a transfer of lands or tenements to a subsidiary of an Irish company registered after the 15th October, 1947.

The two difficulties I have indicated are manifesting themselves in concrete cases and it is my intention accordingly to have remedial provisions written into this year's Finance Bill. Another matter which will be covered is the granting of exemption or virtual exemption from duty in instances where property is transferred and the transfer is being made from a parent company to its subsidiary.

DEATH DUTIES.

Where a sum of money is deposited with a banker in the joint names of two or more persons and one of the persons dies, the legal estate in the deposit vests automatically in the survivor; and the bank, before paying out to the survivor, will not require production of probate or of letters of administration. Before 1935, when preventive action was taken, it thus frequently happened that moneys on deposit were withdrawn by a surviving depositor in a joint account without the claim for death duties on the deposit having been discharged. Section 33 of the 1935 Finance Act prevented a banker from paying out money in a joint account to a survivor until any claim for death duties had been satisfied. The provisions of the section were limited to deposits exceeding £100 in amount. At that time estates not in excess of £100 in value were exempt from all death duties and, although the deceased might have died possessed of other property, it was considered safe to exclude deposits of £100 or under from the scope of the section. Since last year estates not exceeding £2,000 in value are no longer liable to death duties, so it appears to me that the limit of £100 for joint deposits in the Finance Act, 1935, might be lifted to £500, with some administrative saving and without undue risk to the revenue. The Finance Bill will contain an appropriate provision.

NET EFFECT OF ECONOMIES AND TAX CHANGES.

The reliefs I have mentioned will reduce the yield from increased taxation this year to approximately £11.2 million which, when added to the net saving of £3.9 million on food subsidies, gives £15.1 million or exactly the amount required to balance the current Budget.

PROSPECTIVE BORROWINGS, 1952-53.

The proposals which I have outlined will provide for one part only of the State's expenditure, that is for those public services which if they are to be continued cannot be financed otherwise than out of revenue. I am still left, however, with a huge volume of prospective expenditure, which if it has to be incurred, can be met only from borrowing. The total is £35,000,000 made up as follows:-

	£ million
(a) Voted items classified in 1951-52 as “capital services”	9.28
(b) Provision for “Below the line” issues, as set out in the White Paper of Receipts and Expenditure, 1952-53	24.78
(c) Provision to cover guarantee of issue of shares by Industrial Credit Co., Ltd.	.50
(d) Provision for capital for Irish Steel Holdings, Ltd	.25
(e) Provision for capital for Agricultural Credit Corporation, Ltd.	.25
Total	£35.06

OBJECTS OF EXPENDITURE.

The total becomes £35.9 million when allowance is made for loan repayments by local authorities which will be reissued to them from the Local Loans Fund. In order to facilitate comparison with the particulars of public outlay on capital works given in last year's Budget statement, the following table shows the objects of this proposed expenditure of £35.9 million:—

	1952/53 (estimate)
	£million
Housing	12.05
Public Health:
Sanitary Services	0.67
Hospitals (excluding expenditure from Hospitals Trust Fund)	0.38
Agricultural Development	3.99
Electricity Development	9.00
Turf Development	1.75
Telephones	1.75
Schools and Other State Buildings	1.16
Afforestation	0.60
Fisheries	0.16
Transport	3.41
Industrial Credit Co., Ltd.	0.50
Irish Steel Holdings, Ltd.Agricultural Credit Corporation, Ltd.	0.250.25
Total	£35.92

Actual expenditure under the corresponding heads in 1951-52 was £33,000,000, as against the Budget estimate of £29.4 million.

It is, I think, unnecessary for me to elaborate on any of the major items included in the table. The Dáil is already aware of what is being done. It has legislated recently to make further finance available to the Electricity Supply Board and it will soon be asked to provide for our share— £2,250,000—of the purchase price of the Great Northern Railway Company, which is included in the table under the heading of "transport."

Only the last three items in the table seem to call for special mention. It will be necessary for the Industrial Credit Company shortly to make a public issue of shares in order to raise additional capital to fulfil its functions. This share issue will be underwritten by the Minister for Finance in accordance with the Industrial Credit Act, 1933, and the provision of £500,000 is made to cover this liability.

Hitherto Irish Steel Holdings has been financing both capital and current requirements on the basis of a bank overdraft guaranteed by the State. It is not desirable that this condition of affairs should continue and accordingly it is intended to provide the company with capital resources, so that only fluctuations in its current requirements will be financed by bank overdraft.

The £250,000 for capital for the Agricultural Credit Corporation is a provision to meet the additional finance which the corporation may require both to expand its normal lending activities and to give credits for the purchase of cattle and sheep, agricultural implements and machinery under the schemes announced earlier this year by the Minister for Agriculture.

SOURCES OF FINANCE.

I pass on, now, to consider the difficult question of how the £35,000,000 can be financed. Now, whatever the social or economic urge for particular forms of expenditure may be, we must always have regard to our capacity to undertake them and we must accept the fact also that there is a limit to what we can afford to spend on them in any single year. How that limit is to be determined is, of course, the crucial question, to which in the end only the lending public can supply a definite answer. In this particular year, 1952-53, we are under serious constraint. As I have already emphasised, a substantial reduction in the deficit in our external payments is of vital importance for national wellbeing. But this reduction cannot be secured unless the overall Budget, current and capital, be brought close to a balance; and this means that to the highest degree possible State expenditure will be met from current incomes of the public and secured from them in the form of ordinary revenue and loans and that the issue of new money will be avoided.

PROSPECTIVE SAVINGS.

Let us try to assess the prospects in regard to savings. The first item to be taken into account is the probable net receipt by way of "small savings", i.e., Savings Bank deposits and purchases of Savings Certificates. We may, I think, expect about £6,000,000 under this head, or roughly the same as our receipts in 1951-52. There was, however, no National Loan last year and it is the general experience that in a year in which a National Loan is issued—as it will be this year—small savings are attracted into the loan and the growth in Savings Bank deposits and holdings of Savings Certificates is correspondingly reduced. It may seem optimistic, therefore, to count on £6,000,000 but I am hopeful that we shall get at least that amount.

While there has been an appreciable increase in recent months in Savings Bank deposits, Savings Certificates, on the other hand, have been rather moribund for years past. So much so that it would clearly be of no use to campaign for increased savings in schools and factories unless we could offer more attractive terms. The present issue was first offered in 1946. I have decided to withdraw it and to replace it by a new issue which will yield £3 8s. 9d. per cent. per annum, free of income-tax, if held to maturity, as against the £2 10s. per cent., free of tax, which the present issue carries. The new issue price will be £1 and the £1 certificate will be worth £1 10s. at the end of 12 years. Everyone, even those who hold the maximum permitted amount of existing certificates, will be free to buy up to 1,000 certificates of the new issue. Arrangements are already in train for the introduction of the new certificates and it is expected that they will be on sale at all post offices as from Monday, 5th May.

The second heading under which receipts for capital purposes will become available is a minor one. The amount of the annual contribution income of social insurance funds which is available for investment has been running close to £1,000,000 for some years past. This source and small savings may yield about £7,000,000.

PUBLIC ISSUE.

A gap of £28,000,000 still remains and constitutes our great problem. In discussing it, I must mention the significant figures for the public response to the last three National Loans. The first of these, the 1948 issue of £12,000,000 was fully subscribed by the public, but owed its success in part to the fact that it was the first public issue offered by the State since 1941. Of the three issues, which were for a total sum of £39,000,000, the Irish public took up £27,000,000, making an average of £9,000,000 per issue. The average subscription by externs was £1,000,000. On this showing, it would seem that £10,000,000 is roughly the measure of the normal public response in an ordinary year to a National Loan.

But this year we must ask for much more, for if we were to raise only £10,000,000 in this way we should still be £18,000,000 short of realising our capital programme. Here we come to the hard core of our problem, which is that if we do not get a considerable proportion of that remaining £18,000,000 from the investing public a large part of the capital programme will be in jeopardy. The final determinant in the matter is the fact that we must not attempt to finance the public outlay by means which would damage our economy, perhaps irreparably. To do so would be culpable in the highest degree and would bring widespread hardship and social distress in its train.

From what I have said it will be clear that the extent to which the Government can give effect to its capital programme will be decided largely by the response to the proposed loan. In building up our country we cannot go further or faster than public support will carry us. The Government can designate the objective, it can prepare the plans but it is the citizens of the State and their institutions who must supply the means.

With all due regard for the position of our existing bondholders, we shall do our part to make the new issue attractive to all classes of potential investors. We can say truthfully to them that in this Budget, onerous as it may be, we have done what is essential, but no more than is essential to put the public finances in order and to revive confidence in the credit and stability of the State. On the solid basis thus laid we can build a future worthy of the sacrifices of the past, worthy too of the men and women of this generation, the first to be born in freedom but for that reason the more determined to preserve it. When Fianna Fáil left office in 1948, this State stood high in credit with the world. It owed no foreign debt. The encumbrances which the preceding Government assumed we shall, however, honour, as Deputy Costello rightly said, to the last dollar. But we shall not add to them. We shall rely on our own people to provide by their industry and thrift the capital necessary to build up the nation. We relied on them before during stringent and terrible days. They did not fail us then and they will not fail us now.

Mr. McGilligan

The first matter to which I find it necessary to refer is the part of this speech which has dealt with the Budget for the year just ended. The House has been told that that showed a deficit of £6.7 million. I said often in this House and I would repeat it again now that the figures are known and that last year's Budget will be found as far as items for which I was concerned to be balanced. I assert now that it has proved to be so. I think that the figure £6.680 million comprises a figure of an alleged deficit. I want to point out that that includes £379,000 for the mouldering stuff called fuel that we found in the Phoenix Park when we took office in 1948. I accept no responsibility for that. I doubt if there is one person in the whole of the commercial, trading, banking and financial world of this country who could be found to subscribe to the idea that that was a debt which should be met out of the resources of the taxpayer in a particular year. I accept no responsibility for the £400,000 which is the charge for the new price of butter. I accept no responsibility for the charge of £200,000 for ground limestone which could have been met out of American Aid of the grant type if the present Government had not, by incapacity, lost that aid. I accept no responsibility for the £250,000 which represents a new charge by way of increased payment for wheat announced since we left office. I accept no responsibility for the bulk sum of £845,000 part of the £2.3 million that was said to be the charge in respect of Córas Iompair Éireann losses during the year. Part of that was stockpiling, according to the statement made by the Minister in this House. Part of it was the best estimate Córas Iompair Éireann could give of future charges for replacement and another part of it, almost £400,000, for extra charges of a replacement type in addition to operating losses during the year.

These items come to £4,474,000. Subtract that from the alleged deficit of £6.7 million, and it means something less than £2,000,000. What about the carry over? It was £1.9 million. As far as I can gauge, from receipts in the last three weeks of the financial year, that £1.9 million is still there and that £1.9 million will completely do away with any alleged deficit in the Budget I introduced.

I will now speak of the present Budget. It is impossible to use the term financial statement in connection with it. It is butchery of the taxpayer. I want Deputies to remember the setting of this Budget. In this Budget, we are asked to agree to the exclusion of subsidy on certain commodities and a reduction of subsidies on others. It means in the end that the Government are going to save £6.6 million, and they will give back £2.75 million of that to the people who will get any relief. The relief will be restricted to the classes who receive old age pensions, to the people who will benefit from the increased rates of children's allowances and to those who are going to draw unemployment assistance. Except for these three groups, all others are going to suffer. This old-time subsidy was supposed to represent 2/- per week. One shilling and sixpence per week is going to be removed except for those limited classes—old age pensioners, those in receipt of children's allowances and those drawing unemployment assistance.

The other charges that have been detailed through this Budget, are the charge on tobacco, the charge on whiskey, the charge on beer, the charge on petrol, the charge on income-tax and the threatened charge, still to come, by the way of motor vehicle duties. Again, the real setting has to be observed. These steps with regard to subsidies are taken because it has been discovered that incomes have exceeded the cost of living. Let us remember 1947. In that year the Supplementary Budget put 6d. on whiskey, 3d. a pint on beer, 4d. on cigarettes and 6d. in income-tax and certain other charges. These charges were to provide subsidies. This year these taxes are being put back as well as extra burdens, but subsidies are to be reduced to the amount of £6.6 million, of which £2.75 million is to be given back. Deputies who were in this House or who came in here in 1947 will recall that their experience in the countryside during the general election campaign in 1947-48 was that the people were outraged at the increased charges. The pretence was that they were required for subsidies. What will be the experience of Deputies in the countryside when the people learn that these taxes are being reimposed and that, at the same time, the subsidies that were used previously as an excuse for these taxes are being reduced.

We must remember that in 1947 there was a threat that the Wages Standstill Order would be reintroduced. I do not know that that mood persisted during our period in government. One of the things which Fianna Fáil would have prevented was the increase in salaries and in wages for workers in industry. That increase in salaries, in the words of the present Minister for Justice, was bound to be reflected in new salaries to the civil servants and new salaries to the employees of the local authorities, and it was opposed openly. That was one of the things Fianna Fáil wanted to prevent and would have prevented if they had got their majority. They have at least learnt their lesson for 1947-48, so now there is to be no standstill Order as far as wages are concerned. However, the better and the more insidious approach is this: wages have now gone, according to the Minister, above the increase in the cost of living. They will have to be reduced, if not by a standstill Order, by these exactions— a reduction in food subsidies, an increase in the tax on tobacco, beer, whiskey, petrol, motor vehicle duties and income-tax.

In connection with the small increase put on petrol last year, we tramped through the Division Lobby because it was asserted that that was going to put increased cost on the public transport. Is the 4d. a gallon likely to put any increased charge by way of fares on the travelling public? And added to the 4d. is the fact that the State is grabbing the extra 1½d. which the motorist could have been saved by the lucky circumstance that industrial alcohol, that disreputable product, has now found a market on the other side of the water.

There is one relief of outstanding importance in this Budget—dances. The dance tax is to be taken away. It is out on the ground that the Minister never saw any social advantage in it. In the later stages of this Resolution I will produce the letter I received from the secretary of the Dance Hall Proprietors' Association to which there was annexed a letter from the present Tánaiste. The letter from the secretary of this association was to the effect that Fianna Fáil was the only group that would promise a withdrawal of the dance tax and they were asked to subscribe to the funds of the Party; and the statement was made in that letter that one of the dance hall proprietors had already announced his intention of subscribing £100. That is the reason why the dance tax is reduced and not for any reason of social discrimination or any sort of social advantage or disadvantage with regard to the tax.

The Budget statement has lasted almost a couple of hours. I do not remember a Budget statement in ten years that did not refer to and pay particular attention to emigration and to unemployment. There is not one line about either of these, how unemployment has grown and how emigration has grown or the likelihood of unemployment growing still more and emigration proceeding apace because of these things. There has been a great deal of talk during the Budget of saving and insistence on saving. The word "saving" echoed and re-echoed and was repeated several times during the Minister's statement, all to show that the Minister did not dare to approach the investing public in the year that has passed and he is standing on the brink of approaching them now in the hope that they will respond.

He found it necessary to say that the three issues taken in my time did not meet with a full response. The Minister had another of his own experience. He floated a loan in 1933. It was a modest one of £6,000,000. The public made a still more modest response; they subscribed £2,400,000. The Minister at least faced the public this time with the almost certain assurance that he could not do worse than he did before. Less than 40 per cent. was the public response. That is the Minister who, after imposing charges that are bound to reduce the available saving in the people's hands, thinks that he can get a favourable response but makes sure so far as he can of getting some response by the threat that, if the money is not forthcoming from the people by national loan, a lot of these schemes will have to be abandoned.

The Minister perorates about no foreign debt. Are there any assets to meet the foreign debt that has been accumulated since the days he spoke of? The very paper that he publishes this morning shows a great volume of assets as against that debt, and that is a matter we can again develop in detail in the later stages of this discussion. The cynical observation of the Minister that the fever period of Marshall Aid spending is over must surely sound very strange to Deputies who know the exact situation with regard to Marshall Aid spending. We left over £26,500,000 in June and that is all gone. That was fever spending. The Taoiseach the other night talked about the rake who had exhausted his substance and had to face the world without any backing. That is the position of the Government at the moment. They have exhausted the very substantial assets that we left them and they now have to go to see will the public support them and then try to run this scheme of theirs in accordance with whatever provision they get. After all the hullabaloo during the last election and all the scorn that was poured upon our borrowing schemes and our capital schemes of the development type, we are now told by the Minister that the time is not ripe to make any changes and for the time being they will leave these things as they are.

Subsidies are the main object of attack in this Budget. The observations while the Minister was reading his speech showed that people here were quite alive to the fact as to how strongly he derives from the recent British Budget in his present proposals. But it is not altogether of Downing Street. Part of it comes from Foster Place and the Central Bank. The Central Bank's main attack was on subsidies. I have quoted a paragraph of that report several times; there is no need to weary the House with repetition. Just listen to the last phrase of the governor and his committee on that point. "It is true that the removal of subsidies may tend somewhat to increase the cost of living but some inconvenience in this respect must be weighed against the compensating improvements including especially the reduction of consumption". That has been undoubtedly running through all the speeches and all the eulogies that have been made since last June; that the people here have too much money. They have all too much money in their possession and are spending that money by living too well and in particular by eating too much. That is what we have set out in this Budget to correct.

Let us hope that the disappointment and the anxiety that was clearly developing in the benches behind the Minister will spread to the countryside. I hope that the Minister and his colleagues will give us an opportunity soon of getting a decision from the people on these matters.

Mr. Norton

We have seen the Fianna Fáil Minister in his Budget speech this afternoon bringing before the House the same old bag of tricks that he has brought into it on so many previous occasions. On a certain memorable occasion there was a man who set himself up as a remarkable man who thought he had a perfect knowledge of financial matters and he then said:-

"Even before Fianna Fáil went into the Dáil its members had directed public attention to the dangers to which our people were exposed by reason, not only of our attachment to sterling but of the short-sighted policy of the Anglo-Irish bankers in investing their depositors' funds in British securities. The Free State Government under President Cosgrave had been on the side of Britain; the Anglo-Irish bankers have been on the side of Britain; the Currency Commission has been on the side of Britain."

That man was no other than the present Minister for Finance. This is the particular man who comes in to-day to indulge in condonation of our sterling assets and to weep at the plight in which our sterling assets are and who is most anxious to see that our assets are preserved. When you remember the advice that was given on that occasion by Deputy MacEntee can you trust the Minister for Finance of to-day to know what is right and wrong? This is the man who told the people not to let the bankers take their sterling and deposit them in British securities. To-day he is engaged with the British Chancellor of the Exchequer in a life and death struggle in which he is playing the giant's part to try to save sterling from being rocked right throughout the world. We can have no confidence in a Minister who as a Deputy gives one type of advice one day and on the next occasion gives a completely contrary advice on the things on which he speaks.

This Budget is a frank Budget but it is a frank swindle of the plain people of this country. It is a frank Budget and there will be, as Deputy McGilligan has said, rejoicing over it in Foster Place this evening and in other places where the governors of banks meet, because they will to-day be able to say: "At last we have forced Fianna Fáil into the policy of abandoning subsidies" and syphoning off additional advantages from the workers who will have to pay higher prices. The bankers can feel proud of this Budget and throughout the Minister's speech one could see the depression on the faces of his colleagues sitting behind him. I have seen more enthusiasm in a morgue than I have seen on the Fianna Fáil Benches to-day. Deputy Burke nearly had apoplexy and I said to my colleague. Deputy Corish, it would be in order to ask the Minister to stop for a moment until Deputy Burke had a chance of recovering himself.

There will be no rejoicing or enthusiasm amongst the Fianna Fáil Deputies over the matter. Nobody in the Fianna Fáil Party will go to town to-night over the Budget and I suggest there will be very few chapel-gate meetings next Sunday to extol the virtues of this Budget. If Fianna Fáil was 100 years old next Sunday, you would not get the boys to come to a cumann meeting to debate the Budget.

Is this a Budget for the wealthy people? Brewers and bankers will thank the Minister for it. It is a Budget which asks the workers to pay more but it gives something to the tobacco kings as well. They excited the sympathy of the Minister and he had to give them something worth while, at the same time, making the workers pay more for their bread, butter, sugar and tea.

There has been a cut in the food subsidies, so that in the future the people are going to pay 9d. for a 6½d. loaf, they are going to pay 3/10 for butter. I have here a document which shows a large photograph of Deputy Lynch, sent out to the people in 1951 telling them that under a Coalition Government, as he called it, butter was costing them 2/10 a lb. Deputy Lynch can get a much larger picture in his next leaflet, increased proportionately with the cost of butter, because the people are now going to pay 3/10 per lb. for butter which cost them 2/10 under an inter-Party Government.

Mr. Lynch

Is there a promise in that that the cost of living would be reduced?

Mr. Norton

And the people are going to have the privilege of paying 9d. for a loaf which cost them 6½d. If they had any objection to paying 6½d. for a loaf Deputy Lynch is now remedying that position by making them pay 9d. So that they really will appreciate the value of the butter they are going to be made pay an extra shilling for. But that is not all that they are going to pay for because they will also have to pay more for flour, tea and sugar. All these moneys are going to be rooked out of the pockets of the workers. And, as if nobody had a sense of humour, the Minister, after increasing all these things, then tells the people that they will have to save more money. In other words, in the same week as they are asked to pay all these increased prices they are also asked to save more money.

Mr. Cosgrave

They will be able to dance cheaper.

Mr. Norton

We will come to dancing later. As if those increases were not enough the people are now going to pay 7d. more for each packet of cigarettes they smoke; they are going to pay 3d. more for a pint and 4d. more for petrol and there is to be another 1/- on income-tax and in the income-tax code there is no increased allowance for a man in respect of his wife and no increased allowance in respect of children. But the net effect of all the juggling is that the Minister gets nearly another £1,000,000 in respect of income-tax and he provides no adequate additional relief for wives or for children. He rides away from that and he juggles with the figures, a juggle which does nothing to deal with the problem now confronting the large masses of the wage-earners who must pay income-tax to-day on the wages they get. In order to get a proper picture of value to-day as compared with pre-war one must advert to the answer given to a question of mine to-day when we were told by the Taoiseach that it now takes £2 1s. 10d. to buy what one pound bought in 1939. In circumstances such as these people with an income of £3 a week, be they road workers or agricultural labourers, are compelled to pay income-tax under the present income-tax code.

There will be some reliefs, cod reliefs. It is a cod relief giving the old age pensioner 1/6 whilst at the same time increasing the price of the commodities upon which the old age pensioner mainly lives. The old age pensioner who lives mainly on tea, perhaps a bit of tobacco and an occasional pint will get an extra 1/6 per week. Not all the magicians in the Department of Finance or the statisticians in the Central Statistics Office could balance that old age pensioner's budget: 1/6 extra and he will pay more for bread, and he will pay more for tea, and he will pay more for sugar, and he will pay more for tobacco, and he will pay more for beer, and he will pay more for butter. I suppose the surplus will be invested in the Minister's new loan.

Here is the obvious fraud, here is the obvious swindle in this whole business. The Minister said that subsidies on this group of commodities cost £6.7 million. He intends to give relief to the extent of approximately £2.7 million. He is raiding the subsidies to the extent of £4,000,000 and that £4,000,000 is being taken out of the pockets of the people and put into the Exchequer at the expense of the people. Is not that clearly diddling the people out of something to which they are entitled and to which they have been entitled? It was bad enough in 1947 when the then Fianna Fáil Government decided to increase the price of certain commodities but at the same time decided to provide subsidies. Now the subsidies are gone, the commodities are increased in price and there is a substantial tax on every simple luxury that the masses of the people enjoy to-day.

We can look now at the Social Welfare Bill through the medium of this Budget. That was the game all along: the idea was to get the Second Stage of the Social Welfare Bill out of the way in case one might see the relationship between it and the Budget.

Mr. Dillon

Hear, hear!

Mr. Norton

The simpletons sitting over here were told that the Fianna Fáil Social Welfare Bill would cost the workers less than our Bill. Will it cost the workers less now? Is it not clear now that the workers will pay the entire cost of the social welfare scheme? As a result of the food subsidies alone £4,000,000 will go into the Exchequer, and the people will pay under other heads as well. We have now the situation that the employer will scarcely pay anything under the Bill and the State will pay nothing except what it scrapes out of the pockets of the workers.

The Social Welfare Bill is being financed by the imposition of ruthless taxes on the workers and by raiding the food subsidies in order to make them pay a part of the Social Welfare Bill. This is a fraud, a pernicious fraud, on the workers. The Minister has sought to sell them a pup in the dark by trying to get the Second Stage of the Social Welfare Bill before the people could see its real significance against the background of the Budget to which we have just listened.

Deputy McGilligan said there was some relief from taxation under this Budget. That is true. The tax on dancing has been abolished. There will be great jubilation throughout the country on that and bonfires will light on every hill to-night because the Minister for Finance and the Taoiseach have shown themselves the saviours of the dancing reputation of the country by abolishing the tax on dancing. The Minister was indeed unconsciously humorous when he abolished the tax on dancing. It does not matter now whether he imposes a tax on dancing or whether he does not because by the time the people have paid the additional taxes represented by the higher prices of food there will not be a "bob" left in anybody's pocket to go to any dance in the country.

On one famous occasion when he was rather annoyed the Taoiseach took a midnight ride up to the Park and he there interviewed the President. As a result of that interview he came back with a Dáil Dissolution in his pocket. Remembering that the Fianna Fáil Party managed to cheer this Budget this evening, this would seem to be another opportune time for still another midnight ride to the Park. On this occasion, too, he should look for a Dissolution of the Dáil and, when he is going, he should take with him these four unscented, political Independent tulips so that the whole lot may be lost in the holocaust for the benefit of the Irish people.

Mr. Blowick

The only comment one can make on this Budget is to say that it shows that the present Government is completely unfitted and unsuited to deal with the problems that face the country. The Minister for Finance opened his Budget statement by talking for about 15 minutes on the subject of agriculture. He said, first of all, that the lack of progress in this country was undoubtedly exceptional and difficult to understand. He gave us a short résumé of the prices the farmers are supposed to be enjoying and he finished up by saying that if the living standard of farmers and the community generally is to be sustained it can only be on the basis of greatly expanded agricultural and industrial output.

One way in which he proposes to bring the balance of trade into a state of equilibrium is by giving the Agricultural Credit Corporation facilities to loan £250,000 amongst 383,000 farmers. That will work out at about 6/8 per farmer per year for the purpose of developing the agricultural industry. His generosity will not escape the farming community. It must be remembered, too, that that will be at an increased rate of interest, from 4½ to 5 per cent. Does he believe that the farmers can be eternally treated as a joke? Is he sincere when he and his colleagues go around the country asking for increased production after seven years of compulsory tillage, with the land practically depleted of fertility and not in a fit condition to meet an emergency should it arise, and believe that by giving the Agricultural Credit Corporation facilities to lend £250,000 they will put the agricultural industry on its feet? We have suffered from one hammer blow after another as he revealed the rapacious taxes he proposes to reimpose, taxes that I believe are nothing more or less than the determined and petulant attempt of the Taoiseach to justify the supplementary Budget he brought in in October, 1947.

There is an old saying that it is hard to break an old dog of his trot and I believe that those who understand the Taoiseach's mentality will be not one whit surprised to find the taxes back again on tobacco and drink at the same level at which they were when they were removed from office in 1948. The general hope of the people of the country was that the cost of living would be brought down, even after the steep increase which had come about, since the 13th June last, because we cannot forget that the last election was fought on promises of Fianna Fáil to bring down the cost of living in which even the Taoiseach took part.

The Taoiseach

No.

Mr. Blowick

The Taoiseach made statements that the cost of living could be brought down.

The Taoiseach

You do not know anything about it.

Mr. Blowick

You implied that the cost of living could be brought down.

The Taoiseach

I did not say that the cost of living could be brought down.

Mr. MacEntee

It was Deputy MacBride who said that He promised to bring it down by 30 per cent.

Mr. Blowick

How much has it gone up since? It has gone up 100 per cent. on the figures which obtained prior to the last Government getting into office. I say that the Budget speech of the Minister is a clear and definite proclamation to boys and girls in the rural areas to fly out of the country while the going is good. The fact that all the schemes of expenditure for national development for developing this undeveloped country, which the inter-Party Government had initiated and had got going to a very large extent, have been cut down, taken in conjunction with the Minister's Budget statement, is a clear indication to the youngsters to clear out of the country. That is the reading I take from it. The tax on beer has been increased by 3d. a pint and on spirits by 6d. per glass. At the same time, while you are taking these taxes out of the workers' pockets you calmly propose to give £40,000 to a few distillers or brewers, whom you do not specify. That is your gift to put their industries on their feet. Cigarettes, sugar, tea, butter, flour— all the things that enter into the workers' cost of living have been taxed.

I might again refer to the statement of the Minister for Finance when he mentioned the infamous inter-Party Government, which had provided a rich man's loaf and a poor man's loaf. I want to say to the people of the country that it is about time, if they want to save the country, that they should waken up and nail this political hypocrisy once and for all, if we are going to get any decency or truth in public life. I think this time the Minister for Finance has gone too far and I believe the people will not swallow this Budget from the present Government.

The Minister provided just a few reliefs. Of course, he joked about the old age pensioners, particularly those who are not fortunate enough to have sons or daughters living. I want to say that the idea of giving an increase of 1/6 to an old age pensioner, who has no alternative income, is a joke that it is too cruel to perpetrate on that particular class of people. The increased cost of tobacco and the increased outlay on a number of other small items as a result of the increased taxes will more than eat up that 1/6. It would be far decenter to find some other means of dealing with the old age pensioner than to perpetrate this joke of telling him that you are giving him 1/6 a week to balance all the taxes you are putting on him.

So much could be said on this Budget that I am really at a loss to know where to start or finish. I think the proper course is to take it piecemeal as it comes along in the various resolutions. I want to conclude on this note. Looking round the House at the five men in particular who are responsible for the disaster that has been brought about in this country, I cannot help reflecting on the work of the scoundrels in the old House of Commons who sold this country and who were directly responsible for the bloodshed that followed in subsequent years. In the same way the sins of five men have brought a terrific punishment on the top of the people of this country. Even some of them are Judases enough to clap this Budget, the most infamous since 1921, on this country.

Mr. MacBride

I do not propose to speak at any great length on this Budget. Previous speakers have expressed views that I would only echo if I were to deal with the question in detail. I think that probably more serious still than the actual impact of this Budget on the people is the mentality which has brought about the introduction of the Budget. The Minister for Finance has told us that the subsidies were being removed because wages had increased at a higher rate than the cost of living, because earnings had outpaced prices but he was silent on the source of his information in that regard. I should like to ask the Government this question. Is it the Government's deliberate policy to lower the standard of living of the working people of this country, because that is what this Budget amounts to? I think it is somewhat sinister that we should find that the Minister for Finance should introduce a Budget, which was practically drafted for him by the Central Bank. I think that the stage has been reached when the people of this country must ask themselves who rules this country, whether it is being ruled by the Government or this House, or whether it is being ruled by a conclave of bankers in Foster Place, very often under the directions of the British Treasury, because it is quite obvious that this Budget which was conceived in the minds of the people who wrote the Central Bank Report——

Donnchadh Ó Briain

Who appointed them?

Mr. MacBride

The Deputy wants to know who appointed them. The Deputy's Government appointed a number of them; others were appointed by the Government of which I was a member but the Government of which I was a member did not allow the bankers or the Central Bank to rule it. The Minister for Finance spoke for close on two hours reviewing the economic position of the country. I would suggest it is no exaggeration to say that he spent almost 25 per cent. of his time dealing with sterling assets but at no time did he state to the House what the total gross holdings of sterling assets were. When I sought information on this at Question Time, the Minister always evaded my question or said he had no accurate statistics. I think it is futile to seek to discuss the balance of payments position without that information. In this very long survey of the economic position, the Minister omitted to refer or even to note the existence of what, to my mind, are two of the gravest features of the present economic position of the country, firstly, that unemployment has risen by over 12,000 in the course of the last few months and, secondly, that emigration, as revealed by the issue of travel permits, has increased in the last five months by 60 per cent. These, to my mind, are the two most serious factors in our economy.

The Budget, as it is conceived, and the mentality behind it—the mentality of the Department of Finance and the mentality of the Central Bank—is aimed at creating further unemployment in this country. It must result in further unemployment, and further unemployment must, in turn, result in increased emigration. The deflationary policy which is being pursued by the Government can only lead to unemployment, and the restriction in credit and the increased bank charges must result in further unemployment. It is a deflationary policy in full action, and this deflationary action is intended to create unemployment. The Budget introduced by the Government in the House to-day is devised for the purpose of creating a greater degree of deflation and of creating more unemployment.

I would like to know who speaks for the Government in this House and who represents the views of the Government in this House. The Minister for Finance to-day spoke several times of inflation, of the inflationary situation that exists and of the dangers of inflation. A week ago in this House the Tánaiste said that the position had changed in recent weeks, and that he had now come to the conclusion that the danger in the world and in Ireland at the moment was not inflation, but the danger of a deflationary spiral which was causing unemployment. He said that deflationary period had come and that that was the danger. Yet, we have the Minister for Finance to-day talking of inflation, and introducing a Budget which is intended to be a deflationary one and which must cause unemployment and emigration.

Now, apart from the fact that the provisions of this Budget are intended, as the Minister has said with candour— I do not know whether it was his own candour or the candour of the officials who prepared the brief—to remedy a situation where wages and earnings had kept pace with the cost of living and had outstepped the cost of living——

Mr. MacEntee

I said nothing of the sort.

Mr. MacBride

The Minister said that one of the reasons why the subsidies were to be removed was because wages and earnings had increased proportionately more than the cost of living.

Mr. MacEntee

That is not what the Deputy said.

Mr. MacBride

The obvious corollary to that is that the Minister wants to remedy that position.

Mr. MacEntee

And the Deputy wants to misrepresent.

Mr. MacBride

That is what the Minister is doing in his Budget. The Minister is seeking to reduce the real wages and earnings of the people so that they will be able to buy less, and so that they can tighten their belts a little more. That is the purpose of the Minister's Budget.

The Taoiseach

The Deputy knows that it is not.

Mr. MacBride

I have a great deal of respect for the Taoiseach in a great many matters. I think he has rendered considerable service to this country, but when it comes to economics I think he knows nothing about them.

The Taoiseach

As much, I suppose, as the Deputy.

Mr. MacBride

The Minister for Finance was such a menace previously as Minister for Finance that the Taoiseach had to remove him for creating difficulties of this kind and for being subservient to the banks.

The Taoiseach

That is not true. I know that is not true.

Mr. MacBride

That is all I propose to say. I am satisfied that there are sinister influences running the Government which are a menace to the Irish people.