I understand that the Opposition cannot take it and I do not propose to resume.
Vote 6—Office of the Minister for Finance (Resumed).
I move that the Vote be referred back for reconsideration. We have just been treated to a sample of the attitude of the Minister for Finance towards this House. He has spoken deliberately for three hours and five minutes without coming to the kernel of anything connected with the Supplementary Estimate. Then he comes in here to-day and half a minute before questions end this note is passed across the House from the Government Whip to Deputy Sweetman——
On a point of order. I gather that communications between the Whips are of a confidential nature, that they result from discussions which have previously taken place and I suggest to you that it is not proper that the Deputy should take advantage of the courtesy which has been extended to the Chief Whip of the Opposition Party in this matter to make a statement to the House which would be entirely partisan and which is obviously designed to mislead the public.
Deputy Mulcahy is not purporting to discuss the decision but is referring to a note which was sent to the Opposition Chief Whip. I do not think it is the first time in the history of this House that decisions of the Whips have been referred to.
It is not the first time in the history of this House that members of the Fianna Fáil Government have shown their contempt for the House. That contempt was shown for three hours and five minutes last week when the Minister spoke on his Estimate. As I say, a minute before the end of questions to-day this note was handed over to Deputy Sweetman:
"I gather that the Minister for Finance proposes not to speak further on the token Vote for the office of the Minister for Finance. Hence the field will be free for your people."
Is it in order for a private, confidential note of that nature to be read out? There has been a good deal of discussion between all the other Whips and myself at various times in regard to the business of this House but this is the first time a confidence like that has not been respected in regard to a note which I passed as a matter of courtesy to let the principal Opposition Party —who were interested particularly in this token Vote that was being taken as arranged prior to the Adjournment —know the position. It was as a pure matter of courtesy I passed the note to Deputy Sweetman, so that the Opposition would be ready to resume the debate.
I take it the Whips represent their Parties in these discussions and that any decision reached by them will be communicated to the Parties. I do not regard any decision reached by the Whips as of a confidential or private nature. Surely it is published to the members of their Party and therefore it is a matter for the whole House.
Are you not aware of the fact that the Chief Opposition Whip conveyed to the Government Chief Whip that if I resumed my speech they would resort to concerted organised opposition.
(Interruptions.)
That is untrue.
Let the Minister keep quiet. I am not going to have myself misquoted like that.
I am not ruling that communications between the Whips are private or personal. They are not.
I understand that Deputy Ó Briain wants to say something.
He has had his mouth shut by the Minister.
Did I say that?
No. I am sorry if I gave the Minister for Finance the impression that Deputy Sweetman said anything like that because of the discussions we had.
I understand it was indicated to the Government Whip that no other Government business would be allowed to be taken until the Estimate for the Minister for Finance was disposed of.
The Chair can only deal with what he knows by his own senses. I have no such information. Deputy Mulcahy on the motion to refer back.
May I say the last statement of the Minister is also untrue?
We are anxious to dispose of the Minister for Finance's Estimate but we are anxious to dispose of it in a constructive way.
118 interruptions in the course of one hour.
Deputy Mulcahy is entitled to be heard without interruption.
And two untrue statements by the Minister this morning.
The Minister for Finance introduced a token Vote into this House for the purpose of permitting the House to discuss the effects of his administration on the country, and he interposed between the discussions of the matter by the House three hours and five minutes of statements by him that have no reference — good, bad or indifferent — to the matter we are required to discuss. On the last day upon which he was discussing the question, significantly and certainly enough he took the halter which public opinion has hung around his political neck and he gently twisted it around the neck of the Taoiseach, then around the necks of his colleagues and then around the necks of the other members of his Party, as much as to say, whatever is happening to anybody out of all this it is happening to the whole lot; that is, it is not simply going to be the Minister for Finance who will be the victim of public judgment but he is going to see that it is hung around the necks of the whole lot. He need not be a bit afraid. We are discussing the Minister for Finance's Estimate from the point of view of the effect that it has on the people and if the Minister thinks that by his kind of trickery to-day and by that type of insult in not carrying on discussion in a way that was normally anticipated, in view of the little he had said with regard to the real matters and in view of the substantial explanation which seems to be required about things that matter, he is going to prevent this House from doing its duty, then he is very much mistaken.
The Minister bases his case on the fact that the last Administration destroyed everything and that he had to come and arrange to do some drastic and violent things in order to secure that the country was put right. He deliberately set out in his Budget policy this year to reduce employment in this country, to reduce the consuming capacity of our people, to reduce the money in their pockets and to destroy in every possible way the outlook on the country's economy, the outlook on the country's way of working that the last Government were beginning to stabilise. The inter-Party Government set out to maintain the cost of living at a stable position if they could not reduce it, to increase employment, to increase the hope and the courage of our people in building up their economy here, to teach the people that they had a strong credit, that their capacity, resources and ability were such that they had a credit to capitalise; that they should use that credit and build on that credit. In various ways, the people were grasping the idea of what national credit meant and how it could be used, how employment could be increased and how the cost of living could be kept down.
Taking the period 1947 to 1950, one finds that the cost-of-living figure in the middle of 1947 was 184, that it was 184 in the middle of 1950. The cost-of-living figure based on retail prices had been kept at a level over that three years. During that period industrial earnings had been increased by 18.5 per cent.; agricultural wages had been increased by 19 per cent. The cost of living remained steady for three years and increases in industrial and agricultural wages were 18.5 and 19 per cent. respectively. The cost of living had been maintained steady in spite of the fact that import prices had risen by 5.9 per cent., wholesale prices had risen by 11.4 per cent., and agricultural prices had risen by 15.6 per cent.
That was the effect on the ordinary standard of life of the people. During that period, the people had been induced to utilise and to gather their savings in this country so that they could be used for the building up of the country. In plans for the development and strengthening of our economy, the improvement of our amenities, the stabilising of our people's lives in decent homes, the Government showed the people a number of ways in which our credit could be used. Year after year they were asked to give of their savings to a Government loan so that, with taxation kept down, as it was, the economy of the country could be strengthened by the proper use of the country's savings and revenue might be increased at the lower rate of taxation. That was done.
The Minister then comes in and, following up their disastrous attempt to discourage and dismay the people by difficulties that were arising, when the cost of living was rising in the middle of 1951 as a result of the impact of the Korean war on the situation, undermining the people's confidence, hit them with the violent Budget of this year, in which they took an additional £11,500,000. That, together with the attack on the cost of living, when they reduced subsidies to the extent, I submit, of £8,500,000, completely disrupted the people's approach to the balance between wages and the cost of living and threw the whole economy of the people with regard to financial credit to the winds.
Last year, instead of going to the people and collecting the people's savings, which they now suggest it is necessary to collect, they left the people in the position that they gave them no opportunity to put their savings into a Government loan and they took £24,000,000 that had been left as a reserve in the Marshall Fund and squandered it absolutely and completely. In doing that, they did two things. By their failure to go to the people for their savings, they broke the continuity of the people's thought in the matter of savings. By throwing away the £24,000,000 that was left there out of the Marshall money, they threw away a reserve that should have been kept by their side so that, when they wanted to add a small amount to the people's savings to meet their capital programme, it would be available and, in addition, it would be available to protect them against the demands of financial interests for higher interest rates.
It would be difficult to get the situation right in many respects after the blow that was struck by the Fianna Fáil attitude in 1951 and this year, but this country has survived more from the Fianna Fáil people than even their latest blow, big as that is. The resources of this country and the character of its people are such that it will survive even the blows that Fianna Fáil have been striking in recent months.
Anybody looking around the world to-day will understand that any country, no matter how favourably situated, requires the balanced minds of its people and the co-operation of all minds and classes to overcome their difficulties. It has been the unfortunate experience of this country, due to the mentality of the Minister and his colleagues, that in the 30 years of the existence of the State there has never been given an opportunity to the people or Parliament to envisage any single problem in its full perspective in relation to the power of our people to deal with it, the desire of our people to deal with it and the possibilities of dealing with it. Every single major problem has been trampled underfoot by the partisanship and personality of Fianna Fáil, regardless of the fact that this country struggled for its freedom and parliamentary institutions in the interest of the people as a whole and succeeded in getting such parliamentary institutions as it has by the efforts of all the people.
The problem to-day is, not so much to gather the whole of our financial strength and the whole of our resources, but to gather the minds, integrity and intelligence of our people, to pool their brains and spirit in order to deal with these things.
In the discussions that we have had with the Minister for Finance in recent weeks in this House and in his contribution to this debate, he has left no word unsaid, no gesture unmade that he thought could in any way, obscure, bedevil and divide the minds of our people in dealing with this particular matter. We want to get away from these matters in this discussion here. We want the House to look in a simple and sincere kind of way at the Minister's policy and the results of it.
Taxation has been raised. A shilling has been put on income-tax. A shocking and bitter inquisition is being carried on at the present moment by a specially devised machine of the Income Tax Commissioners to harry every person and every employer to get after income-tax payers who, in particular circumstances, are in arrears. This is being done at a time when, due to the economic situation in the country, many of them are quite unable to meet the demands on them that would have been made if the administrative machine dealing with the collection of income-tax had been properly working in the past; and now, at a very bitter moment for some of them, in addition to the ordinary increase in income-tax, a general inquisition is being carried out.
We want to persuade the people and different sections in the Dáil that there was no necessity for the increase in income-tax or the substantially increased taxes that were imposed this year. The policy that was being pursued of low taxation, better and increased industrial development, maintenance of employment, the keeping down of the cost of living, where it was rising substantially even in Great Britain, was a policy that was possible by the co-operation of our people.
The Minister made very considerable play, in a long drawn-out explanation, on the balance of payments and what their ideas were with regard to the balance of payments. The returns circulated to-day have given the Minister his answer, showing that everything he said was political eyewash and political propaganda for the purpose of obscuring the intent he had in mind, the old intent of the Fianna Fáil Party, to keep the people in as close a grip as possible, to dip their hands as deeply as possible into the people's pockets for that purpose and to secure to themselves in every possible way the position of dictators of policy for people's lives, either by regulation or by rule or by the rule of the purse.
The latest blow the Minister has struck our economy is the launching of the £20,000,000 loan at 5 per cent. I would ask Deputies who want to examine what the case was for putting the interest rate as high as that, to examine the information that is available. They will find information in the Record and Statistics Supplement to the Economist for various months. Taking the savings in bonds 3 per cent., redeemable on the 1st September 1960-70 and the savings in bonds 3 per cent., redeemable on 15th August 1965-75 we can look back at the gross yield for the latest date of redemption, quoted in the records systematically given every week in this supplement. Deputies will find that in the case of the first mentioned, the bonds redeemable 1960-70, the gross yield quoted for the latest date of redemption was, on the 15th November, £4 3s. 9d.; on the 4th October, £4 4s. 11d.; on the 6th September, £4 2s. 6d.; on the 2nd August, £4 7s. 9d.; on the 5th July, £4 4s. 10d.; and, going back before the change of bank rate, on the 1st March 1952, £4 5s. 6d.; and a year before that, £3 8s. 0d. At any rate, there you have in the latter months before the Minister went for his loan, an equivalent type of Government security showing a gross yield, assessed on the latest date of redemption, of £4 3s. 9d., £4 4s. 11d. and £4 2s. 6d. Taking the savings in bonds 3 per cent. redeemable 1965-75, we find the figures for the 15th November 1952, £4 3s. 11d.; for the 4th October, £4 4s. 0d.; 6th September, £4 2s. 0d.; and 2nd August, £4 7s. 0d. This shows that an equivalent British security of that kind was less than 4½ per cent., whereas the Minister goes out and puts a blister of 5 per cent. in interest for his borrowings on the people of this country in a most outlandish and cruel way.
We have seen the results of that imposition on those people who, in the spirit of hope and confidence introduced by the inter-Party Government into administration, were marrying their own savings with the credit available to them from the local loans funds, so as to establish themselves in houses. That class of people who contribute so much to our general society and our general production here but who cannot expect to be housed by the local authorities, were, under the impulse of the greater increase in hope and confidence brought about by the three years of inter-Party Government, putting substantial amounts of their own money and utilising the credit of the country to build up their homes.
I want to quote now the figures for the development that has taken place there. Borrowers under the Small Dwellings (Acquisition) Acts borrowed from their local authority funds that —except in the case of the City of Dublin, I think — were provided by the State through the Local Loans Fund. In the year ended March 1947 they borrowed £4,600; in the year ended March 1948 they borrowed £8,600; in the year ended March 1949, £162,700; March 1950, £1,816,000; March 1951, £2,273,000; March 1952, £3,460,000. That borrowing reflected people in this country who had savings of their own, who wanted to build their own homes and establish their families, making use of the State credit that was offered through the Local Loans Fund to help them, to add that to their savings and build a new Irish home. Everybody knows what the result of the Minister's increase in interest rate has been on them. It brings us back to the queer kind of influence that has operated in this country for so long in financial circles, where every possible obstacle is placed in the way of building houses for the people or helping them to build their own houses. Our minds go back to the old days when it was Arthur Griffith's dream to have an Ireland where every man owned his own house. From the very first time the State was set up effect was given to that impulse to put people into secure and satisfactory homes. One of the first things that was done in the way of expanding capital was that two thirds of the cost of the original set of houses that were built by local authorities as long ago as 1922-23 was provided by the State in order to gear up the wheels of the building industry here, in order to prepare it, after the troubles of the First War, to fulfil its function, to give the people habitations in which they might live and rear their families and develope their culture.
From the very first, there has been a violent financial attack on the policy of utilising capital for the building of houses. We have had the classical example here that has been quoted before.
I quote from page 167 of the Report of Inquiry into the Housing of the Working Classes of the City of Dublin, 1939 to 1943. The quotation is headed: "State Responsibility for Raising Capital." It goes on:—
"For a long period the corporation found little difficulty in raising on the public market whatever capital they required for their activities, but in September. 1938, the city manager reported to the housing committee, that the next instalment of the five-year programme demanded the provision of approximately £3,500,000 to £750,000 of which they were already committed; that there were difficulties in raising money by issue of stock at that time; and that an adequate assurance of the necessary funds should be secured before entering into further commitments.
Between November, 1938, and April, 1939, however, £1,000,000 was secured, £275,000 from the Bank of Ireland and £750,000 from the Hospitals' Trust Board.
Negotiations took place with the Banks' Standing Committee on the matter of raising £2,000,000 by issue of stock, but in January, 1939, it was intimated to the corporation that the banks could not underwrite a public issue."
In January, 1939, the banks of this country announced to the Dublin Corporation that they could not underwrite a public issue of £2,000,000 for the building of houses under the Housing of the Working Classes Acts. Two reasons were given. One was "the uneconomic character of the housing programme, aggravated by the high level of building costs". In 1939 it was uneconomic to provide, after seven years of Fianna Fáil administration, houses for the working population in the City of Dublin. The money could not be spent then in January, 1939, on the eve of the war because of the high level of building costs. That was the first reason given.
The second reason was: "The magnitude of the sums required for the corporation's five-year programme of public works." I think that is the classical example of the outlook of those in this country who are, if you like, the custodians of our national credit.
Of our Minister for Finance.
That is what we want to come to. Somewhat later we were concerned with the rate of interest that was being charged even in 1945. We felt that the credit of this country properly used would bring about a more realistic state of affairs in the matter of the price that the Irish people would have to pay in respect of the capital required for development purposes.
I raised the matter on the Central Fund Bill in 1945 and at column 1359 of the Official Debates of the 14th March, 1945, the Minister for Finance, excusing the Banks' Standing Committee, said:—
"They have their obligations to the community, just as," as he said, "the bricklayer, the engine driver, the farmer and everybody else has responsibilities. But I do not see that the banks are obliged to run themselves into bankruptcy, even to build houses for the Dublin citizens, very necessary as that work is."
The position at that particular time was that the Government stood aside and brought no influence to bear on the Banks' Standing Committee. The ministerial mind is again shown in the statement made at column 1361 of the Official Debates, dated 14th March, 1945:—
"Another aspect of the difficulties of the Dublin Corporation, in particular at that time of which Deputy Mulcahy speaks and at other times, was that bankers are commercial men and must make a financial success of their institutions in the interests of their shareholders."
We had a difficulty a couple of years ago when the Dublin Corporation again looked for £5,000,000 to carry on their housing programme and when they were refused any kind of accommodation or recognition at all by the Banks' Standing Committee. The Government of that time had to send for the Banks' Standing Committee and they had a discussion with them. As a result, the accommodation which the Dublin Corporation required was given them.
Had the Government any power to compel them to give it?
At any rate, the Government got them to give it.
But that was with cap in hand.
Who had their cap in hand?
The Government.
Oh, no.
Did you ever ask any bankers about that?
Is not that the effect of the 1927 Currency Act?
You are forgetting the 1942 Act.
We will come to that.
Deputy Mulcahy on the Estimate.
The Government had no power to compel the banks to do it.
I would like to assure the Deputies who are anxious to look at this matter in a detached way that when the members of the Government met the Banks' Standing Committee at that time they had not their cap in hand. They discussed a serious problem with men whom they regarded as having functions by reason of their being the Banks' Standing Committee. We tried to bring them to a realisation of their function. Apparently we did not bring them to any permanent sense of that realisation.
No, that is quite correct.
For the moment we did and they agreed to give the accommodation to the Dublin Corporation. I think the rate was 3½ per cent.
Deputy Cowan said three weeks ago that there was no difficulty about finance in the Dublin Corporation. He answered for the Minister for Finance.
Deputy Cowan did not speak in the debate yet.
We are waiting to hear him.
At 3½ per cent. the loan of £5,000,000 by the banks in Ireland to the Dublin Corporation brought in to the banks an annual net profit of £80,000 a year for the period of the loan. There was no danger of the banks in their capacity of being analogous to bricklayers, carpenters, farmers and other people like that going bankrupt by reason of the fact that their function was operated to enable the corporation to get the houses built that were wanted here.
To-day we have the Minister for Finance throwing aside the £24,000,000 of the Marshall Aid money. If it were necessary for the Government to take formal powers to see that the Dublin Corporation were provided with the necessary money to go ahead with their building programme, the £24,000,000 was there as a reserve to be used, while the necessary machinery was being put into operation. When the Minister for Finance threw aside that money, he did two things. He threw away any protection he had against the obscurantist mind that operates with regard to housing in the banks here and threw away the protection he had against that particular kind of financial outlook on the housing of the people that seems, not only in this country but in other countries, to put every possible obstacle in the way of getting the people into houses as a "gad is gaire don scornaigh"— cutting the knot nearest to the people's throat — if they are to live to rear their families and carry on the productive work of the country.
The result is that he now is in the position that he is successfully stopping housing. The stream of people who were building houses, creating homes under the Small Dwellings Acts and making use of these loans, the figures of which I gave a short time ago, has now stopped. It is stopped, at any rate, except for those people who have fairly substantial incomes. The normal marginal person who is able to use this machinery and who formed a very large part of those who were using it, as shown by the anxiety created by the recent situation brought about by the Minister, is being cut out and there is the financial and economic problem of seeing how these people are to be dealt with in future.
The Minister, by paying the 5 per cent. rate for the £20,000,000 he got recently, has struck a very severe blow at the financing of our capital work not only for Government and private people but for local authorities. The position has not yet disclosed itself to local authorities, but disclose itself it soon will, and the result will be that the unemployment and cessation of production that has already hit the building industry will hit many of the other development works that are being carried on under local authorities.
Would that loan of £20,000,000 have been got at less than 5 per cent.?
The position ought to have been quite clear. It was perfectly clear that there was substantially over £10,000,000 a year available in savings from the people, and, with the understanding that that opening was available, there would be greater sums ready to be made available. There was a sum of about £6,000,000 coming in yearly through the Post Office Savings Bank and the small savings certificates. The capital development schemes that require to be attended to, visualised over three or four years, were fairly clear and whatever deficiency there might have been in the savings available from the people could have been made up by the proper utilisation of the Marshall Aid moneys and we had in hand all the financial resources to deal with the capital schemes required for the next three or four years, schemes which, once effectively carried out, would leave the country in a very strong position to go ahead with the general economic and social life.
The Minister has created a situation which is one of great concern to anybody who reviews the economic situation as a whole. In the meantime, however, the Minister has shut his eyes quite definitely to the position he has created with regard to unemployment. Every month that has passed has shown an increase in the number of people on the live register. If we go back to January last and take the figures for the months down through the year, we find that there were 7,800 more unemployed in January than in the year before; in February 11,100; in March, 9,700; in April, 12,900; in May, 11,800; in June, 8,800; in July, 10,700; in August, 9,400; in September, 6,700; and in October, 8,400; without any statistical information available to us as to the number of people on short time in various industries.
The Minister, therefore, in dealing, in an alleged way, with the presentation of his Estimate has completely shut his eyes to the unemployment position created here, to the position with regard to the country's credit and the use of its resources for carrying out capital development work, the fall-off in industrial output and the enormous difficulties which, in their family life, people are meeting, as a result of high taxation, high cost of living and resultant unemployment. It is no wonder the Minister should come in here and try to obscure the situation by his talk for three and a half hours in which he introduced every single word that could possibly fret the minds of the people on purely personal and political matters.
It is no wonder that he should come in to-day and try to trick the House which expected him to deal with some of the other matters he promised to deal with, such as the condition to which he is reducing the Civil Service by his talk on arbitration and the teaching fraternity by the way in which he is robbing them of the established arrangement that a conciliation and arbitration board would be set up.
These are things the Minister cannot escape either by insulting the House or confusing the issue in the House. They are all there to be met by the people and the longer the Minister carries on his antics, both here and outside, instead of facing up frankly to the problems confronting the country and to his responsibility in the matter, the greater will be the sufferings the people will have to go through.
I listened to a considerable part of the debate initiated by Deputy MacBride on his motion dealing with the Central Bank and I listened also to the debate that took place on Deputy Dillon's motion. I understood that, when we came to discuss this token Vote, an opportunity would be available to the House to consider in a serious way this whole problem of currency and monetary control, and the position in which the country finds itself to-day because of the financial policies that have been pursued over the past 30 years. I have been somewhat disappointed that the debate has not reached the standard that one would expect it to reach. It is perhaps unfortunate that the House did not have the benefit of Deputy McGilligan's contribution on our problems following on the very long speech we had from the Minister.
We will get it sure enough.
I expect the House will have the benefit of Deputy McGilligan's contributions. He is one Deputy who, I and quite a number of Deputies believe, has made a very deep study of financial matters, if one interprets correctly what he said here on the debates on the Central Bank Bill.
Deputy Davin has said on occasion that the Labour Party specifically asked that Deputy McGilligan should be Minister for Finance in the inter-Party Government so that he might give effect to some of the ideas he had expressed in the debate on the Central Bank Bill in relation to the reorganisation of our monetary system. The great difficulty in a discussion on monetary matters here is that too few Deputies apparently are acquainted with the intricacies of finance and monetary control and the result is that the debate on such matters is generally left to a few individuals and carried out with the usual Party thrust and parry.
I thought that was particularly so when I saw the terms of Deputy MacBride's motion recently in regard to the Central Bank. Deputy MacBride objected that the Central Bank had not given us a report of their proceedings in the way that a football club would do it. He put the point that under the Statute the only report they are required to make to the House is one showing the number of meetings held, the personnel that attended and the decisions taken. He maintained that they have no right to express their views in what might be construed as a political fashion in such a way as to affect the general policy of the country. I think that is too narrow an approach to the matter. I have no objection to the directors of the Central Bank, or to anyone else, expressing views. The only objection I have to their views is that they appear to be antiquated and out-of-date, and people who express antiquated views in 1952 ought not to be in the position of governor or director of the Central Bank.
Money, currency and monetary control and all the other expressions current in financial circles often create difficulties. Undoubtedly the subject of finance contains some very complicated definitions, definitions that are deliberately put about by the bankers themselves for the purpose of confusing the issues and for the purpose of preventing the ordinary people understanding what goes on in the banks.
I do not pretend to be an authority on finance but I do endeavour to understand its relation to our national needs. I look on money, as I think every Deputy does, as having no value in itself. I believe that is generally accepted. Money is simply a voucher to enable goods and services to be exchanged. It is a device for transferring wealth. It stands to reason that if a nation is to be happy and contented there must be sufficient money in circulation to enable goods and services to be exchanged freely amongst the members of the community.
And goods produced in abundance as well.
If necessary, yes. I think that is a sufficient definition of money and the purpose of money in so far as this debate is concerned. Money has not the same value in one century that it has in another. Three hundred years ago one might buy a cow for a few shillings. Those were supposed to be the good old days but this country could not be kept running to-day if farmers had to sell their cows for a few shillings each.
They could get a plug of tobacco for 6d then.
There has been an enormous change in the value of money to-day as compared with the value it had prior to the First World War. Up to 1914 one could do amazingly well on a £. To-day one can get very little for a £. The value of money changes from century to century, from decade to decade and often from year to year. Every country should be in the position of so arranging its business that there will be a sufficiency of money in circulation to enable goods and services to be freely exchanged.
When banks were first founded they acted as something in the nature of a trustee organisation. Money was deposited with a bank. The bank held it, paid interest on it, lent it out and returned it when the time came. The money in which banks dealt at that time was money actually lent or lodged with them. They held it in the same way as trustee securities would be held. In time — I do not want to spend too long on this because it is purely historical — the function of the banks changed. It is now a well-known fact and accepted by every economist and financial expert that banks lend out more money than they receive on deposit from their customers. Statistics prove that for every £100 the banks get in they can lend out £1,000. They consider themselves to have a very safe margin if they have £10 in hands for every £90 that they hand out. The money that the bank hands out in that way is not money that is lodged with them or that is the property of any individual in the State. It is money that they themselves create and lend out at an interest rate which they fix. They do that, as Deputy Hickey says, on the credit of the country. Deputies who speak in this House often forget that important fact. They forget that the banks create money — and create as much as nine times the amount of money that is lodged and invested with them. They lend that money out at interest and it is out of that interest that they make their very big profits that enable them to carry on in the luxurious way they do in this country. Even in small towns, you find three, four or five banks, all of which have luxurious premises and reasonably large staffs. The money that they use for that purpose is money that they themselves create. For a long time they tried to conceal that fact. For a long time they did conceal it until, eventually, investigations showed that that was the position.
We had the position, as mentioned by Deputy General Mulcahy, that the Government had a discussion with the banks in regard to money that was required for housing purposes in Dublin. I asked Deputy General Mulcahy if the Government had any power to compel the banks to lend that money to the corporation — and, of course, the Government had no such power. As a result of the discussion, apparently, the banks agreed to lend money to the corporation at 3½ per cent. — for which the corporation charged 4 per cent. to the people to whom they lent that money under the Small Dwellings (Acquisition) Acts.
Does the Deputy know how the banks got the money?
I welcome any information which Deputy McGilligan may be able to give me.
Their attitude then was that it would mean only a double entry in their books. There was no question of security.
I think that is perfectly correct. I accept it.
That was not necessarily their attitude at the beginning.
Oh, no.
I can accept that. That is why I put the position to Deputy General Mulcahy that, as far as the Government was concerned at the time, they went hat in hand to the bankers——
No.
Let me elaborate.
I am anxious that we should be clear on this matter. May I take it that the Deputy is not pursuing this line of argument in order to excuse the present Government for not doing at least what the last Government did?
I am making the speech of an Independent Deputy on a matter of grave concern. In my view, no Minister and no Government should have to sit down with the bankers and, by threats or otherwise, extract money from them — money that is required for a public and social purpose such as the building of houses. Whether it be the Minister in the last Government or the present Minister, there should be no question of it. The laws of this country should provide for the relationship between the banks and the Government and for the duties, obligations and responsibilities of the banks to the people. I think the Government— whatever Government it is — should investigate very fully the position whereby banks create credit out of nothing by entries in their ledgers and lend that money out at 3½ per cent., 4 per cent., or 5 per cent., as the case may be. They do it, not because it is their duty to do it or because a demand or a request, as the case may be, is made to them by the Government of the day. That is the position of money and the position of banking as I understand it.
Into all this problem of banking and money we had, since our State was established 30 years ago, two major efforts to deal with the financial position of the State. I think those two major efforts are contained in the Central Bank Act and the Currency Act. They followed from the reports of commissions that had been set up by the Government of the day. We set up a Central Bank. That Central Bank was deliberately deprived of a function that it ought to have — the function of equating currency and credit with national production and the needs of the Irish nation. While the Central Bank is a Central Bank in name it is not a Central Bank in fact. If we are to deal with the problems that confront us — and serious problems confront us as a nation — this House will have to consider seriously the question of amending the Central Bank Act at an early date so that the Central Bank will be given the power to provide the currency that we need for purposes of national production. If the ordinary commercial banks can manufacture or make money — or create credit, as it is called — for their own purposes and their own profit, I think it is necessary, if we are to maintain our freedom, that our Central Bank should have the power to create credit for purposes of national production. If we want to build houses — as we must build houses —we should build those houses not on money borrowed at 5 per cent. or 4 per cent. but on money created by our Central Bank and made available to our local authorities and to the Government at a nominal rate of interest.
During the last war the British Government could obtain money from the joint stock banks at a very low rate of interest.
At 1¼ per cent.
They could obtain as much as they required. If the war had lasted for another ten years, they could have obtained from those banks all the credit they required at that low rate of interest. We in this country are concerned now with a war. It is not a war against another nation but it is a war against poverty, slum conditions and unemployment. In that war, we are entitled to use the very same implements in regard to finance that are used by big powers in the wars that they fight with other nations.
With far more justification.
If we have a Central Bank that will equate our currency and provide the credit we need for national production, then we can be happy about it. Whatever money would be necessary to keep this country going would be provided by, or under the authority, or by the power or direction of that Central Bank. Until we do that, we are in the unfortunate position that our Central Bank cannot create one pound note without having a British pound note as backing for it. That is a bad position. In previous debates in this House reference was made to the position of New Zealand — how New Zealand met the crisis, how New Zealand broke the link with sterling, how New Zealand had a different exchange rate, how it had an internal money system related to sterling and how it was necessary for New Zealand to do those things to end unemployment and to put an end to the impoverishment of their farmers and bring prosperity to the country.
I think every Deputy should make it his business to study the steps taken by the Labour Government in New Zealand to deal with the very serious crisis that affected New Zealand at the time the Labour Government was called to office there. In that study there are many valuable lessons for this country. If our Central Bank is permitted to carry on as it is, we are entirely at the mercy of the British banking system. I have the feeling, so far as our own commercial banks are concerned, that if there is any application made to them in a big way for money, they are advised, and take the advice and directions, from the Bank of England and the British joint stock banks. I think very few Deputies would disagree with that statement of the relationship that exists between our banks and the British banking system. It seems to me that a necessary step to be taken is to take control of our own finances.
In this debate, references have been made to inflation and to deflation. The Minister has quoted a speech made by Deputy McGilligan in which he referred to the dangers of inflation and to the corrective steps that might have to be taken in regard to them. I think there has been too much talk about the dangers of inflation.
About the danger of deflation.
I think deflation is much the more serious danger but unfortunately it seems we are being pushed into a deflationary situation and a deflationary situation would be bad for this country. Deflation will lead to unemployment. It will lead to ordinary shopkeepers being unable to sell their goods and ordinary people being unable to buy the goods produced by our manufacturers. If the ordinary people cannot buy the goods that are being produced by our manufacturers, it means that people employed in these industries will lose their employment and you will get into a very vicious circle because once the spending power of the people is injuriously affected, it has its reaction right round in a circle. The farmer will have difficulty in disposing of certain of his produce; the manufacturer will have difficulty in disposing of the goods he makes; the shopkeeper, the distributor or the retailer will have difficulty in selling and gradually, in every link of the chain, there will be unemployment, and unemployment at the moment leads only to one thing and that is emigration. The more people who emigrate to Britain the fewer people there are in this country to buy the goods manufactured by our manufacturers or produced by our farmers. So that this deflationary process that has set in—at least I think it has set in— will have injurious results on the economy of the country in that it will lead to if persisted in or pursued——
It has led.
No. I just want to deal with the matter in my own way. It will lead to unemployment and emigration and the more emigration we have, the fewer people there will be to buy goods here and to keep the economy of the country going, resulting in more unemployment and more emigration. I think that any Government that is in power will have to consider —we shall all have to consider—in the national interest what is the best policy to pursue in that regard. It seems to me that reasonable inflation within control is the proper way in which you can deal with the present position, that we must give people more spending power. By giving people more spending power, we create a better market for our manufacturers, we bring business to our distributors and retailers. We create new employment in industry and in the distributing lines. The more money that is to be spent, the more of the farmers' produce can be bought by our own people. Only in that way can we arrest the drain of emigration which in itself assists and creates unemployment.
I think I said at the beginning that the members of the Central Bank who would give the advice to the Government that has been given in the report for last year are not the right men, in my view, to have in charge of our currency or our monetary affairs in 1952. I think the same remark applies to the advisers of the Minister for Finance, whether the present Minister or his predecessor. I was amazed some years ago when I read the report of the Drainage Commission. On that Drainage Commission was an official of the Department of Finance and he brought in his own report, so far as I recollect. I did not think that I should have an opportunity of taking part in the debate this evening and I intended to look up that report and have it for reference.
He brought in a report in which he opposed drainage. The country, he said, could not stand it. That was his mentality, as it was the mentality of the bankers ten or 15 years ago that it was wrong to spend so much money on houses. The advisers of the Department of Finance have been there for nearly 30 years and they are in a groove.
The Minister is responsible for policy and not his advisers.
I am talking of the effect of their advice not on this Minister but on every Minister for Finance over the last 30 years.
Surely the Minister is not responsible for the reports which are issued by the Central Bank?
Deputy Cowan is not discussing the Central Bank at the moment.
He is discussing policy with regard to the issue of money, credit, and so forth.
Anyway, the view that I have formed over a number of years is this: that we are, and have been for 30 years, on the wrong lines and that we have got to change them. I have listened to Budget speeches made by Deputy McGilligan and I have listened to Budget speeches made by the present Minister for Finance, and I could see no difference between those speeches. Deputy McGilligan gilded some portions of his to make them taste a little better. The present Minister served them up just as they were. That was the only difference that I could see. I say that as an Independent Deputy who believes that there is a great lot to be done in regard to finance control if this country is to be prosperous. I certainly will not get into an argument between the Minister and Deputy McGilligan as to what either of them said in any year, but when I examine their speeches I find that both of them have said the same thing.
And they have not taken us anywhere.
Change the situation.
I am putting forward the view that it is necessary to have a big change if this nation is to be saved. I remember the time when the financial adviser of the then Minister for Finance advised him to take 1/- off the old age pensioners. Men like them, who would so advise, should be brought out to the block and have their heads cut off.
That was Government policy and not the policy of anybody else.
I notice how reluctant the Minister is to intervene at this stage.
I can say, and I do say, that men like the governor and directors of the Central Bank who give the advice they do give would, in other times and in other countries, be placed on the block, because the advice which they have given is bad advice, and dangerous advice for the country. We have just got to face up to that situation.
Deputy Mulcahy talked about getting money from the Post Office, and getting money here and there. That is only toying with the problem. Deputy MacBride was only toying with the problem when he talked about the proceedings of the Central Bank and said that we should have a record of the times they met, who was present and what they decided. That is only toying with a serious problem. I think that I am entitled, having looked at this for 30 years, to come to the conclusion that all is not well in regard to our position with finance. We want new advisers and we want new experts. Other countries do not object to going outside and bringing in an acknowledged expert to give them advice. I read that some of the Mediterranean countries brought in Dr. Schacht from Germany. We could do very well by bringing into this country a person of acknowledged authority. I think it will be accepted by everybody that the Civil Service is not the place in which a man can be trained to be a financier, the type of financier that will be able to run the country.
I mentioned war earlier in my speech. If, for any reason this country were to be involved in a war to-morrow in which we would spend millions of money, our financial advisers could not stop that war with their advice. There are only two things they could do. One would be to do the best they could to provide the finance, and the other would be to commit suicide. That is all they could do. They dare not say to the Government: "No, you cannot go on with the war, you have not enough money to fight it." But we are engaged in another war: in a war against poverty, in a war against the slums and in a war against unemployment. Why should these alleged financial experts say to the Minister: "No, you cannot fight that war; let our people continue to live in the slums; let them be hungry and let them take the emigrant ship: no, you cannot do it, because that is the sort of finance that we learned when we were part of the British machine, so you just cannot do that"?
I have spoken on this matter because, I think, it is necessary that the viewpoint which I am expressing should be voiced here in the House. This country of Ireland is ours. It does not belong to the political Parties on either side; it belongs to all of us, and it is our duty, when we see a serious situation, to try and get out of it. I want to see more money, more purchasing power, being put at the disposal of our people. I want to see our civil servants, our Guards, our Army and our teachers paid enough money to enable them to live a decent life. I want to see those people being given purchasing power to enable them to purchase the materials which our shopkeepers and our retailers have to offer, and which our manufacturers and our farmers produce. I want to see our old age pensioners, our widows and their orphaned children and our pensioners of all kinds in receipt of purchasing power so that they may be enabled to buy the things which they need, and so that they may be able to live an ordinary Christian life in a Christian country. I want to see our agricultural workers, our skilled craftsmen and our unskilled labourers all getting a decent wage, and I want to see our farmers and producers getting a decent income from their hard work. It is clear, from the way in which we have been carrying on for the last 30 years, from the way in which we have carried on under the financial system that we inherited, that that cannot be done. It can only be done by a new approach. I think that we can have that new approach if only we determine to have it.
Deputy McGilligan, when he spoke on the Central Bank Acts, did give expression to views somewhat like those which I am now expressing. He did give expression to quite a number of views in regard to monetary reform and monetary reorganisation, but, unfortunately, although the matter was put to him time and again by questions in the House, he did not avail of the opportunity he got as Minister for Finance to bring in the amending legislation which would enable these things to be done.
Financial interests are very powerful in this country.
Whether they are powerful or not, the point is that it will take a long period of education before our leading politicians come to a decision to change things as they are and to use our finances in the interests of the people. A lot of the problems which cause trouble and confusion here can only be solved if we take the proper steps to solve them and the principal and primary and necessary step, in my view, is to give powers to the Central Bank that will enable it to operate in the interests of the Irish people, that will enable it to provide the money that we need for housing or for works of a productive nature at a rate of interest that will be reasonable, perhaps ½ per cent., perhaps 1 per cent. but no more than that. But we are in pawn at the moment to the commercial banks, who apparently do not yet understand their responsibility to the Irish community.
There was a very bitter fight to establish this House, a very bitter fight to achieve freedom and liberty in this country, but a fight was never fought for the purpose of enabling a few people who have control of the banks to strangle the life-blood of this country, and that is what they are doing. As I say, as an Independent Deputy I can only express my view and my view is that this reorganisation is necessary and must take place and I should like to hear other Deputies who believe in that idea express it, because I think it is time that we did take control of this very vital matter of our own finances and our own monetary policy.
Listening to the speech we have heard from the Deputy who has just sat down, one could hardly believe that in the month of April this year he voted to cut subsidies and to impose taxes upon the beer and tobacco of the people. He did that while voting for a Budget which was framed at least on the advice of the bankers, certainly on the advice of the Central Bank, and particularly on the advice of the officials whom, apparently, he is so anxious to condemn now. That was the Deputy's action.
Is this any use?
We will see that. The Deputy says that my language when Minister for Finance was the same. Let us not bother about language, and look at the activity. I spent three years and a bit reducing taxation, developing certain capital schemes, inaugurating a new method of capitalising those schemes, and that was met by a tornado of abuse from the time the new Government came into office until April this year. Then we reached the culminating point, that what was done in three and a half years was all wrong, was recklessly extravagant and was leading to the destruction of the State. Deputies were asked to rally round and vote for the cuts in the subsidies and for the heavy taxation which the Budget imposed. Deputy Cowan is one of those who went into the Lobby to support that, and actions speak louder than words.
Long ago, after the Siege of Troy, the lady who had brought it about was apostrophised and it was said that hers was the face that launched a thousand ships. Deputies around the Minister can speak of him now as the man who lost thousands of votes and is rapidly bringing a lot of Deputies to the point when they will talk of the time when they were members of Dáil Éireann, and when they will be given, I suppose, the honorific title of ex-T.D. Looking at it in retrospect, however, it will be very lacking in consolation. I have no doubt that that will be their fate and that that is why Deputy Cowan made the speech he made to-day. But his actions in the Division Lobby speak much louder than his words. I agree with a lot of what he said, but I do want to prove that the speech he made this evening is in complete contradistinction to the life which he has been forced to lead by giving loyalty to the Fianna Fáil Party since they became the Government.
You got the same advice as they did.
I undoubtedly got much the same advice but I objected to the advice I got to over-tax, to tax for a surplus, and I refused to do it. I said that I believed that the present Minister got exactly the same advice but the difference was that he took it. The Minister opened his speech on this matter by pretending that it was in defence of the White Paper of 1951. It is not necessary to go into the whole details of this White Paper, but there are two or three startling things in it which should be referred to in order to get a correct view of the White Paper. Deputy Dillon, in his motion, spoke of this, I think, as a disreputable document and stated that it was tendentious nonsense and should not be produced before Dáil Éireann. Leaving out the rhetorical phrases, I agree with the Deputy that the White Paper was misleading. I cannot understand how it came to be written, except that the Minister himself took, so to speak, the gloomy side of the advice given to him and hid the offsetting good points which might possibly have been made to him. In any event the White Paper is on record as saying, on page 8:—
"The inescapable conclusion is that substantial relief to the balance of payments can only be achieved by importing less."
There is the mood. There are two ways of dealing with the balance of payments so as not to leave any deficit: one is by exporting more and, if that is not possible, the second is to confine oneself to slashing imports. Of course, there is a middle way open by doing a little of both, increasing exports and possibly collapsing imports, where that can be done without damage to the political or economic programme of the Government. But here definitely on page 8 we have it that: "The inescapable conclusion is that substantial relief to the balance of payments can only be achieved by importing less."
Remember, when we started on the programme which it was alleged brought about this terrific unbalance in the payments, we were moving in the region of forecast. Possibly there was something in the nature of prophecy about it. We made a forecast after getting all the advice possible, after surveying the figures supplied and making up our own minds with regard to such things as tendency to improvement or, still further, dis-improvement, with regard to the terms of trade and with regard to all the various matters that had to be brought into the picture before a view could really be formed. We thought that improvement could be achieved through exports. When we examined the imports we felt that the imports situation in itself was likely to mend —that imports would lessen in volume and that their price would be balanced by the better price likely to be got for our exports. Many of our Deputies made that case here on the Supplies and Services legislation last year. We pointed out that the terms of trade had gone against us on account of Korea— that, of course, was on the import side —and that the terms of trade were likely to improve when the swing in prices affected the value we were getting for our exports. We pointed out that a good deal of the imports were due to stockpiling which we ourselves were doing for Government Departments, secondly, to stockpiling which we had asked traders to do through the city and through the country and, thirdly, because many private citizens, reading the signs as we read them, thought it necessary in their own interests to do a little stockpiling each on his own. We pointed out that that period of stockpiling would come to an end as a result of satisfaction or satiety or because of a change in the world situation that would render stockpiling unnecessary. In addition we pointed out that the prices we would get for our exports were likely to rise when the Korean incident which had raised the prices of the things we bought had had its full effect and given us increased prices for what we sent to the British or other markets. Finally we pointed out that due to the measures we had taken the volume of exports could increase and would increase. That was the plan we had.
The White Paper disavowed all that. The inescapable conclusion to be drawn from it is that a substantial relief in the balance of payments could be achieved only by importing less. What are the facts? We are now outside the region of forecast. We now can see the figures. Can anybody deny that when the end of this year comes and we have a complete balance as far as international payments are concerned, the 50 per cent. improvements will have been achieved not through cutting imports but through increasing exports either in volume or by getting better prices for them? What was the likely deficit in the balance of payments? This, it should be remembered, is a document produced and presented to the House in October, 1951. The addendum on page 15 shows that it took into consideration the figures for imports and exports for September of that year. Therefore it can be regarded as a document based on nine months of the calendar year of 1951. Paragraph 30 in page 13 reads:—
"The forecast of the deficit in the balance of payments in 1951 is based on favourable assumptions."
It meant that it probably could go worse but that the balance could not be any better than was forecast. The paragraph continues:—
"Full account has been taken of the normal seasonal increase in both the volume and price of exports in the later months of the year. Assuming an uninterrupted flow of imports the deficit in the balance of payments is likely, therefore, to be in the region of £70,000,000."
That was not a forecast to any great extent because the addendum brought the information up to date at the end of September. There were only three months ahead for which anything in the nature of a guess had to be made. Yet, published in October, fortified by the September figures and with only three months to run, the forecast is a deficit of £70,000,000. When the end of the year came that figure was shown to be falsified by £10,000,000. Deputy Dillon makes the point that it was £10,000,000 in a quarter of the year.
Those are the two main features of this White Paper on which the Budget was based. Its inescapable conclusion was that the only way to achieve a better balance in our payments on the international side was to import less, and, secondly, that the deficit in the balance of payments was likely to be £70,000,000. On the 14th of November, 1951, the present Minister is reported in column 725 of the Official Report as saying: —
"The assumption on which the deficit of £70,000,000 in the balance of payments for 1951 rests is that the excessive imports over the last five months of the year will be £10,000,000 greater than in the last quarter of 1950, as compared with an increase of £31.7 millions in the first eight months of the year over the corresponding period in 1950."
Then this was solemnly stated in the House: —
"On the basis of the available figures, there is no reason, no rational ground, for changing the estimate of £70,000,000 deficit in our balance of payments."
Although the White Paper is only an October Paper it is based on the figures for the first nine months of the year and £70,000,000 is the figure. By mid-November the Minister has got another month and a half to consider the whole matter and there are only six or seven weeks of the calendar year to run. Yet he bases his whole policy again on the fact that there will be a deficit of £70,000,000 in that year. We say that that was falsified to the extent of £10,000,000, and that that £10,000,000 error is, so far as the Minister is concerned, confined to the last six weeks of the calendar year and, so far as the White Paper is concerned, confined to a period of three months — the last three months of the calendar year.
There were two assumptions: that there was a bad deficit which was likely to be £70,000,000 in 1951 and likely to be £50,000,000 in the financial year 1952/53 and on those assumptions regarding the deficits the Budget policy was framed. The Budget policy was also framed on what the White Paper said: that the only way to rectify the balance was to cut imports and that exports, so to speak, were out. The Budget was later introduced on the 2nd April this year and in column 1124 of the Official Report on that day the Minister is recorded as saying this: —
"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."
I take it that that is the April, 1952 mood developed from the White Paper of October, 1951 and from the Minister's own views expressed in November, 1951. Continuing after the portion I have already quoted, the Minister said: —
"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."
Again the emphasis is on cutting: "We cannot afford the present scale of spending abroad in excess of our current external earnings". According to the forecast there was to be a deficit in the year we are in of £50,000,000. From that the Minister went on to say in column 1127: —
"As a necessary corollary to those two conditions of the 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."
After that the Minister came to the heart of the matter in column 1138, where he said: —
"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."
Later in the same column he pointed out: —
"To ease the process of adjustment to real costs, it is not intended to withdraw the food subsidies completely this year."
The Minister wanted a bit in hand, probably for the health scheme next year, through a further cut in the flour and bread subsidies. Am I wrong in assuming that the Budget policy has been one which aimed at reducing the spending power in the hands of the community? If the food subsidies were cut, as the Minister cut them, was it not quite clear to the Minister's mind that there would be less money in hand to spend on certain other things? He expected that the same amount of bread and flour, sugar and tea, would be consumed but as these would cost more, the conclusion clearly was there would be less money in the people's hands to spend on such things as items of apparel, houses and house furnishings. I suggest that that policy was clear. It was to stop the inflow of purchasing power into the hands of the people; in that way you would stop the excessive spending abroad, and in that way you would be in line with what the White Paper called "the inescapable conclusion", namely, the only way of getting substantial relief in our balance of payments is by importing less.
I suggest that the White Paper had those two grievous errors. It stated the deficit to be £70,000,000, when only six weeks after, in November, we had the Minister's statement showing us that the calculation was £10,000,000 out on a quarter of the year. In order to rectify the position as it had been stated, number one, that the deficit last year, would be £70,000,000, although it was not, and the deficit this year would be £50,000,000, there was, of course, a great need to collapse purchasing power in the next five months, and that the Budget set out to do.
As I said in regard to these matters, after the war in Korea had started the Government information was that prices were rising and the cost of necessary imports was going to fall much heavier on the community than before. We must remember that we were in the region of forecast, possibly in the region of attempting to prophesy what was likely to come. As I said, it was not a rash forecast. We made our forecast based upon our judgment. That judgment was based upon figures that were presented to us, figures that showed the actuality, figures that tried to project themselves into the future. We took into consideration the trend of trade and examined the objects which were likely to be purchased at the enhanced prices. We were very much in the region of forecast and we did make our programme. The programme we had before our minds was not to any degree lessened or diminished in the amount we intended to spend because of what had happened. We felt there were certain correctives to be applied. We felt the balance of payments would not be as big when certain accidental matters had passed. We felt also that the terms of trade would take up in our favour. In addition to all that, we felt that the export situation was improving and that we would have more money arising from those exports to spend on those necessary imports.
I suggest that what has happened since the outbreak of war in Korea to this particular date has shown that our programme was a good one and that in so far as we did forecast anything, the forecast was an accurate one. I want to put in contradistinction to that the forecast of the White Paper of October, 1951, the Minister's forecast in November, 1951, as well as the Minister's forecast made on 2nd April, 1952. Again to mark the contrast, this surely must be taken into consideration: the Minister was not so much prophesying or forecasting as we were. He had evidence through the months that had gone, the last three months of 1951 and the earlier months of 1952. These months gave him evidence as to the change in trade. These months certainly showed him, according to the Tánaiste here recently, that the terms of trade had substantially altered in our favour in the first three months of the year.
Notwithstanding all this they went wrong, and they went wrong in a way that has hurt the community and has led to the outbreak of indignation on their part which gave us a new Deputy to this House. There was no necessity for the Budget harshness of 1952. As far as that necessity was based upon wrong figures, then the Minister is responsible for accepting the wrong figures. If he is still relying on the same type of figures now being produced he ought to learn from the past particularly when that error is so near to him.
This year we are told the situation has improved. It has improved and as regards the international payments side, exports are responsible for half of that improvement. In so far as it is a question of reducing imports, the terms of trade are helping there. We were doing stockpiling when we thought it was necessary and the community, following our lead, were doing likewise because they thought it was necessary. That stockpiling is now apparently over. Not merely is that the case but the Central Bank report this year calls attention to the fact that the situation in regard to imports is due to what they call destocking. That does not mean stockpiling. It means running down not merely the stocks brought in on the programme of stockpiling but it even means running down the stocks of tobacco which we had and of which we left a two years' supply to the Minister. The same thing will apply to many other commodities where many years' supplies of different items were left. A fictitious improvement to that extent in the balance of payments has been achieved by the Minister and his Government through running those stocks down. I do not know what the argument this time is on the part of the Government, but coming from the Minister it is that he is trying to gear our whole economy to a war situation. In any event there is an improvement and the improvement was marked even in October 1951. It was more marked in November 1951. It was so marked that the Minister could hardly have failed to realise it when it came to his Budget in 1952 except for the fact that he had gone moaning up and down the country and it was not opportune for him to retract at that time. The country had to be made pay for all the advice that he got that was bad in itself and was worse on account of his taking it.
We did feel it was necessary to keep the programme under review although we did not modify it. We did not feel there was any necessity to modify it. We felt confident that what we were doing was correct. We felt that the bad times anticipated were due to the Korean upset and even though the war in Korea itself had not passed, we felt that there was no reason to alter the orderly and systematic programme we had set before ourselves. We did on that occasion what must have been unexampled in the history of this country. We called into conference the editorial representatives of the four daily newspapers of this country in the autumn of 1950. We told them what we were doing. We explained our programme to them. Part of the terms used to that group was that it was quite certain that there would be a marked disequilibrium in the balance of payments on account of what we are doing, and that that would occur pretty well immediately. We told them that we were not anxious about that. We were not anxious because we did not believe that it would have a repercussion of a permanent type upon the economy of the country. We put the cards on the table before the representatives of the four daily newspapers in the country. We did tell them we relied upon them, on account of a danger we indicated to them, not to give publicity to this matter at the time. The danger we pointed out to them was that as we were going in for stockpiling, if attention was suddenly directed to the marked deterioration in the balance of payments situation or to any great increase for a couple of months in either the value or the volume of imports, it would make it much more difficult and more expensive for those whom we were sending to purchase stores which we thought were necessary stores for Government Departments. That is in the memory of the four editorial representatives of those papers who met me and colleagues of mine. They know that in 1950 we anticipated that there would be a worsening of conditions on the surface and temporarily. We warned them of what we were at and we told them why we were going to continue along the path we were travelling. We exposed our hand to them and we explained to them the reason why we thought that was not going to be of any future harm, that the situation would rectify itself. We gave them data upon which we came to that conclusion.
So far as prophecy was concerned, so far as forecasting was concerned, we had a programme. We had a programme that was not indifferent to the circumstances of the time. We had a programme that in no way neglected the immediate bad return that there was going to be from it but we were confident that the programme would work out. We felt so firm in that belief that we did, as I say, what must have been unexampled in the history of this country, by making that clear to four editorial representatives that that was the plan and that that was going to continue, that it was likely to have certain results, which would be passing, and that the new situation would develop along the line we forecast because of the examples that we gave them and the arguments that we used to them.
Notwithstanding all that and notwithstanding, as I say, that we were forecasting and that there was no great certainty about matters, the Minister imposed this Budget of 1952 on the community.
Deputy Cowan talks here to-day about the bankers and his hatred and detestation of bankers. He also criticised the Minister for having accepted the advice that came to him, as he puts it, through banker channels, or, else, through people whom he puts in at least as poor a category as the bankers themselves. It is too late for a Deputy Cowan or any other member of the Party that accepted the Minister's arguments to speak in the circumstances. The Deputy accepted the Budget and the Deputy and other Deputies had pointed out to them that there was a philosophy behind the Budget, the philosophy of the Central Bank.
We pointed out that it was based upon these two fundamental errors in the White Paper — the one that said we could only achieve good in the bad situation that there was represented to be by cutting imports; and the second, that in the year towards which the Budget was looking, a deficit of £50,000,000 had to be contemplated. We challenged both these figures as well as one other matter and against us were all the Fianna Fáil Deputies and the four or five satellites who were in support of them. They were in support of a policy that was clearly stated and made clear in argument — it was, that money had to be taken out of the people's pockets by taxation of a fierce type as, otherwise, that money would be spent in such a way as would call for imports from England and, therefore, this gruesome matter of the balance of payments would not have been correctly managed. That was the whole theory of the Budget.
At the Fianna Fáil Ard-Fheis this year the Tánaiste could say that, of course, they were not against a readjustment of wages to meet the new condition. The Budget was. The background of the Budget was that people were spending too much because they had too much to spend. There was that simple phrase of the Minister's in column 1138 that the Government were satisfied that as incomes generally have already advanced more than the cost of living there was no justification then for the policy of subsidies.
If language means anything, does that mean anything else than this: "Over the three years of the inter-Party Government your salaries and wages got a little bit in advance of the cost of living figures. We are going to meet that by raising the cost of living so as to take away from all of you wage and salary earners the amount that you got extra over and above the cost of living?" If there is any meaning to be read into this phrase other than that, I would like to hear it. That was a phrase that I said was paraphrased in this House as meaning that people were too well-off and the Minister was going to see that he would reduce them to the old-time situation where at least the cost-of-living index figure would be somewhat in advance of the figure that measured the increase in wages and salaries.
That was a vicious policy. It was a policy which was accompanied by depression all round. It was meant to cause depression all round. It was meant to leave less money in people's hands for their purchasing. If that was the case, it meant clearly that business must go bad. In addition to that, bank credit was restricted so that people, where they could not earn, were not going to be permitted to borrow, even where the borrowing was for schemes that had been previously sanctioned and that, apparently, the banks thought were good schemes. In those circumstances, the restriction of bank credit added to the lessening of purchasing power in the people's hands was inevitably going to bring about recession in business and that everybody knows to be here over the last year and a half.
Mr. A. Byrne
Hear, hear! Unemployment.
There are two grave errors in the White Paper. Those two grave errors were accepted by the Minister. As the months went on and the new figures came in, revealing how glaring these errors were, the Minister did not change. He carried forward the mood of the October White Paper into November in the speech I have quoted and again into April and, in the months that followed, when the Budget and the Financial Resolution and the whole Finance Bill went through this House, again and again the Minister led his followers in the various divisions that were challenged to make them vote against the people, to make them vote against the standard of living of the people, to make them vote for depression in the lives of the people, to make them vote for depression in business, to bring about the condition that was represented here recently to the arbitration board in connection with the Civil Service that, for the first year in about seven years, the return from direct taxation, that is to say, the return from taxes on income, from taxes on trading profits, will be down next year. It will have to be down. When one works for depression, reduced trade and reduced profits, the conclusion must follow. The conclusion was there and that is the conclusion that, deliberately, Deputies who are facing me brought about in the attack on the people's standard of living based upon the glaring error that this had to be done in order to rectify the balance of payments and, in any event, whether it was right or not, sure, were not the Government satisfied that salaries had gone higher than the cost of living warranted and, therefore, was it not proper to reduce the standard of living of the people by reducing those wages and salaries?
I was told in the Budget speech of 1952 that the Budget I left did not balance. I made comments upon that conclusion that very day and now that we are still further from it let me go through the figures again. The deficit was said to be £6.7 million — that is for the last year. In that £6.7 million alleged deficit there is £3,100,000 for fuel losses. The Tánaiste himself had said that if that sum of money was added to the national debt it was well done and that we were as well out of the war situation, better out, than any nation in the world. Of course, he made the point of putting in as something naturally not to be met out of current revenue, the new prices that were due to be met and which had been fixed for meat and butter, £600,000.
When the Tánaiste was bringing in two Estimates for Córas Iompair Éireann, he pointed out two items, stockpiling and future replacement of some of the capital goods of Córas Iompair Éireann, £850,000. Those three items together came to £4.6 million. Take those from the alleged deficit of £6.7 million and we have to answer only for £2,100,000. The forecast for the next year showed that the revenue was expanding, as it had done in each of the previous four or five years, when there had been an expansion in revenue, mainly in income-tax, which was up £2,750,000. If those were the only commitments to be carried forward to the next year, and if the Minister had made no new commitments — the Minister could not include the turf losses again, they had not to be met a second time — and if he had accepted only my own commitments and taken away only the fuel losses and the stockpiling and the replacement for Córas Iompair Éireann, there was left a sum of money which could have been and would have been equal to the new revenue which was forecasted and which is now in process of being gathered in. The extra revenue of £2.7 million would have given a balance in the Budget on the commitments carried in and left something in the neighbourhood of £750,000 over. In addition, it is now known that, in an account for which he said there was a deficit of £6.7 million, the Minister carried out £2,860,000.
I wonder if in the history of trade and commerce or even of governmental finance there is any example of anything similar to that — a declaration that the Budget is unbalanced to the extent of £6,750,000, while the man who so declares has in hands £2,750,000 in cash. Yet that is the pretence which was forced on the country.
In the Minister's Budget speech, as reported at column 1130, he told us that the computation for the year 1951-52 showed expenditure amounting to £87.9 million. Included in that £87.9 million there is expenditure on reserve stocks £1.8 million and there is £2.7 million paid in discharge of arrears on the fuel subsidy. £1.8 million was a forecast; the actuality was about £0.8 million. There was stockpiling to the extent of £800,000 and arrears of fuel subsidy paid in the year were £2.7 million. That is £3,500,000, all told. There was no stockpiling, I understand, arranged for this year and there was certainly going to be no fuel losses. Between those two items last year you had expenditure of £3,500,000 and we are told that the total expenditure in fact proved to be £87.9 million. If you subtract the items not going to recur, £3,500,000, from the £87.9 million, you get £84.4 million. The revenue, according to the White Paper produced with the Budget, was estimated at £86,581,000, so the revenue for the year we are in, with no extra commitments by the Minister, amounted to £86,500,000, while the expenditure that he had, leaving out fuel losses and stockpiling, was £84,500,000. Therefore, the Minister had £2,000,000 to spare on that calculation. Yet I am told that was a Budget that was in arrear. I know the difference between one year and another.
What I am pointing out is that the Minister has made a pretence before the public that the Civil Service could not get an increase in salaries, neither could teachers, the Army nor the Gardaí, unless the subsidies had been cut. I pointed out to him that he estimated the yearly expenditure for 1951-52 at something short of £88,000,000 — £87,900,000. In that there were fuel losses and some element of stockpiling and I take those off and it comes to £84,500,000. In that £84,500,000 there were the payments for the Civil Service, not merely for a year but for 15 months and there were payments with retrospection to the other three classes I have named — the Gardaí, the Army and the teachers; so that there was more than a full year's payment for those classes in that figure of something short of £88,000,000. Yet the Minister is able to face the House here and say that owing to the expansionist policy we carried out, revenue is still on the upgrade and the revenue forecasted adding in the Minister's taxes, with no subsidy, and the whiskey, tobacco and beer taxes, was of the order of £86,581,000. So even if the Minister were going to pay this year again 15 months' payments to the Civil Service and others, he had £2,000,000 in hands to play with, arising out of the good condition of things that we left.
Deputy Cowan objects now to being at the mercy of the bankers, but Deputy Cowan voted to cut the subsidies, on the first presentation of the case made by the Minister. Deputy Cowan says that the present Minister and I talk the same language, the jargon, so to speak, of public finance. I suggest that it is not the speech that counts, but the activity. I was advised to overtax in order to get the money required for those capital purchases we had in the Estimates. But I thought them to be apt for borrowing. I was asked to get that money by over-taxation and I refused to take it that way. I expressed the opinion this year that the present Minister was getting the same advice and was taking it. I believe he is still taking it.
The Minister makes a poor mouth with regard to the present Budget. He has told — for, of course, the special purpose of prejudicing the arbitration award — the public, through his representatives, that the subsidies had to be cut in order to allow the Civil Service payments and that next year was going to be far harder than this year. He has told us that the taxes that he imposed in April of this year are not producing the desired revenue. Certain items were spoken of at that arbitration, the tot of which I made out to be £4,500,000, and if that is a true calculation it means that the revenue forecast in the Budget is going to be down by about £4,000,000. I know nothing of that. It may well be that when we were criticising the Minister's policy in April of this year we did not make enough allowance for what inefficiency and blundering and bungling could do. It may be that we underestimated the effect on the public of the hardships imposed by the Budget. I move to report progress.
Progress reported.
Committee to sit again this evening.