The fact is that many of the people who spoke about reducing expenditure were people who had been in office on a previous occasion, and they should have known that one cannot decrease expenditure and increase social and other benefits at the same time. The two things are impossible of achievement, but reducing expenditure was a good catch-cry for election purposes: "We will reduce expenditure by so many millions" was the slogan.
The proof of the pudding is in the eating. The figures are there for everybody to see. Within a very short time of the last Government assuming office it will be found that, comparing their expenditure with expenditure in the previous period, expenditure had gone up by several millions. Government expenditure was not reduced during that period.
It is inherent in politics that an Opposition must always strive to do the things that are popular. An Opposition does not bear the responsibility that a Government has — to make ends meet. An Opposition does not strive to make ends meet. They are not compelled to try to balance their accounts. It has happened in the past, it will probably happen in the future, that on every occasion on which a measure is introduced conferring benefits on certain sections of the community the Opposition will seek to increase those benefits and subsequently, when the cash has to be found, they will oppose the measures necessary for providing the cash.
The point I want to make is that, unless the Opposition claims that this is a time in which we should have deficit budgeting, they can make no case that the Government policy of balancing the Budget has in any way whatsoever led to the present position. It will not surprise me if some of them talk about deficit budgeting.There was deficit budgeting in the past. There had been deficit budgeting when we took over in 1951. There was, in 1951-52, a deficit of some £4,000,000 on items that will not be disputed by the Opposition as being current items. We had in that year a deficit of £4,000,000.
Are we or are we not to borrow to meet current expenses? We hold that whilst under very exceptional circumstances deficit budgeting may be resorted to in order to meet a special emergency, if we want to get down to normal working and if we want to achieve something like stability and something permanent, we must make ends meet and revenue must balance expenditure. Increased taxation does, of course, take out of the pockets of the individual money that the individual would otherwise have an opportunity of spending for himself. If it is taken by the State it may not be spent to the best advantage in order to meet local needs and to encourage private enterprise, which is the best way of giving employment. So much for the first point in our financial policy of balancing our Budget.
The next urgent problem confronting us was to try to reduce the deficit in our international payments account. When the official figures were calculated it appeared that there was a deficit in our international payments for the year 1951 of £61.6 million. In the previous year there had been a deficit of £30,000,000, and in the year before that a deficit of £10,000,000. It will be seen from those figures that there was a progressive increase in the magnitude of the deficit.
These deficits meant that by corresponding amounts our net external assets were being reduced, and that over a period of three years there was a reduction of over £100,000,000 in our net external assets. In 1949 the total of these assets was reckoned to be about £225,000,000. I think £400,000,000 represented our gross external assets and our liabilities amounted to about £175,000,000, leaving a balance of £225,000,000.
Most of these figures are, of course, estimates. They are as accurate as a competent investigator could make them. So far as I am aware, they have not been seriously questioned. At the end of 1951 we had only £125,000,000 worth of net external assets. That was the amount that saved us from being a debtor instead of a creditor nation. A couple of years with deficits in the region of £61,000,000 would have changed us from being a creditor to a debtor nation and would have left us without any net external reserves, with all the adverse consequences that would flow from that situation.
At the moment, in case of necessity, we can for any good or sufficient reasons realise some of our external assets. They are available, and we can use them. If, however, we were to continue along the road on which we were travelling in 1951, in two years from that time we would have come suddenly to a situation in which we would find ourselves without any reserve to call on in time of necessity.
Will the members of the Dáil say it was wrong financial policy that we should aim at changing that situation and drastically reducing that deficit? The best way of doing it would be, of course, if you could, to increase production and increase our exports, but that is something which, with the best will in the world, you cannot do quickly. It takes time to have productive enterprises mature and give you the results which you hope for when the enterprises are being embarked upon. Increased production is the cure, and perhaps, before I conclude, I will repeat what I have said many times about the direction in which that increased production can best be secured. At any rate, it would not give us within a year the results we felt the situation demanded, so we had also to reduce imports, to go through the list of imports and discourage those which were not vitally necessary.
The year 1951 and preceding years were ones in which there was a tremendous increase in the amount of our imports. There was, as a result of the Korean war, feverish stockpiling. Because of that and also because of the general monetary and financial situationhere, there was a great deal of over buying, with no attention being paid to savings. The worst feature of these deficits I have mentioned was that, if you take, for instance, the increase from the £10,000,000 to the £30,000,000 of this £20,000,000 only about one half represented capital formation. The rest was spent on consumer goods. If you examine the next year's deficit, you will find that of the £31,000,000 by which the £61,000,000 exceeded the £30,000,000, only about one half corresponded to capital formation. The other half was expenditure over and above that which would have been possible if we were to live strictly within our means and make consumption and production meet. This situation meant that there were really no savings in the year 1951. A general examination of it shows that there was practically no community saving; yet, while that was happening, there was a very extensive campaign of capital investment.
As far as the second point in our financial policy is concerned, again I put it to the Dáil that it was adopted essentially to safeguard the nation economically. The dangers of these high deficits were well understood by the Opposition when they were themselves in Government, with the responsibilities of Government on their shoulders. When the deficit increased from £10,000,000 to £30,000,000 they gave warning of the dangers and pointed out how alarming was this increase. Surely, if it was alarming when it went up to the magnitude of £30,000,000, it was sufficiently alarming to make the Government of the day look sharp and take action when it reached £61,000,000. I say, then, that on these two points of general policy, if the Government were to do their duty at all, there was no alternative for them.
We were not against capital investment. We had plans in 1947 which indicated a considerable expansion in capital investment for which the State would be taking the initiative and be largely responsible. But at all times we knew that there were limits to what could be done. We were not like thefrog that wanted to become equal to the ox and blew himself up in the process. We realised fully what were the limitations of our financial and economic resources and that we had to live within them and not to imagine that we had the resources, say, of the U.S.A. or some other big nation. Our resources were definitely limited, and we had to live within them if we were not going to jeopardise the economic future of our nation. Therefore, as far as balancing the Budget and trying to bring about a balance in our international payments are concerned, the Government took the only course that was really open to them to take.
The next question was our capital programme. As I have said, we were never opposed to capital development. At no time have we said that any reserves which we had outside should not be brought home if they could be used for production here at home giving dividends anything like what they were giving while they were outside. Perhaps we should have been more conservative than that. The return on our external investments enables us, year by year, to bring in millions of pounds worth of goods, just as if we had sent out exports to an equivalent amount. They were valuable in enabling us to import these goods every year. They were producing capital and consumable goods which we needed to the extent of several million pounds, the amount varying from time to time. If you part with that right or power to get goods from outside, you must see that goods are produced at home to something like the same amount. The only test we ever had with regard to the realisation or utilisation of these foreign reserves was to see that they were employed here in a manner that would give the same national dividends in the way of goods or the utilisation of national resources.
From the very beginning, Fianna Fáil set out to develop the national resources of the country, and wherever it was a question of utilising some of our outside investments to get that done we have never hesitated to use them. Let nobody suggest that as a Government we were against capital development or the realisation orreturn—or, using that famous word, the repatriation — of our assets or some of them.
What was the actual capital requirement in accordance with the programme which we set before us and which was also the programme adopted by the Coalition Government, when it changed its old attitude and reverted to the policy of Fianna Fáil in these respects? The policy of capital development became common policy, and the only question was the extent to which it could be done and the manner in which it could be done. We are running now at a rate at which, according to the latest the Minister for Finance has told me, there are demands amounting to something like £47,000,000 for the coming year. Taking it generally, there was a demand this year for something like £42,000,000, of which £35,000,000 is for direct Government enterprise, for the financing of which the Government became almost immediately responsible, and the remaining £7,000,000 is required to meet other needs, such as those of Dublin and Cork Corporations. Therefore, £35,000,000 was the immediate State requirement.
To meet that, one should have current savings to practically the same amount, that is, if we were to act on a sound basis that would continue. I am not going to say that that should not be supplemented, that it could not be very profitably supplemented, by the realisation of some of our foreign investments, on the conditions I have mentioned — that is, when we do realise these foreign investments they should be applied and used here in a manner in which they would be at least as productive as they have been and supply us directly with the goods which we were indirectly getting through them from outside.
Compare that £35,000,000 needed with our savings. I have told you that our savings in one year were nil. Can we get them up to £35,000,000? The savings which the State could hope to get were practically nil. How were we to get those savings stepped up to such an extent that there wouldbe some £35,000,000 over and above the ordinary needs of private enterprise? About one half that figure seemed to be the sum one would arrive at as being likely. Is it unreasonable to look for savings of the magnitude of £35,000,000 annually from the community? The national income, according to the latest figure we have, is about £369,000,000. Ten per cent. of that would be about £37,000,000. Is that an unreasonable amount to look for? In other countries they are able to save from 10 to 15 per cent., and it is not regarded as unreasonable. We ought to strive to get at least 10 per cent. Are we able to do it? The indications were far short of that. The sum we were likely to get was far short of that.
Under those circumstances if we are to keep up this rate of capital investment at home — of a magnitude of from £35,000,000 to £40,000,000 — there will be a very heavy demand on our external reserves. These reserves are not unlimited. Even though we could do it we should think twice before we deprive ourselves completely of these reserves, even though there are some projects at home in which they could be usefully applied. If we are careful not to make the demand too heavy we can use them to supplement our savings for capital development here up to a reasonable sum for a number of years, but we certainly cannot afford to draw on them as heavily as we have been doing in some recent years.
Some people seem to suggest that the amounts that are available are far greater than they really are. Take the sums that are available to the Minister for Finance directly through Post Office savings, Savings Certificates and some other departmental funds. The liability standing against the sums which he holds, the repayments which can be demanded from him in cash, amount to about £86,000,000. The latest figure I have shows that, in external assets, he has only about £30,500,000.
The money which the Central Bank has to meet the legal tender notes is some £65,000,000. There has been agood deal of discussion as to whether all that money should be kept in external assets or whether some of it should not properly be put into Irish securities. That is a question of which different views can very well be taken. At the moment, there is no immediate need to decide which way it should be done. If a decision had to be arrived at, I have my own views about it; but I do not think a decision has to be arrived at, as there are other resources. It is a matter on which there are strong differences of opinion. We can leave it aside for the moment, but if it became a question of having to take a decision, the Government would take a decision on it.
The next item in our external assets is the amount held by the commercial banks. The net amount is, I think, something about £109,000,000.
The total under these headings for March, 1952, was about £211,000,000. That seems a substantial sum, but when you inquire how much of that is really readily available, you find that there are considerable restrictions in regard to the realisation of these sums. The commercial banks have their own obligations and responsibilities. So far, we have not found any enterprise for which we definitely wanted money in respect of which we were not fairly met by the banks. I am sure that will be the position in the future, but if a different situation should arise, that particular situation would have to be dealt with. It has not arisen immediately, anyhow.
The position is that, at considerable loss, we have realised the assets which were necessary to carry out our capital programme. Year by year, it is going to become more difficult, unless we have a greater amount of savings; and the whole economic position is going to be more difficult unless we are able to step up production. The stepping up of production is, from the general economic point of view, the main aim of the Government's economic policy. There is one direction in which the stepping up of production is obviously possible and immediately called for, and that is in the agricultural industry. Anybody who studies the situation—and a number of people have studied these matters, over recent years in particular — must be convinced that agricultural production can be stepped up at a far higher rate than any other production, by proper attention to it.
The land is calling out for fertilisers, for lime—or ground limestone, if you wish to put it in that form — and other fertilisers. In other countries the amount of fertilisers used is many times the amount we use, and they have production accordingly. We have been appealing to the farmers to bear that fact in mind and to remember that a small initial outlay is able to produce over a period of years many times the amount in crops of the cash that has to be invested. There is the question of credit, which is a matter which is engaging the attention of the Government with a view to seeing, if credits are necessary, how these can best be provided.
There is also the necessity to produce the things required for increased production, such as ground limestone, and the question of how that can be produced in the quantities required and made directly available to the farmers. An increase in production will, of course, enable us, with the same rates of taxation, to bear the burdens much more easily, and it is in that direction that we have mainly to seek for relief. The time has come when we are bearing a burden of taxation which is already so heavy that we are practically staggering under it. If we are to continue increasing benefits, social and other benefits, increased taxation is necessary. If we have increased production, that is tolerable, but we have reached a point at which, without increased production, further taxation is going to be definitely harmful to the community, and, so far as we are concerned, we are going to set our faces definitely against it.
I have said all this as an introduction to the problems which we have to discuss mainly because I want to point out that the steps the Government has taken, the financial and economic steps, were steps which were absolutely necessary to meet the grave problems with which we were faced when we came into office. The suggestion ismade, first, that some alternative policy could have been adopted, and I am trying to prove that there was no alternative, in the situation with which we were faced, but to do the things we did. In addition to the suggestion that there were alternative policies, there is the suggestion that some of the things that have happened have happened because of that policy, but that is a suggestion that cannot be sustained either.
We are quite willing to admit that heavy taxation does make for less expenditure by the private individual and that its general tendency is to decrease the amount of employment that would otherwise be given. I think that is true, and I will not seek to dispute it. Generally, if you are taking out of the people's pockets money which otherwise they would be at liberty to spend and would be likely to spend in a way in which employment would be given, there will be less employment, and employment by private individuals is far preferable to, and far more elastic in its nature than, employment given directly by the State. The fact that taxation is heavy is admitted. If we could have lighter taxation, we would probably have, in certain directions anyhow, more employment, but the taxation was necessary to meet the expenditure on State and other services, the social services, for the removal of which I have heard nobody in the House put up a case. The present social services have, so far as I know, been accepted by all sides of the House.
The unemployment in the main, up to the present anyhow, has been due to the fact that there was at the outbreak of the Korean war buying and stocking up of materials at high prices. The public were slow to buy at these high prices. A lot of consumer goods were brought in here, which meant that some of our factories which would have been producing these goods were on short time. I instanced the other day the case of the clothing and textile industries. The using up of these stocks has taken place since the high price boom which followed the outbreak ofthe Korean war. Once that subsided a recession began to develop. These stocks of materials have been slowly used up. The using up of these meant that some of our industries were not working at full capacity. Our aim was to try to reverse that situation as quickly as we could. Consequently you had the Minister for Industry and Commerce reintroducing bit by bit, according as it was possible to do it, protective measures mainly intended to restore employment and, if possible, to increase employment in some of the manufacturing industries.
