In introducing the Budget for last year I emphasised the urgent need torestore order in the public finances and in our general economy. I explained that, while these objectives would take longer than one year to attain, the Budget would facilitate their achievement. Looking back on the year which has passed, it is plain that we have progressed a long way towards the attainment of our objectives. We have succeeded in bringing the current revenue and expenditure of the State closer to equilibrium, while at the same time we have reduced the balance of payments problem to manageable dimensions.
VIEWS ON BALANCE OF PAYMENTS.
When, last year, I stated that the deficit in our balance of payments, which began to grow ominous during the latter part of 1950 and the earlier half of 1951, was our greatest anxiety, I said nothing that the Dáil and the country had not already heard many times over from both sides of the House. For instance, even as far back as July, 1939, according to column 1817, Volume 76 of the Official Report, Deputy Dillon declared
"It is plain to the observant that, unless we correct the adverse trade balance, and correct it soon, we are going to have a crash."
In May, 1948, the Coalition Minister for Finance said that it was
"impossible to view with equanimity a continued reduction in external assets on last year's scale. These assets can be consumed now only at the expense of a reduced standard of living for the future ..."
(Volume 110, column 1053.)
Three months later, in August, 1948, Deputy J.A. Costello, who was then Taoiseach, told us that the adverse trade balance had grown
"to an extent which must cause anybody who thinks about it for one moment or who looks at the figures the utmost alarm for our economic and financial stability."
(Volume 112, column 2146.)
In his Budget speech of 1951, mypredecessor, Deputy McGilligan, reminded the country that
"deficits in the balance of payments cannot be sustained for more than a short period"
(Volume 125, column 1880), and then sounded the warning that
"the present position"—that is at 2nd May, 1951—"on external account is by no means satisfactory and if it continues to develop unfavourably the application of corrective measures will be called for."
(Volume 125, column 1883.)
BALANCE OF PAYMENTS, 1951.
The balance of payments position unfortunately did continue to develop unfavourably. The deficit of £30,000,000 which had emerged on external account for 1950 continued to mount and the year 1951 eventually closed with a balance of payments deficit of £61.6 million. If our predecessors regarded a deficit of £30,000,000 as "disquieting" or as a cause for "the utmost alarm", if they had warned the country that "deficits in the balance of payments cannot be sustained for more than a short period" and that, unless we could "within a few years equalise our external receipts and payments, we must inevitably suffer a decline in our living standards", were we to ignore the alarming significance of this adverse figure of £61.6 million? From statements which have been made from time to time, it would appear that we were. The Government were admonished, in fact, to watch and wait for some spontaneous and mysterious process to put matters right.
EFFECT OF GOVERNMENT ACTION, 1952.
Fortunately the Government did not adopt this attitude of helpless fatalism. On the contrary, they did what my predecessor in his Budget speech of 1951 had foreshadowed would be inevitable, they applied the requisite "corrective measures". Recognising that the immediate necessity was for budgetary equilibrium, they took steps to balance the current Budget. At the same time, efforts were made to encourage homeproduction and saving, and imports were reduced. In consequence, we emerged from last year with a deficit in the balance of payments which the Central Statistics Office inform me was £9,000,000.
FINANCING OF 1952 BALANCE OF PAYMENTS DEFICIT.
This deficit of £9,000,000 was financed mainly by the sale of sterling assets by the Government and by private owners and by external subscriptions to the 5 per cent. National Loan. The sale of assets and the incurring of debt to foreigners outweighed the increase shown in the external assets of the Irish banking system.
The figure for the balance of payments deficit is the lowest in the postwar period. Yet it would be wrong to conclude from this fact that the position no longer requires close attention. During 1952 certain factors of an unusual character contributed to narrow the gap between our external expenditure and our externally derived income, and these are not likely to recur this year in the same degree. Nevertheless, making all due allowance for these special factors, when we contrast the out-turn of 1952 with that of 1950 and of 1951, I think we have reason to congratulate ourselves.
DEFICITS WITH CURRENCY AREAS, 1952.
The balance of payments problem exists, of course, independently of any question of foreign exchange difficulties, but in existing circumstances it is important for us to keep under review not only our general external balance but also in a special way the position in relation to non-sterling countries. The fact that, in association with the great improvement in the over-all balance of payments last year, there was a substantial decline in our deficits with the dollar area and with the rest of the non-sterling world is, therefore, very satisfactory also. The figures which I now propose to give in that connection are those of actual payments and receipts as recorded by the Exchange Control. They are notidentical with those which appear in our published balance of payments statistics because the latter record trade transactions at the time of physical import and export of the goods, whereas the time of payment may be either earlier or later.
Because international payments problems are centred on the dollar, the balance with the dollar area, from which we have to buy so many commodities vital to our economy, may be referred to first. To get a true comparison we must exclude Marshall Aid receipts, for if these are included, comparative statements as to our real deficit with the dollar area could not be clearly presented. In 1951 our payments for imports and for all other purposes to the dollar area were $117.9 million while our receipts, including exports at $10.4 million, totalled $48.3 million; the deficit was, accordingly, $69.6 million. In 1952, the corresponding figures were payments $80.5 million, receipts $52.1 million (including exports $11.1 million) and the deficit $28.4 million.
In 1951 we had a deficit of £27.4 million with the non-sterling members of the European Payments Union on trade and other items. Last year we succeeded in reducing it to £20.5 million. In the final summation, our global deficits, expressed in pounds, with all countries outside the sterling area in respect of 1951 and 1952 were, respectively, £58.7 million and £34.1 million.
1952 BUDGET.
It would be idle to claim that equally gratifying results were secured in relation to the problem of the Budget; but even here substantial progress was made. As the Dáil will recall, when the Budget for 1952-53 was framed, the problem which the Government had to solve was three-fold. We had, first of all, to try to ensure that the deficit thrown up on the Budget of the preceding year would not recur. Then we had to meet the inevitable increase in the current cost of the public services, and, finally, we had to procure funds to finance the social welfare legislation of 1952. All told, there had to be found, either by reductions in Stateexpenditure or from fresh taxation, a sum of over £15,000,000. We struck the balance as narrowly as we possibly could, seeking no surplus, making no unnecessary economies and imposing no avoidable taxation. In the event, as I shall detail later, we fell somewhat short of our goal of a balanced Budget.
PUBLIC CO-OPERATION.
As well as the significant changes in the budgetary position and in the balance of payments which I have outlined, another matter merits special mention, namely, the diminution in the inflationary effect of State capital outlay. A closer approach to monetary stability has been secured. This has been due in large measure to the greater tendency of the community to save and to the increased readiness of its thrifty and industrious members to entrust their savings to the Government for investment in works of national importance. The record response which the saving and investing public gave to the National Loan in September last was a striking manifestation of confidence and the Government are particularly appreciative of it.
The nation, indeed, has much for which to thank its provident and responsible citizens. Without their practical support the country would not have made such substantial progress towards economic recovery. If the public had not responded to the needs of the situation by saving more and spending less on imports of consumer goods, last year's Budget of itself could not have been so successful in checking and redressing the unhealthy development of recent years. In this connection it is salutary to remind ourselves that, while the activities of the State have a considerable influence, they are not of predominant importance in our economy. Private decisions as to work, investment, consumption and saving play a major part in shaping the course of our economic and financial affairs. If the public continue to cooperate, especially by producing more it will be all the easier to overcome our economic and financial difficulties. Recovery in production and trade isalready under way and this Budget will stimulate it.
REDUCTIONS IN IMPORTS, 1952.
It is satisfactory that the improvement in the balance of payments to which I have referred was achieved so quickly and without any marked or general disturbance of the country's economy. As was to be expected, dispensable imports of consumer goods accounted for much of it. For example, of the drop of £32.4 million in total imports, one category alone, namely, textiles and clothing, accounted for £15,000,000. It can be fairly said that, in general, the import reductions were such as to cause the minimum of embarrassment to domestic interests. Indeed, the speedy action which the Government took to control imports of textiles and clothing helped considerably, not only to redress the adverse balance, but to restore and sustain employment in this important industrial sector. Apart from textiles, imports of materials for industry and agriculture were well maintained.
CONDITIONS OF 1953.
It is difficult at any time to assess future economic prospects but particularly difficult at present when world trends are so much in doubt. The proper course is to avoid predictions and to confine ourselves to a brief review of recent and current trends.
World prices of many basic materials have fallen in recent months. Our internal prices have by now borne most of the effect of the recent round of wage and salary increases. Stability seems at last within reach provided we avoid a further inflation of internal costs. The dangers of such an inflation at a time when costs are falling elsewhere and competition is becoming keener should never be absent from our minds. As it is, the prospective stability in prices is encouraging new purchases and there are already signs of increased activity in many industries.
IMPORTS.
A rise in such imports as are essential to support increased home production and enable exports to beexpanded is, of course, not to be deprecated. Other factors, however, may operate to enlarge our import total without necessarily increasing our export capacity or earnings. Purchases, for instance, to replenish stocks used up in 1952 may tend to raise the 1953 import figures. If, in addition, the recent increases in wages and salaries should fail to be accompanied by an adequate expansion of output, the balance of payments situation might again deteriorate. Accordingly, although there are certainly good grounds for confidence, we cannot afford to be complacent about the future.
EXPORTS.
Last year, for the first time, exports exceeded £100,000,000. The actual total was £101.5 million or £20,000,000 more than in 1951. Of the rise in value, only £2,500,000 can be attributed to higher prices; most of the increase was due to greater volume. Cattle, dressed meat, tinned beef and the products of new industries, such as sweetened fat, showed the largest increases. In the last quarter of 1952, however, the rate of expansion slackened. Nevertheless, there has since been no falling back and, indeed, exports in March of this year were the highest ever recorded for a single month. The future course of exports depends essentially on the volume of agricultural output and on competitive conditions in external markets, and it has to be said that in some respects the latter have recently become adverse as, for instance, in the case of the trade in frozen meat to the dollar area.
PRODUCTION.
Estimates of national income, savings, etc., are not yet available but the provisional indices of the volume of production in industry and agriculture show the trend of national output. There was some improvement in agriculture in 1952. Gross output rose by 1.7% as compared with 1951. On the other hand, there was a slight decline in output in manufacturing industries. In general, the position was that national production was about the same in real terms as in 1951 and 1950. Inthe final quarter of 1952, however, there was a pronounced upturn in industrial output which was greater than could be ascribed to merely seasonal causes.
REAL INCOMES.
Although industrial production was lower, wage earners and other secured substantial increases in pay during the year, as a result of which the purchasing power of the earnings of the average worker in the transportable goods industries was by December, 1952, as high as in December, 1951.
EMPLOYMENT.
As regards the employment situation, there have recently been welcome signs of increasing activity in consumer goods industries. In the textile and clothing industries in particular, there has been a considerable increase in employment in recent months. The number of houses completed in 1952, with State aid, was 13,018, as compared with 12,125 in 1951 and 11,879 in 1950. Recently, however, the number of houses in course of erection has declined. It is too early to say whether the falling off in private building is likely to be permanent. It is certainly due in large part to the satisfaction of arrears of demand which had accumulated during the war and the years immediately following, when building materials were scarcely procurable. To some extent, the effect on current demand of higher prices due to increased costs of materials, wage increases and higher interest rates, may be responsible. In this industry, as in others, high costs have generated a consumer resistance which can only be overcome by a reduction in prices. Local authority building has also slackened somewhat; not, however, because of any shortage of capital, but because in some urban and rural areas much of the programme has been completed. In the particular case of Dublin, such delays as have occurred are occasioned by the need for development of sites before further housing schemes can be proceeded with.
EFFECTS OF EXTERNAL POLICIES
To arrest the inflation in prices andwages and to secure some measure of stability in external payments, other countries, during the past year or so, have been forced to make internal adjustments of a drastic character designed to reduce domestic consumption and to increase the surplus available for export. These measures have increased the intensity of the struggle for export markets, as the fall in import prices clearly indicates. Their effect has been greatly accentuated by the re-emergence of Germany and Japan as highly competitive producers. A slackening in rearmament demands and the movement towards greater freedom in international trade are other factors of significance. We have already felt some of the consequences of these developments and we may expect that they will become more acute. It is vital, therefore, that our domestic costs per unit of output be brought down; for, otherwise, we shall be priced out of our external markets.
POTENTIALITIES OF AGRICULTURE.
Whether we like it or not, there is no escape, so far as our export industries are concerned, from the effects of these world developments and we must adjust the circumstances of our production accordingly. This applies particularly to agriculture which is the sphere in which we have at once our greatest production and our greatest export potential. Unfortunately, that potential is still far from being fully realised. Taxation presses lightly on the land, so that there is little scope for any stimulus under that head. The Government have provided incentives in a more direct and useful way—by guaranteeing high prices for agricultural produce, by arranging markets, by draining, reclaiming and fertilising the land, by making credit available for the purchase of stock and machinery and by providing educational and advisory services. Accordingly, if the margin between the return to the producer and his costs should be reduced by the action of the forces to which I have referred, the only practicable remedy is to increase production and to spread farm costs over a larger volume of output.
FINANCIAL POLICY, 1953.
In the financial sphere, balancing the current Budget must remain our immediate objective and we must likewise strive to create conditions in which, so far as is practicable, capital expenditure will be financed from current savings. As an adjunct to this, the Government will continue to stimulate saving by making it attractive and popular.
II. —CURRENT BUDGET, 1952-53.
CURRENT EXPENDITURE, 1952-53.
The immediate aim of last year's Budget was the simple and modest one of restoring order to the public finances by bringing current expenditure and current revenue into line at £97,761,000. The figure was fixed for us by the commitments which we had inherited and by the obligation of fulfilling the pledges to expand and improve the social services which had been given by all Parties during the general election. The accounts for the year show that current expenditure was £97,966,000 or a mere one-fifth of 1 per cent. beyond what was budgeted for. It is true that there were Supplementary Estimates for non-capital purposes of £8,890,000 but of these £5,750,000 was provided for in the Budget— £4,750,000 for additional social welfare services and £1,000,000 for unspecified contingencies. In the controversy which developed over the Budget, it was suggested that credit should have been taken for over-estimation, in other words, for the probability that actual expenditure would in the end fall short of expectations. The answer which was given at the time was that experience of recent Budgets had shown that any such casual saving was eaten up by unforeseen supplementaries. And so it turned out in regard to the Budget of last year. There was almost an exact balance between the unprovided-for supplementaries and the savings realised in other directions.
CRITICISMS OF 1952 BUDGET.
So many criticisms were directed against the 1952 Budget that I may beallowed a minute or two to emphasise the absurdities and inconsistencies inherent in them. Take, for instance, the allegation, repeated monotonously and bolstered up with tedious arithmetic, that £10,000,000 of unnecessary taxation was imposed so that we should be in a position to show a surplus on the 31st March last. Incidentally, this phantom surplus occasioned much mental confusion among its inventors. They were never clear in their own minds as to whether it was to be used to finance capital expenditure or was to be held for the distribution of tax reliefs in later years. In any case, as the accounts have shown and as everyone knew from the start, their suppositious calculations had no basis of fact. There was no surplus. There was never intended to be a surplus. Over and over again that was made clear by the Taoiseach, by myself and by other members of the Government. Our aim was to secure a Budget which no more than balanced. In the outcome, even that limited objective was not realised.
Since no one is foolish enough to believe that democratic Governments impose unnecessary taxation, even to take it off again later, what did those who devised the fiction of a surplus hope to achieve? I think the answer must be that their aim was to obscure the truth that the severity of the measures taken in the last Budget was due to the laxity of the previous Administration. Rather than permit this to be known, however, those accountable for the situation tried to browbeat the Government and compel them to adopt a passive attitude and allow things to drift. That course would have been inconsistent with responsible administration of public affairs.
The pity indeed is that this Government came too late on the scene to enable it to avoid drastic remedies. There is no doubt that if the situation which developed in 1950 and reached its culmination in 1951 had been dealt with sooner, the adjustments required to restore order would have been much less severe. If the 1951 Budget, instead of being—as it quite obviously was—a Budget designed for a snap election, had been a sound Budget, hadbeen balanced or nearly balanced, it would have been a relatively easy task to balance the current Budget for last year. Again, the reduction of the deficit in the balance of payments in 1952 to tolerable size would have been achieved with much less strain if external receipts and payments in 1950 and 1951 had not been allowed to get so far out of balance. These are the simple facts. The corrective measures, to use my predecessor's phrase, which were forced on the Government last year, were necessitated by the failure of the previous Administration to act before the situation assumed serious dimensions.
SUPPLEMENTARY ESTIMATES. 1952-53.
I have already drawn attention to the fact that, in the actual working-out of the Budget of last year, total current expenditure, including that due to uncovered or unforeseen supplementaries, exceeded the original budgetary provision for the Supply Services by £205,000, that is, by about one-fifth of 1 per cent. I should like, however, to go into this matter a little further. Last year's Budget included £5,750,000 for foreseen supplementary charges and for contingencies, so that the Supplementary Estimates which were subsequently introduced were covered to this amount. Of the £5,750,000, as I have already said, it was estimated that £4,750,000 would be required to meet the additional costs arising under the social welfare legislation of 1952. The actual provision for additional social welfare charges exceeded the £4,750,000 mark by £4,810 or, approximately, one-tenth of 1 per cent. The £1,000,000 which had been allowed for current contingencies was a net rather than a gross provision since it took account of the possibility of general savings. If it were gross, it would have been deficient to the extent of £3,135,000 because, for the reasons which I shall now detail, the gross provision which actually became necessary for unforeseen supplementaries was £4,135,000.
First of all, in the course of the year it became possible to procure defensive equipment for the Army in greatermeasure than was foreseen but in much smaller measure than the Army's needs. This alone involved an additional provision of £860,000. We had then to provide agriculture with £555,000 as a further advance against the importation of superphosphate and an extra £150,000 for the ground limestone subsidy. An additional £580,000 went in grants to health authorities; a further £200,000 was given in supplementary agricultural grants; and, as a new charge, £130,000 was provided as the first instalment of an ex-gratiapayment to teachers who were retired before the 1st January, 1950, the day fixed by our predecessors for the coming into operation of new superannuation terms. We had, furthermore, to find another £1.1 million to cover losses on C.I.E. All told, the items I have mentioned came to £3,575,000, while the balance of £560,000 was spread over a large number of items of lesser magnitude. I doubt if anyone will have the hardihood to question now that these additional provisions were properly made. Certainly, when the relevant Estimates were before the Dáil there was no demand for curtailment of the expenditure. On the contrary, as in the case of the additional subsidy for C.I.E., the urge was very much the other way.
It has always been a sine qua nonof sound budgeting that the estimate of expenditure on which the Budget is based should be comprehensive so as to minimise the contingency of supplementary demands. This is a principle which, as I shall show later, has been little honoured in recent years. This year the Budget will be based on that sound principle, however, and, accordingly, every care has been taken to ensure that uncovered demands will not arise during the current year on the scale which characterised all Budgets for some years past. For example, the amount included in this year's Estimate for the subsidy on ground limestone is £600,000, as against an original provision of £300,000 last year and £200,000 in 1951-52. Similarly, theex-gratiapayments to retired teachers are fully covered in the published Estimates, while the amount included in the Defence Estimate fordefensive equipment is £1,800,000, as against an initial provision of £850,000 in 1952-53 and £370,000 on 1951-52. For C.I.E. there is £1,500,000, as against £1.3 million, and for grants to health authorities £6,013,000, as against £5,180,000. So far as the social insurance and social assistance services are concerned, the total amount which was included in the original Estimates for 1952-53 was £13.6 million. In this year's Estimate we are allowing £19.9 million—that is to say, £6.3 million more.
It will be readily appreciated that the increased provision which has been made, not only for the services which I have mentioned but for others also, has significantly enlarged the scope of this year's Budget and will reduce correspondingly the risk of Supplementary Estimates being called for during the year. To exemplify what I have in mind, I may recall that, while in 1949-50 the amount included in the Budget for Supplementary Estimates by my predecessor was £676,000, the total amount of the supplementaries actually introduced and voted was no less than £9,212,000, or almost 14 times the Budget provision. In 1950-51 the Budget statement included £600,000 for supplementaries but the additional provision actually voted for current services was £3,412,000, which was almost six times what the then Minister for Finance had budgeted for. The Government have taken decisions in relation to the Budget which I am now presenting which will ensure that nothing of that kind will occur this year.
REVENUE, 1952-53.
I have now some remarks to make concerning the revenue of 1952-53. As I have stated, the forecast and the event were in close accord on the expenditure side of last year's Budget; a similar position did not obtain, however, on the revenue side. As in other countries, the Budget Estimate was not realised and it was this shortfall which was mainly responsible for the deficit of £2,048,000 with which the year closed.
Instead of the projected £97,761,000, the revenue actually received was£95,919,000, showing a deficiency on the Estimate of £1,842,000. As non-tax revenue, at £11,799,000, was only £17,000 short of the Budget Estimate, the deficiency was virtually confined to the tax revenue. Of the shortfall, customs accounted for £1,724,000, excise £1,295,000, estate duties £144,000 and stamp duties £157,000. To offset these in part, motor vehicle duties yielded an extra £374,000 and income-tax, surtax and corporation profits tax between them exceeded the Estimate by £1,121,000.
An examination of the main items of customs and excise shows that beer and petrol produced more than was expected, but that the revenue from spirits was deficient, the gap between expectations and receipts in this instance being as much as £1,500,000. Tobacco, too, was short of the target by £600,000. After the first impact of be increase in duty, however, the consumption of tobacco recovered considerably and is now at a level which promises a higher revenue this year. It is believed that a declining trend in the consumption of spirits had set in before the last Budget and would have continued even if there had been no increase in duty. Indeed, a tendency for the consumption of spirits to decline has been a marked phenomenon in several countries over the past two or three years. Doubtless, the increase in duty accentuated the tendency in our own case; on the other hand, there is good reason to believe that consumption was not affected to the extent that the reduction in clearances from bond would suggest, so I am expecting that the revenue from this source will show an improvement in the present financial year.
CONCLUSION.
Although the outcome of the 1952-53 Budget was disappointing in that revenue failed by some £2,000,000 to cover current outgoings, it was nevertheless a marked improvement on the experience of the previous year when, because of the shortcomings of the 1951 Budget, the current deficit was £6.7 million.
III. —CAPITAL BUDGET, 1952-53.
OUTCOME ON CAPITAL ACCOUNT, 1952-53.
We may now turn to the capital account for 1952-53. I am glad to be able to say, and I am sure the country will be no less glad to learn, that without curtailing capital investment in any form we managed to finance it in a much less inflationary way than in recent years. For this we have in the main to thank once more the Irish public who, despite the higher cost of living, decided to spend less on consumer goods, so as to save more and have more to invest. When introducing the Budget for last year, I ventured to forecast that there would be a "return to more normal habits of spending and saving" among the thrifty and industrious elements in the community. That prediction has been fulfilled and indeed the improvement has been even better than could have been foreseen. In consequence a National Loan for £20,000,000, the largest ever floated here, was not only fully subscribed without recourse to the banks, but attracted a record number of investors, including many people of small and modest means. That the improvement has persisted, with the consequence that more money is available for investment, is evidenced by the unprecedented support which was given to the last public issue made by the City of Dublin.
As against a Budget Estimate of £35.92 million the actual expenditure during last year on State capital account came to £32.27 million. The detailed figures are as follows:—
|
Budget 1952 Estimates |
Actual Issues |
||
|
£million |
|||
|
Voted “capital services” |
9.28 |
8.61 |
|
|
“Below the line”issues |
24.78 |
21.65 |
|
|
Issue of shares by Industrial Credit Company, Limited |
0.50 |
0.50 |
|
|
Capital for Irish Steel Holdings, Limited |
0.25 |
— |
|
|
Capital for Agricultural Credit Corporation, Limited |
0.25 |
— |
|
|
Loan repayments reissued to local authorities |
0.86 |
0.89 |
|
|
Dublin Corporation |
No specific provision |
0.53 |
|
|
Air Companies |
do. |
0.09 |
|
|
Total |
£35.92 |
£32.27 |
So far, however, as the issues fell short of the Estimate, I wish to emphasise that the difference was entirely casual. It was not due to any curtailment of capital investment. The most important causes of the difference were, first, the fact that the £2,250,000 provided in the Budget Estimate for the acquisition of the G.N.R. did not mature for payment—the enabling legislation is at the moment before the Dáil; secondly, neither the E.S.B. nor Bord na Móna needed as much as had been expected; thirdly, the Estimates for certain voted items, such as arterial drainage machinery, proved to be on the high side; and, fourthly, the banks provided the capital resources needed by the Agricultural Credit Corporation. The absence of an issue of capital to Irish Steel Holdings, Ltd., will be dealt with later.
BORROWINGS AND SOURCES.
Allowing for the deficit on the current Budget, as well as for capital outlay of £32.27 million, the sum which had to be raised last year in addition to current revenue was £34.32 million. Towards this requirement, loan repayments by the E.S.B., local authorities and other debtors contributed £2.35 million, leaving £31.97 million to be raised independently. How that sum was raised, or rather, the ultimate sources of the borrowings, may be set out as follows:—
|
£million |
|
|
(1) Small savings and net investment income of Departmental Funds |
5.86 |
|
(2) National Loan |
20.00 |
|
(3) Bank Advances (net) |
2.50 |
|
(4) Sale of sterling securities of the Post Office Savings Bank and other Funds |
4.54 |
|
32.90 |
|
|
Less increase in cash balances of Exchequer and Funds |
0.93 |
|
£31.97 |
|
The corresponding table for 1951-52 showed a greater total of borrowings because of a greater Budget deficit and a smaller measure of public support for the Dublin Corporation loan. It showed also a draw on cash balances of £3.4 million, a draw on the American Loan Counterpart Fund of £24.5 million and a sale of sterling securities of Departmental Funds of £11,000,000.
IV.—CAPITAL BUDGET, 1953-54.
OBJECTS OF EXPENDITURE.
It is convenient at this point to review briefly the State capital Budget for the current year. The objects for which new capital is required are:—
|
Estimate |
|
|
£ million |
|
|
Housing |
10.54 |
|
Sanitary Services |
1.08 |
|
Hospitals |
5.08 |
|
Agricultural Development |
4.72 |
|
Electricity Development |
8.00 |
|
Turf Development |
1.27 |
|
Telephones |
1.50 |
|
Schools and other State Buildings |
1.30 |
|
University Buildings |
0.20 |
|
Afforestation |
0.68 |
|
Fisheries |
0.15 |
|
Transport |
4.40 |
|
Wireless Broadcasting |
0.12 |
|
Irish Steel Holdings, Ltd. |
0.25 |
|
Total |
£39.29 |
NET BORROWING.
Excluding the capital provided by loan repayments, net borrowing should be of the order of £36.3 million for purposes which can be set out alternatively as follows:—
|
£ million |
|
|
Voted “capital services” |
14.18 |
|
“Below the line” issues as in the White Paper of Receipts and Expenditure |
22.63 |
|
Capital for Irish Steel Holdings, Limited |
0.25 |
|
University Buildings |
0.20 |
|
Capital for Air Companies |
0.76 |
|
Dublin Corporation (outstanding instalment of underwriting commitment) |
0.21 |
|
38.23 |
|
|
Less |
1.93 |
|
Loan repayments to Exchequer |
1.93 |
|
Net Total |
£36.30 |
I shall refer later to a special circumstance which may affect this figure of £36.3 million.
The increase in prospective State capital requirements as compared with the actual needs of 1952-53 is due mainly to the assumption by the Exchequer of the burden of financing the hospitals' building programme consequent on the exhaustion of the Hospitals' Trust Fund. Other operative factors are additional expenditure on agricultural development, particularly on land reclamation, and the carrying forward to this year of the liability to pay half of the cost of acquiring the G.N.R. Company. Deputies are familiar with the objects of capital expenditure and I do not feel that any of the items, apart from housing and the provisions for university buildings and for Irish Steel Holdings, calls for special explanatory comment at this stage. The voted "capital services" figure will be explained later.
HOUSING.
The Dáil will note that housing occupies top place in the capital programme and is still by far the largest item in it. In fact the figure of £10,500,000 by no means expresses fully the extent of public outlay on housing. So far as local authorities are concerned, it covers only housing financed by advances from the Local Loans Fund and from voted grants. It is out of this fund that, with the important exceptions of the cities of Dublin and Cork, the loan requirements of housing authorities in general are met. Therefore, as deficiencies in housing accommodation in the smaller urban and rural areas are overtaken, the demand for advances from the Local Loans Fund must tend to taper off. This explains why the estimate of the demand on the fund for housing purposes in the current financial year is £1,000,000 less than the actual figure for last year. So far as Dublin and Cork are concerned they will continue as heretofore to finance their housing activities by public borrowings. In the past both cities have been able, with the assistance of the Irish banks and the State, to meet their capital needsby the issue of stock and I am sure that they will not experience any insuperable difficulty in this connection in future.
There is a fact which I ought to mention before I pass on. It is that in recent years new dwellings in this country have accounted for a much higher proportion of domestic capital outlay than in most European countries, even those which have suffered the devastation of war.
UNIVERSITY BUILDINGS.
The £200,000 for university buildings has been included in anticipation of the introduction of a Supplementary Estimate to provide a grant to University College, Dublin, towards the cost of certain properties at Stillorgan which are the nucleus of new university buildings.
IRISH STEEL HOLDINGS.
The £250,000 for Irish Steel Holdings is a repetition of a provision made in 1952-53 towards putting the company's capital structure on a more appropriate basis. We had hoped that this would have been done last year but the matter has been delayed, mainly because the question of the future capital needs of the undertaking has not yet been resolved. In the meantime the company's bankers have continued the temporary overdraft facilities afforded under State guarantee.
SOURCES OF FINANCE.
So far as the State capital programme for this year is concerned, we are faced, as I have indicated, with a net borrowing programme of the order of £36,000,000. The problems involved in raising from this small country such a huge capital sum will be formidable indeed, perhaps even more so than last year. It is never possible to make any firm prediction as to private savings and in view of the erratic experience of some previous years the prospects must not be overrated. But in the year just ended the greater part of the State capital programme was financed from the current savings of the community; production is on the upturn, import prices are tending to fall,money incomes all round are higher and there has been a reversion to former habits of thrift and providence. In short, people now feel that if they have more money it is money which it is worthwhile to save. In these circumstances, while our task will remain difficult, we may face it with some optimism.
Last year the figure for net principal receipts by way of small savings finally emerged at £4.3 million. In the early part of the year it was tending towards my original estimate of £6,000,000. But when the 5 per cent. National Loan was offered there were substantial withdrawals from the Post Office Savings Bank for investment in the Loan, which left the ultimate net receipt at the figure I have mentioned. On the other hand, the total receipt from the Irish public in the form of subscriptions to the 5 per cent. National Loan and "small savings" amounted to £21.3 million, which was 80 per cent. more than the corresponding total for 1950-51.
It will be necessary to float another public issue during the present financial year; and, as in other years, this will react to reduce the savings garnered through the Savings Banks and the sale of Savings Certificates. Nevertheless, in view of the measures which have been taken to stimulate and promote saving by making it more attractive, it is not too rash in the improved financial circumstances to expect an increase in small savings.
We have indeed good reason for this expectation, since the new issue of Savings Certificates which was put on sale in May last has been remarkably successful, gross sales in 1952 amounting to £3.4 million. Allowing for encashment, with interest, of old and new certificates, net sales in 1952 were well over £1,000,000 as compared with an insignificant net receipt of £50,000 in 1951. A Director of Savings was appointed some months ago and his special task will be to organise and intensify the campaign for thrift. To this end full use will be made of the modern publicity media of the radio, the Press, and the cinema, with, we hope, enduring results in the expansionof our resources for capital development. A second minor source of Exchequer finance is the net investment income of the Post Office Savings Bank and the Social Insurance Fund. From this source and from small savings, receipts in the current year are expected to reach £7,000,000.
Last year when outlining the capital programme which we wished to finance. I said that the response of the public to the loan which I then foreshadowed would determine in large measure the Government's capacity to carry the programme through. The ultimate response indicated beyond any doubt that the public were fully behind the Government and were prepared to support in a practical way the programme of national development to which we were committed. I feel that we shall receive the same whole-hearted support for the next issue as for the last.
Should private contributions fall short of meeting our needs, we shall have at our disposal some of the remaining sterling investments of Government Funds. I have no doubt that the banks also will meet any reasonable request for assistance in financing State capital projects. The substantial help they have given hitherto is greatly appreciated. As well as joining earlier this year in underwriting the Dublin Corporation issue, the banks have agreed to underwrite fully a £2,500,000 issue of Government-guaranteed Transport Stock and to assist also with a proposed public issue by the Cork Corporation.
Taking everything into consideration it would appear that the capital programme which I have outlined is within the capacity of the community and can be carried through without damage to our economy. Yet in that connection a certain reservation must be kept in mind.
It is only in recent years, and largely on the basis of the American Loan Counterpart moneys, that State-financed capital expenditure has reached its present proportions. While we may see our way safely ahead for another year, it is not yet possible to say definitely whether a programme of the present size can be continuously sustained, without imposing too greata strain on the balance of payments and without depriving private enterprise of its capital needs. As a general proposition it is clearly unwise to aggravate the obvious difficulties of financing the State capital programme by adding unduly to its magnitude, for the assignment of an item to the capital Budget does not relieve us of the embarrassment of paying for it. On the contrary, to the extent that the State capital expenditure proves to be unproductive, it increases the ultimate burden on the taxpayer and reduces the ability of the community to cope successfully with economic vicissitudes. Moreover, it has to be remembered that, however desirable new capital projects may seem, the resources available to finance them are not inexhaustible and that in this realm, as in most human affairs, means are much more limited than desires. It must, therefore, be the duty of the Minister for Finance to prevent the unwarranted expansion of State capital outlay and, within the programme itself, to ensure a greater concentration on directly productive projects.
CONTROL OF INVESTMENT.
Before leaving the subject of capital investment I think it is necessary to deal with a certain proposal of which we have been hearing a lot of late. It relates to the establishment of a board to decide investment priorities and watch the effect of total investment on the balance of payments. We have been given no indication as to the type of board which would carry out these functions. Against our economic background, in which the basic limitation on national development is the low level of current savings, it is surely a misplacing of emphasis to give pride of place to a proposal for controlling and disposing of the nation's savings when the true national need is to induce our people to save as much as possible. From that point of view, indeed, the introduction of a formalised control of investment would be harmful; for interference with the investor's freedom of choice would discourage private saving.
Notwithstanding this primary defect,certain politicians in search of a programme have swallowed the proposal with avidity. These gentlemen appear, however, to have overlooked the simple fact that control over investment would be useless without control over savings. Control over savings would, of course, raise important ethical considerations as to the right of the individual to dispose of his income or his capital. But I need not dilate on this aspect of the matter. Let us instead ask ourselves how the control could be operated. It would be quite impossible, for example, to control total investment, if companies were free to use their reserves and other resources as they pleased, or individuals their capital or savings. Apart from interference with the freedom of individuals and firms to use their own moneys according to their own desires, we may take it that directives would be issued to banks, insurance companies, building societies, etc., as to the manner in which they should hold their assets. I cannot think of anything more calculated to discourage savings and to undermine confidence in the institutions through which savings are accumulated.
The only practical way, indeed, of ensuring that resources would be diverted to the particular types of investment favoured by the controlling body would be for the State to provide for a Budget surplus by increased taxation so as to bridge the gap between voluntary savings and investment. Rational people would not expect this course to commend itself to those who opposed so bitterly our endeavour to achieve a balance on the current Budget of last year on the excuse that our real purpose was to raise in taxation the moneys required for certain capital expenditure. Nevertheless, the individuals who took that line then now advocate the establishment of a board which would facilitate a deeper encroachment by the State on the resources available for private enterprise and investment. Consistency has sometimes been described as a doubtful virtue, which, no doubt, is why some people are not addicted to it.
Let us ask ourselves, however, whether it is practicable over thewhole field of private and public enterprise even to attempt to frame an absolute scale of priorities in investment policy. To begin with, there is the difficulty that the investment which will best serve the national interest or give the greatest return cannot be decided a priori.Broadly speaking, investment is much more likely to be directed into productive channels when the decision has to be taken by people who are risking their own capital. They are likely to weigh the pros and cons more carefully, balancing initiative and imagination with that prudence and foresight for lack of which the most energetic and enterprising may encounter disaster. They will take the utmost care to be right in their judgment because they have something to lose. Under the proposed investment board, however, the demands of the various sectors of the economy would be determined by the subjective judgment of planners who would themselves have nothing to lose and would be indemnified against the effects of their decisions. The planners would have their own predilections and some matters, perhaps indeed very important matters, might be decided accordingly.
We may now turn to the consideration of the current Budget for the year.
V.—CURRENT BUDGET, 1953-54.
BUDGETARY POLICY, 1953-54.
Our guiding principle this year is to keep a tight rein on expenditure until output expands and revenue automatically expands with it. We must shun any policy which would wreck the improvement in the national finances secured with such difficulty over the past year and we must not do anything which might retard the economic recovery that has begun. The simple rule of health—that current expenses should be met out of current revenue— retains all its old validity. It is, in fact, all the more binding because of the size of our capital programme and the strain it will put upon current and past savings. Were we to incur a deficit in the current Budget, we should have to borrow to meet it. By so doing we would be encroaching on the fundsavailable for capital purposes. We would be wasting on ordinary running expenses the resources which are sorely needed to finance housing, agriculture, electricity and other forms of national development.
Such a misapplication of capital funds we, as a nation, cannot afford. State capital outlay is already so large in relation to any reasonable assessment of what we can borrow from the public that it would be the height of imprudence to budget for a deficit on current account. So far as the Budget is expected to exert a positive influence on the level of economic activity and on employment, it is desirable that it should do so in a direct and useful way, through a large and balanced programme of State capital works, rather than by diverting capital resources to serve consumption needs, whether public or private.
This is my answer to the charge that in fiscal matters the Government have been pursuing an out-moded and ultraconservative policy. We have been attacked for what is alleged to be our rigid adherence to orthodoxy and our failure to adopt what are termed progressive and flexible methods in dealing with the country's problems. Stripped of their sophistry, the contentions of our critics are nothing better than demands for laxity in administration such as characterised their own régime. On the plea that it would stimulate economic activity, they are pressing us to adopt the malpractice of burking year-to-year commitments by deliberately incurring deficits even in the current Budget.
Advocates of this policy do not realise that the contribution by the State towards the stimulation of economic activity is determined, not by deficits on the current Budget but by the over-all effect of State expenditure, capital as well as current. They overlook the extent to which in recent years total State outlay has exceeded the resources drawn from the public in the form of current revenue and savings and has been financed by putting new money in circulation one way or another. In this matter we have been much less conservative thanmany other countries which are not generally categorised as such—Norway, Sweden and Denmark, for instance— which for years past have been running surpluses on their current Budgets. I dare not, of course, mention Britain, for the Leader of the Labour Party would snort "Tory", although the practice was initiated by a Labour Chancellor; and the Republican gorge of Deputy Dillon would rise in abhorrence at the sound of the name. But there it is. This country, on the other hand, has consistently had deficits in its current Budget, while at the same time it has been realising external assets or incurring foreign indebtedness.
In the light of these prefatory remarks we may now outline the current Budget for the year. The White Paper on Receipts and Expenditure, which Deputies have had for the past few days, will, no doubt, have enabled them to comprehend the problem in the main. There are, however, certain additions and subtractions to be made, and these will have a material effect on the final balance.
CAPITAL SERVICES.
First among them, and the most substantial, is the deduction to be made from the current Budget for voted "capital services," upon which vexed question I must say a few words. Last year in the vain hope of allaying controversy, I excluded from the charge against revenue every single item in the Supply Services which had been classified as "capital" in my predecessor's 1951 Budget. About the capital character of several of these items, I had misgivings which have not since abated. This year again, however, but for a different reason, I must postpone any reform of the procedure. If there is anything in the view that we are poised between inflation and deflation, then it follows that this is not a year for categorically assigning to taxation charges which for some years past have been met by borrowing.
Recently, in reply to a parliamentary question, I listed the items, amountingto £9,366,000, in this year's Estimates which fall within the classification of "Capital Services" adopted for the purposes of the 1951 Budget. To these I propose to add three new items of an obviously capital character, namely, the grant-in-aid of the hospitals' building programme (£4,500,000), the cost of new broadcasting transmitters (£115,000) and the provision for grain storage loans (£200,000). The total deduction, therefore, to be made in respect of such voted "Capital Services" is £14,181,000.
Deputies are, of course, well aware that heavy expenditure on hospital construction has been incurred annually for years past, so I need not remind them that the hospitals' building grant does not represent a net addition of £4,500,000 to national capital outlay. It is, however, a new item in the State capital programme. The Hospitals' Trust Fund can no longer defray capital costs in addition to meeting current deficits, and so that the building programme may proceed, the Exchequer has been called in aid.
DEFENSIVE EQUIPMENT.
I have now to refer to a further matter which requires special consideration. As the House is aware, the failure in some recent years to maintain our Defence Forces at proper strength with an adequate standard of equipment was a source of concern to all who valued the liberties which have been won so dearly. In the three years preceding the outbreak of World War II expenditure on defensive equipment, on the basis of present-day prices, ran at the rate of £400,000 a year, and would have been larger if supplies had been procurable. During the years of conflict the average expenditure, again at present-day prices, exceeded £500,000 a year, and once more would have been greater if more equipment could have been obtained. During 1949-50 and 1950-51, however, expenditure was a mere £54,000 and £56,000, respectively, again at present-day prices.
In the light of these figures, the Dáil and the country will appreciate the anxiety of the present Governmentwhen in June, 1951, in conditions of great international tension, they took over responsibility for the defence of the nation and found that the country had to rely on an ill-equipped and under-manned Defence Force.
Immediate efforts were made to retrieve the position by procuring from whatever source it could be obtained the equipment which would afford the Defence Forces some hope, if attacked, of defending our territory. Within our first 20 months or so of office, we expended on such equipment just a shade under £2,000,000; and we have placed further orders which will require us to find £1,800,000 for the same purpose this year.
But this is not, and in our circumstances cannot be, the sum total of the country's expenditure under this head. The position in relation to international affairs which the State through its successive Governments has taken involves the maintenance of a highly efficient Defence Force, a Defence Force which, whatever its numerical strength, must be up-to-date in armaments. For a State of our size, resources and strategic situation, this creates a financial problem of some magnitude. The first heavy impact of it was felt last year, when over £1,700,000 was expended on defensive equipment.
This Government is concerned above all to preserve the independence of our people. Under no circumstances will it seek to economise or improve budgetary appearances by shirking its duty to provide for the nation's defence. In the present condition of our economy, however, it would be inappropriate to ask the taxpayer to shoulder the whole cost of repairing in the immediate present the deficiencies of the past. A substantial part must be accepted as an immediate obligation, since the defensive equipment is required primarily to place us, who live and breathe at this moment, in a position to defend ourselves and our liberties. It is true that, defending those liberties and preserving them, we shall pass them on to succeeding generations but it is we, and not the unborn who are directly concerned that in this our daythese precious things should not be taken from us. It is, therefore, incumbent on us to meet at least that share of the cost which, if adequate provision had been made in the past, would be normal in the circumstances of to-day.
It is not easy in our position to assess what that share would be. Perhaps we may take the years 1937 to 1940 as a norm. This was a period of acute international tension, a period, too, when in face of surprising opposition we were endeavouring to provide for the country's defence. We then taxed ourselves to the equivalent at present money values of £400,000 a year for the purchase of defensive equipment. I think it reasonable to ask the taxpayer this year to provide not less than that amount out of current revenue for the same purpose.
Of the remaining £1.4 million, I propose to find £500,000 by drawing on the revenue balances carried forward at the 31st March last. These balances are the Exchequer counterpart of the liquid capital of a going concern. They are paid into the Exchequer in the first few weeks of the financial year when current revenue receipts are meagre and in this way they obviate pro tantothe necessity for temporary borrowings. In recent times, however, the balances have tended to exceed the £2,000,000 or so which is regarded as a reasonable carry over. On 1st April, 1948, the cash balances in the hands of the Revenue Commissioners amounted to almost £1.9 million and over the three years to 1st April, 1951, they were maintained around this level. As a result of fortuitous accretions over the past two years, however, the figure at 1st April last had risen to £2.5 million. They will now be drawn upon to the extent and for the special purpose which I have mentioned, thereby reducing them to a round £2,000,000. In fulfilment of this decision, the estimates of Exchequer receipts from taxation at existing rates which appear in the White Paper include, in addition to current receipts, the sum of £500,000. The balance of £900,000 required this year for the purchase of defensive equipment will be provided by short-term borrowings.
EFFECT OF ADJUSTMENTS.
The effect of these adjustments is to increase by a further £900,000 the sum deductible from the expenditure side of the account, thus giving a net amount of £101.5 million, as follows:—
|
£ million |
||
|
Central Fund Services (excluding payments to the Road Fund) |
11.68 |
|
|
Payments to the Road Fund |
4.35 |
|
|
Supply Services |
100.55 |
|
|
less deductions |
15.08 |
85.47 |
|
Total |
101.50 |
|
In connection with these figures, we may note that the provision for issues to the Road Fund shows an increase of £476,000 over the actual figure for last year as set out in the White Paper, but this is balanced by a corresponding increase in estimated revenue from motor vehicle duties. The prospective increase of £1.78 million in other Central Fund services does not reveal the whole story, since last year's figure included a special payment of £500,000 for shares of the Industrial Credit Company. Excluding this item, the increase is £2.28 million, which is almost entirely attributable to increased charges for the service of debt, internal and external. The debt service provision is, in fact, up by £2.24 million, of which increase almost £600,000 arises because a full year's interest on the Marshall Aid borrowings falls due this year. As the Dáil is aware, the rise in borrowing charges is an inevitable consequence of the progressive increase in the State debt caused by heavy annual borrowings to meet capital expenditure and Budget deficits.
Excluding only the voted "capital" items the net Supply Services figure for the present year is £86.37 million, which compares with actual outlay on non-capital Supply Services in 1952-53 of £84.7 million. The increase arises mainly under the headings of Social Welfare, Defence, Local Government (Gaeltacht roads), Health, Army and other Pensions, Education, Lands, Forestry and Tourism. These and other increases are offset in part by a reduced provision for transport subsidies and by a credit, instead of a debit charge, for superphosphates. Takingnon-capital expenditure as a whole, both on Central Fund and Supply Services, the increase over last year's actual outlay on similar services is £4.43 million.
SUPPLEMENTARY ESTIMATES.
So far my remarks have related to the figures given in the White Paper. Traditionally the White Paper reproduces the figure for Supply Services from the Volume of Estimates published some months before. There are, however, a few items for which the published Estimates do not provide and which I must now take into account in order to present a comprehensive picture.
A case in point is the proposed Bill to increase the pensions of those who were wounded or disabled when fighting in the national cause in the period from 1916 to 1923. The text of the measure will be before the House shortly and its enactment will involve an increase in expenditure which during the current year will be about £165,000 with a prospective ultimate maximum of £215,000 annually. Some additional expenditure on minerals exploration at Avoca is also foreseen.
To cover the cost of these pension increases, the additional expenditure at Avoca and such minor contingencies as cannot be averted, I propose to bring in on the expenditure side a comprehensive and limiting figure of £750,000.
ECONOMIES.
While economies affecting the living standards of the weaker sections of the community are out of the question and will not be sought, this does not apply to other sectors of the administration. There is little reason to doubt that within the framework of an expenditure of over £100,000,000 significant economies can be made without impairing efficiency or curtailing essential or useful services. Accordingly, the Government have decided that a general economy of at least £3,500,000 in the cost of the public administration must be secured. I can assure the Dáil and the taxpayer that this matter will be most vigorously pursued in every Department.
REVENUE.
Before coming to a final review of the budgetary position, there are some revenue and other matters to which I must advert.
First of all, it is gratifying to note that the White Paper figures for non-tax revenue show an increase of £3,153,000 over last year's receipts. Larger interest receipts from the E.S.B. and other borrowers compensate in part for the heavier debt charges on the Central Fund. The transfer from the Central Bank on foot of surplus income is doubled, the figure this year being £800,000 as against £400,000. After the many harsh things which have been said here about the board of the bank, it would ill-become the Minister for Finance if he did not say that he at least appreciates this substantial contribution to alleviate the taxpayer's burden. It will defray approximately two-thirds of the interest on the Marshall Aid Loan. The Post Office services, which are the main category of non-tax revenue, show an increase of £890,000, partly as a result of normal expansion and partly in contemplation of the measures to reduce commercial losses recently announced by the responsible Minister.
In estimating receipts from taxation in the current year I have considered it reasonable, having regard to the general character of the Budget and prevailing trends, to allow for a natural increase in the revenue, particularly from those duties which are showing their innate resilience after the temporary set-back of last year. There is good reason to anticipate a substantial improvement in customs and excise revenue, partly offset, however, by reductions in the estimated yield of income-tax and corporation profits tax. Motor vehicle duties are expected to yield £4,350,000 or almost £500,000 more than for last year. In all, tax revenue this year at current rates is expected to show an improvement of roughly £2,000,000 on last year's actual figure, thus in effect reaching last year's target.
SPIRITS.
I have already expressed the view that the produce of the spirits dutylast year was adversely affected by the fact that consumption had been met in part by using up stocks on hand rather than by withdrawing stocks from bond. I have budgeted, accordingly, for an increase in the spirits revenue in the present financial year, but I do not propose to make any change in the rate of duty. I am fully satisfied that any reduction would result in a loss of revenue.
INCOME-TAX.
It is exactly 100 years since income-tax was applied to Ireland but no one would have wished me to celebrate the centenary by raising the tax still further. I am sorry, indeed, that circumstances make it impossible for me to propose a reduction in the rate or any increase in reliefs or allowances. The appropriate Financial Resolution will be moved.
Over the century, and particularly in recent years as the standard rate of tax has increased, the income-tax code has been under constant criticism. One of the more recent but most persistent contentions is that the present incidence of the tax constitutes a positive deterrent to the modernisation and extension of productive capacity. This is so serious a possibility from the point of view of national development that, despite the many difficulties involved, the Government have decided that the matter should be fully investigated. The decision will impose demands on the time of individuals, companies and organisations in industry and commerce wishing to make representations. It will also put considerable strain on the already hard-pressed Revenue Commissioners whose principal preoccupation must always be the efficient collection of the revenue in accordance with existing law. Arrangements are, however, being made to set up a committee to consider the question of the incidence of direct taxation on production. Its personnel and terms of reference will be announced in due course.
STAMP DUTY .
Under the Stamp Acts as they stand, a purchaser of lands or houses can avoid the increase in duty, imposed some years ago, by adopting a somewhatdevious method of acquiring the property. In the case of a non-national liable to pay at the 25 per cent. rate the duty evaded might be considerable. I propose to move a Financial Resolution to-day with a view to closing the loophole.
Another stamp duty matter arises this year. The rates for purchases of lands or houses by Irish citizens operate only if the deed contains a statement that the person acquiring the property is an Irish citizen. It has been brought to my notice that some purchasers, in the belief that they were not Irish citizens, have omitted the statement and paid duty at 25 per cent., but have found afterwards that they were in fact entitled to describe themselves as Irish citizens at the time of the purchase. Existing law affords no relief and so I propose to insert a provision in the Finance Bill which will authorise the Revenue Commissioners to make refunds in appropriate cases. The cost to the Exchequer will be trifling.
ENTERTAINMENTS DUTY.
Over the past two years I have had repeated representations from the representatives of the cinema proprietors concerning the present scale of entertainments duty. This scale is highly anomalous at several stages in its gradation and I have agreed that it should be replaced. The proposed new scale, while avoiding an increase in the incidence of duty on any current admission charge, will afford some relief at the lower levels of admission charges. I am not seeking to gain revenue by the change—in fact I may lose a little—but, if so, the loss will not be of any significance.
These changes in the law will have an insignificant effect on the revenue. The position now is that we have a prospective revenue of £101.17 million to cover a current expenditure which at most should not exceed £98.75 million. I shall be forgiven if I pause here to look back on my previous term as Minister for Finance in the days before the war and reflect how happy I should have been to gladden the heart of the taxpayer by the announcementof a surplus of almost £2,500,000. Alas this year's possible surplus emerges only to tantalise the taxpayer and then begins to fade away when we turn to consider the Civil Service Arbitration Award.
CIVIL SERVICE ARBITRATION AWARD.
This Government will not borrow to defray increases in public remuneration. They stand firmly on the principle that such increases must be met out of taxation and that those who advocate them or grant them must accept the necessity for raising the requisite tax revenue to meet them. In the light of the revenue trends of last year the Government, who in the Budget for that year had already substantially increased taxation to meet, inter alia, the cost of a previous arbitration award, exercised their rights under the Civil Service Arbitration Agreement and decided that they could not pay any increase in remuneration in respect of 1952-53. That decision has been fully vindicated by the out-turn of last year's Budget.
The substantial economies which will be vigorously sought and secured in administrative and other expenditure will enable the award to be met in respect of 1953-54, but not for any prior period, without an increase in taxation. The Government have decided accordingly and the decision will be effective as from April 1st. Approval will also be given on the same basis to corresponding adjustments in the pay of other State personnel, including the Army and the Garda Síochána, and in teachers' salaries. It is estimated that the cost in the current financial year of all these increases will be £2.4 million, which will in effect absorb the amount which otherwise might have been available for reducing taxation.
Current expenditure, therefore, for 1953-54 comes into line with current revenue at approximately £101,000,000. This sum marks the limit of expenditure beyond which the Government is determined not to go until the present pressure on resources is eased by an expansion of national output and taxation has been reduced to a more tolerable level. Only the gravest and mosturgent grounds of national interest will be accepted as justifying any modification of that attitude.
CONCLUSION.
This Budget marks the second phase in the struggle of this Government to re-establish order in the public finances and in the nation's economy; and we may now review what we have accomplished in that regard. We have virtually resolved the balance of payments problem. We have stimulated thrift and industry. We have regained for the State the confidence of the saving and investing public, so that we can look forward with assurance to the continuance of a well-ordered and sound programme of productive capital investment. To the measure of the nation's capacity, we have expanded the social services and provided for the health and welfare of our people. We have been concerned to make good past deficiencies in the vital matter of national defence. We have met the demands of the public servants for increases in remuneration with due regard to the position of the taxpayer. And we have taken decisions which assure the balance of this year's current Budget. This is a Budget which is designed to achieve stability of prices and money values, to foster increased productive effort and to afford a firm basis for continued economic and social progress. That progress, however, can only be achieved if we have not only a sound financial basis for it, but the will, enterprise and energetic effort which are essential if we are to develop our economy and expand our markets even in face of intensified competition. It must be clear to all of us, worker and employer, farmer and industrialist, public servant and politician alike, that we cannot maintain our present standard of living, much less improve it, unless we earn that standard by a substantial increase in production which will reflect itself in increased exports. Thanks to the measures which the Government have taken during their term of office, the nation is no longer moving towards economic disaster; it has regained its balance; and it only remains for it, unitedlyand co-operatively, to bend its will and its energies to ensure that the bright prospects which now open before it will be realised to the full.
