Despite some setbacks, such as the disappointing harvest and the widespread winter flooding, the economic picture for 1954 is, on the whole, satisfactory. In all the main branches of the economy progress was made. The external trade returns showed a further improvement, consequent on a turn for the better in the final quarter of the year. Exports were higher and our import bill, thanks to increased home production, was smaller. Non-trade earnings, which go so far to offset the trade deficit, were well maintained. The result was that receipts from abroad virtually balanced external payments. A remarkable feature of last year's external account was that our traditionally heavy deficit with the dollar area was turned into a small surplus.
In other spheres of activity, also, advances were made. Output in manufacturing industries increased and both employment and earnings in these industries reached new heights. Agricultural production responded to improved markets and the provisional 1954 returns show an increase in output notwithstanding the bad harvest weather. These advances were made in conditions of internal balance. Prices—retail and wholesale—remained reasonably steady in 1954 and domestic investment was financed almost entirely from current savings. Since the turn of the year, however, there have been some signs of an increase in the trade deficit. This is the picture, as I see it, in the broadest outline. I now propose, as is customary, to fill in some of the detail, beginning with the balance of payments.
BALANCE OF PAYMENTS.
The deficit for 1954 is estimated at £5,500,000, the lowest figure since 1946. We earned a slight surplus with the dollar area, which, though it may be purely temporary, is a phenomenon without precedent in our records and is, therefore, worthy of comment. It resulted from a falling-off in dollar outlay while dollar earnings were maintained at a high level. Since most of the dollars we earn still come from invisible rather than merchandise exports, there is obviously much room for expansion of direct trade with the dollar area. We look forward to efforts on the part of our exporters to strengthen and widen the foothold they have already gained in that highly competitive market.
There was also an improvement in our trade balance with the rest of the world outside the sterling area, to which an increase in exports contributed. I have every hope that this improvement will be maintained, particularly as additional assistance and encouragement are now available to exporters as a result of the Government's decision last autumn to extend the activities of Córas Tráchtála, Teoranta, to Continental and more distant markets.
BALANCE OF TRADE.
Imports last year amounted to £180,000,000, almost £3,000,000 less than in 1953, while exports were £1,000,000 more at £115,000,000. The overall improvement in our trade balance was, therefore, just short of £4,000,000. It was only in the last quarter of the year, however, that the trade pattern changed for the better. During the first nine months the excess of imports over exports was £5,000,000 greater than in the corresponding period of 1953. Imports in that period were higher while exports were reduced by the slump in British demand for our sugar products. In the last quarter of the year, however, imports fell by £6,000,000 and exports rose by £2.7 million. It was as a result of this welcome change that we finished the year with a trade deficit almost £4,000,000 less than in 1953. In the first quarter of this year the trade gap widened despite an increase in exports. This was due mainly to replenishment of stocks of wheat and other cereals and of various raw materials. Imports of machinery and fertilisers also increased.
EXPORTS.
The continued overall expansion of exports is most welcome, particularly as it is a volume increase and is based on an improvement in agricultural production. Total sales of cattle off farms were higher last year than at any time in the past 20 years. The increase in exports of cattle and beef has, in fact, more than compensated for the decline of over £10,000,000 in exports of chocolate, chocolate crumb and confectionery. Exports of cattle increased in value by £8.8 million and by no less than 163,000 in number while exports of dressed beef and veal increased by 17,000 tons or £3.8 million in value. There has been an even greater rate of expansion in the number of cattle exported in the early months of this year, the total in the first quarter being over 75,000 greater than in the first quarter of the previous year. Exports of bacon and hams in 1954 were £1.7 million higher at £4.4 million. As against these increases, less eggs, poultry and pork were exported. Sizeable markets were, however, obtained for a number of industrial items, including cardboard, for instance, exports of which increased by £800,000.
Some apprehension has been expressed that the increase in cattle and beef exports may be at the expense of stocks. It would seem, however, that the decline in stocks has been insignificant both absolutely and in relation to the volume of exports. Between January, 1954, and January, 1955, cattle numbers fell by less than 23,000 or 0.6 per cent. of the total. The favourable market conditions have encouraged farmers to build up their stocks and the most recent figures of cattle under one year, which are the key figures for future output and exports, show a rise. The lower mortality rate of young cattle, because of improved veterinary services, has helped to maintain stocks despite the rise in exports. Provided the farming community take advantage of the veterinary aids available, it should not be beyond the capacity of the country to maintain cattle exports in all forms at last year's level of approximately 870,000; in fact, we should be able to go well above that figure as time goes on.
IMPORTS.
The fall in imports in 1954 is explained mainly by increased home production which lessened our dependence on certain foreign products. There were decreases in wheat, maize and sugar. Wheat imports fell both because stocks were drawn down and because home supplies were greater. Increased domestic production of feeding stuffs accounted for our smaller purchases of maize. The reduced export demand for sugar products, accompanied by a drawing down of stocks built up in the preceding year, caused a drop in imports of sugar. On the other hand, more raw materials were required to sustain the continued rise in national production. Purchases of agricultural machinery from abroad increased from £1.8 million to £2.5 million, while the number of agricultural tractors imported increased from 4,360 to 5,377. The decline in imports of consumption goods was not at the expense of the general level of consumption which rose last year.
TERMS OF TRADE.
Import prices, which had been falling practically unchecked since September, 1951, continued to decline in the first half of 1954. In the second half of the year, however, this falling trend was reversed and import prices are now more than 3 per cent. above the level of a year ago. Export prices were slightly lower on average in 1954. In view of the tendency for import prices to rise, there is a danger that the terms of trade may deteriorate further this year. In that event we shall have to export more if we are to keep a reasonable balance in our external payments.
PRODUCTION.
There was an increase in 1954 in industrial as well as in agricultural production. The provisional figure of the volume of production in all industries and services covered by the Census of Industrial Production is 2 per cent. higher than for 1953. The biggest advances were in the assembly and construction of vehicles and in engineering. There was some falling off in local authority housing but this was largely counterbalanced by a rise in private building. The indications are that physical capital formation was about the same as in 1953.
Despite the difficulties encountered last year, there was a further improvement in the value and volume of agricultural output. Gross output was some £6,000,000 higher than in 1953, the volume being over 4 per cent. greater. The increase in production is attributable to improved veterinary and technical services, to increased mechanisation of farm operations, to the greater application of ground limestone and fertilisers and to the rehabilitation of land and farm buildings. Agreements have been signed recently with the American authorities for the application of a total of £2,950,000 from the American Grant Counterpart Fund to certain projects which will bring further benefits to our agriculture. These are the eradication of bovine tuberculosis, the provision of pasteurising plant at creameries and cream-separating stations and the continued subsidisation of ground limestone. The expenditure of this substantial sum, which we owe to the generosity of the United States Government and people, the more extensive use of mechanical equipment and the acceleration of rural electrification should lead to still greater productivity in agriculture, which is the main prop of our economy and the basis for our security and prosperity.
EMPLOYMENT AND UNEMPLOYMENT.
Over the eight years from 1945 to 1953 there had been an aggregate fall in the number of males engaged in agriculture of 100,000, representing an average annual decline of 12,500. The outstanding and gratifying feature of the employment returns for 1954 is that no further decline took place. Last year's provisional figure of 421,000 was the same as for 1953. In manufacturing industries, employment showed a further rise in 1954 and in the December quarter exceeded 150,000 for the first time. Our improved employment experience is reflected in the number of persons registered as unemployed. In recent months the figures have been running at a level some 5,000 to 6,000 below the 1954 figures.
PRICES AND EARNINGS.
Wholesale prices fluctuated little in 1954 and there has been no change in the index of retail prices since August. Wage rates and earnings generally remained stable. Prospects for price trends in the coming months are less settled. The cost of living may be affected by the rise in prices of imported materials. We can meet this effectively only by exporting more, which means, in the first place, producing more and doing so more efficiently. This is the way to keep up and even improve our living standards in face of a rise in import costs. No real or lasting protection is given, in these circumstances, by increases in money incomes alone; indeed, if we sought refuge in this, we would risk being costed out of the export markets on which we rely so much for our prosperity. I would, therefore, enter a plea, in the national interest, for a careful and reasonable attitude on the part of employees and employers alike, lest both internal and external stability be jeopardised and development be seriously retarded. It is important to keep the production lines open in the interests of better living standards for all and to avoid any interruption which might mean an irrecoverable loss of both earnings and investment.
INTEREST RATES AND SAVINGS.
A National Loan of £20,000,000 was successfully floated last autumn with— as I am happy to acknowledge—the unqualified support of the Leader of the Opposition and of all Parties in the House. The effective yield to redemption was 4½ per cent., the lowest rate for a National Loan since 1950. Housing authorities and organisations such as the E.S.B. and Bord na Móna, whose interest charges are related to the Exchequer borrowing rate, have also benefited from this reduction in the cost of borrowing.
The lower level of interest rates thus established is desirable for the stimulus it affords to investment and national progress. It was for that reason particularly gratifying that the Irish banks, in recognition of the national interest and in spite of the difficulties it caused for them, refrained from raising their lending rates when the Bank of England rate was raised in January and again in February last. On the one hand, our external payments and receipts have not been seriously out of line, while, on the other, the need to press ahead with capital development, both to give employment and to raise national living standards, means that a rise in interest rates here should, if possible, be avoided. In this sphere, however, as in many others, we cannot insulate ourselves fully or for long from the influence of trends in the world outside nor can we fail to keep a close watch on tendencies at home, so as to continue to take such action as we can to protect our own economy.
While the total volume of savings is not disappointing, the upward trend in small savings has unfortunately been interrupted. Net sales of savings certificates and deposits in the savings banks came to £5,000,000 or £640,000 less than in 1953-54. Withdrawals of deposits and sales of certificates for investment in last year's National Loan appear to have been higher than usual and this may account in part for the failure of the figures to show an increase. It is none the less disappointing that the upward trend in small savings appears to have lost its impetus. It should not be necessary to speak of the value and significance of thrift both for the individual and for the nation. Small savings make an important contribution to the financing of the State capital programme. The yield to the investor in savings certificates, being tax-free, is particularly attractive having regard to the course of interest rates in recent times. It is, in fact, the equivalent of 5½ per cent., subject to tax. I shall have more to say later on the subject of savings and I hope before the end of the year to arrange for a more intensive campaign to interest all sections of the community in the attractive facilities for saving which lie to their hands.
CONCLUSION.
On the whole, 1954 was a good year. Reasonable stability of prices and freedom from any major industrial disputes enabled progress to be made in output, exports and living standards. The cost of imports has risen in recent months and there may not be an equivalent resilience in export values. This, therefore, is a year for watchfulness lest forces be released which might disturb our internal cost and price structure and upset our balance of payments. For that reason, the Budget must be constructed in such a way as to moderate, rather than aggravate, any unsettling tendencies in the economy.
II—CAPITAL BUDGET, 1954-55.
I turn now to the capital expenditure of the State last year and to the programme for the current year. I should draw attention at the outset to a change I have ventured to make in the presentation of the figures of State capital outlay. For my own convenience—and I hope also the convenience of Deputies—I have transferred to the paper entitled "Tables in connection with the Financial Statement", which has been circulated, some of the tabular matter hitherto given in the Financial Statement itself.
As indicated in Table II of the paper I have mentioned, capital expenditure financed from the Exchequer in 1954-55 was £32.86 million, against a Budget estimate of £39.49 million. This outturn follows the pattern of preceding years in which capital expenditure was also some millions less than the Budget estimates. Actual, as distinct from estimated, expenditure has been fairly stable around £33,000,000 for some years past. A discrepancy between forecast and outturn is not uncommon in large-scale programmes of capital works. Delays and difficulties can emerge at any stage from planning to the clearance of the final payments. The tendency, when framing estimates of this kind, is to set the target of achievement as high as possible. Such optimism is, perhaps, natural but it needs to be moderated by realism if estimates are not to promise achievements beyond what experience shows to be practicable. In making forecasts for the current year I have acted on this principle and, I hope, brought the estimates into closer accord with the probable outcome.
Although the weather was unfavourable for building and construction works generally, development work on land, forests and bogs was well maintained last year. Issues for electricity development, hospitals and telephones were some £4,000,000 less than anticipated. The rain brought a profit to the E.S.B. in the form of a reduction in purchases of coal, with the result that the Board was able to defer some of its financial demands on the Exchequer. Receipts from the Hospitals Sweepstakes were above expectations and this, combined with overestimation of building progress, also lessened the draw on the Exchequer. Irish Steel Holdings, Limited, continued to do well and financed its operations during the year without recourse to the Exchequer for capital. It is not possible as yet to determine what amount of permanent capital will be needed by the Company, but last year's provision of £250,000 is being retained to allow of capital within that limit being available for the Company if required.
While borrowing from the Local Loans Fund by housing authorities declined somewhat in 1954-55, a contribution of £1.8 million was made from State funds to finance housing in Dublin through the taking up of part of last year's Corporation issue. This issue, which was for £5,000,000, was underwritten by the Minister for Finance jointly with the Irish banks.
The total expenditure of almost £33,000,000 is indicative of steady progress in national development. Since assuming office, the Government have been giving considerable attention to the subject of capital expenditure and a full review is being conducted of this important sector of public finance. The review is aimed at securing optimum results from public investment, both economic and social, and also at enlarging the supply of capital for private enterprises of a productive character. Full economic development cannot be achieved by investment in the public sector only; productive investment in the private sector is indeed a prime necessity if our resources in men and materials are to be fully and efficiently utilised.
BORROWING, 1954-55.
The financing of the Capital Budget last year, together with the deficit of £1,631,000 on current account and the £120,000 borrowed for defensive equipment, involved a net borrowing of £32.07 million after allowing for loan repayments of £2.54 million from local authorities and other borrowers. This borrowing was raised from the following sources:—
|
£ million |
|||
|
(1) |
Small savings and net investment income of Departmental Funds |
7.58 |
|
|
(2) |
National Loan |
19.20 |
|
|
(3) |
Bank Advances (net) |
2.00 |
|
|
(4) |
Net decrease in cash balances of Exchequer and Funds |
0.64 |
|
|
(5) |
Sale of securities from Departmental Funds |
2.65 |
|
|
TOTAL |
£32.07 |
million |
|
For the most part, the funds required for capital expenditure during the year were provided from Irish savings but an increase in saving will be necessary in order to sustain and raise the level of investment.
III—CAPITAL BUDGET, 1955-56.
The total capital expenditure for the current financial year is shown at £34,000,000 in the Table which I have referred to earlier. The individual estimates making up this total have been drawn as realistically as possible in the light of actual progress in recent years and cover the following services:—
|
£ million |
||
|
Housing |
9.32 |
|
|
Sanitary services |
1.27 |
|
|
Electricity development |
4.00 |
|
|
Agricultural development |
4.67 |
|
|
Hospitals |
2.95 |
|
|
Schools and other State buildings |
2.02 |
|
|
Telephones |
1.50 |
|
|
Turf development |
1.25 |
|
|
Transport |
3.12 |
|
|
Afforestation |
0.85 |
|
|
Fisheries |
0.15 |
|
|
Wireless Broadcasting |
0.01 |
|
|
Min Fhéir, Teoranta |
0.08 |
|
|
Ceimicí, Teoranta |
0.12 |
|
|
Irish Steel Holdings, Ltd. |
0.25 |
|
|
Alginate Industries (Ireland) Ltd. |
0.01 |
|
|
National Development Fund (Expenditure) |
2.50 |
|
|
TOTAL |
£34.07 |
million |
It will be seen from these figures that substantial expenditure is again in prospect this year to finance housing and sanitary services, to provide modern school buildings and to supplement moneys available from the Hospitals Trust Fund for the construction and improvement of hospitals. The conservation and development of our natural resources is of paramount importance to the economy, and Exchequer assistance for this purpose is afforded by the provisions for land reclamation and drainage, electricity and turf development, fisheries, afforestation and transport. The provision for advances to the E.S.B. has been reduced to £4,000,000 in view of the power to borrow from sources other than the Exchequer which the Board possesses under recent legislation.
IRISH SHIPPING, LIMITED.
Irish Shipping, Limited, have, with Government approval, been carrying out a programme of replacements and additions to their fleet which will enlarge their earnings and will also provide additional Irish-owned tonnage to safeguard essential supplies in the event of a future emergency. The Company, which has a fine record of efficient and profitable operation behind it, has financed the purchase of new ships to the extent of about £3,750,000 out of its own resources but now finds it necessary to seek new capital to complete its programme, which includes provision for tanker tonnage in addition to dry cargo vessels. It is expected that an instalment of about £1.5 million will be required to defray payments maturing in the present year for ship construction and the necessary provision has been included in the Capital Budget. This investment will increase our earnings of foreign currency and provide additional employment for Irish seamen and is also a prudent reinforcement of our economic security.
NATIONAL DEVELOPMENT FUND.
The estimated cost of all the projects approved up to the present for financing from the National Development Fund is just over £6,000,000, which is more than covered by the issues of £8,000,000 made to the Fund. Roughly £3,000,000 has been expended in the past two years on road improvements, drainage and other approved projects. Some projects, though approved, did not progress much beyond the preparatory stages last year but will be well under way this year, notably the scheme for the eradication of bovine tuberculosis in the Sligo and Bansha areas. Other projects are at present under consideration and some of them will become charges on the Fund in the course of the year. In all, it is estimated that expenditure from the Fund in 1955-56 will reach £2.5 million. The provision which the House will be asked to vote for the Fund this year will be determined by reference to commitments accumulating as the year advances. There has been a marked improvement in economic conditions, as is evidenced by rising production in agriculture and industry, as well as increased employment, and, in these circumstances, therefore, it should be possible to utilise our financial resources to a greater extent for projects yielding a permanent increase in income and employment, with lesser emphasis on short-term schemes to relieve unemployment or provide amenities. The Fund will, of course, continue to provide a reserve for contingencies calling for immediate action but I hope that the need for short-term measures will decline in this and future years as opportunities of permanent employment increase.
NET BORROWING, 1955-56.
Loan repayments of £2.83 million will be available to meet the estimated capital expenditure of £34.07 million, leaving a balance of some £31,000,000 to be raised by borrowing. In our circumstances, it is to our own people that we must look to provide the greater part of the funds needed for national development. Investment of our savings under successive native Governments in the relatively short period since 1922 has already yielded results in greater agricultural potential, increased power supplies, improved housing, modern schools and hospitals, Irish air and shipping fleets, forestry expansion and other developments which justify the foresight and courage of those responsible. The progress already made demonstrates how much can be done to improve the economy and to utilise our resources through capital investment and the application of modern techniques.
In relation to the capital programme and the borrowing it entails, I would like to put before investors the consideration that investment in Ireland, whatever form it takes, yields a double dividend. Besides the direct return on the sum invested, there is an increment which I can hardly call invisible, for it is real and tangible enough, arising from the fact that in so far as investment in Ireland brings a net increase in employment or output there will be more goods to handle, more customers for our shops and manufacturers and better conditions of everyday living. These considerations will, I hope, weigh with investors and induce their support for Irish issues.
Those whose means allow for small savings only or who are unfamiliar with the management of investments can also contribute to national development. Every pound saved and invested in Ireland, whether through the ordinary banks or the savings banks or by purchasing savings certificates, becomes available to support new industries and development works generally.
We who live and work here must recognise that our personal fortunes are bound up with those of our economy. It is broadly true to say that none of us can hope to become much better off or attain a higher standard of living unless the country as a whole is developed and made more prosperous. It is equally true that this development, if it is to be done at all, must be planned, financed and carried out by ourselves. There is no outside agency that we can rely upon to finance this work for us and the Government can operate only within the limits of the means placed at their disposal by the ordinary members of the public. I would ask every Irishman: Do you want to see this country more prosperous in ten, 20 or 30 years' time? Do you want to see better employment opportunities at home for your children as they grow up? We all want to see production increasing not only to yield bigger incomes for the producers and their families but also a margin which can be used to provide better health services and more generous provision for old age and the contingencies of life. If we want all these things, we must save now and in the coming years. Our savings, whether they be little or much, are the motive power that sets more wheels turning and more hands to work. The favourable economic conditions prevailing at present should enable us to save more and to accelerate progress in realising our economic and social ideals.
IV—CURRENT BUDGET, 1954-55.
One of the Tables circulated in connection with the Financial Statement shows how the 1954 Budget turned out as compared with the estimates which my predecessor set before the House in April, 1954. Excluding Road Fund finance, current expenditure exceeded the estimate by £1.87 million. The main explanation of the excess is that this Government, in accordance with the principles on which it was formed, reduced the cost of butter to the consumer by 5d. a lb. and honoured in full the arbitration award to public servants. Expenditure on these two items came to £1,980,000.
Excluding motor vehicle duties, which go to the Road Fund, the actual revenue received by the Exchequer exceeded the Budget estimate by a mere £200,000, an increase of £650,000 in tax receipts being offset by a shortfall of £450,000 in non-tax revenue. The additional receipts came mainly from income tax and corporation profits tax, the yield from customs and estate duties being somewhat less than was expected. Some particulars of the yield of the various taxes may be of interest. Tobacco brought in £21.9 million, beer £7.9 million, oil £7.8 million, and spirits £7.5 million. On the inland revenue side, income tax and sur-tax produced £23.5 million, estate duties £3,000,000 and corporation profits tax almost as much. Other significant contributors to the Exchequer were stamp duties £1.8 million, and entertainments duty £1.3 million. The non-tax revenue total of £16.85 million included £6.6 million from the Post Office, £4.5 million of interest and dividends on Exchequer assets, £1,000,000 of surplus income from the Central Bank, £1.76 million of land annuities and £1.14 million from the American Loan Counterpart Fund to cover interest on the Marshall Aid Loan.
In the event, there was a deficit on current account for the financial year 1954-55 of £1.63 million which is an indication of the difficulty with which I was faced in preparing proposals for a balanced Budget this year. It now remains to present these proposals to the House.
V—CURRENT BUDGET, 1955-56.
ESTIMATES OF REVENUE AND EXPENDITURE.
The White Paper presented to the Dáil a few days ago shows the estimate of revenue at £110.62 million while current expenditure, at £112.70 million, exceeds the revenue figure by £2.08 million. By comparison with the actual figures for last year, the estimate of revenue shows an increase of £3.9 million, although last year's reliefs are costing £600,000 more this year. On various occasions during the past six months I ventured the opinion that the confidence engendered by the policy of the Government was showing a beneficial effect on trade and on our economy. The buoyancy of the revenue is a proof of the soundness of that opinion. Gratifying though the improvement in revenue is, it nevertheless falls short of matching the estimated increase in expenditure. This shortfall, together with the fact that last year closed with a deficit, which we have to overcome this year, accounts for the difference between revenue and expenditure as detailed in the White Paper.
Of the gross increase of £4.2 million in expenditure compared with last year, £1.8 million arises on Central Fund services. This is due to the additional provision required for the service of debt both by way of interest and sinking fund and is an inevitable concomitant of borrowing for national development. I must emphasise, however, that it is a gross increase and that the estimate of revenue allows for the receipt of additional interest and dividends of over £850,000 from State capital assets. Moreover, part at least of the remainder of the increase in debt charges is recovered in the form of taxation on the extra income and expenditure generated by the capital programme and is therefore allowed for indirectly in the revenue estimates.
This leaves the butter subsidy— which was introduced but only partly met from revenue last year and is costing no less than £2,000,000 this year—and the additional cost of health services as the main reasons why expenditure is in excess of revenue on the White Paper figures. Even if I were to make no other provision I could claim it as a satisfactory achievement if I were able to provide these benefits this year out of revenue at existing rates and still balance the Budget. Unhappily, unlike my predecessor, who, last year, could draw on C.I.E. for "£1,000,000 or so", I can invoke no similar fairy godmother to solve my problem.
SUPPLEMENTARY ESTIMATES.
While the Government are determined to prevent avoidable expenditure, I have in prudence to make some provision for expenditure which, though not now foreseen, may make its appearance before the year is out. In the light of the experience of previous years I have decided that a sum of £750,000 will suffice under this heading. This provision has the effect of increasing the difference to £2.83 million.
TEA.
Last January the Government decided to hold the retail price of tea at its then level notwithstanding the abnormal and steep rise that had taken place in world prices. Tea Importers, Limited, were enabled to effect this by adding the deficiency to the guaranteed overdraft that the Company normally operates to finance its purchases. The considerations underlying this decision, which will be effective until the price of this year's harvest is known in September, were explained and debated at length on the Supplies and Services Bill and on the Vote on Account. As then stated the Government felt that so steep a rise in world prices could be due only to temporary causes and that it would be undesirable to jolt our economy by submitting it to temporary fluctuation. A rise in the retail price at that moment might easily have had influences of a permanent nature on our national cost structure. By blunting the impact and by averaging the price over a period less hardship will be imposed on the consumer.
Since then world tea markets have turned. Almost every day we see references in the newspapers to falls in the price of tea. The outcome of the recent auctions in Ceylon may be taken as further evidence of the overall trend. The latest issue of a wellknown economic journal reports:—
"The tea boom is over... the auction room in Mincing Lane is closed for the third time this month; no one wants to buy tea just now."
So far, therefore, events have justified the Government's decision. No one can as yet forecast how far prices on the world market will have fallen by September and until that is known it is unwise to decide what course must then be taken. Accordingly, I do not propose to commit myself one way or the other until the whole problem can be reviewed in the light of all the circumstances then prevailing.
OLD AGE AND WIDOWS' AND ORPHANS' PENSIONS.
I have referred to the need to provide this year from revenue for the continuance of the butter subsidy, the expansion of the health services and, in addition, contingencies not covered in the Book of Estimates. I intend, however, to provide for another item of expenditure even though it aggravates my immediate problem.
When the Government was formed we set forth the objects towards which our policy would be directed during the lifetime of this Dáil. No member of the Government expected to achieve all of these aims concurrently or in the immediate future; they were, rather, the long-term goals towards which we would advance. Accordingly, it is necessary to consider the priority in which our objectives should be approached. After the items to which I have referred, I think all the Parties comprising the Government are agreed that there is a rather large group who have the first claim because of their dependent position in society and the straitened circumstances in which many of them find themselves. I am happy to be able to announce that the Government have decided to increase old age pensions by 2/6 a week, that is, from 21/6 to 24/- a week; blind pensions and widows' non-contributory pensions will be increased by the same amount. The scales of pension for those who do not qualify for the full rate will also be increased. In all, some 200,000 pensioners will benefit. In addition, the allowance for orphans will be raised to 7/- a week. Legislation to give effect to this implementation of one of the points of the Government's declared social policy will be introduced at once. I have no doubt that the Dáil will facilitate its early passage so that the administrative arrangements will be completed in time for the increased rates to operate as from Friday, 29th July next. The cost this year will be £900,000 and in a full year about £1.25 million.
This provision for improved social services increases the apparent difference between revenue and expenditure to £3.73 million. It will be increased still further by two tax concessions to which I will now refer.
SMALL BREWERIES.
Some of our small breweries have been finding it difficult to keep going in recent years. I am afraid there is no way in which a Minister for Finance can assure these concerns of being able to expand their existing markets. Nevertheless, I feel it incumbent on me to make a contribution towards preserving the smaller breweries and the employment they give locally. Previous Ministers for Finance endeavoured to ease their position by lightening their liability to excise duty. As a result of concessions given in the past the first 5,000 barrels brewed in any year carry a rate of duty 30/- a barrel less than the standard rate. I propose to increase this rebate by one-third to 40/- a barrel. The resultant loss of revenue this year will be about £20,000.
INCOME TAX.
However difficult my position, I feel that the family is deserving of special consideration. I accordingly propose, in relation to income tax, to increase the tax-free allowance for each child from £85 to £100. This means that a married man with one child will not be liable to income tax unless his earnings exceed £533 a year or £10 5s. a week. With two children a married man will be exempt unless he earns more than £666 a year and a married man with three children will not incur liability to tax unless his earnings are in excess of £800 a year. The cost to the Exchequer of this increase in the allowance for children will be £100,000 in the current year. The relief will benefit 27,000 individual taxpayers and will, in fact, exempt completely from income tax some 3,000 families.
Some little time ago the Minister for Health set up a committee to examine the feasibility of instituting a scheme on a national basis by which people could voluntarily provide by insurance for the medical expenses with which they might be faced in the event of illness overtaking them, their families or dependants. It is possible already to effect somewhat restricted cover of that nature. I propose to take advantage of the Finance Bill to introduce an entirely new relief into the income tax code in order to show my wholehearted approval of the principle that our citizens should, where they are able, make their own provision for such expenses. In future, anyone who enters into a voluntary contract of insurance to provide for the expenses of medical care and attention in case of sickness will be entitled to deduct the premium paid to his insurance company under that contract before computing his income tax liability. The cost this year need not be taken into account because there is at present far too little of such insurance. I sincerely hope that this relief will serve as a gesture and as an incentive to our people to make such provision when they are earning and in good health as will enable them to retain their independence in face of the adversity that illness often brings. If the committee to which I have referred is able to devise a suitable scheme, the contributions payable under it will similarly attract income tax relief. It is not usual for a Minister for Finance to express the hope that the cost of a tax relief will rise year by year, but I can genuinely do so in this case because of the principle of personal independence involved.
The only other income tax matters I need mention are, first, that I propose to extend to future stock issues of Dublin Corporation and other local authorities the privilege of nondeduction of tax from dividends—a concession which I hope will make these issues more attractive to investors—second, that I propose to extend the exemption for charities so as to relieve profits of a trade exercised in the carrying out of a primary purpose of the charity and, third, that the Finance Bill will also contain a provision confirming the Agreements with Canada on Income Taxes and Death Duties.
There I must leave income tax, at least until I have received and considered the report of the Industrial Taxation Committee, which I understand is approaching the end of its deliberations.
ESTATE DUTIES.
I might, perhaps, at this stage refer briefly to some other changes in tax law to be included in the Finance Bill, although they do not affect my budgetary arithmetic.
Two Financial Resolutions on estate duties will be moved this evening. One is connected with the confirmation of the Agreement with Canada on Death Duties and is necessary because of the possibility, in exceptional circumstances, that property now free might become chargeable as a result of that Agreement. The second Resolution relates to a provision for aggregation of certain assurance policies in order to stop a method of avoiding estate duty. Certain estate duty provisions of a relieving character, which I need not detail now, will also appear in the Finance Bill.
STAMP DUTIES.
Credit-sale agreements have to be produced to the Revenue authorities and stamped with impressed stamps of amounts varying usually between 3d. and 2/6, whereas hire-purchase agreements can be stamped with a 6d. adhesive stamp. For general convenience, I propose to bring credit-sale agreements into line with hire-purchase agreements. I shall move a Resolution to authorise this change.
I intend to repeal in the Finance Bill the stamp duty chargeable on the certificates of notaries public.
MOTOR VEHICLE DUTIES— TRACTORS.
Deputies who represent creamery areas will, I am sure, agree that the present method of delivering milk to creameries is extremely wasteful of the producer's time. In order to encourage a more efficient method, I propose to reduce from £31 10s. to £8 the road tax on those farmers' tractors which are used for reward solely for the carriage of milk to and from creameries. The necessary provision will be included in the Finance Bill.
DEFENSIVE EQUIPMENT.
I must now revert to the apparent gap between revenue and expenditure which, as a result of the tax concessions, has become £3.85 million. For some years it has been the practice to deduct, as being proper to borrowing, the excess over £400,000 in the amount required for defensive equipment. This deduction was made on the ground that £400,000 was in all the circumstances as much as the taxpayer should be asked to meet from current income. On that precedent, which, I think, is not unreasonable, £400,000 out of the total provision of £800,000 this year may be classed as a borrowing rather than a revenue charge. The gap in the Current Budget is thus narrowed to £3.45 million.
FLOUR SUBSIDY.
Whatever differences of view may exist on the question of subsidies, all of us, I think, are agreed that any subsidisation of foodstuffs should be confined to basic necessities. The existing subsidies have, therefore, been reviewed to see whether some relief could not be obtained for the taxpayer by ensuring that the call on him for assistance is reserved to essential items and that he is not asked to bear an unnecessary burden on top of the heavy load he has to carry in any event. Any reasonable means by which we can reduce the charge on the taxpayer for subsidies must obviously receive careful consideration. For several years prior to the abolition of rationing in 1952 the principle operated was that subsidy should, broadly speaking, be reserved for flour used in the baking of bread. Subsidised flour was not made available for industrial uses such as the making of cakes, confectionery and biscuits. On the dismantling of controls, however, subsidised flour became available without restriction for luxury and less essential commodities. It is now intended to revert in some respects to the earlier situation and to arrange that the subsidy will be reserved, as far as practicable, for bread, for flour for home-baking and essential foods like sausages. A suitable scheme is being prepared by the Minister for Industry and Commerce, who will announce the details at an early date. It will effect a saving this year in flour subsidy payments of the order of £450,000. This saving reduces the gap to £3,000,000.
SAVINGS AND OVERESTIMATION.
Last year savings and overestimation yielded £5.25 million as shown in the first of the Tables. This, however, was £500,000 less than the total allowance of £5.75 million made by my predecessor at Budget time. Of that allowance of £5.75 million no less than £1.75 million related to specific items —defensive equipment, social insurance, transfer of Gaeltacht roads to the Road Fund, etc.—most of which were taken into account this year when framing the Estimates and, therefore, are not available to me now. Moreover, this year's Estimates were, perhaps, more carefully sifted than usual before publication. While it is impossible to detect every instance of excess provision or to foresee every possibility of saving, I could not with prudence reckon general overestimation this year at as high a figure as was taken in recent years. In 1953-54 overestimation was £3.6 million and, last year, if the shortfall were entirely deducted from the general provision, £3.5 million. In the light of the close scrutiny I have mentioned, I do not think I can safely put it higher than £3,000,000 this year. This, however, as Deputies will have noted, is sufficient to balance the account without any increase in taxation.
CONCLUSION.
This is the first Budget introduced by this Government since it was formed last June. It provides £2,000,000 for the subsidisation of butter and almost £750,000 for additional health services, it provides for increased old age, blind, widows' and orphans' pensions, it grants relief to income tax payers with dependent children, and it provides for the additional cost of the tax concessions made last year. These benefits amount to no less than £4,250,000. More than that, the Budget does all this without any change in rates of taxation although it carries a net £1,000,000 more for the service of the debt for capital development, although there is no £1,000,000 for me from C.I.E. and although I have allowed for the £500,000 of overestimation not realised on my predecessor's forecast last year. It does all that on sound principles on which we, in this Government, can build with safety and with results which will enure to the benefit of the economy. It marks the first instalment, but only the first instalment of our plans. Building now on this foundation, given ordered world conditions and reasonable internal stability, we will be able to advance in quiet confidence towards the remaining objectives outlined in the declared policy of the Government.
