Dáil Éireann debate -
Thursday, 2 Jun 1955

Vol. 151 No. 5

Finance Bill, 1955—Second Stage.

Minister for Finance (Mr. Sweetman)

I move that the Bill be now read a Second Time. The main purpose of this Bill, as the House is aware, with one exception—an important exception —is to translate into legislative form, where legislation is necessary, the budgetary proposals for the current financial year. The exception is, of course, the increase in the old age, in the blind and in widows' and orphans' pensions, for which separate legislation is required and has already been introduced.

The Finance Bill also contains a certain number of technical additional provisions, which it was not necessary to go into in the Budget, but which I shall now explain as I go along. The debate on the Budget concluded only very recently and I, therefore, do not propose, at this stage, on the Second Reading of this Bill, to go into the sections in any elaborate way but merely to enumerate their purpose and give a brief account of their contents. We shall have an ample opportunity for detailed discussion on the Committee Stage, if that is desired.

Part I of the Bill, as usual, deals with the income-tax code. Section 1 reimposes the same rates of income-tax and surtax as were in force in the year ending 31st March last. The remaining sections deal with matters to which I made reference in the financial statement.

Section 2 increases the deduction which a taxpayer is entitled to make in respect of qualified children from £85 to £100 for each child.

Section 3 extends the exemption from income-tax for charities so as to relieve the profits of a trade exercised in the carrying out of the primary purpose of the charity.

Section 4 authorises the deduction from income-tax before income-tax liability is computed, of insurance premiums paid to provide for the expenses of medical care and attention in case of sickness. In respect of that section, I would draw the attention of the House to the fact that the phrase "authorised insurer" is used in sub-section (1) and is defined later in the section. That has the effect of relating it to the definitions that are in the Insurance Act, 1936, and it will therefore include the scheme that is operated by the Irish National Teachers' Organisation. Deputies will see that that is clear from the wording that is followed in the second section when relating to the Act of 1936.

Section 5 extends to future stock issues of local authorities the privilege of being able to pay dividends without deduction of income-tax at source. That does not mean that interest on stocks of local authorities to be created in the future are tax free. It merely means that that interest will be payable without deduction of the tax at source and it will be assessable on Schedule D in the ordinary way.

Part II of the Bill contains four relieving sections in respect of customs and excise. The first section in this part, Section 6, increases from 30/- to £2 per standard barrel the rebate that is allowed to each brewer on the first 5,000 barrels of beer brewed by him in any year and in this regard the year commences on 1st July and this section will be effective as from the year commencing 1st July, 1954. The House will remember that I announced that I was making that concession for the purpose of assisting the employment that these small breweries give locally and so to try to make my contribution towards their being enabled to carry on satisfactorily.

Section 7 reduces from 35 per cent. to 25 per cent. the minimum proportion of a cine-variety programme in a patent theatre which must consist of a personal performance so that the entertainment may qualify for the 30 per cent. repayment of entertainment duty allowable under the Finance Act of 1948, sub-section (10), Section 4, paragraph C. The House is aware that in patent theatres there is a provision by virtue of which they have to pay less entertainment duties if they put on a live performance to the extent of a proportion of the show. This is a change to enable them to alter the period of time they devote to the live shows.

Section 8 of the Bill revokes the customs duty on galvanised corrugated iron or steel which has been suspended since 1942. In the absence of such a provision it would automatically come into force again next year with the lapse of the Supplies and Services (Temporary Provisions) Act, 1946. It has been announced that this Act will not be reintroduced next year.

Section 9 has three purposes. It provides, in the first instance, as announced, that the £8 excise duty applicable to agricultural tractors used on public roads for the baulage of goods without reward shall also apply as from the 1st July, 1955, to agricultural tractors using a carry-all or other detachable container for the conveyance of goods without reward. As things are at present the attachment of such a device transforms the tractor into a goods vehicle making it liable for duty at the higher rate appropriate to that type of vehicle. For example if it is one and a quarter tons weight it is liable to a duty of £34. The ordinary tractor can carry much more in a trailer at the £8 rate than could be carried in the detachable container so that it would be inequitable to leave the law as it stands at present.

In the second place the section carries out the announcement which I made in the financial statement, that is that agricultural tractors used for hauling milk, separated milk and containers to and from creameries for reward will be subject to duty only at the £8 rate. Provision is made in the section for a refund of the duty where a tractor qualifying for this relief has already been taxed for the full period up till 31st December last.

Part III of the Bill contains four sections dealing with death duties. The first of these, Section 10, provides for confirmation of the agreement with the Government of Canada, signed on 28th October last, for the avoidance of double taxation on the estates of deceased persons. The agreement is set forth in the First Schedule of the Bill.

Section 11 provides that, where property is being taken out of settlement, the trustees may obtain from the Revenue Commissioners a certificate of the prospective amount of estate duty for which they, as trustees, may become accountable. This will enable trusts to be wound up in certain cases, but I should explain that should the amount of the duty be found later to exceed the amount specified in the certificate the trustees will not be liable for the excess but the beneficiaries, who have received the funds, will still remain liable and such excess must be paid by them.

The effect of Section 12 is to take all assurance policies contracted for by a deceased person on his own life for the benefit of other persons, and in such terms that he himself could take no interest in the policy moneys, and to aggregate them together for the purpose of ascertaining the appropriate rate of duty to apply to each of the policies. The reason for this section is to combat a scheme for the legal avoidance of duty whereby an individual desiring to insure himself for £10,000 takes out five policies each for £2,000, which is the estate duty exemption limit. As the law stands, on the death of that person, each of these policies would form an estate in itself and no duty whatever would be payable in respect of those five policies. It is to avoid the operation of such a scheme in the future that we are making this provision in Section 12.

Section 13, on the other hand, is a relieving section which limits the application of the aggregation rule. Under the existing law, if a person's own free estate exceeds £2,000 it is aggregated for estate duty purposes with any settled estate in which he had an interest and, accordingly, becomes liable to the higher rate of duty. Under Section 13 the aggregate will not apply where the net value of the free estate of the deceased does not exceed £10,000. That is to say it is being extended from £2,000 to £10,000 in relief of the existing provisions. There is also the usual provision here for marginal relief as exists in many death duty cases.

Part IV, and Sections 14 and 15 in Part IV are concerned with the Canadian double taxation agreement. They are for the purpose of giving effect here under our domestic law to that agreement. Again, the agreement in this case is set forth in the Second Schedule to this Bill.

Part V refers to two matters affecting stamp duty to which I made reference in the financial statement. In Section 16 I have provided for the repeal of the stamp duty on the certificate of notories public which became consequential on the enactment of the Solicitors Bill last winter. Section 17 provides that credit sale agreements will be brought into line with hire purchase agreements for stamp duty purposes.

The remaining four sections of the Bill which are contained in Part VI are now the normal sections. Section 18 makes the usual amortisation arrangement in respect of borrowing for voted "capital services" in 1954-55 and 1955-56. The necessary repeals are provided for in Section 19 and in the Third Schedule to the Bill. The repeal of Section 5 of the Finance (Miscellaneous) Provisions Act, 1935, and of Section 23 of the Finance Act, 1938, abolished the bounties on tobacco made from home-grown leaf and on sugar made from home-grown beet which were introduced in 1935 to compensate exporters in particular for the higher duty-free cost of such commodities as compared with the imported products. The tobacco bounty was suspended under the Emergency Powers Act. No bounty has been paid in either case since 1943. Tobacco has virtually ceased to be grown here and sugar ceased to be liable to duty in 1946. With the lapse of the Supplies and Services (Temporary Provisions) Act, 1946, the original legislative provisions would be revised and, in the circumstances, their repeal is now proposed.

That concludes a very brief review of the sections of the Bill and the Schedules are those to which reference is made in the sections, and to which I have referred. In view of the fact that the debate on the financial statement was so recent I do not think that any further or more detailed statement is required at this stage.

Mr. MacEntee

This Bill is remarkable, not for what is in it but for what is not in it. I suppose those innocent people down the country who believed all the Coalition spokesmen told them at the last general election thought that when this Bill was issued and circulated to the Dáil that there would be sections relating to beer duties, spirit duties, duties on tobacco and duties on petrol. These sections are conspicuous by their absence.

If one might try to find a description for this document—though, of course, it is not a sample of the most expert versification—one might describe it as almost an Elegy on the Disappointed Taxpayer. Appropriately enough to-day we can apply to those who voted for the Coalition, particularly to those who voted for Fine Gael, a well-known line, indeed a hackneyed line, from Lycidas, for it is most opposite, "That the hungry sheep"— the Fine Gael sheep—"look up and are not fed." Where in this Bill are the tax reductions which were promised us? So far from there being any tax reductions in this Bill there are new provisions—at least one provision—to harrow the taxpayer, to pursue him even beyond the grave; for that is the purpose of Section 12. If a man in his lifetime has been astute and intelligent enough to devise a means whereby those who are heirs of his body—his own children, to whom he has a special responsibility—will secure a reasonable share of his estate after death, a means whereby the grasping and avaricious hand of the Minister may be prevented from taking what the person who made the money, worked for it and who owns the money thinks should belong to his children, a means of thwarting the Minister in pursuit of this property, the Minister has now come along and made certain under Section 12 that what belongs to the children will pass into the Central Fund.

Hitherto there has been no evasion of the tax law. Let us make no mistake about this. This Section 12 is not to punish crime; it is not designed to penalise an offender. This Section 12 creates a new offence, if one may put it that way. It is designed to ensure that a man who, as I said, is astute and intelligent enough to find a way to distribute his property or some small portion of it—because, of course, the amount involved is inconsiderable— equitably between his children will be stopped from doing this for the benefit of his own posterity.

There are one or two minor reliefs in the Bill. There is the relief provided in Section 2 which we welcome and which, no doubt, would have been embodied in a Fianna Fáil Budget if it had been introduced this year. But there is one limiting factor in regard to it to which I would like to direct the Minister's attention and where I think that a minor amendment to the existing law would remove what is to-day an anomaly. Under a section of the 1920 Act where a child enjoys an income in its own right above a certain figure the taxpayer does not get the benefit of this allowance, or, I think, of a housekeeper's allowance either—the full benefit of it—and I would suggest that perhaps the Minister would look into that, and perhaps when he is concluding the debate on this stage he might be in a position to inform the House that he would favourably consider it.

The other section which is a relief section is Section 7. Section 7 is designed to secure a rebate in entertainments duty in cases where a certain proportion of the programme consists of what is generally known as "a live show." The section provides that the fraction which entitles the owner of a patent theatre to this concession shall be reduced from 35 per cent. to 25 per cent. I am not opposed to that. Quite frankly, if it had been put to me, I suppose I would have asked the Government to accept it, but I am just trying to throw my mind back to my tenure of office from 1951 to 1954 and imagining to myself what the Minister for Health or the Parliamentary Secretary to the Minister for Agriculture would say if a Fianna Fáil Government——

Parliamentary Secretary to the Government (Mr. O'Donovan)

Did the Deputy increase taxation then?

Mr. MacEntee

——brought in a section like Section 7—or, as he is there, and inspired me, the Minister for Social Welfare. We remember what the Minister for Social Welfare said when, because of the increase in the cost of manufacturing and of raw materials and on the advice of the Prices Advisory Body who are now sending the price of bacon sky-high, we proposed to increase the price of cigarettes by a penny. We were told then that this penny was being given by the Fianna Fáil Government to the English tobacco monopolists. That is what we were told by the Minister for Social Welfare. If we were bringing in this Section 7 to-day and the Minister for Health was sitting on this side and the Parliamentary Secretary to the Minister for Agriculture was also here, we should be told that under Section 7 we were giving away the taxpayers' money to a millionaire cinema owner. That is how it would be represented. I am not saying that, but it is just as well that the public should be reminded of the manner in which perfectly legitimate, reasonable and indeed unavoidable concessions, concessions which were inevitable if the general public interest was to be served, were misrepresented when we had to do things like that in our Finance Bills.

As I say, if I had been where the Minister is, I would have agreed to this. Half a loaf is better than no bread and if these people are not enabled to carry on and give such employment as they do now in maintaining a live show at the theatre, it merely means that a great number of people—stage hands, scenic artists, a great number of people who serve as supers in one way or another, as well as members of the orchestra—will be thrown out of employment, and I feel that the concession for what it is worth, is justified, if it is going to enable all these employees to remain in their jobs.

I was saying that this Bill is remarkable not for what is in it, but for what is not in it. I have already referred to the significant omission of any reference to the duties on beer, spirits, tobacco or petrol, which, if they were reduced to the 1951 figure, were, according to the Taoiseach himself in 1952, going to put £10,000,000 back into the taxpayers' pocket. In fact, if they were brought back to the 1951 figure, I think the amounts that would go back into the taxpayers' pocket would certainly be very substantially in excess of £10,000,000. I am not going to say that it would be possible for the Minister to do that. It would not be possible for him to do it and to maintain public expenditure at the level to which it has been driven, and driven not by Fianna Fáil but by the Coalition since the Coalition took office in June, 1954. The Minister cannot deny that under several heads he has very considerably and substantially increased public expenditure. Unfortunately, for Deputies and for the general public, the full extent to which he has increased expenditure has not been disclosed.

When speaking on the General Resolution the Parliamentary Secretary to the Government told us that he had no doubt that the greatest boon which could be given—I am not quoting the Parliamentary Secretary exactly——

Mr. O'Donovan

No, nor the last day, either.

Mr. MacEntee

I took the Parliamentary Secretary's statement from the Official Debates. If he wants to run away from that statement——

Mr. O'Donovan

Quote it accurately.

Mr. MacEntee

We know that the one significant characteristic of the Coalition is the alacrity with which when it is politically expedient, they can abandon a position and take up a new one diametrically opposed to that which they first held.

Mr. O'Donovan

I will give the Deputy the quotation.

Mr. MacEntee

The Parliamentary Secretary undoubtedly led the general public to believe that, in his opinion, the greatest boon which could be conferred upon the community as a whole —I think he said—in the general interest would be a reduction of 6d. in the standard rate of income-tax. He said further it would cost £1,500,000 but that the Minister had not got the £1,500,000. I am glad to see that the Minister apparently has a public conscience in relation to these matters. Apparently, however, he is not so very strongly opposed to the point of view of the Parliamentary Secretary as perhaps this Budget might lead people to believe, because he went down to Cork and on a public platform, addressing a Fine Gael audience, he devoted—I do not know exactly how long—a substantial part of his speech as reported in the newspapers to justifying his omission to reduce the standard rate of income-tax and to confer this greatest boon upon the community as a whole which the Parliamentary Secretary suggested could have been done, if it had not been for something else. What ground did he defend it on? He defended it on the basis that he apparently prevented the cost of tea from rising and that he had apparently reduced the price of butter, but he has not prevented the price of bacon from rising, nor the price of bread.

Mr. Sweetman

Will the Deputy quote me accurately, please?

Mr. MacEntee

The Minister does not expect me to weary the Dáil by repeating verbatim——

Mr. Sweetman

Do not put words into my mouth which I did not use.

Mr. MacEntee

——the lame defence of a very astute lawyer.

Mr. Sweetman

Do not put words into my mouth which I did not use.

Mr. MacEntee

He could not reduce the standard rate of income-tax, because he had, first of all, restored the subsidy on butter and had restored the subsidy on tea. I wonder does the Parliamentary Secretary believe that the perpetuation of subsidies is in the general economic or public interest? He may get up here and, speaking as a politician, say, yes, he does. He may even say it on the hustings, but will he, in his capacity as a professional economist, embody that view in his teachings to his students?

The really significant thing about the debate on the Budget of 1952 was that the Fine Gael Party were not prepared at that time to pledge themselves to a restoration of subsidies. They have, of course, changed their minds— changed their minds perforce, because there is a whip on the box, there is a coachman driving the team. The whole 50 or more—I forget how many —Deputies in the Fine Gael Party have to answer to the crack of the coachman's whip and have to go in whatever direction he may tug the rein.

Of course, those people who voted for Fine Gael in the belief that if they got into power there would be some limit put, some halt called, to the increase in public expenditure—and, with that halt, that the taxpayer would inevitably benefit—have been disappointed. Indeed, the policy of reducing expenditure appears to have been abandoned. The real point, however, is that not only did the Government promise a reduction in taxation, but they promised a reduction in the cost of living as well. Not only did they promise a reduction in taxation and a reduction in the cost of living, but they promised a simultaneous expansion in the social benefits. They did not say, as they are saying now: we will give you a reduction in taxation or a reduction in the cost of living or an increase in the social services. Not at all. They promised all three to the people.

The actual hard, harsh economic fact is that the cost of living has not been reduced—that, so far from the cost of living being reduced, it is, as the Americans say, on the up and up. It is true that the apparent cost to the consumer of butter has been reduced and that the apparent cost to the consumer of tea has been prevented from rising. However, the real fact of the matter is that the consumer of butter and tea is now paying for these commodities in instalments. He pays the first instalment to the grocer and he is going to pay the second instalment under this Bill to the Minister for Finance. There is no blinking of this fact. The only thing about it is that it is very questionable whether the incidence of the taxation which the Minister has to levy in order to provide the revenue to maintain these subsidies is a just and a fair one.

Take, for instance, the question of butter. Who is making the most out of the subsidised butter? Is it the housekeeper in a humble working-class district? Not at all.

Mr. O'Donovan

The dairy farmers.

Mr. MacEntee

The Parliamentary Secretary has said "the dairy farmers." That is an admission that the case I am making is correct. The dairy farmer gets the same amount for his butter whether it is subsidised or not. The only question is in what way is it paid. As I have said, the consumer pays one part directly to him over the grocer's counter more or less through the ordinary channels of trade. The other portion or instalment he pays indirectly as a taxpayer. I was asking the question: Who it is who benefits most by this butter subsidy? Is it the housewife in a humble working-class district? Is it the little shopkeeper or is it the small professional man? Not at all. As far as the shopkeeper and the professional man are concerned and the housewife, if her husband happens to be an artisan or a tradesman in the income-tax paying class, they get nothing. They pay as much in direct taxation as their wives save through the subsidy.

The people who are really benefiting by this are those who are supplying meals for profit—not those who are trying to feed their children in their own homes or their husbands at their own tables. The people who are coining money because of this butter subsidy are the hotel keepers and the restaurant keepers. Whether they are grade A or grade D hotels, whether they are fashionable restaurants or merely the humble sort of café that caters for the typist, they are the people making money out of this—not the general body of consumers.

In one way or another, since the general body of consumers pay through the nail for this cheap butter for the restaurants and hotels they are probably losing, and losing very considerably on the transaction. The same is true of tea except with this distinction. Apparently when you subsidise butter you are subsidising it, if you may say so, for the benefit not only of the hotel caterers and the restaurant caterers but some portion of the benefit finds its way to the Irish farmer. However, when you subsidise tea what do you do? The Irish farmer gets nothing out of it. The hotel caterer gets his whack and so does the restaurant caterer, and the balance of the cash goes to the Far East or the Middle East, to the tea growers in Ceylon and India. The tea growers in Ceylon and India are the people who get the maximum benefit out of the tea subsidies and it is because he wants to subsidise the hotel caterers and the restaurant caterers and the tea planters of Ceylon and India that the Minister for Finance in this——

Mr. Sweetman

Indonesia. I should not like the Deputy to forget anything.

Mr. MacEntee

——Finance Bill has not been able to confer on the community as a whole that greatest boon to which the Parliamentary Secretary to the Government adumbrated.

There are a number of other matters to which I should like to refer on this Finance Bill but some of them, I think, might open too wide a field for discussion. There is only one thing I can say, perhaps, in conclusion. The highest tribute which has been paid to the Minister for Finance and his Budget was paid by the Parliamentary Secretary to the Minister for Agriculture. What was it? What were the terms of this eulogy? He said this Budget might have been a Fianna Fáil Budget. According to the Parliamentary Secretary to the Minister for Agriculture, there is no higher standard now by which a Coalition Budget can be judged than that which was set by us in 1952. There is this resemblance, at any rate, between the 1952 Budget and the 1955 Budget. I think that the Minister, despite his difficulties, has made an honest attempt to present to the country and to the House a balanced Budget.

It is a good thing that he has done that because he certainly will have cleared away an atmosphere of unreality and illusion which has characterised public life in this country since 1948. The Budgets of his predecessor were not balanced. I doubt if a critical analysis would show that any one of them was balanced but I know that, in relation to two of them, there were very heavy deficits running into millions. In the case of the other Budgets, they showed a nominal surplus arising from the fact that the then Minister for Finance had not met the public obligations as they arose. I think that, in this Budget, the Minister has tried to do his job decently and honestly and for that, despite all the criticisms which can be levelled against the Budget, I for one am prepared to commend him because I think that, in doing that, he is doing a great public service.

Again, let us get back to the Parliamentary Secretary to the Minister for Agriculture. He implied that this was, in fact, the sort of Budget that Fianna Fáil would have brought in because it was an honest Budget—that is what he said—and a sound Budget. So far as one can see from the outside an endeavour has been made to present a balanced Budget. On the other hand, I do not know what are the actual facts behind this Budget. I do not know, for instance, to what extent the Estimates which the Minister has made for revenue will be fulfilled. I do not know to what extent he will be able to maintain the Supplementary Estimates within the figure of £750,000 which he has allowed for them but, assuming that the Estimates for revenue are really realised and assuming that he is able to restrict Supplementary Estimates to the figure of £750,000—it would be a Herculean task if he accomplishes it—then it looks to me, from the outside, that the Budget will balance.

I think the Minister's refusal to reduce taxation is an earnest of the fact that he does recognise that the public interest demands now, and indeed at all times, except in very exceptional and emergency circumstances, that the Budget should be balanced, that the Budget for every year should be balanced. It is not always possible, of course, to realise that. Emergencies will occur and special provisions will have to be made to meet special circumstances on occasion; but definitely, in so far as there is an annual review or annual casting up of the accounts for the year, the Budget for each year in my view should be balanced.

Having said that, I would like to say this, that the fact that the Minister has not attempted to reduce taxation in this year is something for which I at least will commend him. Again, the very fact that he has not been able to reduce taxation shows how shallow and how unprincipled were those who pledged themselves to the people at the last general election that they would reduce taxation considerably. They have not been able to do this— and they must have known that they would not be able to do it, because the mere fact is that, as I have said, public expenditure does not permit taxation to be reduced. If we want to get a reduction in public taxation, then in my view we must impose a definite limit on public expenditure. I think the time has come when we will have to take stock in this country. With our limited resources, with our undeveloped economy, we cannot go on providing for all our citizens the things which the richest States and the most highly industrialised communities in the world are able to afford.

We have to remember that we are, in the main, an agricultural community, that the majority of our people are very poor people, that there are no very great fortunes in this country, no huge industrial enterprises which can be readily and easily taxed. Therefore, as people of common sense, as people who regard providence and prudence as virtues, as people who wish to pay our way in the world and maintain not only our political but our economic independence, we shall have to put some definite limit on public expenditure. When we do that we shall be in a position to consider these reductions in taxation which I believe are absolutely essential to the general good.

I think money fructifies best in the hands of those who make it. I do not believe and never have believed—and the experience of public enterprise everywhere has confirmed me in the belief—that the State in most matters can do better than the individual. While the State will have to undertake capital expenditure for development where the finance needed for the development of natural resources is far beyond the competence of any Government or any group of individuals to supply—and the State will of course in those circumstances have to step in and provide for capital development— nevertheless so far as day-to-day working of our economy is concerned, so far as the financing of private enterprise and private industry is concerned, so far as the capitalisation of our agriculture is concerned, the best hope of this country lies in allowing the man who earns and makes the money to employ it to his own best advantage. In that way he will give employment to others and he will put the economy of our country upon a sound foundation.

I was going to say a great deal more about the impact of the Government's policy on agriculture. The Minister for Health has just reminded me of it, or I think it was Deputy O'Higgins, I am not sure, who brought in here a leaflet which was circulated by me at the last election. I think it was a good leaflet, I think it had a great sense of humour, particularly as the Minister for Agriculture was passing the ammunition to shut down Irish enterprise, using anti-aircraft guns for that purpose.

We thought, having regard to the experience of the 1948-1951 Coalition, that the foibles and prejudices of the Minister for Agriculture would be turned against Irish industrialists and Irish industrial enterprise. That has not been done. Instead of that, the general financial policy of the Government and their guns have been turned very much against the Irish farmer. He is paying for Government policy through the reduction in the price of wheat, through the increase in the price of offals and, if I may say so, through the enforced reduction in the bank deposit rate—through the enforcement of a limitation upon the amount which he may earn on bank deposits.

He is paying for a great deal of the Government's policy and I do not think that is right, because Irish agriculture is languishing for want of capital. Anything that can put money into the farmers' pockets in present circumstances is not a bad thing for the community as a whole. Anything that will allow money to remain in the farmers' pockets is not a bad thing for the community as a whole. I think the farmer will use his own capital, his own personal capital, much more wisely and very much better than he will if he can get credit easily from any public source. Unfortunately, that is what the Government is preventing the farmer from doing now. We were building up capital in Irish agriculture, we were putting money into the pockets of the Irish farmer. That was not a bad thing, I think that was what we wanted—but what is happening now? He has no longer a margin to save, he has no longer a margin to build up his capital resources; and he is driven back to the same position as before, the position in which he was a mendicant having to go into the bank manager and to other institutions and look for temporary accommodation until he would get his crops in.

Mr. Sweetman

Tripe.

Mr. MacEntee

When we were in office, the Irish farmer had at least some prospect of financing this capital expenditure with his own capital, knowing that he could look after it much better and that he would not be harried by the anxieties that always beset a man who is too deeply indebted to the bank.

Mr. O'Donovan

I propose to speak on this Bill only for a short while and my primary reason for intervening is to give Deputy MacEntee the correct quotation as to what I said about taxation. It is given in column 1372 of Volume 150:—

"I am not saying there should not be reductions in taxation. There is not the slightest doubt, from an economic point of view, and the general good of the community, that the operation by which a Minister for Finance might bring the greatest good would be to reduce taxation by 6d. in the £."

What is my quarrel with Deputy MacEntee? My quarrel about that quotation is that he took the subordinate clause and made it the principal clause. From an economic point of view, yes: as regards industry, yes; yes as regards salaried people; but if we analyse the economic point of view in this country, what do we find? As regards our farmers, they pay practically no income-tax and they provide at present 80 per cent. of our exports. How then could it affect the part of our economy which is of the greatest importance, according to Deputies opposite, that is, the provision of moneys with which to pay for our imports at all times? If, in fact, the farmers pay little or no income-tax, is it not obvious that a very large part of our economy cannot be affected by income-tax at all?

Deputy MacEntee quoted that statement of mine three times on the last occasion. He did not quote it quite so definitely this morning. I noticed he had it written down. I was here the first time he used it and I did not jump to my feet because I wanted to refer back to the quotation myself and I had not the reference. I thought he was wrong and I would have drawn his attention to the fact. I am inclined to think Deputy MacEntee did not do that inadvertently. The extent to which the general good of the community is affected by taxation is undoubtedly, when taxation is high, very great indeed, but apart from the economic point of view the Government is concerned with other points of view.

I will start off by making a present to the Opposition. A Government is concerned with the political point of view. It is the business of a Government to look to the political end of things. Even before you come to the economic point of view there is another point of view which, in my opinion, takes primacy before the economic point of view, and that is the social point of view. This is the order: first of all, there is the political stability and organisation of the community and, as I say, a present to the Opposition, regard for the opinions of the people politically; secondly, and the one which is really of significance in this matter, there is the social point of view.

I asked Deputy MacEntee at column 1723, Volume 150 of the Official Debates of 18th May, 1955:—

"Would the Deputy have given 2/6 to the old age pensioners?"

Deputy MacEntee did not answer me directly. He answered me in this way:—

"Nobody will believe, whatever else they may believe about any other Deputy in the House, that the heart of the Parliamentary Secretary is bleeding for the old age pensioners."

Again to be fair to Deputy MacEntee, I will quote what he said later on in the column, and it answered my question by inference. He said:—

"...if we were in office to-day there would have been in this year's Budget a reduction in the standard rate of income-tax and there would have been a corresponding reduction of an equivalent amount in other taxes as well——"

That would be £1,500,000 and £1,500,000, that is, £3,000,000.

"——and there would have been no cut in the social services."

In other words, Deputy MacEntee, if he was Minister, would not have cut the amount given to old age pensioners, so he answered my question. The question was: "Would the Deputy have given 2/6 to the old age pensioners?" and, if I might use Deputy Lemass's words, they would have got "sweet Fanny Adams" from Deputy MacEntee if he had been Minister for Finance.

What did the Minister for Finance do this year? In fact he did provide additional moneys for a reduction in taxation. He provided £600,000 to implement the legacy which Deputy MacEntee had left him from last year's Budget.

Mr. MacEntee

That is not so. I did not leave him any legacy.

Mr. O'Donovan

He provided £600,000 to implement in a full year the concessions in relation to income-tax from last year's Budget.

Mr. MacEntee

I misunderstood the Deputy.

Mr. O'Donovan

In addition to that he provided a small sum, £100,000, which was of significance socially and to a lesser extent economically, for the concessions to our children. The main part of the Minister's Budget was really taken up with two items: £2,000,000 for butter and £1,000,000 in round figures for the old age pensioners. Deputy MacEntee dilated on the benefits the restaurant owners and hotel keepers got from the Budget. Of course, it is quite easy to get the figures. I regret I cannot recollect them accurately but I can recollect them reasonably accurately because the last time the inter-Party Government were in office, there being rationing at that time, they had a system whereby the restaurant owners and hotel keepers paid the full price for certain items and included in those items were butter and tea.

The Government this year did what they could do and they tackled the item which gave them the most money. They tackled flour, out of which they hope to get this year the best part of £500,000 and in a full year somewhere in the region of £750,000. Of course, Deputies opposite agree with us in their hearts that that was the right thing to do. I must say I do not disagree with Deputy MacEntee when he says it is a difficult thing administratively. The Government were well aware of that but, at the same time, the Government do not believe it will create that much trouble administratively. To get back to my figures, my recollection is that the value of the subsidy on butter and tea——

Mr. Lemass

What subsidy on tea?

Mr. O'Donovan

Let me finish my sentence. The value of the subsidy on butter and tea which existed when the last inter-Party Government were in office, if we are to judge from the figures, which the Government did not pay at that time to the restaurant owners and hotel keepers, was less than 5 per cent. of the total. Therefore, out of the subsidy of £2,000,000 on butter the restaurant owners and hotel keepers will get far less than £100,000. I am sorry I did not look up the figures before coming into the House. Speaking from recollection, I would say the amount was something like £40,000 or £60,000 in the case of butter and, I think, something the same in regard to tea, because the subsidy was about the same. The tea subsidy was £2,000,000 and the butter subsidy was £2,000,000.

Deputy MacEntee put a very fair question to me. I must say I have no grouse with the general tenor of his speech this morning any more than he had any grouse with the general tenor of the Budget. He asked did I agree with subsidies or not. It is a very fair question and I will answer it in this way. I feel the Budget of 1952 made a grave error in taking out the subsidies so rapidly, in taking them out at one swoop. In fact this caused me— let us be precise about it—to take an interest in politics. I had left the Civil Service, contrary to what Deputy MacEntee said, for a fair length of time at that period.

Is the perpetuation of subsidy in the economic interests of the community? Surely Deputy MacEntee who was Minister for Finance had learned 12 months subsequent to that Budget what was the cost to the community in inflation of prices through the wage increases that had to be given. I made a calculation as best I could that the saving in subsidy was of the order of £10,000,000. I calculated that the extra cost that went on to the community at the time, through the whole economy, agriculture, industry and the other services, was of the order of £22,000,000 to £28,000,000.

It is difficult to come to a conclusion definitely about that because, as Deputy MacEntee would say, these increases had to happen and, of course, that is a good answer, but my observations were that we should not have had these increases because the worst was over, in fact. I am inclined to think, and the Deputy can deny this, that Deputy Lemass agreed with that view. I do believe that Deputy Lemass did agree with that view of mine and in saying that I am not endeavouring to drive a wedge of any kind. Deputy MacEntee said that this Budget has disposed of an atmosphere of unreality and illusion.

At times in 1953 I certainly was astounded at the atmosphere of unreality that existed in political life in this country. At times I was flabbergasted. My amazement seemed to have been justified because, despite the climatic difficulties of last autumn, the whole tenor of life, and of economic life in particular, became more even last autumn and winter. This atmosphere of unreality and illusion was dispersed by the manner in which the new Government went about their work.

Mr. Aiken

Leaving things as they were.

Mr. O'Donovan

However they did it, they changed the atmosphere.

Mr. Aiken

They promised they would change the things.

Mr. O'Donovan

By leaving things as they were, or by some other way, the atmosphere was changed. I should like to draw the attention of Deputy MacEntee to two facts. They are that the Opposition did not divide the House this year either on the Vote on Account or on the Budget. They could not say of the Budget this time that it was their Budget. They did not divide the House against the extra 2/6 in the old age pensions.

Mr. Sweetman

Deputy MacEntee would not have given it.

Mr. O'Donovan

He would not have given it and I suppose he could not force his colleagues into the division lobby on it. The real reason why they did not divide the House on the Vote on Account was the nature of a couple of speeches made here about the rate of interest on bank advances being kept down in this country at a time and under circumstances when they might have increased by 1 per cent. It was the nature of certain speeches made on the Opposition side of the House that prevented the Opposition dividing the House on the Vote on Account because the Deputies of the Fianna Fáil Party knew that here was something that would benefit the country's economy beyond question without doing any damage to anybody.

Now I shall deal with the final part of Deputy MacEntee's speech. Deputy MacEntee, or the other Deputies occupying Fianna Fáil Benches, do not really believe that the main reason why any depositor in this country puts money into a commercial bank is the rate of interest he gets on it. Nobody in any seat in this House believes that. I have no figures, but I have concluded from the lack of comment that not a single depositor has moved his money from any bank in this country because of what the Government did this spring in relation to the rate of interest. There has been no comment whatever on the matter.

Deputy Childers said that the depositors in the commercial banks were making a specific gift of money to borrowers in these banks by not transferring their deposits to any Six County bank. Now if the boot were on the other foot and if Deputies on this side were over there with a Fianna Fáil Government in office and if that Government in their wisdom had taken this same decision what would Deputy Childers have said? He would have yelled: "Sabotage". It would have been all right for him to have made the first part of his statement in this regard. It might have been a reasonable comment that the depositors were making a gift. But the second part of the statement hinted to them to put the Government in a difficulty. What he said to the depositors was: "Look, boys, put the Government in a difficulty by transferring your deposits to the Six Counties".

To my mind, that was an unreasonable comment and perhaps the Deputy may feel now that it was an unwarranted comment. In the final part of his speech, Deputy MacEntee referred to our undeveloped economy. I should like to say this: I thought that the Government in office at the beginning of last year deserved commendation for the arrangements they made to get machinery into this country, to put combine harvesters in the hands of the farmers because these arrangements bore fruit last year. On the 12th December last I saw a Massey-Harris self-propelled combine cutting corn.

Mr. Sweetman

I saw five in the one field on the 26th December.

Mr. O'Donovan

The significant thing about it was that the barley and the oats would scarcely have been savable with scythes, let alone by any other implements.

Mr. MacEntee

The combines would not have been here were it not for the wheat.

Mr. O'Donovan

Let us not divide on why they were here. The arrangements which were made enabling the farmers to have them were of the greatest assistance to the community. On the whole, as I said earlier, I have no grouse with the nature of Deputy MacEntee's speech this morning. It did not condemn the Budget in any way except in the limited way of his previous speech and I think I have dealt with that point when I dealt with taxation.

Mr. Lemass

When the Finance Bill of 1954 was submitted to the House I moved an amendment to the Second Reading motion, an amendment which asked the Dáil to reject the Bill because it failed to give effect to the undertakings previously given by Ministers to reduce taxation. In the debate on that amendment, the members of the Government who spoke asked the Dáil to reject it because they said they had not had sufficient time to do the things they had promised—to bring about the specific reductions in taxation to which they were committed. They pleaded that the limited time available to them made it necessary to adopt the course of taking the draft Fianna Fáil Bill, as they described it, and of presenting it to the House as the Finance Bill, 1954.

Deputies on this side of the House quoted statements made by members of the Government in speeches during the election campaign; they quoted the advertisements they had published in the newspapers, the leaflets they had distributed to the voters and the extracts from Radio Éireann broadcasts, all of which indicated the conviction of the Coalition leaders that immediate reductions in taxation were not merely possible but could be easily accomplished.

These quotations had, I admit, no effect in this House, and I agree that they had little effect in the country. The arguments which Ministers put forward that they had no time last year went down with the more gullible of their supporters. A year has passed and the same Minister for Finance brings in another Finance Bill which again fails in any single one of its provisions to give effect to their election undertakings. I do not think that this Bill should pass through the House without having that fact duly emphasised.

If it is true that during the year there has been no change in tax rates, there has been no change in Coalition tactics either, and members of the Government are still going around the country even now dangling the same carrot, the same mouldy carrot, in front of the noses of the voters telling them that, if not this year, then next year, they will get a reduction in income-tax and a reduction in the rates of duty on beer, spirits and tobacco.

Deputy MacEntee described the Budget as an honest Budget. That is one way of putting it. Those who gather around the table of a three-card trickster at a race meeting do not think of him as a public benefactor, handing out money and inspired only by a generous desire to help people, and when they lose their money and go away with no more benefit from their session with him than they are getting from the Minister for Finance, they do not denounce him as a dishonest rogue because they got only what they expected to get, an education in the facts of life, and that is what the supporters of Fine Gael are getting through this Finance Bill, an education in the facts of life and an illustration of the mean, shabby trick that was played on them by the members of the Coalition Government and by those in this House who support that Government.

It is my desire not to praise the Minister for Finance for the Budget which he has produced but to expose the humbug that made him Minister for Finance and to get him and every other humbug out of public life if I can because their type of trickery is bringing Irish politics into disrepute.

Mr. Sweetman

The brazenness of the Deputy is beyond belief.

Mr. Lemass

There were pledges given by the Taoiseach and by the Minister for Finance that the rate of income-tax and the duties on beer, spirits and tobacco would be reduced. There were assurances given to the public that, within a few minutes of their taking office, these taxes would be reduced.

Mr. Sweetman

That is not true.

Mr. Lemass

The present Taoiseach said in this House that he would not be in office for ten minutes when these taxes would be reduced.

Mr. Sweetman

He did not.

An Leas-Cheann Comhairle

Deputy Lemass should be allowed to speak without interruption.

Mr. Lemass

It is on the record. It is the hypocrisy and the dishonesty of these denials that I want to expose.

Mr. Sweetman

The Deputy is showing his real colours as the brazen person who is prepared to throw responsibility to the wind.

Mr. Lemass

I am going to expose humbug and fraud.

Mr. Sweetman

That is perfectly true. You are exposing it in yourself.

Mr. Lemass

These statements were made by Deputy John Costello, now Taoiseach, by Deputy Sweetman, now Minister for Finance, and by Deputy McGilligan, now Attorney-General. These pledges were given to the public and were shamelessly repudiated and this Bill is evidence of the repudiation. Last year, on the Finance Bill of 1954, I brought forward a number of amendments which gave the Deputies opposite the opportunity, if they wanted to take it, of bringing back the income-tax rate and the taxes on beer, spirits and tobacco to the levels at which they were before the 1952 Budget. They had proclaimed throughout the country that the increase in these taxes in 1952 was unnecessary and unjustifiable. They represented Fianna Fáil as having imposed these taxes for other reasons than the need to get revenue for the Exchequer. They suggested that our aim was to cut down the standard of living of the people and to reduce their spending power for some mistaken economic purpose. They assured the public who voted for them that they would bring back these tax rates to the pre-1952 level.

When my amendments were submitted to the Dáil they voted against them, and as each amendment was presented the case they made for voting against it was precisely the same as they had used against the amendment to the Second Reading of the Bill. "There was no time; give them time and they would do this next year." Another year has passed. This is the anniversary of the coming in of that Government. A whole year has passed and in this Finance Bill there is no provision and no suggestion of a provision to bring these tax rates back to the 1952 level.

I am going to produce these amendments again to this Bill, and again I will make the Deputies opposite either accept them or vote against them as part of the campaign to get hypocrisy, humbug and fraud eliminated from Irish public life.

Mr. Sweetman

The Deputy is going to get more than he bargains for.

Mr. Lemass

The Minister for Finance is always threatening to explode but he never does.

Mr. Sweetman

We will explode all right. Do not worry about that.

Mr. O'Donovan

You will have a long debate.

Mr. Lemass

I have no objection to the length of the debate. The longer the debate goes on the more obvious it will be how shameless was the fraud which was perpetrated on the people 12 months ago by the present Coalition.

Mr. O'Donovan

You did not agree with the 1952 Budget.

An Leas-Cheann Comhairle

The Parliamentary Secretary has already spoken and should not interrupt.

Mr. Lemass

If the Deputy knows anything it has never been made obvious in his speeches here. There is a reason for producing these amendments again and it is that the present rate of income-tax and the present taxes on beer, spirits and tobacco were represented to the people as Fianna Fáil taxes and they are still regarded by many members of the public as Fianna Fáil taxes. They were so described by the dishonest Deputies opposite in their election campaign throughout the country. I want to make it clear through these amendments that they are Coalition taxes; that they are in operation because the Coalition wants them. Will the Minister for Finance have the common honesty to say that he has kept these taxes in force because he had to do it, and because he could not balance his Budget without them?

Mr. Sweetman

The Minister will put his standard of honesty anywhere and before anybody to see how it compares with the standard of honesty of the Deputy.

Mr. Lemass

Will the Minister get up and say that the statements which he and the present Taoiseach and all their colleagues have been making since 1952 were unjustifiable, and that their criticism of the 1952 Budget was based on ignorance or dishonesty?

Mr. Sweetman

I say that everything I said was true, and the Deputy has only to produce any statement of mine to show that.

Mr. Lemass

Why are the taxes on beer, spirits and tobacco and the rates of income-tax being left as they were fixed in 1952? Are they still trying to parade these taxes before the public as something that Fianna Fáil imposed and that they would take off? Does the Minister say that is an honest way to stand up to his responsibility? Why do they not take them off in this year of 1955? I do not believe that any Minister for Finance who wanted to balance his Budget, or even wanted to present to the House a Budget that had the credible appearance of being balanced, could reduce these taxes. I never said that they could be reduced, but the Deputies opposite said that these taxes were unnecessary and an unjustifiable burden on the people. Why do they not take them off? Answer that question. I am trying to get rid of this humbug and dishonesty. Is not the answer to the question that they cannot take them off and balance the Budget? Is there one Deputy opposite who will have the honesty to stand up and say that is the answer?

This "three card trick" that the Government played upon the country has to be exposed sooner or later. These amendments, which I shall move to the Finance Bill, will be moved not for the purpose of political demonstration but in fulfilment of this effort of mine to expose hypocrisy and fraud and to make it clear that these taxes are now Coalition taxes and that they are in operation because the Coalition has decided to keep them in operation. That will help to secure that condition in public life that the Parliamentary Secretary has been talking about; and I hope that every Deputy now supporting the Coalition will be in the House to vote for keeping these taxes in operation; they will get the chance of voting for them and they will then have to make clear to those who supported them in their individual constituencies that these taxes are now in force by reason of their votes, and not for any other reason.

There are some matters affecting this Bill to which I want to make more specific reference. The Minister for Finance said—at least he implied it— that it was not possible for him to effect changes in the system of taxing industrial profits because the committee which his predecessor had set up had not yet reported. I do not think we can go much longer waiting for the report of that committee. The time has come in our industrial progress when we must consider this question as one of urgency and, if the committee is not likely to produce its report soon, then decisions will have to be taken without waiting for that report.

Minister have been representing the industrial position as good. They have been quoting the index of industrial production for one season as against another to suggest that there has been an increase in industrial production. There has been no such increase. If one compares like with like, if one takes the industrial output figure for the last quarter of 1954 and compares that with the last quarter of 1953 one will find there has been no increase in output. There has, in fact, been a slight decrease. With every other country in the world going forward, we are standing still; by reference to every standard by which our economic progress can be tested that is the position. Industrial output is not increasing. The number of workers drawing unemployment insurance benefit is no lower than it was a year ago. It is, indeed, slightly higher. The volume of agricultural production is not increasing. The cost of living is going up. Taxation on the public is going up. There is no evidence of progress to justify the complacency of the Government.

These speeches of Ministers representing the country as enjoying a prosperity boom are altogether misleading; in no way is the country any better off than it was 12 months ago. But there is this difference: 12 months ago there was a Government in office which did not regard the conditions then existing as satisfactory and which was working might and main to improve them. That Government represented the situation as it then existed as merely the beginning of another effort or another drive towards economic progress; whereas to-day we have a number of Ministers sitting back in their chairs complacently reviewing the situation and doing nothing whatever to secure an improvement of it.

I have said on many occasions that our industrial development has reached the stage where, if it is to continue, export possibilities must be opened up. I do not know the significance of the Government's decision to adhere to the recent decision of the council of O.E.E.C., in relation to the granting of aids for the encouragement of exports. I would have thought that the best way of securing interest amongst our industrial producers in export possibilities was by a rearrangement of the system of taxes on industrial profits. But, so far as I understand the present position, the Government has precluded the possibility of taking that course by their adherence to the O.E.E.C. decision.

While I am on that matter, I want to refer again to this question of the withdrawal of the subsidy on flour used for the manufacture of biscuits and cakes. When I spoke here in the Budget debate I contended that the extension of that decision to flour used in the production of biscuits and confectionery for export would mean the end of the export trade in these goods; and the Government, with very commendable promptitude mended its hand and the Minister for Industry and Commerce announced the next day that the manufacturers of biscuits and cakes for export would continue to receive their flour supplies at the old price.

Mr. Sweetman

That is not true. The Minister for Industry and Commerce interrupted the Deputy and told him there and then what had been decided.

Mr. Lemass

What had been decided?

Mr. Sweetman

That the position for export would be protected.

Mr. Lemass

That the manufacturers of biscuits and confectionery for export would continue to get flour at the old price?

Mr. Sweetman

Yes.

Mr. Lemass

The manufacturers were informed to the contrary yesterday. They were informed yesterday that they would receive flour of only 72 per cent. extraction instead of the old 80 per cent. extraction subsidised flour. That means a higher price for flour used in the production of biscuits and confectionery for export as well as home consumption and it means the end of the export trade. It certainly means the end of the export trade in respect of biscuits to the Six Counties, where the British manufacturers are, I understand, cutting their prices at the same time as our manufacturers will be compelled to increase theirs. I do not know what arrangements the Government has in contemplation to bring into operation this two-price system in respect of flour but all the indications so far are that the Government is making a thoroughgoing mess of it and the effect of that mess will be felt in diminished production and diminished employment in the trades concerned.

The British tax system provides for a lower rate of taxation on profits retained in a business for its development as against profits distributed in dividends. Now our problem in relation to industrial development has been to secure a ready availability of capital to finance expansion and the great bulk of the capital which has gone into the expansion of Irish industry has come from the retained profits of existing concerns and there is every reason why in our circumstances we should adopt the British system and apply it here. In fact it is quite obvious that a country like ours, at the beginning of its industrial progress, requires these stimuli to expansion to a far greater extent than they would appear to be necessary in Great Britain; but, if the British Government in its wisdom thinks it necessary to give that inducement to industrial firms to hold their profits for the expansion of their businesses, surely we have equally a sufficiently good reason for doing the same thing here.

We require some inducement to our manufacturers to modernise their plants and get rid of obsolete and obsolescent equipment. Again, while other countries, Britain included, give an initial allowance in respect of new plant purchased we do not do so here. All the arguments which have been advanced in the past that the general rate of taxation here is lower than in Britain do not deal with the point at all. The point is that the efficient firm, the firm which is prepared to expand and buy up-to-date modern efficient equipment, should have an advantage in doing so over the firm that is not doing so within the general tax rate, whatever it may be.

The absence of any provision for depreciation on industrial buildings is an anomaly. It means that the system of taxing industrial profits is in part a system of taxing industrial capital and if anybody will investigate the history of the financing of Irish industry since the end of the war he will find that a high proportion of the taxes paid by industry during that period has in fact been paid out of capital. We find our industrial production at the end of 1954 was no higher than at the end of 1953. We have got to consider what effect that stagnation in industrial output may have on our employment and emigration problems. This Bill contains the Government's proposals for dealing with that position, and that is nothing. There is no indication in it of any policy or of any aim which is likely to contribute to the further growth of Irish industry.

During the course of the past year there were many indications of public interest in the introduction of a pay as you earn system of taxing earned personal incomes. The most significant thing is that that interest to which I have referred seems to have found its most frequent expression in trade union circles. There has been some general indication of support for it in other circles also and it is obvious that the general public feeling is that it is time that something should be done about it. Everybody knows how difficult it is when you have to pay your income-tax once or twice a year in the form of a substantial sum, how much easier it would be if it could be paid weekly in the form of deductions from the weekly pay cheque. Everyone has encountered cases of individual hardship on people who have lost their employment or who have retired but find themselves billed for taxation on the level appropriate to the higher income earned in the previous year.

I must recognise that there are practical difficulties in applying the pay as you earn system here. We were probably right to wait until the British system had been in operation for some time so that we could gain by the experience of the operation of that system before considering applying it here. The British system is undoubtedly complex and the Royal Commission which was set up to consider its simplification has reported that no real simplification is possible without risk of serious iniquities. They regarded it as more important that there should be an equitable distribution of the taxation burden rather than that the scheme should be made more simple to operate. We are told that the application of the scheme here would cost £160,000 in the first year and £100,000 per year afterwards.

Mr. Sweetman

That is the cost to the Exchequer. To that must be added the cost to business people.

Mr. Lemass

The cost to business people would not be very great.

Mr. Sweetman

On the contrary, it would be very much greater.

Mr. Lemass

I do not think so. There has been some opposition by very large employers in Britain on the ground of the additional cost which the operation of the scheme causes but the cost to the ordinary employer, such as the majority of employers in this country, is inconsiderable. In any case, as the law stands, where an employee defaults the Revenue Commissioners can go to the employer and direct him to pay the income-tax and then to deduct it from the employee's earnings. I personally cannot understand why there is this objection to the principle of the scheme which seems to be reflected in the attitude of the Minister for Finance. The scheme is clearly good in principle and we should be able to find a way to operate it. The trade unions have asked for it.

Mr. Sweetman

Not all the trade unions want it.

Mr. Lemass

I would suggest that consideration should be given to this matter by bringing the employers and the trade unions into consultation about the implementation of a scheme. A number of workers' bodies have expressed themselves in principle as being in favour of the introduction of a scheme. Let us get going on it. Let us consider whether the practical objections are as strong as they seem or whether they can be overcome. All I ask is that the process of having the scheme examined in consultation with representatives of workers and employers should begin.

In further connection with income-tax there is another proposition which I want to make. The present personal allowance is not very much larger than it was before the war. I believe that the personal allowance for a single man before the war was £125 and that it is now £140. The personal allowance for a married man before the war was £225 and it is now £280. When the income-tax code was first devised the personal allowance was intended to represent the amount which would be required to give a person a livelihood in accordance with what was then regarded as the working class standard. It was the amount of money which would enable a person to maintain himself on a working class standard and which should be free of tax in everybody's income. It is quite clear that the present personal allowance has no longer any relation to such a theory or standard. Even if we consider the position now, in contrast with the post-war period, we can find no adjustment of this personal allowance in relation to the changes in the value of money. Whether we relate the allowance to the principle of the working class standard of living or some other principle, the personal allowance should vary with variations in the value of money. If that £125 was regarded as a reasonable allowance to be free of income-tax before the war the figure should be somewhere around £300 now. The amount of the allowance should be varied in relation to variations in the value of money and it should also be tied to the cost-of-living index figure as the best guide to change in the value of money. These remarks apply with equal force to the earned income allowance.

I want to make one or two other suggestions. I think it should be a recognised principle of financial policy that the Government should rely for its revenue upon a few main taxes and seek to avoid a multiplicity of taxes. Taxes on income, on inheritance and a few taxes on articles of general consumption, preferably not necessaries, should bring in the bulk of the revenue. We have in operation here a very large number of excise duties on licences and so forth, not all of which were imposed originally for revenue purposes and some of which are obsolete. There should be an examination of all these and the Government should eliminate all those which are now only maintained for revenue purposes and which no longer serve the purpose for which they were devised.

Perhaps the best example I could give is the dog licence tax. Originally that tax was imposed to secure a reduction in the number of ownerless dogs which were roaming around the country. The purpose of that tax was to secure the elimination of these hordes of homeless and ownerless dogs. That problem no longer exists and is not likely to arise again and yet we keep this elaborate tax system in operation although its administration costs a great amount of money and it is difficult to enforce. I think that tax should be abolished.

There is another tax to which I would refer and unfortunately it is one that was imposed by a Fianna Fáil Government. It is the excise duty on tyres and tubes. When the Dunlop factory was started in Cork the Minister for Finance was worried about the possibility of losing revenue from the customs duty on imported tyres and tubes. In order to avoid that and to secure the goodwill of the Department of Finance for the project it was agreed that in substitution for the customs duty there would be an excise duty on the Irish-made tyres and tubes.

Anyone who has visited the factory at Cork will see that there is there a customs compound and all the tyres and tubes made in the factory pass through that compound and are taxed before they are sent out to the retail distributors. This tax has had to be amended from time to time because it produced a number of anomalies and any excise duty on an internal product intended for home consumption is bound to produce anomalies of one kind or another. The amount which it produces is comparatively small and it could be abolished—the time has come when it should be abolished. The consumption of tyres and tubes has expanded far beyond anything contemplated when the factory was founded, and the maintenance of the duty is no longer, in my view, justifiable.

There are certain other excise duties on licences, stamp duties of one kind or another, which appear to be completely unnecessary, which yield very little revenue, which are only a source of annoyance to the public and which should be cleared out of the way. The Minister for Finance could secure a reputation for himself in the history of the legislation of this State if he were to do that job. The total amount of revenue secured from all these duties added together is insignificant and probably would not be noticed in the course of a financial year having regard to the variation there usually is between revenue actually received and estimated revenue.

Mr. Sweetman

Was it not a pity you did not advise my predecessor to do this?

Mr. Lemass

I did.

Mr. Sweetman

But he was not prepared to do it?

Mr. Lemass

I would have persuaded him eventually.

Mr. MacEntee

I had no money to spare then, but I might have had this year.

Mr. Lemass

The Government has to borrow a great deal of money to carry through its Budget proposals of this year and in view of the scale on which Government borrowing has become necessary in recent years it seems likely that difficulty will be experienced in securing year after year the amount which the Government will require by the traditional methods and that is a situation which I think the Government will be forced to face up to. In my view—and I want to make no secret about this—the scale of Government investment expenditure will have to be considerably expanded if the economic and social problems of this country are to be solved. I do not regard it as an achievement to be proud of that the Government is cutting down its investment expenditure this year—the Minister seemed to be a little proud of this fact, but I think it is moving in the wrong direction—because no plan for the rehabilitation of the Irish economy, no plan for getting the country into a position which will secure full employment for our people and end abnormal emigration, can be conceived which does not involve a very considerable increase in Government capital expenditure, at least in its early stages.

There will be practical problems in financing even the present programme of capital expenditure much less the expanding programme which I think is necessary. The Government has talked about setting up a capital investment committee with powers to determine priorities of investment. I think it is high time that the Government made clear to the public what it has in mind. These announcements which appeared from time to time as ministerial statements or declarations to their political Parties smacked of the introduction of some form of control of investment, and while there is any suggestion of Government controls being introduced in that sphere there is likely to be a slowing down of private investment activity. If the Government has anything definite in mind, if they are not just talking in vague terms about something which they do not understand, the sooner they make a specific announcement of their intentions the better it will be, because the situation as it is now is the worst kind of situation to allow to continue, one in which everybody has been told the Government is about to do something but has no precise idea of what the Government contemplates.

I am throwing out these suggestions because I think these are matters of importance which have to be considered in relation to the Finance Bill, of far greater importance than anything that appears in the Bill. As Deputy MacEntee said, the significance of this Bill is not what is in it, but what is not in it, and what is not in it is any indication of policy on the part of the Government, any plan for the benefit of the community or for increasing industrial or agricultural production which can in any way mean that this time next year the economy of this country will be one bit stronger than it is now.

Mr. D. Costello

I do not think the memories of members of this House and the memories of the public in general are as short as Deputy Lemass would have us think. I think the public, and certainly Deputies on this side of the House, remember the Fianna Fáil economic policy as enshrined in the 1952 Budget. We recall very well the phrases which were scattered through that Budget which, in spite of their arguments in opposition, which were made subsequently, were the kernel of the Fianna Fáil policy for their last three and a half years in office. We recall the fact that they set out deliberately to reduce consumption in the future, that they believed earnings had gone beyond the cost of living and that the country could afford to have higher prices for basic commodities.

No matter what Deputy Lemass says now in the Dáil, having left office for a year, on the necessity for increasing agricultural and industrial production, creating conditions of full employment in this State, we remember—and I think the people remember—what the basic economic policy of the last Government was. To my mind, the difference between the two Governments, between the first inter-Party Government and the last Fianna Fáil Government, between the present inter-Party Government and the last Fianna Fáil Government, was that the last Fianna Fáil Government set out by means of its budgetary policy to meet an imaginary balance of payments crisis and that the present Government by its financial and budgetary policy has endeavoured to tackle the real problems of our economy, the problems of high prices, high unemployment and the necessity to develop our undeveloped resources.

I use the phrase "imaginary balance of payments crisis" advisedly because there was no crisis which the last Government had to face and the last Government's policy was framed under a complete misunderstanding of the economic facts. These facts have been pointed out before but apparently ex-Ministers of the Fianna Fáil Government have not learned from them.

I want to quote what Deputy MacEntee said a week or two ago at column 1771 of Volume 150, No. 12, of the Official Debates when he was referring to the necessity for what he described as the 1952 taxes. He said:—

"Our external assets were melting away at an alarming rate. A deficit of over £30,000,000 in our balance of payments in the year 1950 had been followed by another of more than double that figure in 1951. In three years our available external resources had shrunk by over £100,000,000.

This is a small country. It has been alleged that we had at one time a surplus of external assets over external liabilities of about £400,000,000. In three years we had frittered away—because that is what it amounted to when you come to look on how this money was spent— we had frittered away 25 per cent. of our external resources, the things upon which we depend in a very large measure for financing our trade, for some of the income which we drive, the things which the last Minister for Finance in the Coalition Government referred to as our economic mass of manoeuvre, the resources upon which we would have to reply in a last emergency. We were frittering these things away at the rate of £100,000,000 in three years."

That, to my mind, is a very clear statement of an absolutely false economic fact, and I want to say categorically that, in the three years to which the Deputy was referring, 1949, 1950 and 1951, though there were deficits in the balance of payments amounting to £100,000,000, there was no frittering away of our external assets to that extent and I want to give the figures which are available for any Deputy, the figures for our external assets for these three years.

If any Deputy picks up the report of the Central Bank for the year ended 31st March, 1949, he will see the position of the external assets of the banking system as a whole and these figures are very revealing. Taking the figures for the external reserves of the Central Bank, the associated banks and the Post Office Savings Bank as a whole, the total external assets which these banks held on 31st December, 1948, amounted to £214.3 million. If Deputy MacEntee was correct, one would have expected a startling decline in these external assets of the banking system for the three years of the deficits amounting to £100,000,000 but the facts were that, at the end of these three years, on 31st December, 1951, three years later, instead of being £100,000,000 down, the external assets of the banking system stood at £212.6 million, a decline of £1.7 million in these three years. These are incontrovertible facts—for the three years we had deficits in the balance of payments amounting to £100,000,000, the external assets of our banking system went down by only £1.7 million.

We experienced in these three years an inflow of foreign capital amounting to £45.6 million; we availed of the American loan and the American dollar grant amounting to £46.8 million; and our holdings of external securities were only diminished by £7,000,000 in these three years. Instead of the deficit of £100,000,000 bringing about a reduction in our external reserves, a frittering away, to use Deputy MacEntee's phrase, of our external reserves to the extent of £100,000,000, in fact our external reserves for these three years in regard to the banking system as a whole declined by £1.7 million and with regard to the holders of private securities by approximately £7,000,000. That was the crisis, the so-called crisis, which necessitated the savage impositions of the 1952 Budget, which necessitated the reduction in consumption by increasing taxes and cutting subsidies which was the basic fact of the economic policy of the last Fianna Fáil Government.

That is the difference between this Government and the last Government. It is a very easy thing for Deputy Lemass to come into the Dáil and tell the Minister for Finance what to do. It is a very easy thing for him now to come in here and advocate income-tax allowances for industrial concerns that are ploughing back profits and to speak here about introducing pay-as-you-earn systems and the cutting of minor taxes of an excise nature. It is also very easy for him to talk about the necessity for an economic policy to increase production and bring about conditions of full employment in the State.

The answer to these simple phrases is: Why was it not done when they were in office for nearly 20 years, and, in the last three years of the period of their tenure of office, why did they not set about bringing about an expansionary policy, increasing production by means of reducing taxes, by means of keeping the amount of money in the pockets of the consumer at the same level so that he could spend more and why did they set about a policy, as they deliberately did, of reducing consumption in the State, with all its attendant consequences of a reduction in industrial production and increased unemployment? We pointed out these things to them at the time, but they did not listen to us. The country, I think, gave its verdict in a very clear fashion in the general election last year, and, no matter what the spokesman for the Fianna Fáil Party said, the country realised what had happened. We have now set about altering the whole emphasis and incidence of financial and economic policy away from the restrictionist policy of the 1952 Budget and towards increasing consumption, towards increasing investment in the State.

I agree thoroughly with what Deputy Lemass has said about the necessity for increasing our capital investment programme. I remember, however, the attacks which were made on the capital investment programme of the first inter-Party Government. I remember the pawnbroker's sign put up around the City of Dublin saying that we were putting the country in pawn and the attacks made in the Dáil and out of the Dáil on the increased liabilities undertaken by the Government and the increased interest charges which the Exchequer was having to pay because of the capital investment programme. In spite of those things, the first inter-Party Government started the capital investment programme and brought capital investment to a very high figure. I want to see that figure expanded.

I think it is of interest to note how, even though we have greatly increased capital investment in the past few years, we still lag far behind in capital investment the figures which other countries have been able to achieve. If Deputies examine the American experts' report known as the I.B.E.C. Report, at page 23, they will see the figures for expenditure per head of population on fixed capital in the country. In 1950, the year which was taken by the American experts as the base year, the figure per head of the population in this country was 60 American dollars. The comparable figure in Denmark, which is a country in rather similar circumstances to ours, was over double—130 dollars per head of the population—and the Belgian figure was 87 dollars.

Even Finland, which is regarded as a backward country, had a higher figure per head of the population than ours, standing at 66 dollars per head. Switzerland was at 167 dollars per head of the population. It seems to me that these figures indicate that, in comparison with other small countries, we are lagging far behind in our capital investment programme and we have got to set out to expand it in whatever way we can.

There are certain principles of policy involved when we talk about expanding our capital investment programme. In the first place, there has been considerable criticism, some of which to my mind has been warranted, of the balance of the total capital investment in the State—criticism made by expert economists in various journals in the last few years. These criticisms have pointed out that a proportion, and to their mind too large a proportion, of the total capital investment undertaken in our country was in nonproductive capital investment and was sometimes termed "social capital". To some extent that criticism is correct. I do not want to see 1d. less spent on social capital. I do not want to see any reduction in expenditure on hospitals or houses. Rather do I want to see work on them increased, particularly in relation to the housing drive. However, I do want to see the level of capital investment as a whole increased and more of it put into productive capital works. There is no reason to cut down investment on social capital if the investment on productive capital is increased.

Deputy Lemass has referred here to the difficulties which the Government faces with regard to financing their capital investment programme. I think the time has come when the Irish commercial banks should play a part in financing the Government's capital investment programme and should hold a much greater percentage of Government securities in their investment portfolios than they do at the present time. The commercial banks in other countries have co-operated with their Governments in their capital investment programmes. The banks of other countries have large percentages of their investments held in the Government securities of their own countries. Our banks here hold a comparatively small figure of their investment securities in Government stocks. I should like to see that figure greatly increased and the banks taking up loans at a much lower rate of interest than would be necessary to secure money from the public when public flotations have to be embarked upon.

To my mind, the capital investment programme is so important in bringing about conditions of full employment and in increasing production that the rather haphazard nature by which it has been planned in the last few years will have to be scrapped and we shall have to set up a capital investment board. Deputy Lemass has made vague hints and insinuations that it would be to control investment. It is necessary to set up a capital investment board to plan investment. It is time now that the various Departments should, over a period of years, be directed to the type of economic capital programme they should undertake.

We have had considerable criticism here and outside the Dáil—criticism with which I agree—of the increased expenditure on roads. I think too much money is being spent on roads at the present time and that some of the money should be put into houses or hospitals or, if possible, into capital investment of a productive nature. I can see nothing wrong in using the expression that has been used—"raiding the Road Fund." It is a colourful emotive phrase. After all, road tax is like any other tax and if some of it could be put towards the building of houses or hospitals or towards the land rehabilitation programme I should be all in favour of it.

I think it is also important to appreciate, when we talk about capital investment in this country, that capital investment can be met only out of savings either current or past. If current investment is not sufficient to meet the rate of existing capital investment, then we have to draw on our past savings in order to meet it. If that equation is borne in mind, it will be appreciated that it is necessary to intensify the savings campaign if we are to increase the capital investment campaign. A large-scale savings campaign could be undertaken side by side with a large-scale expansion of the capital investment programme without being any great danger to our balance of payments position.

I do not think that much is to be served now by the type of speech to which we listened this morning from Deputy Lemass. Deputy Lemass himself admitted that the speeches which he made last year have not had much effect in the country in general. I do not think the speeches he and his colleagues are making in that vein are having much effect this year either. The people are tired of the slanderous types of accusations that we have heard from Deputy Lemass this morning and from his colleagues for the past year or so. This Government must not be hampered in their work and I do not think will be hampered in their work by trying to run after all the hares started by the disappointed spokesmen of the Fianna Fáil Party. It is time now to get down to the task of seeing that we have full employment in our State. It is time to see that we have not got five or six people living in one room—as they are in my constituency at the present time. It is time to get down to the task of expanding revenue so that we can, if possible, bring better social benefits to our people. These are the real tasks before this Government. I think they have started on that road in a very fine style and that we shall have something very good to show at the end of our four remaining years of office.

Mr. Aiken

I think the Parliamentary Secretary to the Government rather disclosed the basis of the Government's approach to budgetary and other matters. He said the first consideration was political, the second social, and only the third economic. They are still carrying on the same political approach to these matters that they had during the last general election and before it. We would hope that the time would come when budgetary matters—matters of public finance—would be approached not primarily in a political way from the point of view of the interests of the Party but from the point of view of putting the country on its feet and making its progress more certain.

The political approach that the present Coalition group made to the Budgets in the past is now quite obvious. They criticised the 1952 Budget and said that the level of taxation then imposed was savage. From the point of view of their own political future, they said things like that. Deputy Costello, now Taoiseach, said at that time that he would not remain in office for a minute if these savage impositions were continued.

These "savage impositions" are still imposed, every one of them. It was alleged then that they were imposed to reduce consumption. Is it to reduce consumption that they are being imposed to-day? They are the same taxes. The tax on beer is the same, the tax on cigarettes is the same, the income-tax is the same, as in the 1952 Budget. It was said that the only reason was to reduce consumption. Is that the purpose for which they are imposed to-day? As Deputy Lemass pointed out, the members of the Coalition Government will be forced to vote for their imposition. I want to know if they are going to vote for their imposition for the purpose of reducing consumption.

It is no harm to repeat that the members of the various Coalition groups got the votes of the people on the promise that they would abolish those taxes. Deputy Davin said—as I quoted here on the Budget Resolution —that the Labour Party would not be concerned with getting positions in the Government but with reducing taxation and other things. The Minister for Education said on the 29th March, 1954, just a year or so ago:—

"Our policy is to relieve once again the penal taxes that were imposed by Fianna Fáil in the 1952 Budget."

Now, when we brought in these amendments to the Finance Bill to give the Government an opportunity of carrying out what the Minister for Education said he would do and do immediately, they said: "You cannot expect us to reduce taxation in three or four days; after all, this Bill has been prepared, we had no time to change it." The Finance Bill was brought in a few days after the Government was set up, but it is now more than 365 days later, not three or four days, and there is no sign that the Government are going to apologise to the people for the way they fooled them or that they are going to do anything about reducing taxation, even after 365 days.

In order to give credence to all the promises made about the reduction in taxation by £10,000,000 or £20,000,000 as Deputy McGilligan, the Attorney-General, indicated they would do, they referred to what they did in 1948 when a couple of months before the end of the financial year they reduced the taxation on cigarettes, tobacco, beer and whiskey. They said: "What we did in 1948 we can do in 1955 and we will do it and do it immediately." As Deputy Davin said, they would not be concerned with getting positions in the Government but they wanted this taxation dealt with as it was in 1948. Deputy Dunne ran around the country and he was only one of the many who said they would not consider even taking part in a Government until these taxes were reduced. He was very specific—he wanted the taxes on beer, cigarettes, etc., reduced before they would consider taking part in a Government.

The Fine Gael representatives in the Government are quite brazen about the way in which they fooled the people regarding an immediate reduction in taxation. They are quite brazen about it. A number of the lawyers in that Government think that they can talk themselves out of any position. They talked the people into giving them votes and they think they can blind the people now, by more talk, into believing that they never made any promises. The Labour Party are not quite so brazen. The whole of this morning that whole block of benches in which the Labour Deputies are supposed to sit was quite empty.

Mr. Sweetman

Your front bench was almost empty also.

Mr. Aiken

One Labour Deputy looked in for a couple of minutes and then skipped. I wish they were here in order that I might have a chat with them about one clause in this Bill which is an interesting one. At one time we used to be deafened by the Labour Party with the plea that there should be no means test for social services. They were breast high for no means test in regard to old age pensions and I think the present Minister for Finance once supported them in a motion that the means test for old age pensions should be abolished. They were breast high at the beginning for no means test in regard to health services. There is a clause in this Finance Bill which enables an income-tax payer—surtax or otherwise—to get a subvention from the State if he insures himself for hospital and medical benefit—and in that clause there is no means test above a certain figure. Once a man becomes liable to income-tax, the Government is prepared to give him a subsidy if he insures himself for medical benefit and for hospital treatment, but below that figure they are not. If a man has a wife and several children and only a modest income and no income-tax to pay, and if he wants to insure himself and his family for medical benefit and hospital treatment in case of illness, he has to pay his own pounds. The State gives him nothing. I move the adjournment of the debate.

Debate adjourned.