I move:—
That a sum not exceeding £18,250 be granted to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1956, for the Salaries and Expenses of the Department of the Taoiseach (No. 16 of 1924; No. 40 of 1937; No. 38 of 1938; and No. 24 of 1947).
Last year, when introducing the Estimate for my Department, I promised to resume in the present year the practice of giving a brief survey of the general economic position of the country, against which the results of Government policy might be evaluated. The present parliamentary year is drawing to a close; the Estimates of the different Departments of State have been subjected to a detailed debate in the House; the present Government has just completed its first year of office: all these circumstances render an economic survey particularly appropriate at this stage.
It is possible this year to give a general survey without a surfeit of figures, as the current statistical survey published by the Central Statistics Office has been available for some time past; this fulfils a promise which I made last year that, if possible, the survey would be published some weeks before the present debate in order that Deputies might have available in a convenient form the statistical background necessary to evaluate the present state of the economy and the extent to which progress has or has not been achieved.
We are, perhaps, inclined to take somewhat for granted the extension of statistical activities and the advance in statistical techniques which have combined to render possible the publication of the Statistical Survey. Certainly, it is much easier to present an economic review when the essential data are not alone available but also conveniently available. There is more involved here than the convenience of the administrator. The prompt publication of important statistical material is essential to the well-informed discussion and criticism of public policy both inside and outside the House.
Economic policy cannot be created in a vacuum of public indifference and apathy and it is essential, therefore, that the basic economic statistics should be published promptly and regularly, so that those qualified to form and lead public opinion can do so on a firm foundation of fact. It was with the object of strengthening and extending the statistical arm of administration that, when last in office, we arranged for the formation of the Central Statistics Office as a separate unit attached to my Department. This innovation, which, I am glad to note, was continued by the previous Administration, has proved a success and I think I can say, without any exaggeration, that both the Departments of State and the general public have benefited.
The national income statistics, which are, perhaps, the most important set of statistics in the survey, form a natural and convenient starting place for an economic review. If it were necessary to define the economic policy of the Government in a single sentence, it might be expressed as a steady increase in real national income per head of population. If we wish to get down to fundamentals, we must to an extent disregard the changes in national income as measured in current prices and concentrate instead on the trend of real national income, that is, on the flow of goods and services accuring to the country each year. There is unfortunately no internationally agreed method of computing real national income and it is indeed possible to arrive at several somewhat conflicting results by adopting the different methods in vogue. If the national income at current prices is deflated by reference to the price index of personal consumption on goods and services, it will be seen that real national income in 1954 increased by some 2 per cent. over 1953. Real national income, with the significant exception of 1952, has been rising slowly but steadily since the end of the war. It now stands at about 24 per cent. above the pre-war level. An unofficial calculation of national income for the year 1926 indicates that real national income has risen by over 40 per cent. since that year.
Lest we be misled into a false degree of complacency by this record of progress, it is salutary to point out that it represents an annual rate of growth of some 1.3 per cent.; even if the war years are excluded the annual rate of growth only becomes 1.6 per cent. This rate of growth falls far short of the increases secured in other countries and can only be regarded as disappointing in view of the rapid strides made in productivity, inventions and innovations in the last few decades. This rate of growth falls far short of what is required to solve our interrelated problems of a stationary population, persistent emigration, structural unemployment and underemployment on the land.
It is none the less interesting and instructive to analyse further this rate of growth in order to discover what forms the increase in the standard of living has taken. The expression "standard of living"—or "level of living", to adopt the U.N. terminology—is a very wide concept, embracing most of the numerous facets of human life. No single index is comprehensive enough to measure it. It is true that per capita real national income is often used as an index, but this approach gives only an approximate and undifferentiated picture. What we are concerned to find out is the detail behind the index—the components which make up the increase. Not all of these components can be measured physically and even when they can, for example in the case of a reduction in working hours, we would have to find out what was done with the increased hours of leisure before being in a position to judge whether the improvement did in fact add to human welfare.
Subject to this reservation, it is instructive to take a quick glance at what might be called the economic indicators of progress in the last 30 odd years. Thus, under the heading of health we might note that in this period the expectation of life increased substantially; for males the increase was over six years and for females nearly nine years. The crude death rate decreased from 14 per 1,000 of the population in 1923 to some 12 in 1954, while in the same period infant mortality rates per 1,000 live births decreased from 66 to 38. The number of hospital beds, excluding mental hospitals, per 1,000 of the population increased in the last 20 years from less than six to about eight and a half. In accordance with the trend in other countries, the increase in the level of living has not been concentrated in food and nutrition. Our daily calorie intake in 1952 was 3,515, an increase of less than 4 per cent. on the pre-war average, while our daily protein intake actually showed a slight decline. It was in accordance with international trends that the percentage of gross national expenditure at market prices spent on food declined from 30.6 per cent. in 1926 to 25.5 per cent in 1954. This decline has been accompanied by a decline in the resources allocated to total personal consumption of goods and services—from 77.1 per cent. in 1938 to 74.8 per cent. in 1954, and by a small increase in savings which, as a percentage of gross national expenditure, increased from 8.1 per cent. in 1926 to 9.1 per cent. in 1953.
The improvement in the level of living has been particularly evident in the case of housing. Since the State was established, over 250,000 houses have been built or reconstructed. In 1926, the average number of persons per room was 1.19; this had fallen to 1.01 in 1946. The proportion of persons living more than two per room was 27.2 per cent. in 1926; the corresponding 1946 figure was 16.8. In view of the considerable progress made in the housing sector since 1946, we can be sure that the next full census of population will reveal further improvements. These figures, however, still fall far short of the standards reached in other countries.
The first year in which statistics are available of the average number of hours worked per week in all industries is 1937, in which year the number of hours worked per week was 43.9; the corresponding figure for the latest available year viz., 1953, was 45.0. The unemployment percentage was 15 per cent. for 1938—the first year for which the percentage was calculated; the percentage had fallen to 8.1 per cent. by 1954. While these figures are, as I mention later, subject to a number of reservations and qualifications, they support the general conclusion, that, compared with pre-war, unemployment in the non-agricultural sphere has been almost halved.
In some countries, an increase in the level of living takes the form of an increase in educational facilities. In view of the broadly based system of primary education which we inherited on the establishment of the State, it is hardly surprising that there has been little change under this heading in the last 30 years. We have, however, gone some way towards overtaking the vast arrears in school accommodation and over 1,000 new primary schools have been built since 1922, while an even greater number of major improvements have been carried out. Important advances were secured in the fields of technical, vocational and secondary education. Thus in the case of secondary education the attendance or enrolment expressed as a percentage of the children aged five to 14 years in primary schools increased from 4.9 per cent. in 1926 to 10.8 per cent. in 1953. The number of students enrolled in technical institutions per 100,000 of the population increased from 2,174 in 1926 to 3,052 in 1953.
In many under-developed countries, an increase in the level of living is often accompanied by an improvement in transport facilities; such an improvement is often a condition precedent to an increase in the level of living. In fact, however, the modern Ireland has inherited a road and rail system which in some respects is in excess of current requirements. Its extensiveness provides the country with flexible means of communication, but, as the House knows, the upkeep and modernisation of a railway system designed in the first instance for a much larger population has imposed serious technical, economic and, indeed, social problems on successive Governments. I am happy, however, to be able to report that the prospects for placing our railways on a more satisfactory technical and economic basis are brighter than ever before. And I need hardly remind the House that while a good road system is quite as indispensable as the railways for our domestic needs as well as for the development of the tourist industry it nevertheless imposes heavy burdens on the Exchequer that require careful consideration on all sides of the House.
We do not need to have regard to any statistics to be aware of the fact that our increased level of living has to an extent taken the form of an increase in the number of motor cars. Between 1938 and 1954 the number of motor cars per 100,000 of the population almost trebled, while there were even greater increases in the case of other mechanically propelled vehicles.
This outline, necessarily brief and incomplete, gives an indication of how we have enjoyed the fruits of the increase in real income since the State was established. The most significant fact is that this increase has not been accompained by an increase in population. It is a sobering thought that if we had been content not to advance beyond the 1926 level of living and if we could have eliminated the non-economic causes of emigration, we could support at present a population some 40 per cent. greater than our actual population. This statement is, of course, subject to many qualifications, but there is no gainsaying the fact that we have been content to divide amongst a stationary population the fruits of a limited annual increase in the flow of goods and services; emigration was the main method by which an acceptable rate of increase in real income per head has been achieved for those that remained.
It is only a myth that the Irish are vanishing; for over a generation the Irish population has remained stationary and, particularly in recent years, has been enjoying a progressively increasing standard of living; but it is salutory to reflect that the increase in total national income would have been spread over a bigger number of people had emigration not taken place. If those who emigrated had remained at home and if it had been possible to engage them in productive work that added real wealth to the national income then their standard of living as well as that of the community as a whole would have increased.
Instead of engaging in indiscriminate deploring of emigration, we should draw the obvious moral from what has taken place. We must attempt so to arrange our affairs as to make it possible for a growing number of the annual natural increase in population to be employed in productive work at home. For many years a large part of our population was under-employed, in the same way that a large part of our natural resources are still under-employed. By under-employment we mean that persons are engaged in work which does not make the addition to real wealth which their labour would contribute if it were productively and fruitfully employed.
Work in itself has no economic virtue unless it is productive in the sense of creating goods and services which will be of benefit to the workers themselves and to the rest of the community. Work which is economically unproductive may have a social and moral justification, but in the short run at least it is unlikely to increase real national income. It merely means that the existing real national income is distributed over a greater number of people. To make the efforts of labour more fruitful, capital is needed and that is why this country has so much to gain from productive investment. We must direct that investment of capital where it will provide the most useful return. Our agricultural industry is potentially the industry which can give the most spectacular return from new capital.
Later on I shall have some remarks to make about the prospective course of the balance of payments. But this I can say here: unwarranted deficits in balance of payments must always be avoided; but a clear distinction must be made between deficits which are not justified by the current productive efforts of our people and deficits which represent an addition of economically rewarding investment to the productive resources of the community. Improved methods of technical, vocational and agricultural education can also contribute enormously towards increasing the skill of our workers. It is the combination of skilled labour and capital that in the long run can add most to our real wealth.
Our gratification at the remarkable strides which Irish manufacturing industry has made should not prevent us from examining our achievements in that field with a most critical eye. We must recognise that in many instances the capacity of the Irish market to absorb more home-produced manufactured goods is probably limited and that there may not be great scope for further development unless export markets can be found. In certain cases thanks to the initiative and enterprise of enlightened businessmen, satisfactory export markets are being found. The exploitation of these markets is not going to be an easy task, however rewarding it may be. Where we depend on imported raw materials; where we must include in the cost of our finished product freight charges on these imported raw materials; where in addition we must include the cost of freight charges on the export of the finished commodity, we are obviously adding seriously to the cost at which these finished articles can be sold abroad in markets where they must compete with goods of the same character which can be produced more cheaply.
In saying this, I am not suggesting that there are insurmountable barriers to the development of our export trade in manufactured goods; I am pointing to the difficulties, pointing to the fact that we cannot afford any complacency, pointing to the obvious conclusion that in a highly competitive world the exploitation of new export markets for Irish manufactured goods is not going to be easy of accomplishment. Unless these export markets can be found and developed, the only hope there is of a substantial extension of Irish manufacturing industry will depend on the extent to which we can increase the demand of the home consumer. That can best be done by increasing the prosperity of Irish agriculture. Agriculture is the industry in which we have to a striking degree a comparative advantage. By increasing agricultural production and stimulating agricultural exports, we will be able so to enrich the Irish agricultural community as to enable it to purchase a growing volume of home-produced, manufactured articles. Our exporters are not going to be daunted by the problems of export markets but their efforts in those directions can be notably supplemented by extending the home market for their goods.
Whatever differences may exist regarding the means, there are practically no differences regarding the end of Government economic and social policy. We are all agreed on the necessity for increasing production as a firm basis for greater employment, the elimination of the economic causes of emigration, the improvement of our social services, etc. Of this many-sided problem there are two aspects in particular which I wish to stress— productivity and investment. It is not sufficient to increase production; productivity must at the same time be increased if we are to secure a market for our increased production both at home and abroad.
This theme of productivity is foremost in current international commentaries; the latest annual report of the O.E.E.C. pointed out that "... today, however, the problem of raising productivity has pre-eminence". If this can be said of the more advanced industrialised countries, it applies with all the greater force to us and we can be sure that our future as a viable economic unit, capable of sustaining an increasing population at an increasing level of living, will stand or fall according as we succeed in overtaking our arrears in this field. What I am saying is nothing new; the present and previous Ministers for Agriculture and Industry and Commerce have stressed it frequently in the past. In the agricultural sphere an important function of the proposed agricultural institute will be to co-ordinate and intensify agricultural research so as to provide a firm and solid basis for an extension in agricultural production.
As regards industry, the drive for increased productivity must come primarily from private enterprise and can only succeed if employee as well as employer is conscious of the urgency of the problem. The State can, however, help in a variety of ways. The agreement which we made with the United States Government in regard to the disposition of Grant Counterpart Funds provides for the expenditure of £350,000 on the provision of technical assistance to industry and agriculture. This fund will enable the Government to pay portion, normally one half, of the costs of technical assistance projects. Pending the execution of the necessary sub-agreement with the American authorities, provisions of £42,000 and £15,000 for technical assistance have been included this year in the Votes for the Department of Industry and Commerce and the Department of Agriculture. Technical assistance may take the form of visits to Ireland by foreign experts and visits of Irish industrialists abroad; the technical investigation of manufacturing possibilities in this country; the engaging of industrial consultants, etc.
The Institute for Industrial Research and Standards occupies a central position in the drive for increased productivity but the success which it can achieve will depend on the co-operation of industrialists, both in bringing specific problems to the institute's notice and in adopting the suggestions which the institute may make for their solution. In order that it may become more closely in touch with the problems of industry the institute proposes in the near future, to dispatch some of its scientists and engineers to individual factories so as to learn at first hand the difficulties confronting manufacturers.
It is also proposed to strengthen the institute's facilities by the erection of three research laboratories out of grant counterpart moneys specifically provided for that purpose; the relevant sub-agreement was signed recently. At the request of the Minister for Industry and Commerce and in conjunction with the Industrial Development Authority, the institute is examining the question of setting up in this country a national productivity centre which would work in liaison with the European productivity agency established by O.E.E.C. The establishment of such a centre would bring private enterprise more closely into contact with the stream of European thought on the subject.
The Irish Management Institute is also doing useful work in this field. Conscious of the importance of technical and other education, the Management Institute has established a joint committee representative of business, the universities and the vocational educational schools to examine the most desirable forms of education and training for management and the best methods for their provision. At the employee-level, the training schemes at present provided by vocational educational schools for a wide range of industries and trades have played an important part in the drive for increased productivity.
Productivity is an elusive concept difficult to isolate and measure. The only available indices in this country relate to the volume of output per wage earner in transportable goods industries. This index, to base 1936=100, stood at about 120 in 1950. After remaining relatively constant for the two following years, the provisional index increased to 133 in 1953 but fell back slightly to 132 in 1954. The rate of increase over pre-war compares favourably with that of other O.E.E.C. countries but our comparatively good showing is due, in part at least, to the fact that our increase was from a relatively low base.
Lest there be any misconception, I should point out that the index, while expressing output per wage earner, does not purport to represent solely the productivity of labour; the increase is attributable to the greater productivity of capital as well as of labour and it should not be forgotten that in the years 1946 to 1952 over £80,000,000 of additional fixed and working capital was injected into the transportable goods industries.
The question of productivity and efficiency raises the issue of tariffs—an issue in which it is only too easy to be misrepresented. There is a broad measure of agreement with the necessity for a regular review of tariffs to ensure that, if moderate tariffs are required for the development of new industries, such tariffs do not constitute a shelter-belt behind which high-cost firms perpetually remain high-cost firms. The latest O.E.E.C. report contains many references to this problem. While admitting the justification of modern tariffs to protect the development of new industries, the report recognises that it would be economically wasteful to promote forced industrialisation behind high tariff walls.
The report also draws attention to the tendency of tariff systems to spread and harden and to encourage positions of privilege and structural maladjustment. Despite all this, the report frankly recognises that in this field Governments may have a difficult choice to make. The process of tariff review is a slow one but it is important that a start should be made so that industrialists may be under no delusion regarding our determination to use the tariff weapon, not as a feather bed, but as a spring-board for efficient and productive industrialisation. I am sure that this is what efficient and progressive industrialists themselves would desire. A start has already been made and several tariffs have already been referred to the Industrial Development Authority for review.
Another aspect of industrial policy which commands support from all sides of the House is the proposal to encourage actively but within proper safeguards the investment of foreign capital in this country. There is a growing realisation that, in the 20 years which have elapsed since the Control of Manufactures Acts were enacted, conditions and circumstances have so changed as to warrant modifying the rather negative attitude towards foreign capital which is enshrined in the Acts and embarking instead on a more positive policy.
The Minister for Industry and Commerce has already given an indication of the steps taken and proposed to attract foreign capital. We are under no delusions that foreign capital will form a queue for admission into this country. The O.E.E.C. report on private United States investment in Europe and the overseas territories pointed out that "The basic fact is that no great quantities of American capital are just waiting for an invitation from European countries to come over here. If the United States investor is to cross the Atlantic he will have to be wooed aggressively." That comment is capable of general application in our circumstances.
What we are all striving for is a high level of investment in this country in which foreign investment would take up any domestic slack. The policy of wealth creation, the policy of raising incomes and standards, to which this Government are committed, requires a high level of capital formation, particularly of productive capital formation. Comparative figures issued by O.E.E.C. illustrate the extent to which our capital formation is deficient. The percentage of our total annual resources devoted to capital formation was 12 per cent. in 1952 compared with an average figure of 18 per cent. for all O.E.E.C. countries. Inadequate as our figure of 12 per cent. is, there are two aspects of it which are disturbing— the extent to which it was not financed by domestic savings and the degree to which it was dominated by State capital investment.
The House is already aware that the latter aspect is the subject of a comprehensive review, and it would be premature to attempt to forecast the conclusions. One thing is clear; if domestic capital formation is inadequate and if the State capital programme is running at a high level, then it would be preferable if the deficiency were made good by the sector. As the extent of the public sector's borrowing in post-war years may have had repercussions on the industrial capital market, the views of the Industrial Credit Company, Limited, have been sought regarding the facilities by which industry obtains capital for development and the improvement, if any, of such facilities which may be necessary or desirable.
Another factor which is revelant in this connection is the amendment of our statute law relating to companies, a question which must be deferred until we have received the report of the committee established in 1951 to review this matter.
Capital investment is one side of a medal the reverse of which is the central problem of economic development, namely, savings. The marked recovery of savings in the last three years has enabled the level of fixed capital formation to be maintained despite the sharp fall in external disinvestment. The existence of external assets enables us, as it has in the past, to maintain a level of capital formation in excess of that justified by our level of domestic savings, a process which of course cannot be continued indefinitely as our external assets are by no means inexhaustible. It does not require an excess of prudence to arrive at the conclusion that external disinvestment should be regarded as a marginal supplement to savings and that it should be in addition to and not in substitution for such savings.
In most countries the level of private savings is dominated by company savings—a recognition of the well-known fact that on average companies distribute to their shareholders no more than one-half—and often considerably less than one-half—of their taxed income—and the short explanation of our relatively poor showing as regards savings is the relatively small proportion of our national income which accrues to companies. If we look at the personal savings ratio alone—that is the ratio between personal savings and net personal incomes after tax—we find that in recent years our experience has not been discouraging though we still fall short of the very high levels reached in some European countries.
It is disappointing, however, to have to record that personal savings fell in 1954. In 1952 savings expressed as a percentage of national income amounted to 9 per cent. The percentage increased to 13 per cent. in 1953 but fell back to 10.7 per cent. in 1954. The fall was confined to personal savings as there was a slight increase in company savings. The personal savings ratio fell from 10.3 per cent. in 1953 to 8.6 per cent. in 1954. What happened last year was that the entire increment in national income was consumed and more besides; in fact we were able to maintain fixed capital formation only by running down stocks and work in progress, whereas we added to such stocks in 1953.
This process cannot be continued indefinitely and if we wish to maintain and improve our 1954 level of fixed capital formation, without increasing the existing moderate rate of foreign disinvestment, we will have to recover the savings ground lost last year. If we wish the end of increased investment—not indeed as an end in itself, but as a firm basis for increasing the level of production, employment and incomes—then we must will the means of increased savings. In his Budget speech the Minister for Finance expressed the hope that before the end of the year a more intensive and broadly based campaign would be inaugurated to speed the savings drive. I am sure that every Deputy will wish this campaign God speed.
So far I have not dwelt in any detail on the economic aspects of the immediate past as I thought it better to place such aspects against their long-term background.
The Budget which the Minister for Finance introduced this year has been generally accepted by all Parties in this House and by the country as a complete and comprehensive expression of financial and economic policy. If I am asked to say briefly what our economic policy is, I point to the Budget as a unified and coherent expression of the policy to which this Government is committed. This year's Budget was a clear and unambiguous indication of the Government's determination to finance the services of the State by sound, non-inflationary methods; and to create flexible conditions for the favourable implementation of economic policy. I have long held the view that the annual Budget should be more than a purely financial instrument; it should also be an instrument of economic policy.
The Budget which the Minister for Finance introduced satisfies the severest tests of financial rectitude and at the same time is based on broad and progressive principles. It conferred substantial increases in benefits on important sectors of the community without demanding corresponding increases in taxation. Without any increased rate of taxation per head the Budget increased the benefits per head that each member of the community derived from the proceeds of taxation.
The relatively favourable outcome of external trade in 1954, evidenced by a reduction of £3.8 million in the import excess of that year, has not been maintained so far in the current year. In the first five months of 1955, though exports and re-exports were £4.4 million greater than in the corresponding period of 1954, imports increased by £11.9 million and the import excess accordingly increased by £7.5 million. A detailed analysis of external trade is available for the first quarter of this year; it shows that compared with the first quarter of 1954 the volume of exports increased by 8½ per cent. but the volume of imports increased by about 12 per cent. The increase in the volume of imports is hardly surprising as it follows a reduction in 1954 which was particularly evident in the latter part of the year and may have, in part, reflected a reaction to rising import prices.
It is not surprising to find, from the national income statistics, that the volume of stocks and work in progress was reduced by some £5,000,000 at the end of 1954 and it may be that the increase in the volume of imports in the current year was the result of industrial restocking. The analysis of imports for the March quarter of this year shows that materials for industry and agriculture formed 64.8 per cent. of the total, as compared with 61.8 per cent. in the first quarter of 1954 and since the output of manufacturing industries increased by 2½ per cent. in the March quarter of 1955 (compared with the March quarter of 1954) it is reasonable to infer that the increase in imports is in part associated with increased industrial production and is not entirely being dissipated in the boosting of consumption.
A disturbing factor in the external trading sector is the increase in import prices. These started to rise in the second half of 1954 in a delayed reaction to a general world-wide increase in commodity prices. Unfortunately, our export prices were weakening at the same time, with the result that the terms of trade—that is the ratio between our export and our import prices—moved against us; to base 1938=100, the terms of trade dropped from 111 in 1953 to 108 in 1954. Export prices had fortunately recovered in the opening months of this year and the terms of trade have benefited accordingly. World commodity prices have, in general, weakened slightly and it would be in accordance with normal experience if our import prices fell after the usual time lag. As regards exports, an outstanding feature of the increase to date is the extent to which it is accounted for by an increase in exports of live cattle. There has been a parallel and regrettable decrease in processed cattle exports but there are grounds for believing that this may have been a seasonal factor and not indicative of the outcome for the year as a whole.
Last year, when introducing the Estimate for my Department, I said, in reference to the balance of payments deficit,—"while I am not to be taken as assuming the mantle of a prophet in this hazardous field, may I venture the opinion that we are not likely to be faced with any crisis before the end of the year?" I do not believe that we need fear any crisis before the end of the present year. But the developments of the past few months require us to keep the situation under very careful consideration. The experience of our own country, and indeed of other countries, in recent years, is a vivid reminder that not the least disturbing feature of a serious deficit can be the economic dislocation and social disruption caused by the monetary and fiscal methods often adopted to correct it.
Experience abroad has shown that even when stringent credit restriction and import controls reduce deficits in the balance of payments they tend to bring other evils in their train. They tend to operate indiscriminately against the business enterprise that deserves to be encouraged and against those activities that warrant restriction. They may stifle the efforts of the very enterprise whose efforts are a condition precedent to the restoration of equilibrium in a country's external payments. This indeed is one field in which prevention is better than cure; and that is why careful vigilance of the course of the balance of payments is preferable to drastic, crude and unpredictable measures for restoring equilibrium after things have gone wrong.
The rise in import prices has had repercussions in another sector. The consumer price index cannot fail to be affected by such an increase, particularly when it is reinforced by a strong tendency for domestic agricultural prices to increase; in the first quarter of this year the agricultural price index increased by nearly 6 per cent. It is hardly surprising therefore to find that the consumer price index has shown a slight upward tendency. Between May and August, 1954, the index rose by two points from 124 to 126; it remained at this figure in November, 1954, and February, 1955, but rose by a further point, to 127, in May last. Of the increase of three points since May, 1954, nearly two and a half points are attributable to increases in food prices. It is significant that over two points of this increase in food prices had taken place by August, 1954—when we had been in office for just two months—and presumably reflected trends which had been in force for some time previously. It is equally significant that the index of food prices has been held virtually stable since August, 1954. This is no accident; it is the result of deliberate Government policy which took the form of a subsidy on butter—estimated to cost £2.2 million this year—and the stabilisation of tea prices. The combined effects of these reliefs is to reduce the consumer price index by 1.08 points. The present index is 127.49 points and if these reliefs were not operative the index would be increased to 128.57; as the index is rounded off to the nearest point, it would be published as 129-compared with the actual index of 127.
There has been no marked change in recent years in the percentage contribution of the various sectors to national income. In the agricultural sphere it was highly encouraging to find that although the weather was very unfavourable the volume of gross agricultural output increased by some 3½ per cent. last year. The volume index for that year was some 10 per cent. greater than pre-war and was the highest ever recorded. The volume figures have increased in each of the last four years and we are now reaping the fruits of increased agricultural investment by way of drainage and reclamation, fertilisers and limestone, machinery, veterinary services, etc. Experience in agriculture in the last few decades has been one of minor fluctuations around a constant norm. The slight but consistent upward trend in recent years affords some basis for the hope that we are about to bid good-bye to this norm forever. While problems still arise in some particular sectors the outlook for agriculture as a whole is certainly more promising than for a long time past, provided always that we can keep our prices competitive and thus sell at home and abroad the added output which technical progress and intensive investment promise to make available.
For some years past the industrial sector has accounted for a little less than one-quarter of the national income. On the average, in West European countries the corresponding percentage is over 40 per cent. so that it will be seen that we have still some distance to go before we reach the West European level of industrialisation. In our case the last stages will undoubtedly be the hardest as we have already skimmed the cream from the milk. The volume of net industrial output increased by about 2½ per cent. last year, an increase which is inadequate to meet our problems. In the immediate post-war years, when we were overcoming the arrears of the war period, the annual increases were of the order of some 10 per cent.; the average annual rate of increase in the last four years was by comparison a mere 2 per cent.
For more up to date figures we have to rely on the quarterly sample of transportable goods industries. These showed that the relatively disappointing out-turn for 1954 was due to a tapering off of the increase towards the end of the year. The volume figure for the last quarter showed a marginal decline of some 0.1 per cent. on the corresponding 1953 figure, due in part to a fall in the sugar industry as a result of bad weather conditions. That the check was but a temporary one was borne out by the fact that the index for the March quarter of this year showed an increase of 2½ per cent. over March, 1954, and was in fact the highest ever recorded for a March quarter.
The quarterly sample of transportable goods industries also throws some light on the current trend in employment and earnings in manufacturing industries. In the last quarter of 1954 the total employment in these industries exceeded 150,000 for the first time. The corresponding figure for the March quarter, 1955, showed an increase of 3,000 over March, 1954. Weekly earnings in manufacturing industries are now two and a half times the 1938 level. They have remained relatively stable, apart from the usual seasonal fluctuations, in the last three years with a slight upward tendency which has had the effect of leaving the index for the March quarter of this year some 3 per cent. higher than 12 months previously.
It will be clear from what I have said that the sample quarterly inquiry of transportable goods industries is one of the most important carried out by the Central Statistics Office. Without it we would be in the dark regarding the up to date movement of production, employment and earnings in manufacturing industries. In this field it is essential that our statistics should not alone be reliable but that they should be up to date. I am glad to say that most industrialists cooperate in completing the returns in good time, but this co-operation is set at naught by the persistent refusal of a small though important sector to furnish the returns in good time. The results of the inquiry should be available within four weeks and in any event not later than six weeks after the end of the quarter to which they relate, but because of the non-co-operation of a small number of concerns the results are usually not ready until some 11-12 weeks after the quarter in question.
The returns required by the Central Statistics Office are not complicated or difficult. Furthermore, in some countries the inquiry is made monthly instead of quarterly, as in this country. I would earnestly appeal, therefore, to that small handful of industrialists who are largely responsible for the delay to complete the returns as promptly as their fellow industrialists. They can rely on the co-operation of the Central Statistics Office in disposing of any difficulties which may stand in the way of earlier returns.
No reference to the industrial sector would be complete without a reference to the unemployment problem. In view of the highly seasonal nature of unemployment in this country, it is customary, when analysing the trend of unemployment, to compare the numbers on the live register on any given date with the corresponding number 12 months previously. On this basis the present level of unemployment shows a fall of some 5,000 to 6,000. At the end of June this year the live register figure was 47,605 compared with 53,577 at end June, 1954, and 63,589 at end June, 1953 though it is only fair to add that the 1953 figure is very much affected by certain transitional effects of the Social Welfare Act, 1952. The live register figures are an imperfect guide to the unemployment problem. Even in the summer months, when they exclude most of the rural under-employment, the numbers registered included many who by reason of age, infirmity, etc., are more unemployable than unemployed.
An analysis of the register on these lines would isolate the hard core of the unemployment problem—the numbers genuinely seeking and capable of work. In the absence of such an analysis the best single guide to unemployment is possibly the unemployment percentage, that is, the number of currently insured persons on the live register divided by the estimated currently insured population, excluding, in both cases, persons whose principal occupations are agriculture, fishing or private domestic service. The percentage was 7.3 (the lowest recorded) in 1951, rose to 9.1 in 1952 and 9.6 in 1953, but declined to 8.1 in 1954. For the first five months of 1955 the percentage was 8.16 compared with 9.2 for the corresponding period in 1954. An unemployment percentage of 3 per cent. has been held to be consistent with full employment and the difference between our current figure of 8 per cent. and 3 per cent. is one measure of our unemployment problem.
It would be a delusion to regard it as the only measure. To do so would be to ignore two salient factors—rural under-employment and emigration. We have unfortunately no current reliable index of emigration but we have little grounds for believing it is no longer a problem. It is perhaps significant that in 1954 the long-term tendency towards a reduction in the number of males engaged in agriculture was arrested—an indication perhaps that in the emigration experience of that year there was a shift in emphasis between rural and urban areas.
In recent years growing doubts have been cast on the previously held view that emigration was a bad thing in itself. The Commission on Emigration and Other Population Problems drow attention to the fact that emigration does not in all cases spring from a single cause and is not in all cases to be deplored. Even allowing for this, it cannot be denied that emigration is often an involuntary reaction to lack of employment facilities at home. To this extent it constitutes a problem and a challenge for Government. The reports of the Commission on Emigration and Other Population Problems which were received last year are at present being examined by the Departments concerned, and when this examination is completed we will, I hope, be in better position to assess the problem and the means of dealing with it.
It does not require much thought to arrive at the conclusion that there is no single simple solution. The problem must be tackled on a number of fronts. While the general prescription is clear enough, it is on details and methods of procedure that disagreement arises. What we require above all is faith in the future, a faith which must primarily be based on what has been called the fourth dimension of economics—confidence, buoyancy, incentive and initiative. It will be the Government's object to restore and foster this fourth dimension.
