——there would be upon that Budget by the Parties now comprising the Coalition. If our Minister meekly pointed out that he needed a sum of £5,000,000 in order to balance his Budget, there would have been an immediate outcry. It would have been said that the figures were unreal, and implied that there was a conspiracy between the revenue officials, the officials of the Department of Finance and the officials of the various other Departments who help to compile these Estimates, the Minister for Finance and the Government—all together —to deceive both the Dáil and the country. It would be alleged that there was hidden away in these Estimates £10,000,000 of unnecessary taxation. It would be alleged that we were out on a campaign of austerity, that our Budget proposals were cruel, unjust, unconscionable—indefensible. It would have been alleged that such taxation was unnecessary; and, if we gave proof to the contrary, the proof would have been ignored and the charge would have been repeated that there was £10,000,000 unnecessary taxation. Even if that £10,000,000 subsequently turned out to be a deficit of £2,000,000, the allegation would have been persisted in; it would have been repeated and used all around the country and made an excuse for the pretence that we were embarking on an austerity campaign.
We have reached a serious position in the country's economic affairs. There is no doubt whatever about that. We have increasing governmental expenditure. I have always sympathised, both when in Government and out of Government, with the Minister for Finance. Budget day is the day of reckoning for all Departments. It is very popular with heads of Departments and with Ministers who have pet projects of one kind or another—and when I say "pet projects" I mean projects in which they are particularly interested for the public good we must suppose—to forget this. Side by side with their proposals, there should be a taking into account of the resources to meet them. The fact is that there is a competition between Parties, both in this House and out of this House, as to who will promise most. Rarely have we people who will tell the community that these benefits have to be paid for and—if we omit, for the moment, our external assets due to past savings—that there is no source from which these moneys can be got except from taxation and out of the people's pockets and that the result of a great deal of governmental action in these matters is simply a redistribution of whatever wealth or incomes already exist. I always have sympathy with the Minister for Finance who has got to face the music, over a week or so, for all that has been done throughout the year. It should be his duty and the duty of his colleagues to keep that day of reckoning in mind and not suddenly to have to face a deficit of £5,000,000 or £10,000,000, or whatever the number of millions may be, and to have to impose all the vexatious taxation necessary to meet the deficits.
If it were we who had to face this deficit, we would not have speeches from this side of the House such as some of those which have, in fact, been made from this side of the House. We hear people talk about unity. There is or there should be unity in this House amongst all Parties working for the service of the people who sent them here to represent them. It is no pleasure to us to see promises that were made, and that fooled the people, exposed. It is no pleasure to us to realise that this exposure is made possibly only at the expense of the resources of the country as a whole. The best way to get unity in this House is to have a decent Opposition that will do its duty in supporting the Government, where the public interest demands it should be supported, and in ruthlessly exposing the Government when the Government is failing in its duties towards the public either by deceiving the public in getting into office or, still worse, by failing in its duty to the public by not doing its work properly when it is in office.
In this Budget, there is this £9,500,000, leaving out the £500,000 which would make it a round £10,000,000—it seems to be cropping up in multiples of ten, apparently. Roughly £10,000,000 of taxation is being imposed because current expenditure has outrun current revenue— taking as expenditure what the Minister and the Government propose to spend this year and taking as revenue that which is supposed to come from taxation as it existed before these proposals are put into effect.
There is a deficit and it has to be met. It can be met only by reducing expenditure or by increasing revenue, or both. We had to do it when we were faced with a problem of twice the gap that exists at present and an adverse balance of payments of nearly twice the magnitude, too. Our problem was twice as difficult. We had to meet it by a reduction of expenditure and by certain increased taxation. The deficit must be met; we have to face that fact. Let us hear no more of this pretence that there are tens of millions of pounds knocking about for a Minister to put his hands on. You can cut some administrative expenses; I have no doubt about it.
I should be glad if it were true that, in two years, the Government have been able to reduce the number of civil servants by 4,000. I had not heard that figure before. It was mentioned by the last Deputy who spoke. I doubt if it is true. I should like to know where he got that figure. If it is a fact, it is the first instance I have seen that there is any reality in the Government's promise to reduce expenditure. I will admit, particularly if it ran through all the grades, a reduction of 4,000 civil servants in two years would be a substantial diminution, but, as I say, I should like to know where these figures which the Deputy used came from.
It is well for the country to realise that it is extremely difficult to reduce expenditure. After all, if it were easy to do so, every Government would do it. It is difficult and it is because it is difficult that it requires determination if it is ever to be done. We took up the position that State expenditure had reached such a level that we should have to resist any further increase in expenditure. Anybody who has examined a Budget or who has had anything to do with Budgets knows that from year to year there are what you might call automatic increases in expenditure. The most that could be hoped for in more or less inflationary times—in times of rising prices— is that the income in pounds would offset it but that is only temporary because increases in remuneration quickly catch up with income again. There is the matter of the increase in the service of the national debt, for example. There are year-to-year increases in expenditure, unless they are offset by some definite and deliberate saving economy. So far as I know, the Government has done nothing in that regard, but if the figure of 4,000 fewer civil servants is true I will admit it is something and even something considerable, but it has not exhibited itself in financial figures because the amount of expenditure for the coming year is far in excess of that for previous years.
Expenditure has gone up. If expenditure goes up, then, unless the yield from taxation goes up to an equivalent degree, new taxes have to be imposed. The Minister has to balance his Budget; we admit that. However, if it were we who said that the Budget had to be balanced we would be attacked as people nothing better than menial bookkeepers. When we took the national accounts as representing the national position and said that it was essential in our conditions that they should be balanced, we were told we were nothing better than menial bookkeepers and that we should have a higher concept of what a Budget could do.
The present Government has had an opportunity of showing these higher concepts and how these young geniuses they had at their backs would put them on the right road. They should indeed be called genii and they would want to have Aladdin lamps. The ordinary idea of genius is not enough. They would want to have their Aladdin lamps with them. These genii with their Aladdin lamps have not done much to help or show the present Government how to get out of their difficulties. They have not shown them how to balance the Budget except by the time-honoured methods of increasing taxation when the Government cannot diminish expenditure.
There was a gap in this case of some £7,000,000. The Minister reduced it in the usual way until he brought it down finally to £5.3 million. If we brought in such a Budget we would in debate here very quickly get away from high finance. It would be brought down to the individual home, to the housewife and the worker who, at a time when prices were rising, had difficulty in making ends meet. It was a catch cry when we were talking about ends meeting as far as the nation was concerned but when it came down to the household and when the housewife had to try and make ends meet it was quite a different matter. If, in addition to the present pressure on the housewife through increased prices, you had the further taxation envisaged here we would have heard about it at every cross-roads.
There was no use making the case that was made here to-day that cigarettes and tobacco were relative luxuries. In our 1947 Budget, when we introduced subsidies—we did it at a time of rising prices—in order to get the money to introduce subsidies and to lower, as we did at that time, the cost-of-living index figure by, I think, about 13 points, we had to impose taxation. When we tried to subsidise bread, tea and sugar by very substantial amounts and tried to get the money by putting taxation on the pint and on tobacco, we had the Labour Party going around the country, reinforcing Fine Gael, as they are now, and telling the people that we regarded the poor man's pipe and pint as luxuries and that that was our attitude. When we had, in 1952, the very unpleasant task of imposing taxation, we were told that we were pursuing a policy of austerity.
The Minister talks about consumption outstripping production and no savings. When we said that—we said it at a time when it was as true as it is apparently now except that it was true to a greater extent then—we were told that we grudged the people their high standard of living; that we thought they were eating too well, drinking too well and enjoying themselves too well and that our policy was a hair-shirt policy, a policy of stupid austerity. We were told that we were pursuing that policy of austerity at the dictate of the Central Bank and in imitation of, or under compulsion from, the Chancellor of the British Exchequer.
If those who are bringing in this Budget to-day were at this side of the House we would be told that in the attempt to slow down hire purchase and the other measures taken we were following slavishly step by step, Mr. MacMillan or Mr. Butler or whoever might be the Chancellor of the British Exchequer. Everybody knows that it is true that this would be said. Will the present Government say now that they grudge the people the standard of living they have, that they want them to eat less, drink less and have less enjoyment? They will not say it from that side of the House. They said in the past that such taxes would diminish purchasing power, and that they were deliberately designed to limit or lessen the purchasing power that is at the disposal of the individual citizen.
The reason they now give is that consumption is clearly at the present time so high in relation to production that there are no savings. The position is like that which would result from consuming the whole crop yielded leaving nothing for next year's seed. The savings of the community are like the seed, the seed that is reserved from the previous year's crop in order to provide the crop of the following year.
If we are to have economic development in this country we must have current savings but a campaign of demoralisation was started by the Opposition Parties throughout the country and they and we are reaping the benefit to-day. The chickens have come home to roost to the Government but, unfortunately, they are coming home to roost to the people of the country and the community as a whole as well. For the first time in the history of the country, we have reached a situation in which we are not able to meet our capital demands. That which we think necessary for further development we are not able to get out of current savings. We are not able to get it except at grievous loss in regard to our external holdings.
Nothing was so sickening as to listen in this House a few years ago to people who were talking as if there was no limit to the resources of the country and telling the people that they could, if they had the will to do it, raise their standard of living and did not need to save, that the savings of the past would suffice in order to finance the development required here. Many of those who spoke that way either did not believe it themselves or were extremely ignorant. Whichever it is, the country will have to pay for it, I am afraid. Unless we pull together now we will not pull the country out of the mess.
As far as the capital position this year is concerned, there is the fact that at a time when there is an inflationary tendency and when prices are rising, we have had to go to the banks to make up the deficit. The Government got only £8,000,000 odd from the people towards the £20,000,000 loan.
Everybody knows that the big difference between borrowing from the people and using the banks for borrowing is that if you borrow from the people, you are not creating any disturbance in the relation between money and goods in the community. You are not increasing the quantity of money available to purchase whatever quantity of goods there may be. Generally speaking, other things being equal, if you borrow from the banks, you bring new money into the community over and above what already is in existence there. You will have more money than you had before to purchase the same amount of goods available. It seems to me that that ought to be fundamentally clear to everybody. When you are forced to go to the banks, you are creating new money, no matter where the banks get it. Fresh money is put into circulation. If the banks do create credit in order to meet the Government's demands, the banks have to keep their cash ratio in order and have to keep a greater quantity of liquid assets immediately available. That means that they will have a greater proportion of their assets in a less remunerative form.
We have several disturbing features in the present situation, but the most disturbing of all is the one concerning our capital expenditure. I have always been afraid of this. I have spoken about it in the past. We are now reaching the stage when £40,000,000 is the annual demand for capital purposes. This year, the Minister has cut it down somewhat; he has cut it down, I think, to £37,000,000. That is the sum required for public capital within the State and up to this year we have been in the neighbourhood of about £40,000,000 for capital purposes. The savings of the community would have to be very substantial indeed to meet that sum regularly from year to year without vastly increased products. If the savings of the community are to be substantial there are two ways of dealing with the matter—either cut down consumption or increase production.
The greatest fault I find with the measures which the Minister is taking to meet the situation is that there is no consistency about them. He ought to go all out to increase production, and, if he wants to do that, the first thing to attend to is to see that every inducement is given to increase agricultural production. He has not done that—quite the contrary. There is about £12,000,000 of produce brought in from outside every year that could be produced here at home. You have either to increase production or reduce consumption and the Minister has apparently gone out largely on the side of reduced consumption. By his taxation, by his special levies and by the money which he is transferring from current revenue to the capital account, he is diminishing consumption and making some contribution towards meeting his capital requirements, which indirectly reduces the demands on our external assets.
One of the most extraordinary features of the situation, and one of which I would like to get a detailed explanation, is why, when, up to the present, the deficiency in the balance of payments used to be met by increased external indebtedness, that no longer happens now. The reduction in the banks' external assets shows that. We are reducing our external assets and the external assets of the banks and from that there is a whole chain of consequences. The fact that production has not kept up with the greater monetary demand means that there is an overflow of the demand and that we are bringing in consumption goods from outside. The bringing in of these goods from outside means that we are reducing our external assets. When we reduce their external assets, the banks are no longer in a position to deal properly with our external trade or freely make home advances.
Our imports are now over the £200,000,000 mark and you must have a considerable sum available in liquid foreign assets to handle that. The contribution by the banks to the Government loans means a further reduction of the money at their disposal. The Minister and his colleagues know, as everybody who has read the Budget statement knows, quite well that there is here now, as I have said, a serious economic situation which requires to be handled. We believe that that serious situation was largely brought about by mishandling but that is not going to help the country. When the Minister appeals now to the private individual to help, how different from what they said in 1952. It was suggested then by these master magicians, by the genii to whom I have referred, that it was our ignorance was at fault.
We ought all to produce as much as possible and to save the results of that additional production, so that it can be invested in further production. That means that we have to be industrious and, if we want to make further development, we have to be thrifty. Industry and thrift have been placed at a discount for a long period in the speeches made by certain politicians in this country. It is essential that somebody should say these things now. We want industry and the desire to work and to produce efficiently. We want thrift. If we act thriftily, we will have savings and we will be able to finance our capital enterprises by these savings. The whole progress of this community depends upon efficient production and thrift—in saving, as much as we possibly can, so as to employ it in further development.
I do not know what more I can add. I can only say that I, and everybody interested in the welfare of this country, would hate to think that our people should be left in a fool's paradise, that they should be left in the position that, when the savings of the past are gone, they will be like a man who was left a legacy and who became a spendthrift, and then found that, when his legacy was gone, he was out on the road. It is true that we have not reached the last of our savings or the last of our resources but there must be a combined effort to face realities. The first reality is that our resources are limited and that the Government's spending of those resources at the present time is at a higher rate than can be afforded with present production. The Government by taking the amount it is taking even for its capital purposes is depriving private enterprise of the capital it requires.
If I were asked from the opposite side: "What would you give up?" I would say that I would hate to give up any of the enterprises engaged in at the present time but if I had to give up anything it would certainly not be on the productive side. We have social services. It is a hard thing sometimes to decide what you will surrender in order to keep within the country's means. The main thing, however, is to stop further expenditure until production has reached a stage at which we can afford it, to stop increased public expenditure until whatever productive enterprises are on hands get the amount they require in order to produce the things that will enable us to maintain our standard of living. If we do not act accordingly, as the Minister has pointed out, we will face a period in which our standard of living will be reduced. We would like to know what those who have spoken about higher social and other services will then have to say.
As regards the Budget, we could say it is imposing hardships on our people which they can with difficulty bear. But I for one would say it is better that we have these hardships now than that we should have to suffer much more severe hardships later. One of the things that human beings are capable of by reason of their intellect and their will is that they can forgo a present good for a greater good to come and that they can embrace a present evil in order to avoid a still greater evil in the future. As a community we must behave in that way. If it is necessary that we should face the present evil to avoid greater evils then let us make up our minds to face it. I believe the people of our country, like those of any other country, if properly led and if they feel they are honestly led, are prepared to follow that leadership. But the people who are trying to lead them now are people who are eating their own words. There is no statement made from the opposite benches to-day for which one could not get a parallel contradictory statement made two or three years ago. Were they honest then or are they honest now? That is one question that will come to anyone who is asked to follow their advice. Have we still "Philip drunk" or have we "Philip sober"?
The people of our country will, as I have said, if they are properly led and if they feel they are spoken to honestly, accept advice given to them. I could, for instance, demonstrate the consequences from the point of view of unemployment that will flow from the reduction of capital expenditure, and the unemployment that will flow from having less purchasing power available in the community. I know there is a danger of these things and that we must do our best to avoid them. But let us not at any rate be misled into thinking that evils and dangers such as the country must face at present can be met without proper effort. The one thing that is wrong is that there has been no consistency in the efforts that have been made. We have not had, as there should be, an effort to increase production, particularly where agriculture is concerned. Is it not a shameful thing that last year we should have a diminution of our agricultural production? We have had a 2 per cent. increase in industrial production but we have had a corresponding set-back in agriculture. The whole national income in real terms is precisely as it was, but on the national production there are increasing demands.
The same want of consistency is true of the Government in its attitude in regard to prices. They are acting as the dog chasing its tail. There has been no effort to get stability at any stage because it is the hard thing to do politically and they will not face that. Our national income has not gone up. Agricultural production has gone down. The obvious thing to aim at is to increase agricultural production and to increase production in industry, and that would enable us to overcome our difficulties in the safest manner. We have had an investigation into taxation on industry and after a number of years a report has been presented. One would think that that report would be studied and that if there was anything in it worth while it would be acted upon immediately. Surely there are experts enough to be able to come quickly to a conclusion as to whether there are in relation to this report possibilities in regard to changing the incidence of taxation so as to encourage production, and that if there are that measures would be taken now when it is so vitally necessary instead of postponing action on the report and putting it on the shelf.
There is no indication from the Government's side of a systematic effort to secure an increase in production. As far as we are concerned, we are voting against this Budget because of the fact that the Government has not tackled this problem consistently and because of the fact that the people who are bringing in this Budget are people who a few years ago said Budgets like this were not necessary and are now eating their words. As a public protest against the dishonesty now exposed, we propose to vote against this Budget. In relation to many of the statements that have been made by the Government, I do hope we have exploded some of the myths that were created and that it has been proved that what was done by us worked out in the long run in the country's interests. I hope we have exploded, for instance, the myth about the fabulous sums being available in the way of past savings to meet all requirements. As far as I can see the total amount of our external reserves at the present time can hardly be much above and is likely to be below the £100,000,000 mark. There was the year when we had to bring in this distasteful Budget and we had to face a deficit of roughly £61.6 million. Now there is one of £35.5 million. Naturally one asks the question: are the steps which the Government are taking sufficient to bring that down to what would be considered a manageable sum and many people who are interested in national finance are not satisfied that even £5,000,000 or £6,000,000 would be such because of the various consequences in the long run.
If there was a deficit of £35,000,000 last year and if the total reserve that is now available is probably less than £100,000,000 net, how long can we stand such deficits? Is there any real prospect that in the coming year there will be a deficit which will be less than £35,000,000? The first three months do not hold out very substantial hope. I do not think that they show any such hopeful indication. As well as I remember, there is about £28,000,000 of an excess in the three months. Four times £28,000,000 would be £112,000,000. That would be £112,000,000 on our mercantile trade, as compared with £94,000,000. I think it was £21,000,000, for the corresponding three months of last year. If we take four times the £21,000,000, it is short the year's £94,000,000. So, if we take the three months as in any way indicating what will happen in the year, we will not have a smaller deficit, but, apparently, will have a greater deficit. I hope it will not be so. The Minister has suggested that there seems to be a change since he imposed the levies, that the import excess has come down in the month of March, although it went up very dangerously in January and February. It is not yet clear, however, that the debit balance in our total external payments which, of course, is immediately affected by the balance in our merchandise trade will be reduced this year to a level less than it was last year. It went up by, I think, £29,000,000 or £30,000,000 last year, over what it had been before.
We have a very big leeway to make good and we will not make good by half measures. My own feeling is that we will have a very dangerous further deficit in our balance of payments next year and that our net reserves would not enable us to face two more such deficits as that one. The result then would be that we would be back as a debtor country and, if we do get back into that position, then, almost of necessity, our standard of living will fall because people will not lend to us on credit the things that we are able to buy because of the savings we have at the present time.
I conclude by saying that I regard the national economic situation as a serious situation, that serious measures have to be taken to deal with it and that we have no confidence that the present Government, constituted as they are and with the record of their past statements, are the people to deal with it.
