I think we must accept that the increases which have already taken place will not be easily rectified but can we get a decision from the Government that there will be no further increases until national production has expanded, until increased revenue from existing taxation is available to the Government, to permit of a rise in expenditure without an increase in tax rates? Would the Minister for Finance say that this is the end of the process and that, from this on, either he or the Taoiseach or somebody else within the Government will exercise control in this field, will ensure that administrative costs will not be allowed to rise further?
The Minister for Social Welfare speaking in the debate asked the Opposition to state what reductions in expenditure we would want to make. The mere fact that that question was asked seems to me to make it clear that Ministers have not even begun to understand what their responsibilities are. Nobody wants to make reductions. Even the task of getting rid of superfluous or incompetent civil servants is not a pleasant one. There is nobody in this House who cannot think of additions he would like to make to Government services, new expenditures that he would like to propose which would be beneficial to the people of this country or to some sections of them. What the Government has to face is the fact that national income will not support any higher expenditure.
A worker who gets his week's wages and goes for a walk down O'Connell Street will see in shop windows many things he would like to buy, many inducements to expenditure that he would like to make but, being a sensible man, he knows that he has not got the surplus of income which will enable him to buy these things, to undertake additional expenditures and that, until his income has been increased, until he is able to earn more, he will have to forego buying these things that he would like to have. The Government must act in a similarly sensible way. They must face up to the fact that they must forego expenditures until the national income has been increased to support them.
The fact of the matter is that since this Government came into office the national income increased by 3 per cent. but Government expenditure has increased by 11 per cent. If the Minister for Finance and the other members of the Government will keep these percentages in mind they will realise the extent to which they are bringing the country in the wrong direction.
The Minister for Agriculture, here, yesterday, asked was there any country in Europe where life was easier than it is here. It is not so long ago since he and all his colleagues in the Government were going around the country peddling discontent, telling the people how miserable they were, caoining about the national position as it existed in 1954. This Government came into office in 1954. I wonder do they appreciate the enormous deterioration in national conditions which has taken place since then? 1954 was a reasonably good year. The price level was stable; it had been stable for some 12 months prior to the date of the change of Government. Production was rising and exports were rising. There was in that year no deficit in our external payments of any consequence. The living standards of our people were improving. The average number of persons unemployed in each week was falling. It was lower than in the previous year and in the previous year it had been lower than in the year before that.
I do not think that description of the conditions that prevailed in 1954, when his Government came into office, will be seriously challenged but, just to emphasise that it is not an ex parte account of the circumstances then prevailing, I would remind the Minister for Finance that he so described them in his Budget statement of 1955. In that statement the Minister for Finance said:—
"On the whole, 1954 was a good year. Reasonable stability of prices and freedom from any major industrial disputes enabled progress to be made in output, exports and living standards."
Let us contrast the conditions of 1954 with the conditions of to-day and, again, just to make sure that nobody will accuse me of misrepresenting today's conditions, I will confine myself to quoting extracts from the 1956 Budget statement of the Minister for Finance. According to that statement, there has developed in the meantime, first, a grave balance of payments problem, the financing of which, he said, resulted in a scarcity of capital for development purposes. He pointed out that total savings in 1955 were £21,000,000 less than in 1954 and £30,000,000 less than in 1953. He said that savings declined despite increases in money incomes. He emphasised that the financing of capital expenditure has become more difficult and costly. He said that, for the first time in many years, deposits within the State of commercial banks fell. He said that production was static. In contrast with an annual rate of growth in real terms of about 2 per cent. in each of the two previous years, there was no increase in production in 1955.
He said there was a 2 per cent. fall in agricultural production. The Minister for Agriculture does not agree with that. He asked how any rational person could make that statement. I do not know if the Minister for Finance regards himself as a rational person. I hope the Dáil will not have to decide whether that description applies more accurately to him than to the Minister for Agriculture.
The Minister for Health, Deputy T. F. O'Higgins, says that members of the Government often agree upon policy. We would at least expect that when they come to the Dáil they would agree upon facts. Anyway, the Minister for Finance says there was a decrease of 2 per cent. in agricultural production which was barely offset by an increase in industrial output. Whether, in fact, there was an increase in industrial output is a question that might be examined another time. He said unemployment had ceased to fall —that it was roughly the same now as in 1955. I would point out that unemployment fell in each of the two preceding years. In each week of 1954, almost, the number of unemployed was less than in the corresponding week of 1953 and in each week of 1953 the number was less than in the corresponding week in 1952. Now, the number of registered unemployed is mounting— notwithstanding the fact that emigration is almost at crisis proportions. Indeed, our unemployment statistics do not reveal the full position because, as many Deputies know, there is a great deal of short-time working at present in many industries which is not revealed in our unemployment statistics.
I invite any Coalition Deputy who has spoken or who proposes to speak in this debate to read the speech he made in the corresponding debate of last year. I challenge any Deputy opposite or any member of the Government to repeat this year the speech he made last year. It would be a useful exercise for them to go back over the hopes they expressed and the intentions they indicated last year just to help them to appreciate the extent to which—through their administration—the whole national position has been made a great deal worse. What was the Government trying to do in 1955? I am not asking the House to take my word for it. We had declarations of intentions from the Taoiseach, the Minister for Finance and other members of the Government.
The Taoiseach described the 1955 Budget statement as a complete and comprehensive expression of financial and economic policy. Speaking on his Estimate in July last, as reported at column 1099 of the Official Report, Volume 152, the Taoiseach said:—
"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 the Government is committed."
What were the aims of policy as stated by the Taoiseach then? He said—(1) to get down the cost of living; (2) to prune Government expenditure; (3) to reduce the cost of Government borrowing; (4) to keep down bank lending charges and (5) to expand savings and capital investment. Let us consider the extent to which these aims of the Government have been realised or to which, through incompetence and mismanagement, the Government has been diverted from the realisation of these aims. Speaking in the Budget debate of last year, as reported at column 1409, Volume 150, of the Official Report, the Taoiseach said regarding the cost of living:—
"We are trying to get down the cost of living. We may fail but at least we are not bringing up the cost of living. As a matter of deliberate policy, we are trying to keep it down."
I do not think any member of the Government will claim success in regard to that aim. Since then, the cost-of-living index number shows an average rise of 5 per cent. in the general prices level. A few months after that statement of aims by the head of the Government, he came back here again and, speaking in November last in the debate on the motion of No Confidence, he excused himself and his Government because the cost of living had risen—"prices have risen but for reasons entirely beyond the control of this or any other Government." Within the next few months there was a further change of outlook in the Government.
In the Budget debate of last year the Taoiseach was asserting that, as a matter of deliberate policy, they were trying to keep down the cost of living. By the time the Dáil was discussing prices on the Supplies and Services Bill this year, they had turned completely the other way and we had the Tánaiste, the Minister for Industry and Commerce, denouncing as preposterous the idea that the Government could keep down the cost of living. The Minister for Industry and Commerce thumped the desk and said, as reported at column 1003 of Volume 155:—
"Does anybody imagine that a small country like this with 3,000,000 people can hold at bay inflationary forces which are operating in all the countries of the world?"
The Taoiseach gave the Dáil an assurance in an expression of aims and intentions to keep down the cost of living as a matter of deliberate policy. "At least we are not," he said, "going to bring it up." This rise in prices which has taken place and is taking place is, in my view, the key to all our national problems. Because prices have risen and because there is a widespread public expectation that prices will continue to rise, people are spending rather than saving. There is no confidence amongst the public in the virtue of saving, no belief in the stability of the value of money. Because of the fact that prices have risen, are rising and, in the minds of the public, are expected to rise still further, we have this heavy adverse trade balance about which Ministers have recently been speaking and which is depleting the resources of the commercial banks and causing the credit squeeze which is, in turn, restricting the expansion of trade. Because of that, we have this difficulty, to which the Minister for Finance referred, in financing public capital outlay and a sharp contraction of private investment. Because of that, wages are rising and other costs are rising which are pricing our products out of the export markets and making it more difficult to maintain the volume of our exports which must be restored if the balance of payments deficit is ever to be remedied.
The Government now appears to have no policy whatever regarding prices. That is their failure No. 2. The main concern of the Ministers appears to be to escape the political consequences to themselves of the rise in prices. Whenever they speak now upon prices it is to excuse themselves on the grounds that international forces are stronger than they assumed, that factors are at work which they cannot be expected to regulate. Is it possible to get this Government, even for a brief period, to forget politics— to forget whether the developments in our national circumstances will win them votes or lose them votes in another election—and to concentrate on their responsibilities as a Government?
This issue of rising prices, the consequence of public expectation that prices will continue to rise, constitutes a national crisis with which the Government and the Government alone have the power to deal. I do not think that it is true to say that all the factors which are affecting prices and causing them to rise are outside our control. I am not thinking now of the apparatus of inquiries by the Prices Advisory Body and the making of regulations by the Minister for Industry and Commerce—all that silly nonsense that the Government maintains to keep alive the illusion that they are continuing to do something about prices. Other Governments have operated devices designed to preserve the stability of their internal price levels, notwithstanding fluctuations in international conditions. I will admit that most of these devices relate to the management of their currencies, and that the introduction of similar devices here would be extremely difficult and would certainly be highly controversial. But the issue at stake here is one of the survival of the national economy, if indeed we have anything here which could be properly described as a national economy. We cannot rule out the use of any weapon in that struggle.
The Minister for Finance appears to know what is at stake. There were certain parts of his financial statement which gave that impression. He told us that it was our economic survival that was at stake, our hopes of improving our living standards and of providing a larger volume of gainful employment. Is it good enough, if these are the issues at stake, for Ministers merely to turn from their own responsibilities and to give only excuses to the country? The people are getting tired of excuses and want now from the Government decisions and action. Again, I will admit that when the Taoiseach was speaking here last year and stated that the Government would not bring up the cost of living and would try as a matter of deliberate policy to bring it down, he probably believed that was possible but it merely showed his inability to appreciate the nature of the forces that were at work at that time and the powers of the Government in that regard.
I will now come to the third item in the Taoiseach's 1955 programme. His first aim was to reduce the cost of living and he failed in that. His second aim was to reduce Government expenditure and he failed in that. The third aim was to reduce the cost of Government borrowing. I am not going to let him off with anything in that matter because when the Taoiseach was speaking on the Budget debate last year he said that the previous Government, the previous Fianna Fáil administration, had acted upon a policy of dearer money. Whatever excuses the Minister for Finance might make for himself in the present circumstances, he was not prepared to extend them to the previous Government when it was faced with the same difficulties.
According to the Taoiseach the previous Government was not faced with any difficulties at all and if Government borrowing interest rates rose during that period, it was alleged that it was because of deliberate policy for some mysterious reason the previous Government were forcing up the cost of capital. Later on in the debate on the "No Confidence" motion in November the Taoiseach pointed across to the benches here and said:—
"You brought disaster to the country by increasing the rate of interest to 5 per cent. You destroyed the credit of the country and we restored it."
In view of these declarations by the Taoiseach we cannot excuse him for his policy in that regard on the grounds of not knowing what was the position. Since then, the Government has had its issue of National Savings Bonds at a rate higher than 5 per cent.; 5 per cent. bonds issued at a discount, and the public subscribed 44 per cent. of the total sought.
Last year the Minister for Finance quoted the success of the previous loan as indicating the confidence of the public in the policy of the Government. The Taoiseach in the Budget debate of last year said that the response to that loan showed that the public had confidence in the Minister for Finance and his policy. It also showed, he said, the determination of his Government to reorient downwards the cost of Government borrowing.
What is the position to-day? The Minister for Agriculture stated yesterday that the reason for the failure of that loan, the reason why it did not attract from the public more than 44 per cent. of the total sought, was that while the loan was on issue the British bank rate was increased. Is it seriously contended by the Government that that alone was responsible for the failure of that loan? Do they really believe that it was that accidental circumstance that prevented the loan from filling? Are they trying to suggest now, in face of the problem of raising money for public purposes, that that loan would have been successful but for the unforeseen eventuality of this development in Britain? Will the Minister for Finance say what the indications were that that loan would have filled at the time when the announcement of the increase in the British bank rate was made? Is that the case the Government is putting to the House?
The Minister for Finance was speaking in a different voice when he presented his Budget statement. He was talking then about capital being scarce and dear and was indicating the difficulties of finding money for State capital purposes. Does anybody know if the Minister for Agriculture is talking Government policy or not? What is the point of fostering the belief that the issue would have succeeded but for the mere accident of an increase in the British bank rate taking place at that time? All Exchequer loan rates have had to be increased, according to the Minister for Finance, to 5½ per cent. The members of the Government should go back and read over what was said by them about the effect of higher interest rates on advances to local authorities and other public bodies on the last occasion when they were increased.
According to the Taoiseach, we destroyed the credit of the country and the present Government restored it, but what is the position now? Do they see any real prospect of raising from the public the £37,000,000 to finance their capital programme this year? Are they not going to the E.S.B. and C.I.E. and other sources trying to get short term money in order to meet the immediate requirements of the Government? If they had a sensible appreciation of their duties and the tasks facing the Government, they would know that this phenomenon of higher interest rates is not one that is likely to disappear very quickly and that the problem in that regard did not arise because of an accidental increase in the British bank rate at the time when they were floating a loan. The problem that they are facing is the same as that which the previous Government had to face. The general trend is always towards higher interest rates for borrowing money in an economy where taxation is high. The cards are always stacked against the borrower of money at interest.
Anyway, the Taoiseach last year was proclaiming his intention to reorient downwards the cost of Government borrowing. That is his failure No. 3. Indeed, there has been quite an extraordinary change in the year both in the actual circumstances prevailing and in the attitude of the Government towards those circumstances. The Government finds itself in the position that it cannot maintain the previous level of public capital investment.
The Minister for Agriculture yesterday spent a long time expounding the advantages to this country of capital expenditure upon houses, hospitals, schools and so forth. Nobody is going to dispute that issue with him, least of all the Deputies on this side of the House who were, in the main, responsible for the inauguration of every one of these beneficial schemes, but what explanation is the Government going to give the people now, in view of what the Minister for Agriculture said, that this year they are budgeting for less expenditure on houses, hospitals, schools and for investment in agriculture, forestry and fishing?
Why is it they have to cut down the capital Budget this year? What financial circumstances have they allowed to arise which have forced this disaster on the country? Recently, I publicised certain proposals for national development which involved a higher level of State capital expenditure. I argued that State capital expenditure was multiplied in its effects upon the national income. The reverse is also true. A curtailment of State capital expenditure is multiplied in its effect upon the national income, the level of trade and the level of employment.
All the indications are now that the people have no confidence in the Minister for Finance or his policy. Is the Government going to accept that situation? Are they going to do nothing about it except wring their hands? Are those who control the supply of Irish savings still to be allowed to move them outside the country to seek investment elsewhere, if investment elsewhere offers greater advantages than investment here?
Does the Government think there is nothing that can be done about that? I made a suggestion that there should be brought into operation a capital gains tax in regard to new external investments. I do not know whether that is a good or bad suggestion but there are alternative methods, if the Government do not like that one, by which some penalty or check can be imposed upon the unrestricted transfer of Irish savings for investment elsewhere. Can we afford to let them go elsewhere in the circumstances in which the Minister for Finance stated that capital outlay has to be curtailed and that private capital investment is exceedingly restricted? That is failure No. 3—the reorientation downwards of the cost of Government borrowing.
The next aim of policy of the Government stated during the debate on the Budget of last year was to prevent an increase in bank charges. The Taoiseach said:—
"We took the decision in conjunction with the banks not to increase the bank rate here this year."
Later in the year the Governor of the Bank of Ireland said of that decision that it would appear that insufficient importance was attached to the effect on the liquid resources of the banking system, a factor bearing vitally upon employment and production.
