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Dáil Éireann debate -
Wednesday, 18 Jul 1956

Vol. 159 No. 8

Local Loans Fund (Amendment) Bill, 1956—Second Stage.

I move that the Bill be now read a Second Time. This Bill makes provision for further issues from the Local Loans Fund in respect of local loans. The existing statutory limit on aggregate issues as fixed by the Local Loans Fund (Amendment) Act, 1954, is £90,000,000. The Bill extends this limit to £110,000,000.

Issues from the fund from the 1st May, 1935—when it was established— up to 31st March, 1956, amounted to almost £76,500,000 of which £62,500,000 was for housing loans, nearly £10,750,000 for sanitary services and public health loans, nearly £1,500,000 for vocational educational loans, over £780,000 for a temporary advance to Dublin Corporation under the Finance (Miscellaneous Provisions) Act, 1945, in connection with redemption of stock, and £1,000,000 for loans for other services.

Over the same period sanctions for loans from the fund—including a carry-over from before 1st May, 1935— came to approximately £88,250,000. The difference between the figure for sanctions and the figure for issues is accounted for by the fact that while loans are normally sanctioned in full they are issued in instalments as required by the borrowing authorities.

Included in the figure of £88,250,000 for loans sanctioned is a sum estimated at £1,000,000, representing loans sanctioned since the establishment of the fund which will not be required because of the abandonment of proposed works or their completion at a lesser cost than originally estimated. The total of commitments at 31st March, 1956, therefore, stood at £87,250,000, or within £3,000,000 of the present limit of £90,000,000, which should be reached before the next session. The additional margin of £20,000,000 provided for in the Bill should suffice to cover commitments for approximately three years.

The extent to which loan finance can be made available through the Local Loans Fund depends on the availability of capital for State financing in general. It was indicated in the Budget statement earlier this year that at present capital is not only scarce but also abnormally dear and that in the ordinary course it would not be possible to meet all our desirable capital requirements in the absence of a marked change in the savings trend. I regret I can as yet see no evidence of a sufficiently marked change in that respect. The fact must, therefore, be faced that the capital funds available, even for the most essential projects, are scarce and are likely to continue to be so in the immediate future.

This situation must inevitably react on the finances of the Local Loans Fund and for the present at least all projects requiring to be financed from the fund must be closely scrutinised. In relation to capital outlay as a whole every effort is being made to preserve a reasonable balance between social and economic considerations but in our current circumstances it is vital to devote far the greater proportion of the available resources to productive investment. Housing is the main claimant on the Local Loans Fund. Requirements under this heading are being accorded a high priority and I hope it may be possible to provide for the continuance of all essential local authority housing.

The fact that the needs of local authorities outside the Dublin and Cork urban areas have been largely satisfied and may be expected to taper off rapidly in the years ahead should afford some relief, but unfortunately, any relief in this way for 1956-57 is more than offset by the necessity to come to the assistance of Dublin and Cork Corporations who have been unable themselves to raise all the capital they need to meet their current requirements. Similar assistance has been promised to Dublin next year, if necessary, but it is to be hoped that the difficulties are only temporary and that in the years ahead both Dublin and Cork Corporations will be able to raise their full requirements of capital independently as heretofore.

This Bill proposes to increase the amount of money available from the Local Loans Fund by £20,000,000. Having listened to the Minister's speech, most people will agree with me that the Bill is little more than an empty gesture. The Minister—and I do not criticise him for this; in fact I commend him for it— has told the country that capital is scarce and interest rates high and that this scarcity of capital and those high interest rates are likely to continue for a considerable period.

The report of the committee which I set up to inquire into the effects of taxation on industry has disclosed one startling fact—that out of the £100,000,000 odd raised in recent years —I am speaking from recollection and may be out a million or two at one side or the other—which has been devoted to expenditure generally described as capital expenditure—and whether all of it was entitled to be so described is a questionable matter—almost 98 per cent. has been absorbed by the State and the local authorities in financing their own enterprises, whether they were or were not productive.

In June, 1951, just five years ago, I had to make, as Minister for Finance in the new Government, a statement in this House. In it I pointed out the direction in which the country was going. I emphasised that it was essential that we should conserve our capital resources and devote them, as far as possible, to productive expenditure. If I were sitting on those benches over there and the Tánaiste and the present Minister for Finance were sitting on these benches, this is the sort of trash we would hear this morning. I am quoting from Volume 126, column 1906 of a speech made by the then Leader of the Labour Party—I assume he still holds that position—the present Tánaiste. This is what he said:—

"I listened to the Minister's speech for a considerable period this evening. He was obviously in a very bad physical condition when he attempted to prepare the speech himself.... I have never listened to a worse dirge than I listened to this evening from the Minister.... So long as Deputy MacEntee is Minister for Finance you are going to get hair-shirt economics and a policy of austerity for the next three years.... The Minister believes that this is bound to be a distressful country with an impoverished standard of living.... You will have to put up with low wages, bad houses, intolerable social conditions, underemployment, irregular employment and home assistance.... This is 1951, not 1851."

I am not going to endorse those remarks. I am going to congratulate the Minister on following my example and endeavouring to put before the country the facts of the situation.

In spite of the young economists.

We have seen our external reserves, this mass of economic manoeuvre, the sheet anchor of our independence, as they were described by Deputy McGilligan in 1951, dissipated and, as the commission to which I have referred has reported, little more than £2,000,000 of them have been devoted to really productive enterprises in this country. It is because of this that to-day we have people in irregular employment; it is because of this that to-day we have a growing number of unemployed; it is because of this that to-day the Minister for Finance has warned us that we cannot continue to spend our capital resources on things which are not in themselves economically reproductive.

I am not going to condemn the Minister for that. I know he has a hard task. It is a grave and serious picture which he has presented. It is a problem which cannot be solved merely by talk. We all know the parlous position in which our national transport industry is. It is one which requires immediate action by the Government. But what has been their proposal? They propose to deal with that problem in the same way as they dealt with the emigration problem—to set up a commission and keep people talking so as to give them an excuse for doing nothing.

Then there is the Dublin housing problem. Last night we heard the Minister—and this is relevant, Sir——

More so than C.I.E.

It is all part of the problem, and I only made a passing reference to C.I.E., but do not forget that the Coalition set up another commission in 1951, and the effect of that commission was to delay, for years, the one remedy that might have enabled the national transport undertaking to become a profitable concern.

The Deputy will come to the Bill.

I will, Sir, and I thank you for the indulgence you have shown me, but the Minister has been, not provocative, but a little seductive in his interruptions. I was saying that last night when the question was put by my colleague, Deputy Smith, to his successor in charge of housing, the present Minister for Local Government, as to what moneys would, in fact, be available for the purposes of the Small Dwellings (Acquisition) Acts, we had a spate of words from the Minister which reminded me of nothing so much as a snow-storm. One cannot see very much through a snow-storm and one could not gather what was in the mind of the Minister for Local Government and what was the true position in regard to the Small Dwellings Acts from the statements he made last night. He did say that there will be plenty of money available from the Local Loans Fund for the purposes of the Small Dwellings (Acquisition) Acts. The Minister for Finance who controls the purse, and I am glad to say that this Minister for Finance does, I think, control the purse, announced this morning that we must go slow on housing. The Minister for Local Government said that there would be plenty of money available and when he was challenged to say where the money would come from he turned to Section 9 of the Housing Bill.

Section 9 is the section which provides that insurance companies and building societies are now to come in and do the work which had formerly been regarded as the work of the Department of Finance. They are to come in and provide the moneys which were formerly regarded as being a proper charge on public funds. What is to be the effect of that in the light of what the Minister now says, that capital for productive investment has become very scarce and very dear? Everybody knows that one of the principal objects of investment for insurance companies is in industrial buildings, that is in housing the industries which will enable our people to earn their living and to produce the commodities which we require if we are ever to get back to the position in which we can maintain ourselves as a creditor country. These moneys which normally are regarded as being the principal source of capital for industry and productive purposes are now to be diverted out of their proper normal course to other purposes which had been regarded hitherto as being a proper charge upon public funds.

I did not intervene in the debate last night and I am not going to continue in this trend for very long except to point out that the proposals contained in the Housing (Amendments) Act, particularly in Section 9, cannot be reconciled with the statements which the Minister for Finance has made this morning in introducing this Bill.

Seriously, I would like the Deputy to develop that point because I cannot see the difference.

I do not wish to keep the House. We all know that there are expectations that we might rise this week.

I think those were buried last night.

I do not think so. At least I hope not. There is work to be done and if it had not been, of course, that we had wasted two whole days upon a petty little measure dealing with greyhounds, at the instance of the Minister for Agriculture, we would have got it done.

The Deputy might come back to the Bill.

We are discussing the serious business of the country and we had hoped to complete our discussion upon it and then leave the Government to get down to it and, if they can, to direct their minds to these problems.

I am sure the Deputy will give a good example now by coming back to the Bill.

Yes. I was saying that the statements which the Minister for Local Government made last night could not be reconciled with the statements made by the Minister for Finance this morning. I want to go further and say that one of the purposes of these Local Loans Acts has always been to provide the funds to enable the local authorities to carry out their housing programmes. Last night the Minister for Local Government said that all the money that the local authorities required would be available for the purposes of the Small Dwellings (Acquisition) Acts from the fund; he said in substance that no local authority had been impeded in dealing with its housing problems because of lack of funds. That statement was challenged by the present Lord Mayor of Dublin, Deputy Briscoe. It was repeated, I think, by the Minister for Local Government to such an extent that the former Lord Mayor of Dublin, Deputy Larkin, got up and contradicted the statement which the Minister for Local Government had made.

I mention that only to bring out this point: what is the use of bringing in a Bill to increase the Local Loans Fund by £110,000,000 when, in fact, in the present circumstances, in view of the Minister's speech, the Government has not any hope that it will be able to provide these moneys? Has the time not come when we should stop bluffing and the country should be told what the situation is?

We had the Taoiseach in Cork saying that we were making capital out of the present difficulties that the Government has to face. There never has been a Government in this House that was treated with such consideration by the Opposition as we have treated the present Government in the debate on the Budget and in the Financial Resolutions last year and in the finance debates again this year. The reason for that was that we did think that the Minister for Finance, whatever about his colleagues in the Government, has been doing his best. But we think also that the position is now so serious that the people should be told plainly that we cannot continue to pursue the policy which has been pursued hitherto. The people should be told, in fact, that we are at the end of our resources; that every person who is engaged in industry, in productive industry, in the industries which are making the goods which we must export to live or which we could utilise here to maintain our own standard of life, is facing difficulties. These difficulties have been created very largely by, and flow from the precedent which was created in the year 1949 when this Coalition Government abandoned the practice which all Governments had followed in this country hitherto, not excluding the Fine Gael Government which was in office from 1922 to 1932, that anything which is done purely for a social purpose must be paid for out of current revenue. That was the practice which we followed. It was on this basis that the Local Loans Fund was built up year by year, so that in 1939, when the war broke out, the fund had amassed a considerable amount of capital. All that capital had been provided out of current revenue. None of it had been borrowed. I am sorry, Sir; that is an overstatement. I should say that a considerable amount of it had been provided out of current revenue and only an inconsiderable fraction of it had been borrowed.

Now, Sir, we departed from that sound practice in 1949 and we decided that all sorts of things that, year in, year out, the State must meet would be classified as capital and, instead of asking the community to set aside that money year after year, we borrowed for it. The consequence has been that our external assets have been dwindling, and the rate of non-reproductive expenditure has been considerably accelerated. Nobody can say to-day that for all such expenditure we are getting more than the merest fraction of the return which we would have got, if our resources had been more wisely employed.

That is indefinite enough anyway—"more wisely employed". Would the Deputy develop that?

For goodness' sake, do not encourage him.

The Parliamentary Secretary cannot continue this bluff any longer. This is not a class in elementary economics in a college. This is not a problem of writing minutes to pass responsibility to someone else above. This is a situation which is affecting every man and woman in this country who has to depend——

There are not 90,000 of them unemployed.

——for his livelihood and for the maintenance of himself and his family on what he is able to sell and what he will get for it in the market. There is no use trying to conduct this debate as if it were a petty little debate in the literary and historical society in some university college. This is the Assembly of the nation and the sooner that we wake up to the fact that we have got to deal with these problems, whether they are politically pleasant or unpleasant for us, the better. For it is only when we decide that we will do what is right, irrespective of the political embarrassments which it may involve us in, that the country has any chance of being saved.

We tried to do that from 1951 to 1954 and we did succeed in redressing the situation to a measure. I am not going to described how our attempts to do that were met. Suffice it to say that, if the Government will face up to their problem now, their difficulties will not be taken advantage of in the same way as the difficulties of the country were taken advantage of over the period from 1951 to 1954.

We have now got to the stage in this country in which, for good or ill, the basis of our public finances is the 1952 Budget. There has not been a single reduction in tax—not one single reduction in tax. On the contrary, additional taxes have been imposed, taxes which we know are crippling some of the main instruments of industrial progress in this country, some of the things which are essential if industrial progress is to continue. I have said on other occasions that it is better that taxes should be imposed rather than that we should borrow to meet a current deficit. I have said that. I maintain it because, if we keep on borrowing, pumping money into circulation, this inflationary position in which we are living will get worse. Prices will go higher; unemployment, despite anything that our people may do, will get worse. We shall be put in a much less competitive situation and the position which we shall be facing in a very short time, perhaps within 12 months, is that the Irish £ may be, like the Australian £, standing at a discount 20 to 25 per cent. vis-a-vis sterling.

We have heard people talk about breaking the link with sterling. The only thing the link with sterling meant was that an Irish £ could buy as much as and was as negotiable an instrument in a foreign market as the British £. Let us not continue on the path which we have been treading for the past seven or eight years, because, if we do, inevitably the day will come when the Irish £ will be devalued vis-á-vis sterling.

Is the Deputy being funny?

The Government have the responsibility in this matter.

Is the Deputy amusing himself?

No; I am not amusing myself.

Amusing himself.

I am not amusing myself. I am talking seriously.

You are not thinking seriously.

In any event, I do not believe in playing a buffoon in the nursery like my interrupter.

Do not let the Parliamentary Secretary get vexed. He is a dangerous man.

I am saying, and it is not the first time I have said it—I said it before in this House when I was Minister for Finance—that the problem we have now to face is to restore the credit of this country, to reduce the overheads which are pressing upon our main industries and, despite whatever discomfort or embarrassment it may involve for any political Party, we should take the steps necessary to redress the situation which has been created, which has, at least, been aggravated very considerably, over the past two years.

Is the Deputy suggesting that I will avoid taking steps because of political embarrassment? I hope not.

Mr. de Valera

Not you.

I am not suggesting that, but I know the Minister's difficulties.

Deputy MacEntee ended on a note which suggested, perhaps, that this Government, and I in particular, will not take the steps that we deem necessary because of political considerations. Let me say, quite categorically, that so far as this Government is concerned and so far as I am concerned as Minister for Finance I will take, and the Government will, I know, join with me in taking, such steps as we deem necessary to rectify the national economy, regardless of any Party political embarrassments that may be caused thereby. We put the nation above political Party and we intend to ensure that that will be the aim and the object and the primary purpose of this Government.

Deputy MacEntee, justifiably perhaps, widened the scope of this debate on the Local Loans Fund into what one might perhaps describe as a debate on the national economy as a whole. I do not want to follow him down certain lines that he took. In relation to our transport problem, for example, the House will have an opportunity on the Supplementary Estimate that is to be introduced, if it so desires—the Supplementary Estimate that arises because of the fact to which I referred in my introductory speech on this Bill that capital is at present abnormally scarce and dear. There are certain things he did say to which I must make some reference because, if they were to go uncontradicted, it would be extremely bad for the economy as a whole.

I do not hesitate to agree that the Government are perturbed about the situation in relation to our balance of payments. I did not intend to develop that on this Bill but, having regard to what Deputy MacEntee said, I must make a slight and passing reference to it. The import figures for June did not show the decrease which we had hoped might be shown. While exports showed some buoyancy, the rise, £450,000 in the value of our imports for June over June of last year was a change in the trend that had been operating for the past few months since the imposition of the special import levy in March.

That change is a change which necessitates serious and active consideration by the Government in relation to our balance of payments position. I want to make it perfectly clear that so far as I am concerned and so far as the Government is concerned we are determined that we will take any and every step that is necessary to rectify our balance of payments because we appreciate that it is vital to the national economy to secure that in the years ahead the resources of the country will be maintained to their fullest degree.

I want to make it clear beyond question that the Government are determined to take such measures as may be necessary to prevent the disaster such as was foretold by Deputy MacEntee. I think with adequate steps and the co-operation of the people as a whole we will be able to surmount the difficulty that everybody can see there at the present time. In fact, I am confident that we will be able to surmount those difficulties but we can only do so by accepting the fact that there are difficulties there and by the appropriate measures being taken to surmount them.

If I understood Deputy MacEntee correctly, particularly the end of his speech, I think it was unfair, unjust and prejudicial to the economy as a whole to suggest that I, as the Minister in charge of this Bill and the Government, were not going to take such steps as would be adequate to deal with that situation. The Deputy and the House can rest assured that such steps, if they are necessary, will be taken. I do not propose at this stage to go back over the ground that we covered in an earlier debate and the difference between July, 1951, when Deputy MacEntee and the Fianna Fáil Party took office and April of 1952, when he took his first measure. I did not wait as long as that. I acted much sooner. I did not wait for the Budget to act. I acted in the spring although my problem arose much later in point of time than Deputy MacEntee in his Government suggested their problems arose. They suggested their problem arose in July. I do not agree. It arose later on in that year, when, by freeing and releasing the balance of the Marshall Aid money, they set inflation afoot.

Mr. de Valera

Nonsense!

Deputy de Valera can say "nonsense" but the fact remains——

Mr. de Valera

It was used exactly as it had been used, for commitments and for no other purpose.

We will debate that later with great pleasure.

I am not going to argue about commitments or anything. The fact is that it was pumped out at the end of that period. I am not going to argue about the commitments or the purpose of payment. I am stating the position from the economic point of view. It was that pumping out at that stage that increased our inflationary situation.

Mr. de Valera

Nonsense!

It is no good Deputy de Valera repeating the word "nonsense". It is a fact.

Mr. de Valera

It is not.

It is not even a question of opinion. It is a fact that they were paid out during that period.

Mr. de Valera

Paid out to meet the ordinary commitments.

I am not arguing about that.

Mr. de Valera

What is to be done?

Will Deputy de Valera contain himself for a minute and allow me to finish my sentence without interruption? They were paid out for proper purposes. I am not arguing about that. I am arguing that by paying them out in that way rather than by financing the programme of that time by a loan in that autumn it created an inflationary situation.

Mr. de Valera

Nonsense!

Deputy MacEntee says he saw in July of 1951 a serious situation. He did not move until April. Any situation that arose in respect of the current year arose much later than July but I did not wait for the Budget. I moved before the Budget. I merely mention that in passing to make it clear beyond question that so far as I am concerned and so far as this Government is concerned we are determined to take all such measures as may be necessary and adequate to correct a dangerous trend in our balance of payments. We are determined to do that because we believe that if the appropriate measures are taken the country can and will surmount the present difficulties. If that is done—and it will be done— then there will be no danger—let me emphasise that—of the results to which Deputy MacEntee made reference at the conclusion of his speech.

It would be disastrous if it was felt that there was any possibility of arriving at the position which the Deputy foretold. No matter who may like it or not I want to make it quite clear that I appreciate Deputy MacEntee made that statement in an anxiety to point out the dangers which the national economy could reach if they were not averted. I think Deputy MacEntee must agree with me also when I say that his speech could be misunderstood and I want to make it clear beyond question that so far as I am concerned there is ample evidence that the appropriate measures will be taken and that if the appropriate measures are taken to rectify the economy, then there is no danger whatever of any developments such as the Deputy mentioned.

Question put and agreed to.
Agreed to take remaining stages to-day.
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