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Dáil Éireann debate -
Wednesday, 25 Jul 1956

Vol. 159 No. 10

Committee on Finance. - Vote 6—Office of the Minister for Finance.

I move:—

That a sum not exceeding £116,480 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, 1957, for the salaries and expenses of the office of the Minister for Finance, including the Paymaster-General's office.

This afternoon I propose to avail of the opportunity this Estimate offers to speak on a matter of the gravest national importance. I intend in so doing to be as simple and as blunt as possible, so that everyone in the community will know and appreciate all the facts of the present economic situation. Many people still believe that the situation, although serious, will right itself of its own accord. This idea must be put aside once and for all. A vague uneasiness about the way things are going, and wishful thinking that all will soon be well, must be replaced in the public mind by a real awareness of how serious matters are and a determination on the part of each individual to do his share to remedy them. It is only by realising and by facing the difficulties squarely that we shall be able to overcome them.

In March last the Government, after careful analysis of the economic situation, imposed a special levy on a range of less essential consumer goods and also restrictions on hire purchase transactions. These measures were supplemented in the Budget by higher taxes on less essential forms of expenditure, particularly on imports, and by certain incentives to production and saving. An attractive new issue of Savings Certificates was put on sale on 1st May. Both in March and in the Budget and on various occasions since, it was made quite clear that further action would have to be taken if an adequate improvement did not take place. Stress was laid on how much that improvement depended on individual decisions to produce more and to defer unnecessary consumption now so as to increase savings. A marked increase in saving has not so far occurred, nor has there been any significant increase in output. I am sure all the Deputies in the House and thinking people throughout the country realise the seriousness of our present difficulties and look to a responsible Government to set a headline in dealing with the situation. The Government have, therefore, decided at once to reinforce and supplement the measures already taken, despite any temporary political embarrassment this may cause.

Before announcing the measures which the situation demands, I think it well to state in simple terms the dangers and weaknesses in our economy. Most of our troubles arise from the fact that our production does not support the purchasing power yielded by our money incomes. We are, moreover, spending so much of these incomes to satisfy our immediate wants and desires that all too little is being set aside for the productive investment on which our future standards depend. Because our home output of goods and services is not high enough, a large volume of goods is being imported to satisfy our inflated purchasing power and, since we are not earning enough to pay for these imports, we are eating into our capital to do so. We have even added to the excessive purchasing power of our incomes by borrowing from the banks and drawing down our past savings. The result is that these past savings are vanishing and that sufficient current savings are not being made to finance all the capital works needed to develop the economy. Although the level of capital investment is below that of more developed countries, resources which represent the forced saving of two world wars have been largely wasted instead of being used exclusively and carefully to increase our productive capacity and so provide a firm basis for higher living standards.

We must face the unpalatable truth that, without a radical change in the situation, we cannot enjoy much longer the artificial standards to which we have become accustomed, since the external reserves to which we owe these standards are steadily running out. Unless our present purchasing power is upheld by an immediate increase in production, we must accept a temporary reduction in that purchasing power now or suffer a wholesale and drastic reduction in imports in a very short time, with dire effects on industry, trade and employment.

Our pattern of trade for many years has been that we import far more goods than we export, hoping to make up the difference by what are termed invisible receipts such as the expenditure of tourists in Ireland, emigrants' remittances and similar items. Lately the excess cost of what we import over what we get for our exports has become so great that the invisible trade items cannot bridge the gap. Last year, for example, we spent £204,000,000 on imports but received only £110,000,000 for exports so that the visible trade gap was £94,000,000. Invisible receipts amounted only to £58,000,000 and we, therefore, failed to pay our way by £36,000,000. No household, or business concern, could continue for long to pay out more money than is coming in. What is true of a household or business is true also of a country. We must, therefore, see that more comes in and that less goes out— that is, we must have more production and less expenditure on imports, if we are to maintain national solvency.

The overspending on imports has continued with but little abatement in recent months and no worthwhile net improvement in the trade balance has yet been realised. While the measures taken earlier this year have had some result, the change for the better is disappointing. Taking the first six months of 1956 together, imports were £5.7 million less than last year but this was accompanied by a decline in exports of £4.5 million. The surplus of imports over exports in the period was, therefore, only £1.2 million less than in 1955. This rate of improvement is obviously much too slow seeing that last year the import of goods and services in excess of our earnings abroad resulted in the loss of no less than £36,000,000 of our external capital. I say loss because the external capital was used not for development here but purely for consumption purposes.

Moreover, the fall in imports so far this year has arisen mainly from the running down of stocks of certain staple commodities such as wheat and maize, imports of which were exceptionally high last year because of the bad harvest weather in 1954. Imports of consumer goods and of the materials for the manufacture of consumer goods have shown little reduction and, in view of the failure of exports to revive, are still being maintained at a level higher than we can afford. Imports of commodities subject to the special import levy imposed in March were £3,000,000 in the two months April and May of this year as compared with £3.7 million in the corresponding months of 1955. Apart from imports of motor cars and components which declined by £450,000, the effect of the levy in both months was slight.

The Government have been particularly concerned to note that, so far as total imports are concerned, the falling trend of recent months was reversed in June when imports were actually £450,000 higher than in June of last year. It might have been expected that the impact of the levy would have been fully effective by June. We are still importing, however, at an annual rate of up to £90,000,000 in excess of our exports.

The fall of £4.5 million in exports in the first half of 1956 as compared with the first half of 1955 was mainly in cattle and other agricultural exports, principally pigmeat, dressed beef and butter. As a result of increased domestic costs we find it impossible to sell abroad some of our agricultural products. Cattle exports have shown signs of recovery recently and accounted for most of the increase of £1.7 million in total exports in June as compared with June, 1955. Even on favourable assumptions about cattle exports in the remainder of the year, it would be clearly unwise to expect a sufficient increase in exports as a whole to reduce the trade deficit this year; the most we can hope for at the moment is that total exports will reach last year's level. Our export prospects, even in the long run, are closely related to the level of agricultural production and it is to live stock and other agricultural exports that we must look for any significant expansion over the years ahead.

Another handicap to the restoration of a balance between foreign receipts and payments is the falling trend in the prices obtained for exports as against the rising trend in the prices paid for imports. Even in a country in which merchandise imports and exports were in balance at the outset, this trend would mean that more exports would have to be sold, or less goods bought from abroad, if the balance were to be maintained. In our case, imports are so much in excess of exports that the effect of any worsening of the price relationship is virtually doubled, as is, therefore, the effort necessary to offset it.

That means that even if the volume of imports remained static, every time their cost increased by 1/- in the £, to prevent the balance from disimproving we would have to receive 2/- in the £ more for exports or increase the volume of exports by an equivalent amount. That has not happened and indeed the changed relationship between import and export prices between 1949 and 1955 added, by itself, some £25,000,000 to the trade deficit in the latter year. If we cannot offset, by increased exports, the effect on our balance of payments of an adverse turn in the terms of trade we have no option but to accept the necessary reduction in what we can afford.

The need for an early and substantial reduction in our import excess is emphasised by the possibility of a drop in our earnings this year from invisible items. Emigrants' remittances, for example, may fall below last year's level as a result of recent developments in the motor and other industries in Britain.

These are hard facts, unpalatable facts, cruel facts perhaps, but they are, nevertheless, facts from which there is no escape. The only conclusion to be drawn is that imports and other forms of external spending must be reduced immediately. To secure this result, the Government have decided on the following measures:—

First, an increase to 60 per cent. (full) and 40 per cent. (preferential) in the rates of special import levy on the items which were subject to 37½ per cent. (full) and 25 per cent. (preferential) under the March Order. The specific rates of levy on canned fruit have been increased pro rata and commercial vehicles, except buses, have been made liable to the 15 per cent. levy on motor vehicles. The March rates on motor vehicles, newsprint, newspapers and periodicals are being left unchanged.

Second, a further range of imports has been subjected to levy at the rates of the original levy, namely, 37½ per cent. (full) and 25 per cent. (preferential). Broadly speaking, the goods now being charged are in character those which can less readily be dispensed with than those selected for the first levy and it is, therefore, appropriate that they should bear the lower rates.

These intensifications and extensions of the levy have been effected by an Order under the Emergency Imposition of Duties Act which comes into force at once. Copies of the Order are being tabled and will be made available to Deputies. Of our total imports in 1955, the new list of goods affected represented about £14,000,000, while the March list represented about £22,000,000 making a total of £36,000,000. The effects anticipated from the changes now being made in the levy are a further decrease in imports of the order of £5,000,000 in a full year and an additional revenue yield, again in a full year, of some £3,000,000. I want to stress that the proceeds of these levies will, as before, be paid into the Capital Fund and, therefore, will not be used for ordinary budgetary purposes. These estimates should be reduced by one-third, i.e., to, say, £3,500,000 and £2,000,000, respectively, to allow for the fact that almost one-third of the financial year has passed.

The third measure is a reduction of 25 per cent., which will come into force at once, in the basic allowance for holiday travel abroad. It is essential not only that expenditure on imports of goods should be reduced but also that all avoidable spending abroad should be curtailed. This is the maximum reduction we can enforce under our O.E.E.C. commitments.

I mentioned that the 5 per cent. rate of levy on newsprint has been left unchanged. In 1953 imports were 450,000 cwt. valued at £1.2 million; in 1955 630,000 cwt. valued at £1.8 million. In the first five months of 1956 we spent on these imports £50,000 more than in the same period last year. This is a sphere in which we can have physical control without danger of the emergence of black-marketing activities and I am, therefore, in touch with the representative organisations of the printing and publishing interests with a view to limiting our imports to what we spent on newsprint in 1953.

Furthermore, as part of the general campaign to reduce imports, I have already asked Government Departments and State-sponsored bodies to have all purchasing programmes reviewed with the object of reducing or deferring, as far as practicable, any purchases involving imports.

I would appeal to all firms and undertakings who purchase stocks of goods from abroad to review their plans similarly and effect as big a reduction as possible.

Apart, however, from direct expenditure on imports, all public expenditure must now be reviewed. In my Budget speech I announced that the net borrowing requirement on foot of the capital programmes of the State, local authorities, the E.S.B. and C.I.E. would amount to about £37,000,000 as compared with £41,000,000 last year. I defined most carefully the conditions and assumptions on which this forecast was based. I said:—

"Provided personal savings recover to the 1954 level we can carry through a programme of national development of this magnitude without any undue strain on our resources and with great benefit to our economic and social welfare."

This proviso was and remains of fundamental importance because a failure of savings to revive could not but necessitate the suspension and curtailment of development plans. Even in March last I said I was basing my estimate of the possible level of public capital outlay this year on the assumption that the public would increase their savings to a significant degree, and then I went on:—"For if this assumption were not made very drastic reductions would have to be made in public outlay". I regret that, as I said in this House last week, there is as yet no evidence of a sufficiently marked increase in savings. On the contrary, there is evidence that the consumption is continuing at a higher rate than we can afford and that even past savings—such as those represented by bank deposits—are being drawn upon to support this excessive expenditure on consumer goods. The Government, have, therefore, no alternative but to review the programme of public expenditure settled prior to the Budget and, in the circumstances which still prevail, to reassess how far it can be financed out of available resources.

In the budgetary programme the overall capital requirements of the State and other public bodies in 1956-57 were estimated at a gross figure of £43,500,000. Towards this gross figure, there was expected to be available from capital repayments accruing to the Exchequer and the Local Loans Fund, from the proceeds of the special import levy imposed in March and from the Road Fund the sum of £6,500,000. This meant, as I have said earlier, a net borrowing requirement for the present financial year of £37,000,000.

Towards that amount there is a reasonable expectation that small savings and the investment income of the Post Office Savings Bank and other funds will contribute £7,000,000. Last year these sources yielded £5,750,000. The new issue of savings certificates has given an impetus to small savings in this form and, even though the improvement has been partly at the expense of the Post Office Savings Bank, a net total of £7,000,000 from small savings and investment income seems attainable.

The problem remains of raising £30,000,000. The position in regard to savings and the state of the gilt-edge market make it unfortunately only too clear that the borrowing of £30,000,000 in a non-inflationary way is not possible this year. Last year's experience confirms that there is no hope of success for a series of public issues for C.I.E., the E.S.B., Dublin and Cork Corporations and the State itself. I have come to the conclusion that, at most, only one major public issue, and that a direct Government loan, should be made in the present financial year. It is too early to settle the precise timing but I think it well at his stage to repeat that it will be the only major loan launched for public capital purposes in this financial year. There will, in other words, be no public issue this year for the E.S.B., C.I.E. or Dublin Corporation. The State will, so far as it is able to do so, come to the aid of these bodies, to supplement such funds as they can raise independently so as to provide the capital they necessarily require. The extent, however, to which it can assist must, of course, depend on the extent of the capital resources which the public make available to the State.

It is not usual to indicate in advance the amount or terms of national loans. I can, however, promise that the terms will be attractive to small and large investors alike. It is the Government's desire to raise as much money as possible by voluntary subscriptions from the public; the terms of issue will, therefore, be such as will offer an incentive to public subscriptions and in this way encourage the revival of savings which is so necessary for economic stability and progress.

The usual amount of a national loan is £20,000,000. A loan of this amount should be successful, seeing that it will be the only major public loan in the present financial year, that, as I have said, its terms will be attractive, and that the special import levies will operate to discourage excessive consumption. Even in the difficult conditions of last year, public subscriptions to the various loans floated by the State and public bodies exceeded this amount. It is not, therefore, I hope, unduly optimistic to expect that £20,000,000 will be subscribed. The patriotic good sense of our people, at whose desire and for whose benefit capital development is being undertaken, can, I believe, be relied upon to make the issue a success.

The normal arrangements for the flotation of a national loan mean that Government funds and the commercial banks, as underwriters, have to be prepared to supply any deficiency in public subscriptions. For Government funds—and, indeed, also for the banks in present circumstances—the fulfilment of underwriting commitments would involve further sales of sterling securities. Neither the Minister for Finance nor the banks could regard this as a welcome prospect. It would reduce the already limited reserves held by departmental funds, leaving them less able to support the State capital programme in the future, but what is even more serious, it might necessitate in the case of the banks a contraction of credit facilities in other directions in order to safeguard their liquidity. It is not, I think, appreciated that, as a direct consequence of the balance of payments deficit, the commercial banks have lost nearly £50,000,000, or two-fifths, of their net external assets since January, 1955. It is essential, therefore, that any further sales of sterling securities, whether by departmental funds or by the banking system, in order to finance public capital outlay, should be avoided or at least kept to a minimum.

May I say, in passing, that a good deal of misconception seems to exist about the country's holdings of external assets? Many people, in talking about them, do not take care to emphasise that most of these holdings belong to private individuals and institutions and are no more available for public capital purposes or for covering balance of payments deficits than houses or other private property.

Raising by loan £20,000,000 from the public would still leave us £10,000,000 short of covering the net borrowing requirement of the State and other public bodies this year. In this latter sector, some easement may be secured through external borrowing but external borrowing is expensive and entails special risks. For these and other reasons it can be undertaken only to a strictly limited degree. There is no escaping the conclusion that the net borrowing requirement for public capital purposes as fixed at Budget time must now be reduced.

The necessary extent of that reduction is being lessened by the imposition of the new and increased levies on imports. The proceeds will be used exclusively for capital purposes and it is expected that the receipt in the present financial year will be roughly £2,000,000. Allowing for some limited external borrowing and for the finance provided directly for Dublin Corporation and other bodies by Irish insurance companies, there still remains a gap of £5,000,000 which must be closed if, as a Government, we are to discharge our responsibility to maintain a sound and healthy economy.

This gap could be closed either by an immediate increase in taxation or by a reduction in expenditure or by a combination of both. To raise the amount necessary would require very heavy impositions which, coming so soon after the increases in taxation provided in the Budget, could be defended only if there was no alternative. The Government recognise that their primary obligation is to close the gap by economies in public expenditure.

It is obvious that exhortations to private individuals to forgo expenditure, however desirable, in order to save must fail to carry conviction unless supported by the clearest evidence that public expenditure is being restricted to essentials and that the Government are not using their taxing powers to maintain services which are to any degree non-essential or postponable to less difficult times. Savings cannot, of course, be made without depriving some individuals or institutions of money or services which they had hoped to get or deferring the receipt by particular individuals or classes of new services of a beneficial or desirable nature. Equally, however, these moneys and these services cannot be made available at the present time except by imposing heavier charges on the community at large and this the Government will not do. They have decided, therefore, that at least £5,000,000 will be saved in Government expenditure this year. Plans to give effect to this decision are being framed and the particular reductions will be decided upon and made effective by the Government without delay.

Certain proposals to effect this saving are, in fact, already under consideration and I should stress they cover the whole field of current as well as capital expenditure by the Government and those bodies to which I have already referred. Savings in current expenditure which must be in addition to the £3,000,000 for which I made allowance in the Budget will ease the problem of financing the capital programme because the revenue already provided for such expenditure will then be freed to meet capital needs.

By this cut in public expenditure, by the imposition of the new and increased duties on imports, by very limited external borrowing, and by a national loan it is hoped to carry forward this year, to the utmost limit of our available resources, a public capital programme of a predominantly productive character which will not merely yield employment now but will secure permanent future increases in our living standards.

I have used the phrase "available resources" quite deliberately because in these times the deliberate creation of new credit could have nothing but harmful effects. Either it would drive up internal prices or, and more probably, it would accentuate even further our balance of payments problem by creating a new demand for imports. No Government concerned to preserve a sound economy and secure lasting improvements in the community's living standards could deliberately pump new money into circulation to add to the inflationary forces which are already too active in the economy. On the contrary, the Government must make sure that such external capital resources as are still available will be used solely for the permanent strengthening of our economy and not to satisfy an excess demand for consumer imports generated by the creation of new money.

I have emphasised this point because the belief is entertained in some quarters that the solution of our present difficulties is to be found in financial expedients either by way of credit creation or in other forms, including even a change in the value of our currency. These are no real solutions. I have already explained what would be the effect on the economy of credit creation and it is clear that devaluation of the currency would inevitably lead to a progressive deterioration in our conditions relative to other countries. Leaving aside the effect on confidence in our currency, such a step would have a serious reaction on the cost of living since imports enter so largely into domestic consumption. Wheat, tea and other basic needs would be affected equally with the least essential imports. I want to state clearly and categorically that the Government not merely have no intention of devaluing our currency but are determined to take whatever measures are required, however unpleasant, to safeguard and maintain the value of the Irish pound.

The real need at the present time is for a substantial increase in the volume and efficiency of our national production. This cannot await the fulfilment of any long-term plan nor can it be realised by any magic formula; it must be achieved in the immediate future through the effort and enterprise of individuals if we are to surmount our difficulties. They can be surmounted if we all increase our output by one-tenth. What is needed, therefore, is that everyone should concentrate on achieving this immediate target. A rise of 10 per cent. in national production is well within our capacity in view of the advances recently made in other European countries. I am, of course, referring to an increase in real output, not to an increase in the monetary value of production resulting from higher prices. The benefit obtained from mere price increases by any particular section of producers can only be at the expense of other sections of the community or of the competitiveness of our exports.

While we are attempting to get over our present difficulties stability of money incomes is essential. The measures which I have announced must reduce the purchasing power of incomes by raising the cost of certain imports. They will be rendered ineffective if there is any effort to compensate for this reduction in purchasing power by pressing for higher monetary incomes. In the present serious situation we must all accept a temporary lowering of our standards as a condition of building them on a surer foundation. Another round of increases in money incomes on top of those gained last year would be certain to price many of our products completely out of foreign markets. It would be certain also to aggravate our balance of payments difficulties and to necessitate a contraction in our plans for national development.

I remarked earlier that there has been no sufficiently marked improvement in the savings trend in recent months. While there has been some increase in small savings, deposits with the commercial banks have continued to fall. Next to our lack of resilience in production, this failure of savings to revive is our greatest anxiety. The development of our economy by productive capital works cannot proceed without a large and steady volume of current savings. The savings of our own people are the only means that will enable us fully to develop our national resources and to provide with that development more opportunities at home for employment and a sure foundation for a reasonable standard of living. The Government are, therefore, consulting with the Savings Committee to see how the promotion of a national savings drive can be aided and accelerated in view of the urgent and vital importance of increased savings.

I have outlined the measures intended to remedy a serious situation. These measures will be retained only as long as the situation requires. I hope that a balance will soon be restored in our external payments and the conditions assured for steady progress in economic development. In the last resort, however, a return to balanced conditions depends on the decisions and efforts of individuals. The Government for their part will discharge their responsibility to safeguard the national economy. The situation, however, is one which may vary from week to week and from month to month. I want to make is crystal clear that should any further action be required even while the Dáil is in recess the Government will not hesitate to take it. What is at stake is our economic independence. If we should lose this, the political independence we have achieved would be a mere facade. The Government are determined that both will be preserved at all costs.

Mr. de Valera

We have all listened very carefully to the statement of the Minister for Finance. This is the third Budget statement he has made within this financial year, and the proposals contained in that statement are Budget proposals. That being the case, I do not think we were unreasonable when we suggested to the Government that, now as on previous occasions, budgetary procedure should be adhered to and we, in the Opposition, should have an opportunity of considering these proposals in detail, as well as considering their general import. Apparently, that does not suit the Government, and we have now to proceed at once to discuss this very serious statement and these very serious proposals of the Minister for Finance. I think it is not in the best interests of the country, nor is it the best way of doing business, that that should be so.

I think Deputy de Valera is under a misapprehension. I indicated that, if the Opposition so desired after the speech of Deputy de Valera, I was quite prepared to facilitate the Opposition in every way by having the discussion on these proposals to-morrow. I indicated that I would, if the Opposition so wished——

Mr. de Valera

Does the right hand of the Government know what the left hand is doing? Is this yet another example of that? When I was at lunch I was informed that the Parliamentary Secretary had approached our Chief Whip and informed him that our proposals would not be accepted; that the Taoiseach had prepared a statement on another issue and that our proposals, which were proposals that this financial statement should be discussed in connection with the Taoiseach's statement, were not accepted.

On a point of order.

Mr. de Valera

On a previous occasion the Minister for Finance interrupted and tried to misrepresent what the actual situation was.

He did not, but the Deputy did.

Mr. de Valera

I state now that we made a proposal that, as this was in the nature of a budgetary matter, budgetary procedure should be adhered to——

And I agreed to that.

Mr. de Valera

——and that, on the Taoiseach's Estimate, this should be taken——

And I agreed to that.

Mr. de Valera

——and we were informed by the Parliamentary Secretary, via the usual mode of procedure between the Whips, that that was not acceptable to the Taoiseach.

That is not true.

Mr. de Valera

I am telling the House the information given me. The position therefore is that, whilst we wished to have time to consider this and whilst we also thought that this was a third Budget proper to be considered in relation to Government policy as a whole, here it is being put in as if it were a little "tilly", a little trifle, added on to the Estimate for the Department of Finance. It is nothing of the kind. It is not something to be thrown in and discussed with the other parts of the Estimate of the Department of Finance. It deals with a fundamental national question——

And one too serious for quibbling.

Mr. de Valera

——which ought to be dealt with under the Taoiseach's Estimate; and there ought to be reasonable time given to the Opposition to consider what is the best way in the national interest of dealing with the matter.

Might I just intervene? The difference in the question of procedure is a very simple one. The Opposition wished to discuss this on the Taoiseach's Estimate. I accepted the Opposition's view that they might wish to wait until to-morrow to discuss it. I accepted the Opposition's view that they might wish to have an opportunity of studying the proposals after there had been one Opposition speech, following on mine. But I indicated that I thought, and the Parliamentary Secretary to the Taoiseach indicated, too, that the better way would be to introduce a Finance (Confirmation of Orders) Bill in the morning and that I would do so for the purpose of enabling the Opposition to deal with the matter now, leaving the general discussion of it over until then.

I made a suggestion at about ten minutes past one to-day to the Parliamentary Secretary to the Taoiseach that we should take the Finance Estimates, with practically no debate; that we would then listen to the statement of the Minister for Finance, take the Estimate for C.I.E. —that to conclude at about 8.30 tonight—give the Taoiseach time to introduce his Estimate and then, we suggested, the Dáil might adjourn so that we could have a full debate on the Taoiseach's Estimate on general Government policy, with particular reference to the statement of the Minister for Finance. The Parliamentary Secretary rang me up and, unless I am a fool altogether or did not hear him correctly, told me that the Government would not be satisfied with that. He told me that the Taoiseach intended to refer—I suppose it is no harm to say it now—to emigration. I said I did not care what the Taoiseach referred to; our attitude would be that on the Taoiseach's Estimate, as in other years, we intended to deal with Government policy, with special reference to whatever the Minister for Finance would say to-day. If that is agreed to now, after some misunderstanding, that is another matter.

So far as I personally am concerned, the Opposition may raise anything they like, within the Rules of Order, on general Government policy on my Estimate. I have not the slightest objection to their doing that.

That is news to me because really, in all good faith, we have been trying to meet the Government in this matter. I was told definitely our suggestion was not acceptable. I am sure the Parliamentary Secretary will bear me out in that. He rang me at my house and said that that was not acceptable to the Government. I referred him then to our office and, when I came back at about a quarter to three, I asked in the office if there had been any further word from the Taoiseach's office and I was told that there was not. Now, we have this debate, which could have been avoided.

Might I suggest that the Chief Government Whip and the Opposition Whip should meet for a few minutes to iron out what is obviously a misunderstanding?

I was about to suggest that.

We, on this side of the House, made an arrangement with the Opposition to facilitate the Opposition and give them time to study the measures. An alternative was put up, an alternative which we found was not quite acceptable inasmuch as, if we agreed that the Taoiseach would get in at 8.30 this evening with his Estimate and then the House might adjourn, it was possible that the Taoiseach's speech might terminate in an hour and there would be a loss of an hour and a half parliamentary time to-night. What was at issue was more or less the mechanics of it. The last message I had from the Opposition was that we would resume discussion on this matter following the Opposition Whip's luncheon. I want to make it quite clear that, as far as we are concerned, it is merely a question of the method to be adopted in meeting the wishes of the Opposition and providing them with time to consider this matter.

We are quite entitled to time.

The general mechanics would be settled more easily between the Whips.

What I have stated is exactly what happened.

Can the procedure be discussed now?

Certainly.

We can reach no decision here.

Mr. de Valera

I am interested, and so are my colleagues, in one thing only and that is that, when we are called upon to speak on a matter of this seriousness, and every Budget is a matter of seriousness, we should have an opportunity of considering the details as well as the general principles.

That is agreed to.

Mr. de Valera

Very well. If that is agreed, there can be no trouble.

It was always agreed to.

Mr. de Valera

I was not personally involved and I am giving the facts only as I was told them. The position then is that we have this third Budget. Further taxes are about to be imposed and we got the rather astonishing proposal, in fact almost the threat, that if there was need for a further change, and further proposals of this character, they would be made while the Dáil was in Recess. I say that the Government, in duty, is bound to bring back the Dáil, Recess or no Recess, to deal with matters of such importance. It is not right for the Government to deal with this important matter while the Dáil is in Recess. We have a democratic system here, a representative democracy, and the Government is not all-powerful. The Government is subject, from day to day, to control by the Dáil and we ought to insist that that position will be maintained. I would say that it was a failure to act with good faith towards the Dáil, if the Government intended to deal with matters of this importance during the Recess.

Coming back to the proposals, the statement was a very serious statement and the thought that passed through my mind was: how much better off this country would be if the gentlemen who make statements like it had made them when the danger was in the offing. This is something which has continued in one form or another, or has threatened, since 1947. We are asked to criticise these proposals. Criticism is not likely to come very much from this side of the House for the simple reason that we have always been alive to the danger of inflation. We have always been alive to the danger of the frittering away of our external assets. We have not regarded them as inexhaustible sources of supply. We never thought it was wrong to tell the people, when they were consuming all that was being produced and even more, that we were living beyond our means.

If the people who are making these statements to-day had any decency, they would put white sheets on themselves and go around the country to the places where they deceived the people, where they demoralised the people by preaching doctrines which were without real foundation. The criticisms ought to come, if they are to come, from these very wise young economists, these people of vision, who were to be available for the Government to try to make two and two make five. We have not got them to-day but the Government itself is not even united to-day. We have some members of the Government going round, while the Taoiseach and the Minister for Finance are trying to warn the people and trying to get them to save and trying to get them to make up their minds—and they can be got to make up their minds, if they are properly led—to do the things which are necessary, if all that has been done in the past is not to be frittered away and lost, saying: "Do not mind these people; there is nothing to be anxious about. There is no really fundamentally serious situation at all. There is just a little problem; there is no crisis." We have three Ministers in the Government who on different occasions have either suggested, or told the people directly, when there was question of getting money, that this money was immediately available and no trouble about it. Why does not the Taoiseach, and the Minister for Finance, get these people by the ears and tell them that they are not to go on in that way if they are going to be members of the Government, which is a serious task, if we are to get the country to face reality? The people can be got to face reality and they will face it, if, on the one hand, there are not left the dregs of the demoralisation from which they cannot recover, and on the other, an attempt made by a Parliamentary Opposition to try to make political capital out of a fundamentally dangerous national situation.

We are not attempting to do that; we would be ashamed to do that; but we believe that the present Government is not a fit Government to handle the situation. We believe nobody will have confidence in a driver whose left hand is clutching the brake and whose right foot is stamping on the accelerator. That is the position obtaining as we see it, when we look at some of the measures being taken by the Government. There is no unity of purpose in the Government; there is a pulling in different directions. This is made evident even in this crisis by the conduct of some of the Ministers. I thought one thing had been learned by this Government, that is, that it is better to keep silent than to have different members going round talking with different voices, as took place under the first Coalition.

Criticisms of these proposals, and of these measures, are not going to come from our side of the House. We are waiting now to hear the people who used to talk about the unemployment that would be caused, and unemployment, as the Minister has admitted, will be caused and there is not the slightest doubt about it. It will be caused by the fact that you have restriction of credit and restriction of imports which are necessary for development.

You will have unemployment because less houses will be built and you will have in a number of respects things which were desirable being curtailed by the action proposed to be taken. Where are these gentlemen now who used to talk to us about the fact that, by diminishing purchasing power, we were lowering the standard of living of the people, who used to tell us of the unemployment, and besides that, the emigration? I was told that the Taoiseach would make his principal topic emigration. Does he not know, as everybody knows, that restrictions of this sort are bound to result, as they have already resulted in the building industry, in unemployment and consequently in increased emigration?

We will not have these people coming along now to make these statements. They went down the country where they could not be answered—they will not come in here—where they want to keep votes, and to get votes as they did before. I know that some of them have not got as much brass as the people who can turn round and change their attitude without any trouble. Perhaps that can be said for them anyhow, that they are trying to continue in the line in which they were taught to believe.

The dangers of a situation of this sort were to be seen back in 1947. We had then, by Supplementary Budget, to try to face that situation. We tried to face it by lowering the cost of living and so on by introducing subsidies. We knew, of course, that subsidies, in a sense, would work in a contrary direction and produce inflation, but the most important thing at the time was to try to prevent an increase in the cost of living which would lead to demands for increased wages. We introduced the subsidies to try to make things easy for the working section of our community.

What was the way in which we were met? We were told, when we put a tax on tobacco and so on, that we were in fact taxing essentials and that bread, butter, tea, sugar, and so on, were no less essential than the poor man's pint and the poor man's pipe of tobacco. The people who were then talking about subsidies and the necessity for them when we introduced them to meet that particular situation in 1947—a situation which did not finally continue because of changes in world circumstances—are beginning again now. At that time there was a likelihood that, when all the productive powers of the nations would be turned from war activities into peaceful directions, you would have a situation very different and everybody was getting new machinery and new goods to be out first in the race. That likelihood of temporary inflation did not develop because of various world happenings. A semi-war situation continued. In 1947 there was in the balance of payments, roughly, a £30,000,000 deficit. In the next year there was a £20,000,000 deficit. Then it was £10,000,000; then it went up to £30,000,000 and then over £60,000,000. Therefore, in a few years, we had incurred altogether a deficit of some £150,000,000 in our balance of payments which had to be met—and had to be met by a reduction of our net external assets. We had a very serious situation to face in 1952 and we faced it successfully. It is true that, to those who considered the Party advantage which they could derive from that situation, we gave a wonderful opportunity to go to the country and tell the people of our "hair shirt policy". Now we have austerity. I pointed out then that an austerity campaign is generally recognisable by a few features. One is the imposition of taxation to an extent greater than is necessary to meet current expenditure so as to mop up purchasing power and to use the money for capital purposes. That is what is being done now. We did not have to do that. We were able to get over the situation without doing that. Here we have austerity with that particular feature well marked.

We also pointed out that a feature of austerity would be a cutting-down of our capital programme. It used to be very fashionable to talk of desirable projects being "sacrificed to the sacred cow of sterling." That used to be a favourite phrase at one time. We never did, in fact, sacrifice any capital project that we thought was desirable in the national interest: we did not have to sacrifice it to the cow of sterling. We were able to get the money in order to do it. This is the first time since we set up the Dáil in 1919 that we have been met face to face with difficulties in raising the capital, in finding the capital necessary for projects that we thought would be desirable in the national interest. It is facing you now because you cannot get capital. These external resources are found to be very far from inexhaustible. We have a credit squeeze now which in its character is bound to have the consequences of preventing development and preventing production and preventing even some of the exports that might balance imports.

The Government has to face the situation as we did: it has to face the situation that exists. However much some of us detest this type of Government and the campaign by which they got into office and the demoralisation which the campaign has effected amongst our people, nevertheless, as the national interest is at stake, there is no other thing for us to do but to try to help the people to realise that the hardships have to be faced and that, as a nation, we have to tighten our belts and face up to the situation as we would face up to any national emergency. I have great belief in our people. They have faced emergencies before. I am against external loans. I would rather go short of the things that would be got by an external loan than have an external loan. The policy of self-reliance is the one policy that will enable our nation to continue to exist. Back in 1917, we had to face the people who were telling us what we would lose by not being incorporated in the British Empire. I remember well that we had to tell people down in Kilkenny: "We have a choice. It may be that we have the choice of the humble cottage instead of as lackeys partaking of the sops in the big man's house." We are prepared to face what is necessary in order to have our independence in the cottage, if the cottage is necessary for that. I do not believe it is necessary.

I believe that, with our people definitely warned of the dangers and told what is to be done, our people will do it. I believe we shall do it by relying on ourselves and not by putting ourselves in pawn to any foreign people or any foreign power. Let us face up to the situation and be worthy of the past that has been transmitted to us. Let us not go begging in order to face this situation. It is well within our powers. Our means, fortunately, are not completely exhausted. There are still enough external resources left—if we do not put an undue demand upon them—in order to meet an occasional demand which might be necessary. Let us conserve these and see that they are conserved. If we do that, we have no need whatever to be frightened about the situation. Our people have only to be spoken to frankly by people they believe in—not by people who told them one thing yesterday and another thing the day before. That is why I think it more than ever a responsibility on us, here in opposition, to tell the people of the situation and to give them the lead. We feel it is necessary for people in whom the people believe to give this lead and to explain that this is a situation which, as a nation, we have to face up to and ask them to face up to it—and face up to it they will.

I suggest that the imposition of this levy under the Imposition of Duties Act is a rather insecure way of dealing with the matter. Furthermore, it leaves the duties uncertain from the point of view of people outside.

I will introduce the Bill and time could be provided for it to-morrow. That was my original intention.

How is it proposed to deal with the business now?

It is proposed to continue the debate when the Minister introduces the Bill.

Perhaps we could get ahead with the ordinary formal Finance Estimates on which generally there is not very prolonged discussion and then come to the C.I.E. Estimate and then see what will happen after that?

I have the Bill here and if the House wishes I will introduce it now. It is a single clause confirmation Bill. It may be circulated when it is introduced and then the Opposition can see it.

Progress reported; Committee to sit again.
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