Two years ago, when introducing my first Budget, I emphasised that we could not allow any of the capital needed for productive purposes to be drained away in meeting deficits on current account. I said that the immediate and most essential task was to stop this drain: that done, we could direct our attention and our resources to the fundamental problem of economic development. The accounts for the year just ended show that this first objective has now been achieved. The Current Budget for 1958-59 was balanced—indeed, showed a small surplus—in contrast with the deficits of roughly £6 million incurred in both 1956-57 and 1957-58. We can now apply ourselves with greater confidence to the tasks that lie ahead.
The details of last year's outturn are available to Deputies. Despite the large supplementary sums needed to support wheat and butter prices, Supply Services expenditure exceeded the budgetary figure by only £96,000. In fact, current expenditure on the Supply Services was £1.4 million lower last year than in 1957-58. Though taxation was not increased, revenue exceeded our expectations. Lower short-term interest rates led to a small saving in the Central Fund Services. The net effect of all this was to justify —and more than justify—the allowance of £1½ million for errors of estimation.
II. CAPITAL ACCOUNT, 1958-59.
On the capital side it will be seen from the tables that expenditure last year fell short of expectation, mainly because the capital earmarked for local authorities was not fully taken up. Total public capital expenditure amounted to £37.8 million compared with the budget forecast of £40.3 million. Capital outlay by local authorities fell £4 million below the estimate but variations under other heads reduced the shortfall to a net £2.5 million.
There were various reasons for the drop in expenditure by local authorities last year. In many areas housing needs appear now to be almost fully met. Building work on hands was held up by the wet weather which prevailed during the summer and autumn. While the demand for Small Dwellings loans exceeded expectations in the Dublin City area there was a fall in the demand in other parts of the country.
The sources from which public investment was financed in 1958-59 are shown in Tables II and III. Table II has been expanded to give more information. I hope that Deputies will be facilitated by this and other improvements in the Tables circulated.
Total public investment in 1958-59 came to £37.8 million. The capital available to public bodies from sources other than the Exchequer was £13 million which left a balance of almost £25 million to be financed by the Exchequer. There was gratifying public support for the capital programme through the National Loan, Exchequer Bills and small savings, including Prize Bonds.
It was only to be expected that the receipts from Prize Bonds would not continue at the high level of the first year after their introduction. Nevertheless, the intake from the last three half-yearly issues has been most satisfactory. The total net receipts last year were £2¼ million. The success of the Bonds naturally affected to some extent the support given to the traditional forms of small savings but, in spite of this, the net receipts from Savings Certificates and the Savings Banks, at £2.7 million, showed an increase of £2 million over 1957-58. Taken together Prize Bonds, Savings Certificates and the Saving Banks brought in £5 million of new savings in 1958-59.
The public issues of Exchequer Bills, which were initiated in June, 1957, have proved so successful that the amount of the quarterly issues has been raised progressively from the original £2 million to £6 million. The further step which is now being taken of converting the issues from a quarterly to a monthly basis should prove an added attraction to investors. The discount rates at which Bills are being taken up, in common with other short-term interest rates, fell considerably during the past year. The close correspondence, to which I referred last year, between the average discount rates on our Bills and on British Treasury Bills has continued.
As will be seen from Table X the increase in 1958-59 in the outstanding public debt was £15 million. The net annual increase in debt service charges associated with the growth in the public debt in a major obstacle to the reduction of taxation. This problem has been underlined in the introductory part of the White Paper on Economic Expansion, where the Government have undertaken to strive to reduce the effective burden of taxation by, amongst other things, moderating the growth in net debt service charges. This has to be achieved, in our circumstances of inadequate total investment, not by reducing public investment but by devoting a much higher proportion of it to productive purposes.
In this context, too, the balanced budget of 1958-59 is a cause of satisfaction as it means that the sum of £9 million of sinking fund charged against revenue was properly and effectively applied to the reduction of the public debt. This is a point to be remembered against the complaint that no effort is made to redeem deadweight debt.
III. ECONOMIC POSITION.
During the debate on last year's budget it was suggested that it would assist Deputies if the economic statistics which were included in 1957 and 1958 in the Tables in connection with the Financial Statement were circulated separately in advance of the budget. As this was done in the paper issued a few days ago, I shall refer now only to the main trends disclosed by these statistics and to the economic prospects, as I see them, for the year ahead.
The drop in agricultural production last year, which caused the net fall in national output, was due entirely to the bad harvest. With reasonable harvesting conditions this year, agricultural production should more than regain the lost ground, especially in view of the gratifying increase in breeding stock and young cattle recorded at the livestock census in January last.
Production and employment in industry rose in 1958. Compared with 1957, output in manufacturing industries increased by 4 per cent while employment was 2,000 higher on average. Though the unemployment figures for recent weeks are running about 5,000 less than a year ago, they are still much too high and it is the aim of Government policy generally to increase employment as rapidly as possible. We are not, of course, the only country suffering from a serious unemployment problem. Indeed, in many countries the situation worsened during the past year in contrast to the improvement achieved here simultaneously with a fall in emigration.
The trade figures are a good indication of the improvement in our economic affairs. There were two years in the last decade—1951 and 1955— in which our imports exceeded the £200 million mark. In each of these we incurred large, insupportable deter ficits in our balance of payments. In 1951 the deficit was £61 million and in 1955 £35 million. We are now in a position to afford imports of £200 million a year and the reason is that exports, which were only £82 million in 1951 and £111 million in 1955, reached £131 million last year.
There has been some disimprovement in our trading position in recent months. In January, imports were exceptionally high and exports were well below average. The February trade returns were somewhat better, although the deficit was higher than in the corresponding month of 1958. Imports have been enlarged by exceptionally heavy purchase of foreign wheat to make good the deficiency in home supplies. They have also included some non-recurring items of a capital nature, such as equipment for the oil refinery at Whitegate. On the other side of the account, exports of cattle, which were rather low in January and February, are likely to expand in the coming months in view of the increased numbers available and the favourable market prospects. This expansion should offset, so far as consumer goods are concerned, the effect of higher imports on the balance of payments.
The economy has gained ground generally. The forces of inflation seem to have been pushed back. Prices have been reasonably steady for some time and, though savings have declined, the balance of external payments has not been seriously impaired. Productive home assets have been built up. External reserves have benefited from a capital inflow which indicates external confidence in our economy. Current revenue and expenditure have been brought into balance. The banks and other lending institutions have made special arrangements to meet the growing demand for agricultural and industrial credit for productive purposes.
All this should stimulate and sustain us in our efforts to achieve a big increase in national production over the next few years. These efforts may involve some strain on the balance of external payments in the interval between capital investment and the resulting increase in production but the economy seems now to be sufficiently healthy for such a risk to be taken. If we had not the courage to run a limited, temporary risk for sound long-term ends—and the resolution to correct any really adverse trend in good time—we could not hope to make the maximum progress in increasing production and reducing unemployment and emigration in the years immediately ahead. At the same time, we must see that we do not overspend for current purposes or waste in any other way the capital we must use productively if we wish to raise our living standards permanently.
Having assessed as carefully as possible the economic forces likely to operate on the balance of payments in 1959, I am satisfied that it is appropriate to frame this year's budget on the basis of an increase in State capital expenditure on the one hand and, if at all possible, the provision of some incentives to initiative and effort on the other. I believe that increased investment, important though it is, does not by itself hold the key to the solution of our problems. More important still is the human factor—the will of our people to work for their own and the country's betterment and their efficiency as organisers, producers and salesmen. The human factor, indeed, is the main driving force in the process of economic and social advance.
IV. CURRENT ACCOUNT, 1959-60.
From the White Paper of Receipts and Expenditure issued last Friday it appears that, at existing tax rates, revenue little more than suffices to meet current expenditure in the year ahead. Before considering the prospect further, I am obliged by promises made, not only to our own citizens but to foreign Governments, to review one rather important item of revenue, the Special Import Levies.
Special Import Levies.
Last year I brought the revenue from the remaining levies into the Exchequer as a current item and, in fact, their yield of £1.8 million helped to balance the budget. While they are important as a source of finance, I am obliged by the circumstances in which they were introduced to consider the levies primarily as a check on imports of less essential goods. The two aspects—revenue and import control— cannot, however, be divorced. The support which the levies bring to the balance of payments is not to be measured solely by their direct effect on imports; it is enhanced by their influence on individual attitudes towards spending and saving. Their direct effect itself is not inconsiderable at a time when imports are showing a tendency to rise and the balance of payments is probably no longer in surplus. Neither from the balance of payments nor from the financial viewpoint, therefore, can we yet afford to abolish the levies completely.
Moreover, I am convinced that the objective of economic expansion is better served by giving any tax reliefs we can afford this year mainly to ease direct taxation. This accords with the principle, enunciated both by this Government and the Opposition, that whatever taxation is necessary should, in the circumstances of this country, fall more heavily on expenditure than on income.
At the same time, I would like to show that the periodic review of the levies is not an empty ritual and that, so far as our general position permits, the policy of relaxation will be pursued.
Following a comprehensive review, the Government have made an Order under the Imposition of Duties Act which, as from tomorrow, abolishes a number of levies and reduces most others, leaving the full levy on only a short list of less-essential goods from which the bulk of the revenue is derived. Thirty-five items are completely freed and, where reductions are made, the rate of reduction varies from one-third to one-fifth. In a few cases the levy has been replaced by a protective duty. The details are too lengthy to specify now; copies of the Order will be circulated as soon as I conclude. The net loss of revenue in 1959-60 is estimated at £220,000. I can promise no further review until I come to frame next year's budget.
Adjustment for overestimation, etc.
The effect of this adjustment is to leave a revenue shortage of £131,000 on the White Paper figures. I am, however, encouraged both by last year's experience and by the general economic trend to anticipate a more favourable outcome than is foreshadowed in the White Paper. Without any real risk, I can obviously repeat last year's allowance of £1½ million for errors of estimation. I shall come later to the consideration whether I might not justifiably go further this year in order to give a fillip to economic expansion.
An allowance of £1½ million for overestimation, etc., would leave me with £1,369,000 in hands. In deciding how this limited amount should be applied, I propose first to meet the most pressing of our social obligations before considering other propositions, however desirable they may be from an economic standpoint.
Pension etc. Increases.
I have received many representations to ease the lot of old age pensioners and I am glad to be able this year to show my sympathy for them in a practical way. Most old age pensioners are unable to fend for themselves or to increase any small private means they may possess apart from their pensions. I have decided to increase the maximum rate of pension from 25/- to 27/6d. a week. The increase—which applies also to blind pensioners—will be effective from the 1st August next.
There will be a similar increase of 2/6d. a week in the maximum rate of non-contributory pension for a widow and in the Unemployment Assistance rate for a married man with a wife or other adult dependant.
The cost of these additional benefits is estimated at £883,000 in the current financial year.
I would also like to do something this year for the older group of public service pensioners. These comprise pensioners from the Army, the Garda Síochána, retired National Teachers and Civil Servants as well as pensioners from the service of local authorities. Those pensioners who retired many years ago have suffered a substantial reduction in the purchasing power of their pensions because of the fall in the value of money. This has caused anxiety and distress to the rather large number whose pensions are relatively small. I think that all will agree that pensioners who gave long and loyal service to the State in their different spheres deserve special consideration. Within the limits of the sum at my disposal, the best that I can do for these various State Services pensioners is to increase by 6 per cent the pensions of those who retired before 1st November, 1948, and to increase by 4 per cent the pensions of those who retired between 1st November, 1948, and 31st October, 1952. The increase for the second category will be subject to the condition that no pension will be increased beyond the amount of pension for similar rank and service granted to a person who retired after 31st October, 1952. These increases in State Service pensions will be effective as from 1st August, 1959, and will cost £58,000 in the current financial year.
I also propose to increase by 6 per cent. the Military Service Pensions paid to those who did military service for the nation during the troubled years 1916 to 1923. The cost for eight months of the current financial year will be£23,000.
The cost of the foregoing concessions in the current year will be £964,000. Certain necessary reliefs in Entertainments Duty will make a big inroad into the balance available.
All Deputies have already been made aware by cinema interests of the basis of their claim for a reduction of duty. During the past year I have had their position subjected to detailed examination. From the results it is clear that early relief is essential if the future of this industry is not to be put in jeopardy. The cinema is an important medium of entertainment and relaxation for a large section of the community and provides extensive and valuable employment. I propose to include in the Finance Bill a new reduced scale of Entertainment Duty for cinemas which will come into operation on 1st August next and will cost £150,000 in the current year.
Broadly, under the new scale admission charges up to 8d. will be tax-free in future, as compared with the present limit of 5d.; there will be a reduction of 1d. in the duty element in inclusive prices up to 1s. 9d., a reduction of 1½d. at prices between 2s. Od. and 2s.7d. and a reduction of 2d. at prices from 2s. 9d. upwards. As the relief is designed to benefit the cinema industry, reductions in prices should not be expected.
Cine-variety entertainments now survive in only one Dublin theatre. These shows are taxable in the first instance at the same rates as ordinary cinemas but where the "live" show constitutes not less than 25 per cent. of the whole a repayment of 50 per cent. of the total duty paid is allowed. It is clear that the demand for this type of entertainment continues to decline, whereas the costs of stage shows are rising. Unless relief is given, there is a real danger that cine-variety entertainment may become a thing of the past. Apart from other considerations this would involve the disemployment of the considerable permanent staff and the loss of a valuable platform for Irish variety artists and musicians. The form of relief I propose, therefore, is to raise the rate of repayment of duty for this type of entertainment from 50 per cent. to 75 per cent. The necessary provisions will be included in the Finance Bill to operate from the 1st August next and the cost this year will be about £10,000. I may add that the claim for this relief has had the strong support of the Dublin cinema trade generally.
In the case of dances also, I am satisfied that the introduction of a lower scale of tax is imperative. I propose to exempt from tax admission charges up to 2s. 6d. and to reduce the duty element in inclusive charges from 4s. 6d. upwards by 2d.; at prices between 2s. 6d. and 4s. 6d. the reductions will vary but will not in any case be less than 2d. The new scale, which will be included in the Finance Bill, will operate from the 1st August next and the cost this year will be about £25,000. I hope these changes will enable many semi-philanthropic groups to run short dances at charges which will be free of any duty.
Under existing law full relief from Entertainments Duty is allowed for entertainments promoted for charitable, philanthropic or educational purposes, provided that the expenses of the entertainment do not exceed 50 per cent. of the takings. I have had strong representations to the effect that many voluntary charitable organisations are nowadays deterred from holding dances—a traditional means of raising funds—because they fear they cannot fulfil the expenses requirement. Accordingly, I propose to include in the Finance Bill a provision, limited to dances only and operative from 1st August next, raising the limit to 60 per cent. of the takings. As the object is to facilitate the holding of dances which otherwise would not be held any cost involved will be trifling.
Greyhound racing is liable to Entertainments Duty whereas greyhound coursing and horse racing are not. This difference in treatment which is of many years standing was justified in the past by the practical consideration that greyhound racing was in a position to support the burden of the duty whilst greyhound coursing and horse racing were not. More recently, the growing appreciation of the potentialities of the greyhound industry has led to the setting up of Bord na gCon, one of whose functions is to protect and foster the breeding and export of greyhounds. That body has represented that retention of the Entertainments Duty on greyhound racing is prejudicial to the development of the industry. I accept that view and, as the racing season has already opened, I propose to abolish the duty as from tomorrow, 16th April. This will cost £20,000.
Indoor professional boxing tournaments are seldom held in this country because the incidence of Entertainments Duty acts as a strong deterrent. Such tournaments are, however, quite popular in other European countries. Those concerned with the promotion of tourism in this country believe that international professional indoor boxing tournaments held in connection with An Tóstal would prove a tourist attraction. I am satisfied that there are good grounds for acceding to the request for exemption from duty, particularly as the yield is negligible. I propose that the exemption shall have effect from tomorrow, 16th April.
Section 16 of the Finance Act, 1954, provides duty concessions for entertainments held in rural areas depending on the size of the local population. The Act also provides that increases in population revealed by a census will not affect liability to Entertainments Duty for a period of two years from the date of publication of the census. Marginal increases in population in some 20 small towns revealed by the publication of the 1956 census have the effect that entertainments held in these areas would in the ordinary way become liable to Entertainments Duty with effect from November next. I am satisfied, however, that this would be unduly burdensome and accordingly I propose to provide in the Finance Bill for an extension of the period before liability to duty is incurred from two years to four years.
Revision of allowance for overestimation, etc.
The cost of the Entertainments Duty concessions comes to £205,000 and if I confined the adjustment for overestimation to £1½ million I would now have only £200,000 in hands for other tax reliefs. I am, however, satisfied that at the present critical stage in our development programme the taking of a limited budgetary risk in order to reduce direct taxation is fully justifiable. I believe that a reduction in direct taxation would stimulate productive enterprise and, by encouraging saving, provide additional resources for expansion. The economy needs this tonic and, in the confidence that national output will be raised and the revenue base ultimately strengthened, I am increasing my allowance for overestimation to £2½ million so as to make £1.2 million available for relief of direct taxation.
Income Tax and Sur-Tax.
Measures taken in recent years by both Governments have eased the burden of direct taxation on industry. In the three years since 1956 effect has been given to all the recommendations of the Committee of Inquiry into Taxation on Industry with two exceptions. Moreover, important concessions, which had not been suggested by the Committee, have also been given, notably for exports of manufactured goods and for production of minerals. The exports tax concessions can mean for new export industries complete tax exemption for ten years, while export industries located at Shannon Airport may enjoy complete exemption for twenty-five years. The annual value to industry of the various reliefs granted over the past three years is already of the order of £1 million.
Other measures have also been taken to help industrial expansion. The moneys placed at the disposal of An Foras Tionscal and the Industrial Development Authority for industrial grants have been increased and the Industrial Credit Company has been guaranteed ample funds to provide credit facilities.
Obviously, these measures would be greatly reinforced by a general reduction of taxation on industry.
Our efforts to promote industrial expansion could not, however, be fully successful if we were to overlook the point I emphasised earlier, namely, the importance of the human factor. Unfortunately, the incidence of taxation at present can be a serious disincentive to individual effort. It can and does militate against managerial, executive and professional ability being fully applied to the raising of the levels of production and employment. It also adds to the comparative attractions offered for such talent outside the country. In Britain, for instance, reductions in the burden of income tax and sur-tax as well as the raising of salary scales have been responsible for a steady improvement in recent years in the net income of the salaried classes and their position now contrasts more than ever with that of the salaried classes here. A lightening of income taxation, sur-tax as well as income tax, is necessary to improve the position.
It is, I think, important also to indicate to workers generally, since their cooperation and enthusiasm are vital to our efforts to improve our economic position, that we appreciate the burden which income tax represents in their family budgets. The concessions which I am now about to announce, coupled with the decision already made public to proceed, as soon as possible, with the introduction of a suitable scheme of P.A.Y.E. will be evidence of that appreciation.
I have decided that the most effective stimulus I can give, both to individuals and to companies, is to reduce the standard rate of income tax. I am, therefore, proposing that the standard rate be reduced by 6d. to 7s., the 6s. rate be reduced to 5s. 6d. and the 3s. rate to 2s. 9d. These changes will cost just over £1 million this year.
I am also proposing that the starting-point for sur-tax, which was fixed at its present figure of £1,500 when money was worth much more, should be raised to £2,000 and that the income tax personal allowances be granted for sur-tax as well as for income tax. The rates of sur-tax for taxable income above £2,000 will remain unchanged. The effect will be that the starting-point for sur-tax for a single person will be £2,150, for a married couple £2,310 and for a married couple with two children £2,510. The cost will be £160,000 this year as the reliefs will apply to sur-tax payable on 1st January next.
Comparisons are inevitably made between taxation here and in Britain. I might, therefore, point out that the effect of the reliefs I have just announced will be that so far as individuals are concerned, the standard rate of income tax here will now be 7/- in the £ as against 7/9d. in Britain. Certain allowances are higher here and sur-tax rates are lower. A significant result of this is that, virtually throughout the whole range of income up to £5,000 a year, the weight of direct taxation on individuals will now be lighter here than in Britain.
The combined maximum rate of income tax and corporation profits tax payable by Irish companies will now be 8/4d. in the £ as against a maximum combined rate of income tax and profits tax in Britain of 9/9d. in the £.
Depreciation of Buildings and Other Industrial Reliefs.
I mentioned earlier that all the recommendations of the Industrial Taxation Committee had now been implemented except two. These are the granting of a 2% annual wear and tear allowance for capital expenditure on industrial buildings and the granting of an obsolescence allowance where plant or machinery is not replaced. It is my intention to provide in the Finance Bill for the implementation of both these recommendations with effect from 6th April, 1960. Capital expenditure incurred on or after 30th September, 1956, on the construction of industrial buildings (including hotels) already qualifies for the initial 10% allowance.
In the case of expenditure incurred before that date, there will, in lieu of a 2% deduction, be an annual allowance of an amount equivalent to one-third of the annual value of the industrial building or hotel for Schedule A purposes. Harbours will be brought within the scope of the relieving provisions. A further relief, also effective from next year, will be that capital expenditure incurred on dredging and certain site preparation works will be eligible for initial and annual allowances.
Provision will be made similarly for a tax allowance in relation to capital expenditure incurred on the acquisition of patent rights; and, as a corollary, the seller of the rights will be charged to tax on the sum realised on their sale.
The repairing of foreign ships in Irish dockyards is a form of activity which I have decided should be encouraged by the grant of tax relief on the same lines as the reliefs granted to companies engaged in the export of manufactured goods.
The statutory formula for calculating tax relief on exports may give a distorted picture in the case of certain dutiable commodities such as tobacco and alcoholic beverages where the home sales carry a duty element while export sales are duty-free or qualify for drawback of duty. I propose to remedy this in the Finance Bill.
The Finance Bill will provide relief in respect of the expense incurred in recruiting and training local staff before a new industry commences trading. The estimated cost to the Exchequer this year will be £15,000.
The relief from income tax and corporation profits tax on profits from new mining operations for "non-bedded" minerals is limited to companies commencing to trade within the period of five years from 6th April, 1956. It has been represented to me that, in areas where development is not sufficiently far advanced or where little or no exploration has yet been carried out, this restriction would operate to preclude the grant of relief. Accordingly, I propose having the time limit for the commencement of trading extended from five years to ten years.
I shall be introducing provisions to apply to children over 16 undergoing apprenticeship the relief already available for children receiving full-time education at an educational establishment.
Purchased Life Annuities.
On the Second Stage of last year's Finance Bill in Seanad Éireann I indicated that I would deal this year with the question of tax relief for purchased life annuities. I have now decided that the portion of these annuities which may be regarded as representing the return to the annuitant of capital laid out in purchasing the annuity should be relieved from tax; and the necessary provisions will be incorporated in the Finance Bill. The cost to the Exchequer this year will be of the order of £10,000 and this exhausts the sum available for reliefs.
Amendment of Double Income Tax Agreement with Britain.
I have already explained in a public announcement that an amendment of the double income tax agreement with Britain has become necessary in connection with the legislation enacted in both countries to combat the device known as "dividend-stripping". The new agreement will be scheduled to a Financial Resolution which I shall be moving today. Further amendments of the Agreement may become necessary, on a reciprocal basis, from time to time to deal with methods of tax avoidance.
I propose to simplify the rates of duty on policies of marine insurance. The changes proposed will have no material effect on the yield of duty.
I propose to raise the rates of duty on leaf tobacco but let me hasten to say that this time the increase has been devised in agreement with the manufacturers generally, that it does not involve any effective increase whatever in the taxation of this indispensable source of revenue and that the retail prices of tobacco products will remain entirely unaffected. My present proposals will, in fact, involve neither gain nor loss to the Exchequer.
I will explain. Over a number of years past my predecessors and I have had representations from tobacco manufacturers for a revision of the system of collection of tobacco duty. At present tobacco duty is paid daily by manufacturers as they receive unmanufactured tobacco from bonded warehouse. A considerable time, perhaps up to two months, elapses before they recover the duty from their customers in the prices of their finished products—cigarettes, pipe tobaccos, etc. The annual yield of the tobacco duty being in excess of £25 million it will be seen that a very substantial amount of capital is permanently tied-up in duty. This has been a cause of concern to the manufacturers.
Their request hitherto has been for a simple deferment of the payment of duty. Their case had merit—brewers, for example, are allowed about five weeks' deferment—but was resisted on the grounds that it would involve a reduction in revenue receipts in the first year of operation. The scheme now contemplated surmounts this difficulty. Ordinarily, manufacturers will be allowed to defer the payment of duty on leaf received in any month to the end of the succeeding month but there will be the important exception that the duty on leaf received in the month of March must be paid on the last day of that month, so that it will be brought to account within the same financial year.
While, however, the annual receipt of tobacco duty will thus remain unaltered, the Exchequer will be deprived during most of the year of the use of moneys which it has had heretofore and resort to temporary borrowings will be necessary. The manufacturers recognise the force of this point and have agreed to an increase of 2½d. per lb. in the rates of duty on leaf tobacco in order to recoup the Exchequer for the cost of servicing such borrowings. The rates of duty on manufactured tobacco will not be altered. The new scheme will operate from the 1st May next. I should add that deferment of duty payments will not be compulsory. Any manufacturer who prefers not to avail of the scheme will be allowed a rebate of the additional duty of 2½d. a lb.
While not strictly a budgetary issue, there are impending changes in the duties on hydrocarbon oils which, because of the importance of this source of revenue, I think I should mention here. They derive from the welcome fact that the Whitegate refinery will shortly come into production. I should say right away that these changes will not involve any effective alteration in current levels of oil taxation nor any changes in retail prices of petrol, diesel or other oils.
At present we import our requirements of petrol, diesel oil, etc., and our oil revenue comes from the appropriate customs duties. In future, however, crude oil will be brought duty-free into the Whitegate refinery and our revenue will come from the excise duties attaching to the refinery products. The current excise duty rates are 2d. per gallon lower than their customs counterparts and, accordingly, to preserve the revenue they must in the near future be raised by 2d. per gallon. This will be done at the appropriate time by way of an Order under the Imposition of Duties Act, 1957.
To fulfil an undertaking given to the refinery sponsors, it will also be necessary to increase the customs rates by one penny per gallon above the new excise rates. To avoid administrative and other difficulties, however, this step will, in agreement with the refinery authorities, be deferred until stocks of imported oils are exhausted and Whitegate is in a position to meet full home requirements—probably next autumn—when a further Order will be made.
The Finance Bill will include miscellaneous provisions designed to remedy omissions and defects in the excise law relating to oil.
Cost of Government.
Before I turn to the position on capital account, I would like to refer to a particular aspect of the cost of Government. There can be no public services without the necessary personnel to provide and administer them. Pay must, therefore, be a large element in current expenditure. As a recent Supplementary Estimate indicated, the sum which had to be found by taxation to meet the cost to the Central Government of the Civil Service, the Defence Forces, Garda Síochána and teachers—national, secondary and vocational—in the year just ended was of the order of £34 million, excluding the cost of industrial staff. It may be of interest to give the constituents of this figure:
Of the Civil Service figure of £17 million, £5.5 million went to pay the main Post Office grades, such as Post Office clerks and postmen, who numbered about 13,500 out of a total non-industrial strength of some 30,000 There were 2,500 officers in professional, scientific and technical grades whose pay totalled £2.3 million and some 4,000 in the remaining departmental grades throughout the service who were paid in all £2.8 million. In the general service, grades below Higher Executive Officer comprised 9,400 persons with a total pay of £4.8 million. The grades of Administrative Officer and Higher Executive Officer cost £0.6 million and higher administrative staff just under £1 million; these categories combined numbered 960.
The total of £10.3 million for teachers included certain pay increases operative only from 1st September, 1958. The corresponding figure for a full year would be £10.6 million, divided between the three categories as follows:—
Secondary and vocational teachers, of course, derive part of their remuneration from sources other than the Exchequer.
In my Budget Statement last year I announced that the views of Heads of Departments had been sought on proposals for reorganising the Civil Service structure. The views received showed marked differences of opinion as between Departments. Discussions followed with Departmental representatives to narrow down the area of difference. Following on these discussions, the original proposals, modified as a result of the Departmental exchanges, were forwarded to the staff. The proposals are at present being considered by the various Staff Associations.
It is proposed as soon as the staff are in a position to present their views —which will, I hope, be fairly soon— to meet under the conciliation machinery and deal with these proposals. I anticipate that the staff will have a valuable contribution to make towards framing a structure suited to our needs. Quite apart from the question of reorganisation, I can assure Deputies that every effort continues to be made to ensure maximum efficiency and economy in the public services.
V. CAPITAL ACCOUNT, 1959-60.
The public capital programme for the year ahead conforms under most headings to the projection in the White Paper published last November. Table V—a new table—is designed to facilitate comparison with the White Paper figures. There are, of course, some differences since account has had to be taken of more up-to-date estimates and of new developments. As a result, the public investment now proposed for 1959-60 exceeds the White Paper figure by £3½ million. Net requirements for building and construction are down £2 million but there are increased provisions for shipping, transatlantic air services, electricity and forestry.
Although the estimate for building and construction is below the White Paper figure, it shows an increase of £3 million as compared with actual expenditure in 1958-59. Provision is made for an increase in grants and loans for housing. The 1958 Housing Act widened the scope and amount of grant and loan assistance for private housing, particularly for works of reconstruction, repair and improvement. Small Dwellings loans for the purchase of older houses are being resumed. Provision is also made for an advance of £200,000 to the Road Fund, the counterpart of a grant of the same amount from the Vote for Local Government, towards defraying the cost of improvements to roads affected by railway closings and new or increased industrial activity. There will, therefore, be an extra £400,000 available this year for grants from the Fund.
Local employment should also benefit from the increased provision for arterial drainage (£300,000 more than was spent last year), from the increase of £590,000 for construction works at Shannon and Cork Airports as well as from the additional £230,000 which is being provided for the building of National and Vocational Schools.
The White Paper was concerned to a large degree with ensuring that the inevitable decline in local authority housing would be offset—and if possible more than offset—by increased capital expenditure yielding a more direct increase in production. This year's Budget not only enlarges the provision for public investment but provides for as great a shift towards expenditure of a more productive nature as is immediately feasible.
The action taken to give effect to the White Paper is evident from the tables before the Dáil. The provision of £1¾ million for fertiliser subsidy is accompanied by a net allocation of £1.8 million for the intensification of the drive to eradicate bovine tuberculosis. There is no greater national need than the successful completion of this programme as quickly as possible and certainly within the next five years. Fisheries and tourism receive a capital allocation of £540,000. An extra £160,000 is being provided for telephone development making the total for this service £1.6 million. In other respects also the figures reflect the action which is being taken to carry out the programme, including the legislation enacted last session to permit of an expansion of activities by Irish Shipping Ltd. and Bord na Móna. Further legislation will deal with the extension of the operations of the E.S.B., Bord Fáilte, An Foras Tionscal and the Industrial Credit Company, with the financing of the Shannon Free Airport Development Company, the establishment of Córas Tráchtála as a permanent State agency and exploration for oil and natural gas. The organisation of the Institute for Industrial Research and Standards is being reviewed and the Productivity Committee mentioned in the White Paper is now in being.
In the field of credit the full provision envisaged in the White Paper is made for the channelling of capital into industry by the Industrial Credit Company. I am glad to say there is every reason to think it will be fully required. In the case of agriculture, arrangements were recently announced which will, I believe, ensure that the aim of the White Paper is realised, namely, that agricultural development no less than industrial development will be assured of adequate capital. Credit is now available on reasonable terms and without too many formalities for sound projects designed to increase agricultural production. The allocation for credit to be provided direct by the Agricultural Credit Corporation exceeds the White Paper figure. Again, there is every reason to expect that it will all be required. The Corporation is doing much more active business notwithstanding the recent increase in bank lending to farmers. It would not surprise me— indeed it would please me greatly— to see a total increase in credit for agriculture, through the Agricultural Credit Corporation and the Banks, of some millions of pounds in 1959-60.
These few remarks do not, of course, cover all projects. They are intended merely to give a general outline of the capital expenditure proposed in the coming year and its relationship to the White Paper. I might add that, in addition to State aid by way of loans and grants for commercial and industrial development, the provision of industrial capital is being facilitated by means of statutory guarantees. The guarantees which have enabled St. Patrick's Copper Mines Ltd. to borrow over £1.4 million for their operations at Avoca are an outstanding example. This is yet another way in which the State is cooperating, not alone in the development of the country's economic potential, but also in the provision of a significant amount of employment.
This Budget helps forward the programme of economic expansion published by the Government last November. The reduction in direct taxation is an encouragement to every individual and to every business enterprise to add to their own and to the national income with beneficial effects on employment. Industry and the hotel trade will be further helped by the new relief in respect of buildings. Increased manufacture for export already enjoys the greatest possible relief—complete exemption of the profits from tax—for a clear 10 years' period.
For agriculture, the provisions made implement the White Paper proposals; in particular, large sums are allotted for the eradication of bovine tuberculosis and for increased soil fertility. Both agriculture and industry are assured of all the capital needed for productive purposes on reasonable terms. All the other aspects of national development—including tourism, fisheries and forestry—receive added support. The public investment programme as a whole is enlarged beyond the White Paper projection. At the same time, the most urgent social welfare needs are being met as far as possible. Through its increase in development expenditure in agriculture, industry and other fields, its encouragement to individual and corporate enterprise, its stimulus to increased employment and its support for the weaker sections of the community, to-day's Budget will, I believe, make an effective contribution to national progress.