This Budget rests on the proposition that economic and social progress require increased Government spending. The stimulation of higher production, the realisation of higher levels of employment, the extension of health, education and social welfare services, the provision of more houses, the improvement of communications and similar public services which make for better living in town and country, all require to be financed in whole or part through the Budget. We can cut down on Government spending only by cutting back on economic and social improvement. This is a fact of political life which the Government accept and which the Opposition Parties still appear to be reluctant to face.
This is a fact which Deputy Dillon ostentatiously avoided in the whole of his speech as Leader of his Party this afternoon. One beneficial effect of this Budget and of the debate on it now taking place is that it will help to clarify the really fundamental differences in approach to national problems between the Fine Gael and Fianna Fáil Parties about which there may have been some deliberately fostered ambiguity in the past. The Fine Gael approach, as disclosed in Deputy Dillon's speech this afternoon and in speeches made by him and his colleagues yesterday, is negative, deflationary, timorous, political in the extreme. The Fianna Fáil attitude is, and I hope will always remain, positive, constructive and national.
The Government believe that it is good for the nation to have a continuing extension of our social welfare arrangements, better health services, better schools and houses, rural electrification, rural piped water supplies and so forth. In our judgment, the country can now, because of the growth of national production under the Programme for Economic Expansion, afford them. To make them possible, it is necessary, however, through taxation to get the money required made available to the Exchequer. We think it is good policy to adjust our taxation system for this purpose.
Those who want lower taxes, or those who at least wanted to prevent any increase in the level of the taxes fixed in the Budget of 1962, must be prepared to argue in favour of doing without the better public services and the extended facilities which it is now intended to provide. That is the alternative, and Deputies who favour that course must not be afraid to spell out what it means. They must not be timorous about telling the people what it means. There is no method by which the country can get the benefit of improved services without paying for them. Those who want to avoid paying must be willing to advise the people to do without those services.
The Government's regret—and it is the only regret we have about this Budget—is that it is not possible to improve those necessary and desirable public services to a far greater extent than we are now proposing. We hope to improve them much more in the future. The present Budget is designed not merely for 1963 but for future years as well: it lays the foundation on which better social welfare, extended health, education and agricultural services can be erected in future years. As the country's economic progress continues, as we become better off as a national community by reason of the growth of our production, it is our intention that the State's revenue should also expand so that the improvements we desire to see, the greater improvements we hope to realise, will be made possible.
There is always room for argument as to the level to which taxation can safely or justly be raised. It would be possible to try to do too much at once, which would involve taxation so heavy as to cripple economic progress. It is not our view that this stage has been reached. We think what we have in mind can be done without altering very much, if at all, the proportion of the total national income which is taken for public purposes, relying on the growth of the national income to bring about consequential expansion of the revenue.
It is noteworthy that in the wealthier countries the proportion of the national income taken for public purposes is higher than in the less well off countries. That is understandable because a country can give itself better public services only to the extent that the total national income provides a margin over and above what is necessary to maintain reasonable living standards. As we get better off, we can spend more—we can spend more relatively as well as absolutely—for desirable public purposes, and it will be the policy of this Government to do so.
If there is another and contrary policy, let it be stated. It is just foolish to fulminate against taxation and to demand at the same time more spending for better public services. Nobody likes taxation and nobody is expected to like it. There were no taxation proposals capable of being conceived by the Government, capable of being introduced here by the Minister for Finance, against which some case could not be made. It is not the individual proposals that are made but the overall purpose they are intended to achieve that is important, and in so far as that is concerned, I do not want to be misunderstood regarding the policy of the Government.
We believe the country must spend more money to achieve economic and social progress, that it is good policy to do it and that we can afford to do it. If there is any alternative policy, I hope it will be stated with equal simplicity, with equal clarity. Recently in the course of a speech I made, and to which reference has been made here, I attempted to give in broad outline the Government's ideas for distributing the fruits of economic progress so as to ensure that all elements of our community—the farmers, the wage and salary earners, traders, State officials, pensioners and social welfare classes generally—will all participate in the benefits of rising national production, in a way that will ensure that future economic progress will be helped and so that the living conditions of our people will improve steadily and without interruption over the years.
We are not talking of a pay pause as Deputy Corish attempted to suggest. We have been trying to work out—and hope, indeed, to succeed in evolving—a regular and orderly system by which the benefits of rising national resources resulting from increased production will be fairly and evenly distributed among all the elements in the community, the wage and salary-earners no less than the farmers. In the fulfilment of any policy of that type, in so far as concerns the social welfare classes and State employees and State pensioners and all those who benefit from the different social schemes, all who are remunerated or helped out of State funds in one way or another, and in present circumstances so far as concerns the aim of keeping farm incomes improving in line with urban incomes, it is clear that the Budget must be the main weapon used.
In plain terms, that means this: when justice demands it, we must be prepared to level up incomes by taking away in taxation from some to give it to others whose circumstances require support in that way. I have expressed the view, and I believe this to be true, that our people as a whole, if assured that they will personally be better off in terms of the real buying power of their incomes or wages or salaries will not object to contributing something in taxation to sustain the policy which makes all this economic and social progress possible and which ensures that they are now, and can hope in the future to be, better off than in the past.
This, at any rate, in broad outline as I said, is the policy of the Government. Deputies could advance arguments against that policy on its merits. None of them has done so and I shall venture to forecast that in the course of this debate none will. What they are doing is refusing to look at it and instead are seeking for niggling arguments of a political kind against the proposals of the Government, defaulting in their duty as members in Opposition to the Government to consider that policy as an intelligent and constructive contribution to the development of national thought and particularly to consider its implications in relation to the Budget.
As I have said, this policy which I have outlined, has in large measure to be implemented through the Budget and so, therefore, the Budget must be framed to make it feasible. The tax structure must be such that, regardless of changes in public taste and habits, the inflow of revenue into the Exchequer will also expand in direct proportion to the improvement in national circumstances and in sufficient degree to meet the requirements of a developing social policy. It is clear that the old Budget stand-bys, tobacco, beer and spirits and petrol, will no longer suffice to sustain this policy. Indeed it is now fairly obvious that higher tax rates upon these commodities would not yield higher revenue in the same degree. That is the case for extending the range of the expenditure taxes by the introduction of a new system. We have tried, in framing this Budget, to think in longer terms than the problems of this financial year. We are coming up now to the second phase of the Programme for Economic Expansion and everything which we are proposing to the Dáil in taxation, no less than in legislation, is intended to make sure that so far as is humanly possible, the rate of national economic and social progress in the second phase will be no less than it was in the first.
The preparation of this second Programme for Economic Expansion covering the period to the end of the present decade, is proceeding. It has now been decided to publish it in two parts. The first part of the new programme will, I hope, be published before the end of the present Dáil session. It will set out the objectives of the second Programme, the main assumptions upon which it will be based and the conditions necessary for its fulfilment. Following publication of that first part, it is intended to arrange a series of consultations with the principal functional organisations representing trade unions, industry, agriculture and other important sectors of economic activity.
The purpose of these consultations will be to secure, if we can, their participation and help in the preparation of the detailed programmes conforming to the objectives already defined. We hope for wide and informed consultations. Democratic government is essentially government by persuasion. We have not in mind any form of compulsion other than the compulsion of public opinion, except to the extent that it may be needed to secure that general effect is given to majority decisions. The measure of a country's material progress is the readiness of its people to co-operate in a development policy. Any plan for economic development must be comprehensive and coordinated. Nothing which can help or hinder it can be left out of account. Success assumes a wide measure of agreement. If we cannot succeed on a basis of goodwill, we are not likely to do it on the basis of compulsion. If we do not succeed, there will not be much satisfaction in naming those responsible for our failure.
The realisation of a pre-determined rate of economic growth will involve a whole series of important decisions based on assumptions as to population growth and movement, productivity, exports and our capacity to finance capital needs and will only in part fall to be implemented by Government action. The expectation is that these consultations will be completed before the autumn and that the full and detailed programme will be ready for publication before the end of the year. As this is our timetable, I have had to warn my colleagues in the Government who are directly concerned in these matters not to count on the prospect of holidays during the period of the Summer Recess.
I believe that the time has come when national policy should take a shift to the left. By this, I mean, first, more positive measures than have heretofore been attempted involving Government initiative to ensure the effective translation of the benefits of economic progress into the improvement of social conditions and specifically an equitable wage structure, wider educational opportunities, the extension of the health services and of our systems of protection against the hazards of old age, illness and unemployment; secondly, more direct Government intervention when necessary to keep the national economy on an even keel while maintaining the pace of our economic advance; thirdly, the maintenance of State investment activity at the highest possible level having regard to available resources; and fourthly, the more detailed planning of our economic activities so as to ensure the flow of resources in the directions where prospects are best, if necessary, diverting them from sectors where prospects are poorest. These ideas, in so far as they are developed during the consultations I have mentioned, will influence the character of the second Programme for Economic Expansion.
As in the first Programme for Economic Expansion, private enterprise will continue to be the mainspring of our progress. We have no plans for extending the area of State ownership so far as existing industries and services are concerned, and, indeed, we consider that there should be a periodic re-assessment of all State operations of this kind to ascertain if there have been changes in general conditions which would enable the public interest to be better served by leaving more scope for private initiative. The extent of State activity in the industrial field now taking place—in steel, in processed foodstuffs and in chemical fertilisers— is in directions where in our circumstances it offers the most practical method of speedy progress. Our approach to this matter is pragmatic and not doctrinaire.
State investment activity is planned for this year at the maximum level at which we think it is possible to finance it without seeking external loans. We have introduced a new procedure, as Deputies are aware, by which the Dáil and the public are being given fuller information about the capital programme and the methods of financing it. The extension of the State capital programme over and above the levels fixed this year will require a considerable rise in the level of savings. It is still the position that the proportion of national income saved for investment in this country is low by European standards. Deputy Dillon appeared to me to be talking about the prospects of balancing this Budget by deliberately planning a deficit. I can know of no more irresponsible suggestion at this particular time.
It is nonsense to compare this country with the United States of America. We are trying to make available for capital development every penny that can be procured. We could not plan for a Budget deficit without cutting down our investment for production. In the United States of America, they have no problem of that kind. If they wish, they can meet any problem of that nature while pouring out the hundreds of millions and indeed billions of dollars in loans and grants throughout the world. When we are as wealthy as the United States of America, we may be able to think along these lines but, as Deputies should know, there would be no possibility for us of meeting a deficit on current expenditure except by cutting down on our capital programme and that would be the worst possible policy to adopt at our present state of development.
I wish to draw the attention of Deputies to the statement made by the Minister for Education at Question Time today, when he said that he intends shortly to make a statement regarding Government policy in respect of the development and strengthening of the country's educational facilities. I do not wish to anticipate that statement but what I do wish to do is to congratulate the Labour Party on having produced a policy in that respect. I am always prepared to pay a tribute of respect to any Party in opposition which has the courage to lay on the line its own proposals with regard to matters such as this and whether I agree with these proposals or not, I would commend them for that activity. It is something I would commend to the Fine Gael Party but they are not likely to do it. They refused to reveal even the shreds and tatters of policy with which they went into the last general election until the Dáil had been dissolved and all possibility of criticism had been eliminated.
It is acknowledged that there are serious gaps in our present educational system. In the world of to-morrow, economic progress in this country as in others will depend more upon the education, training and skill of our people than on muscle power. That development is clearly to be foreseen. The time is not far distant when the unskilled labourer will be in diminishing demand and it is not too soon to start preparing the next generation of our people for this situation. But that cannot be done without spending money and you cannot spend money unless you ask the people to contribute it. I say this to the Labour Party also. It is all very well to produce a policy for education but they must go on to the next step and indicate quite clearly to everyone that they are prepared to take that policy out of the realm of theory and put it into the realm of practicability by proposals for providing the money to put it into operation. You cannot do that by voting against taxation.
We tried to make the first economic development programme as flexible as possible and the second economic development programme will be similar in design. Prior to 1958, when the first programme was being prepared, we could say that progress in any direction was all to the good. In conditions as we see them developing for the remainder of this decade, we must adopt a more selective approach, encouraging the forms of development from which we can expect the best results and discouraging those from which the results appear to be doubtful.
Deputy Dillon, on this occasion as on others, spoke about the external trade situation. He is hypnotised by this figure of £100 million difference between the value of our exports and that of our imports. In planning the nation's future progress, we must have regard to this aspect of it as well as to the aspects dealt with in the Budget, that is to say, we must consider how any development plan to which we may commit ourselves will affect the country's international payments. That is agreed. I have no desire to encourage any complacency about the reemergence of a deficit in our international payments, even if it is very small in relation to the volume of our international transactions which ran last year to a total of £700 million, and even if no loss of our external financial reserves was involved.
It would have been a much healthier position if our exports had been that much higher so as to eliminate that gap in our external payments but it is equally undesirable to exaggerate its significance. Here I am handicapped by Deputy Dillon's obvious incapacity to understand the position at all. This is certain, that while our economic growth is proceeding, while we are building up the productive capacity of our country, trying to get the development of our economy going ahead as rapidly as we would wish, there will be many years in which exceptional imports of capital equipment and materials for production are bound to create a similar pattern in regard to our external trade. We have at least the expert advice of the OECD, in their very recent survey of our situation, that this is something which we must be prepared to expect and to tolerate.
The acquisition of the means of increased production, of the equipment needed to enable us to increase our production, must always run ahead of the expansion of trade which it will make possible. Certainly nothing has happened and nothing seems likely to happen which would call for exceptional restrictive measures affecting imports. Nothing we can now foresee is likely to require from us measures of the disastrous nature which, in more serious circumstances, the Coalition Government brought into operation during their final year of office.
We can congratulate ourselves that we got through 1962, with all the inflationary pressures operating during that year, without a more serious deficit, without any loss of external reserves and without any need for restrictive measures by the Government. Nor is it true to say, as Deputy Dillon contended, that our exports are declining. In the first quarter of this year, they were the highest ever recorded for any similar period in any previous year. It is also true that our imports during the first quarter of this year were at an all-time high record. The import excess is higher than it was during the similar period of last year and indeed higher than it was in any year since the first quarter of 1956.
The growth in our external trade is a necessary consequence of our economic expansion. While it highlights and emphasises our need to pursue vigorously the expansion of our exports, there is nothing yet in that picture which would justify in any way any type of restrictive policy applying to our plans for the expansion of production in industry or agriculture. It is clear that if we are to realise our target of an average annual increase of national production of 4 per cent, the main contribution must in present circumstances come from non-agricultural activities and principally from manufacturing industry.
Deputy Corish asked me if we are satisfied with the outcome of the first Programme for Economic Expansion. As he well knows, we set ourselves, in the circumstances of 1958, the target of increasing national production at a rate of two per cent per year. We at least have so developed since then that we can now raise our target, elevate our sights and hope to achieve in the rest of this decade an increase of four per cent per annum.
Over the past three years, the volume of our industrial output rose in 1960 by 8.6 per cent; in 1961 by 8.7 per cent and in 1962 by 4.9 per cent—an average over three years of 7.4 per cent. The significance of the lower rate of growth in 1962 requires our attention. Looking a little further beyond these gross figures we see that, during these three years, there was an expansion of production at a reasonable rate, which appears likely to continue, in many industrial groups, particularly those classified as chemicals and chemical products, structural products, glass and cement, metals and engineering, foodstuffs, clothing and taxtiles. However, all industrial groups contributed something to this expansion of output. The construction industry is also expanding steadily, perhaps even expanding too rapidly, and certainly seems set for a protracted spell of high activity.
Yesterday, the Minister for Finance announced in his Budget Statement that arrangements have been made to set up a Building Advisory Council which we hope will be able to bring about a further expansion in the productive capacity of the construction industry which we shall certainly need if we are to keep up our present rate of development. If we are to realise our target rate of growth, the average annual expansion in manufacturing industry in the years ahead of us must not be less than the average achieved over the past three years and certainly must be higher than the rate achieved in 1962. A major aim of national policy must be to create and maintain the conditions which will make this growth rate possible.
The expansion of exports requires favourable conditions in export markets. In so far as our export trade is mainly directed to markets in Britain, all the present indications are that prospects there will improve during the year and that the signs of recession which seemed to characterise the British scene in recent months are now fading away. The opportunity for expansion is present if we go after it with sufficient energy.
A very large part of the tax revenue which the Budget is designed to yield will be devoted to agricultural price supports and production aids. The total Exchequer outlay for the benefit of agriculture, both on current and capital account, this year will be just around £40 million and that, in relation to our resources, is a very large sum, indeed. This policy of supporting agriculture in these ways and to that extent may not seriously be challenged in the Dáil. It may not require elaborate defence here but I think it has to be defended to the taxpayers. In this, as in all other countries, the rise in agricultural incomes has tended to fall behind the rise in urban incomes notwithstanding the fact that in every country situated like ours there is a decline in the numbers engaged in agriculture. This tendency of agricultural incomes to fall behind urban incomes is particularly true in countries like ours in which agriculture is a major economic activity and in which increased production is largely dependent on access to export markets in which the prevailing prices are frequently below economic levels.
It is not merely elementary justice that requires support from the whole community for agricultural incomes, in the circumstances which I have described, but economic policy also. With some 35 per cent of the country's manpower engaged in farming, any falling-off in their purchasing power must affect adversely levels of trade generally and the growth of employment in many urban occupations. Agriculture contributes 25 per cent of national production and its economic significance requires no stressing. A main difficulty about diverting resources to the support of agriculture is to find a way of doing it that will benefit the hardworking, efficient farmer more than the lazy or bad farmer. The fertiliser subsidy, the farm building grants, and so forth, are a good example of what I have in mind and already they are bringing about a marked improvement in agricultural productivity. The more we channel our help to agriculture in a way that will benefit the enterprising farmer the better will be the results and the less public questioning will there be of the wisdom of this policy.
It is to be expected that for some time yet the fall in the number of persons engaged in agriculture will continue and, while it has the effect of increasing the income per head of the remainder, it has social and economic implications for rural areas which we must try to counter by promoting other types of rural employment. The answer to the problem of declining population in the small farm areas is not solely more and bigger subsidies for farmers but the development of additional forms of economic activities in those areas. This is the policy of the Government and action to this end is being taken in accord with the recommendations of the Small Farms Committee.
The amount provided for agriculture this year represents a very considerable increase over the amount provided in the Budget of 1962. Our main concern must be to get farmers and farmers' organisations thinking in terms of what they can do for themselves by better farming methods rather than in terms of increased subventions from the Exchequer. Subsidisation always has the effect of killing initiative. The danger of increasing these subventions is that farmers will think of them as the only road open to them to better living. Surveys recently carried out have shown that there is an immense amount of work to be done before we can feel certain that our methods of producing and marketing agricultural products are as good as they should be, and show also that by better methods the position and the incomes of the farmers can be greatly strengthened, and strengthened to a degree that far exceeds anything which it is possible to do by increasing State aids. It is the duty of farmers' organisations to get these reports examined thoroughly by all their branches and to formulate their views upon the recommendations contained in them. They cannot be expected to be treated as serious organisations unless they do this. There is certainly need for a national effort along those lines and I hope that, with their help, we shall be able to create it.
When will the necessity for these various supports from the Exchequer to farming cease? The only possible answer is: when international management of agricultural markets brings prices for farm products passing in international trade up to economic levels. We had hoped for that eventual result in the European Economic Community and that hope has to be postponed, although it is by no means abandoned. There are prospects of international agreements in the context of the GATT but it would be, I think, unwise to place too much reliance on them. In this country, we cannot arrange for ourselves the conditions in international trade that would suit our circumstances, although we can and will support any and every prospect of international action. In the meantime, the Government have decided that it is to the national advantage that by the re-distribution of income by means of taxation for the purpose of price and other supports, the farming community will be given the chance of sharing fully in improving national circumstances.
May I at this stage say that in relation to certain statistics which appear in the book which has been circulated to Deputies and which has been quoted here that something seems to have gone seriously wrong with some of our national statistics? Estimates of the total number of people in employment and available for employment based on the census of 1951 became increasingly erroneous as the years passed and while we ceased a couple of years ago, suspecting that to be the cause, the provision of figures relating to a so-called total labour force, it is clear that the position cannot be put right in a statistical sense until the results of the 1961 census have been analysed. Let it be quite clear this is just a statistical matter. None of these errors in our estimates has put one person into or one person out of a job, but the statistics relating to the movement of people out of agriculture are completely inexplicable. That is stated in the brochure which was circulated and which Deputies who have quoted from the brochure did not apparently note. They do not just add up.
I do not believe that 19,000 relatives of farmers left farming in 1962, any more than I believe that in the previous year the number of relatives who assisted farmers increased by 5,000, as the statistics appear to show. With emigration in the past 12 months at the lowest level since the war, with the increase of employment in industry and other occupations capable of fairly exact measurement, with our population rising and with the number of those out of employment exactly counted each week at the employment exchanges, the recorded increase in the number of farmers' relatives leaving agriculture cannot be explained and those who are responsible for the preparation of these statistics and estimates have a job of work to do there.
The movement of people out of agriculture is certainly continuing. It is continuing in this country as in all other countries in Europe, whatever its dimensions here. The various proposals for reversing it, such as the development of vegetable processing industries, the operation of the county development teams now established in the western counties and the recent emphasis on rural developments of many kinds have not yet begun to grip with sufficient strength to reverse it. Personally I would regard this as the major economic and social problem now to be faced. I hope the Dáil will also agree to accept it as such and be prepared to support a policy of diverting financial resources into its solution.
There is a reference I think I should make also to the drop in the rate of emigration which was quoted by the Minister for Finance yesterday in respect of the twelve month period ended December, 1962, as around 20,000 and which in the twelve month period ended February fell to about 12,000. I do not think that that drop in emigration in that period of two months could be explained by any sudden increase in employment here. On the contrary we know that, because of adverse weather conditions in this country, these were difficult months so far as employment was concerned. Therefore, that substantial drop in the level of net emigration between the 12 months ended December and the 12 months ended February suggests that a substantial number of Irish workers who came back to Ireland during the Christmas holiday period did not return to England and that the outward movement of our people during these months was restricted. That may possibly be due to employment conditions in Britain during these months and the position may change again if and when these conditions improve.
I must confess, however, that it irritates me intensely to hear Deputy Dillon talking as if emigration were something this Government invented. I want to contrast that figure of 12,000, representing the net emigration in the period which ended in February last, with the 55,000 who had emigrated in the 12 months immediately preceding the time when the people were able to eject Deputy Dillon from office, although, at that time, on the day this Government took office there were 97,000 people registered as unemployed at our labour exchanges.