As a source of national wealth and employment, the building and construction industry is of major importance. It employs about 70,000 workers. The Second Programme envisages an annual increase of seven per cent in the industry's output. A large part of the capital for financing building and construction comes from the public capital programme. In the present year, it is anticipated that £20.7 millions will be expended on housing, sanitary and ancillary services and over £6 millions on schools and hospitals and it is expected that capital outlay for these purposes will rise steadily to about £37 millions in the year 1969-70. To a very great extent the level of activity in building and construction depends on Government policy and it is our policy to keep it expanding.
A very substantial and continuing programme is required for housing, to repair and replace unfit dwellings and to build new houses due to the expected increase in the population and the growth in industrial activities in new centres. Even when the present backlog of defective housing is wiped out, as we intend, and when all families have well-built, secure and adequate dwellings, the housing programme will go on, and it is estimated that about 7,000 houses will become obsolete in each year in perpetuity and require replacement or reconstruction. The expectation of a rising population creates new housing needs. When arrears of housing have disappeared, we will be able to contemplate improved housing standards. 7,500 new dwellings were completed in 1963-64 by local authorities and by private builders and some 13,000 houses were reconstructed, enlarged and modernised.
The disruption of the building programme and the dispersal of skilled workers which followed the slump of 1956 under the Coalition Government has now been fully rectified. It is necessary, however, to envisage doubling the annual rate of new housing output over a number of years. The Second Programme assumes an annual output of 14,000 new dwellings by 1970. A White Paper detailing the Government's housing policy will be issued soon by the Minister for Local Government and a new and comprehensive housing Bill will be before the Dáil in the next session.
Government policy favours the provision of housing for owner-occupation. While local authorities will continue to provide houses for renting, tenant purchase will be encouraged. The social advantage of having a high proportion of families owning their own houses will hardly be disputed. Apart from housing needs, a large programme of commercial construction is in prospect and there are enormous tasks yet to be faced in the renewal of the central areas in our cities and towns which are now utilised far below their full economic value. To secure the programmed rate of expansion of output, it is necessary to consider every possible device for improving productivity in the building industry. The Irish National Productivity Committee, the Institute of Industrial Research and Standards and the Building Advisory Council are all examining various aspects of this problem and the new Institute for Physical Planning and Construction Research will concentrate on urgent practical problems and provide training and information services.
In building, even more urgently than in other economic activities, new techniques and more economical methods are needed if the Government's construction programme is to be fulfilled. We should not allow any conservative attitudes to hold up the fulfilment of our programme. It is now possible to give to all concerned in the building industry, and particularly to the tradesmen and workmen employed in it, an assurance of a continued high and rising level of activity. This assurance should help in securing the uninhibited acceptance of new methods of construction. It is the Government's intention that the era of booms and recessions which characterised the building and construction industry in previous years will be ended. We have the resources and the organisation to achieve all the aims of Government policy in this respect.
Knowledge of these plans for building and construction is of importance not only to building contractors but also to industrial firms engaged in the production of building materials. Already plans for a considerable expansion of cement manufacture have been announced and in all industries supplying building materials there is a high and rising level of activity. The programmed expansion of house-building is also of interest to manufacturers of furniture and other producers of household goods. The family which acquires a new dwelling is motivated by the desire to furnish it better and this stimulates trade in all forms of household articles. The Government can assist all firms producing or trading in these goods, by affording them the most precise information of our development plans, and this is being done in the Second Programme. The Building Advisory Council, and other bodies associated with the industry, will maintain a continuous review of building projects so that all sections of the industry can plan their development ahead in a manner which has not heretofore been possible.
With the success of our industrial policy to date and the expectation of continuing industrial growth we are experiencing the need for the development of a manpower policy, involving measures to eliminate imperfections in our present system of recruiting workers for employment, including greater stastical knowledge of labour availability, generally and in particular areas; the extension and improvement of the employment exchange service and of vocational guidance facilities; measures to increase labour mobility as between occupations as well as geographically, including the retraining of workers where necessary and help to workers to move to new areas, and measures to deal with seasonal fluctuation and regional problems. Some reallocation of responsibilities between Government Departments may be involved and is under consideration.
The need for a manpower policy is emphasised by changes which are likely to take place as a normal feature of development in the distribution of employment in the various sectors of activity, the anticipated consequences of free trade, the increasing pace of technological change and the need to elevate the levels of technical skills, and to provide advance training in anticipation of new industries. While the basic aim must be wherever possible to bring work to the workers, our progress to full employment can be helped by a greater degree of adaptability and geographical mobility of workers. These matters are under active consideration arising out of reports from an inter-departmental committee which made recommendations on retraining and resettlement facilities and other inquiries. During the present month the matter will be under consideration by the National Industrial Economic Council which we think should have a co-ordinating role in this matter.
Government policy must be consistently directed to helping workers to use their abilities to the best advantage of themselves and of the nation. The most immediate problem, however, is to provide adequate means of dealing with any disturbance of employment resulting from industrial adaptation or technological change. Our arrangements must be such as to give reasonable protection to individual workers against the possibility of hardship arising out of industrial changes.
In this connection, it will be remembered that the Committee on Industrial Organisation recommended consideration of the desirability of providing major industrial development centres, and industrial estates, and concentrating industrial expansion in them. The Government have postponed taking a decision on this recommendation pending the outcome of a further investigation which is now in progress of the social and other implications of it. When our inquiries have been completed, the Government's policy will be made known and in the meantime an active discussion of this aspect of industrial development will help to inform public opinion about it.
I intend now to make a reference to the subject of prices. The 4 per cent rise in the general price level consequent on the ninth round of wage and salary increases was about what was expected and what I ventured at the time to forecast, although it is to be noted that about ¾ per cent of the increase is attributable to higher meat prices following on a rise in prices in world markets which was not anticipated. The effect of higher wages and Budget changes in taxation on prices is now fully effective. No further increase is to be expected. Subject to possible variations in the prices of imported materials, a period of relative price stability is to be anticipated.
Once again we have as a nation learned that we cannot pay ourselves in terms of money, either in the form of higher wages and salaries or higher expenditure on Government services, greater increases of income than the higher national income will support without affecting the value of our money. When the national wage agreement was being negotiated I expressed the view that an overall increase of 8 per cent or 9 per cent would be fully justified by rising national production. I knew better than most the difficulties facing the negotiators of the agreement. I agreed that an increase somewhat greater than economic considerations and calculations might suggest would be worth conceding for the sake of a national agreement.
The 12 per cent wage and salary agreement when negotiated was accepted by the Government and fully implemented in all the public services and by all the State-sponsored organisations. I feel constrained to say, however, that if a national agreement for an overall income increase of 8 per cent or 9 per cent had been possible, wage and salary earners would probably be just as well off in terms of the buying power of their earnings as they have in fact become. I hope this repeated experience will have its effect in future years.
The fact that all round wage and salary increases are being paid in advance of the higher production needed to sustain them may create some difficulties in this year. But it now seems that the difficulties may not prove to be as serious in regard to employment and exports as may at first have been feared. The substantial increase in industrial exports in recent months is a most encouraging development. The widening of the country's external payments deficit in this year is to be expected, which we can and must try to recover next year without having recourse to restrictions which would slow down our rate of development or the increase in employment. The warning in this regard expressed by the Central Bank in its recent annual report is both necessary and timely.
The main task now is to step up productivity, that is to say, the output per worker employed, to an extent that will give permanent support to these higher wages. Because of the continuing rise in industrial output that is being achieved, a 7 per cent increase in productivity has already been recorded this year, although it is to be appreciated that an overall productivity calculation of this kind can be illusory and conceal less satisfactory conditions in particular industries. It is however an indication that our policy is working out on the general lines we envisaged. We may hope to be able to have another general upward adjustment of wages and incomes, even if less than the 12 per cent of the ninth round, without undue difficulty in respect of output or exports or employment when the present national agreement has run its course.
It is, however, of vital importance to the success of the whole national development effort and to the expansion of employment that all who have the power to influence thought and action in this sphere should help in getting an understanding that we have by the 12 per cent increase of the national wage agreement gone to the very limits of possibility of improving general living standards until national production has not merely caught up again but gone ahead. There are inexorable economic laws which exact severe penalties from any nation which disregards them, and this nation is not exempt from them. Some effort is being made by people who like to suggest there is an easy answer to every problem to propagate the idea that the effect on prices of higher wages not offset by higher productivity can be cancelled out by the introduction of a rigid system of price control. That is one of the shibboleths of the Labour Party. I have more experience than most people of operating price controls. I know that, while they are unavoidable in times of artificial scarcity, they tend in all other circumstances to keep prices up rather than bring them down. In countries where price controls are now operated they are associated with policies of wage control, as in France. Indeed they must always be ineffective unless all factors affecting prices, particularly wages, are also made subject to control.
The view of the Government is that a comprehensive and detailed system of price control is neither practical nor desirable. We believe competition is the most effective regulator of prices and that Government action should be constantly directed to ensuring that competition is effective. Reliance on the effective force of competition rather than on ineffective Government regulations does not mean that the Government are indifferent to the movement of prices. Indeed, we are examining the possibility of improving the machinery by which the Government are informed about price and cost developments.
We want it to be known widely by producers and traders that the Government, and ultimately public opinion, is very interested in their behaviour in respect of prices and that ad hoc measures will be taken to deal with any situation which requires it. Whenever arrangements which appear to be restrictive of competition come into operation the Fair Trade Commission will act at once to investigate them and have them declared illegal if they are deemed to be detrimental to the public interest. If, as I have already assumed, a period of relative stability is now to be anticipated in respect of incomes and prices, it will be of very great help in enabling development plans to be pushed ahead with all possible speed. This is the most important aim for all sections of the community at this time.
I propose to review the position regarding agriculture. In this volume relating to the Second Programme which will be published on Saturday there will be a chapter in which the general prospects for agricultural trade in the years ahead are analysed. It must be said that up to now international efforts to moderate protection and support policies for agriculture in the highly industrialised countries have not yet been very successful. This is a very serious matter for this country which is so heavily dependent on agricultural exports. Our support for all international efforts to secure a more orderly system of trading in farm products will be given automatically. The GATT made an abortive attempt to secure this in 1961. The prospects for agreement relating to agricultural trade during the Kennedy Round talks are still very uncertain. The European Economic Community have made substantial progress in establishing a common agricultural policy and for the eventual creation of a single market with uniform prices, free internal competition and a common policy towards other countries. The only major difficulty yet to be surmounted by the EEC relates to cereals.
The agricultural policy of the British Government, in which we have a large interest, is being reconstituted on the basis of sharing the British market at the present level of supplies between their home producers and other suppliers. This involves import controls, which are now operating for butter, bacon and cereals. While this system promises better prices and more stability, it tends, as the Minister for Agriculture pointed out in his Estimate speech, to freeze the market pattern and to limit the possibility of trade expansion.
We have had discussions with the British Government on the possibilities of a closer harmonisation of our agricultural policies and prices in a way which would afford us wider market opportunities. We have in mind arrangements which could be adapted without much difficulty to subsequent Common Market membership by both countries. These discussions have continued for some time past but are not yet completed and further progress is unlikely until after the British general election.
Export trade with other markets and particularly with the United States of America and the European Economic Community, which in both cases is capable of considerable improvement, is receiving special attention from our selling organisations. Improvements in marketing systems and methods are possible and must be vigorously sought and could contribute to expanding our trade with these other markets.
Agricultural output and exports and agricultural incomes in the aggregate and per head have risen, partly due to rising productivity and partly to the increased Government expenditure on agriculture, notwithstanding the fact that the index for agricultural prices showed no rise until this year. During the first four months of this year the agricultural price index showed increases which were on average seven per cent higher than in the corresponding months of 1963. Whatever this may involve for consumers, it is very good news for our farmers. Gross agricultural output was 18 per cent higher in 1963 than in 1958 while, notwithstanding increased Budget support, farmers' costs have also risen. The aggregate net income of farmers rose from £99.4 million in 1958 to £121.5 million in 1963.
I have taken 1958 for the purpose of this comparison as it was the last year preceding the introduction of the First Programme but, in fact, it was not a very good year for agriculture and comparisons of this kind are greatly affected by the base year which is selected.
In deciding that an average annual growth rate for agriculture of 2.9 per cent is feasible, the Government are taking into account the present pattern of production, the average growth rate achieved during the First Programme, our production potentialities and our export possibilities.
The prospects of a major breakthrough for Irish agriculture still seem to depend, however, on acquiring Common Market membership. The potential for increased production exists and there is little doubt that it could be realised if the assurance of adequate market prospects could be given. Notwithstanding advantages of soil and climate, the volume of output per man and per acre in Ireland is lower than in many European countries. The greater part of any increased production must, however, be sold abroad.
Because industrial expansion is proceeding more rapidly than agricultural, agriculture's share of the national income fell from 28 per cent in the average for the years 1951-53 to 22 per cent in the average for the years 1961-63 and those engaged in agriculture as a proportion of the total at work fell from 40 per cent to 35 per cent.
Deputy Dillon and other Fine Gael spokesmen never seem to appreciate the importance of this trend. This country is still too heavily dependent on agriculture and a properly balanced economy will not have been set up until the growth of industry has proceeded much further. The support which is given to agriculture through the Budget and which agriculture needs will be made easier to carry as other productive activities in the country are expanding.
During the course of recent months, there have been very useful discussions with agricultural organisations, particularly the NFA. Although it is unlikely that complete agreement on details of agricultural policy and its application will ever be secured, the practice of consultation is highly beneficial to all concerned. The relations between the Minister for Agriculture and the NFA are now much more harmonious and constructive and with that organisation the practice of regular consultation and an annual general review has been set up. This outcome of recent talks is a matter of personal gratification to me.
The Government are convinced that a well-developed co-operative movement can make a significant contribution to agricultural progress. It has done so in other countries. Enthusiasm for co-operation based on a deep-rooted understanding and acceptance of the co-operative principle has never really developed here and this is one of our serious disadvantages. With the idea of arousing public interest in co-operation as well as of securing a practical plan of action, the Minister for Agriculture arranged for Dr. Knapp, a well-known American authority on co-operation, to review the position and to make a report. Dr. Knapp's report recommended that the IAOS should receive increased Government financial support subject to its reorganisation on lines suggested in his report, that it should have responsibility for working out general reorganisation plans for the dairying industry and should extend its activities in the co-operative field. The Government have accepted these recommendations in principle. He also recommended that the Dairy Disposals Company should be transferred to co-operative control. The Government do not object in principle to this proposal but the practical difficulties involved are very considerable and are greater than Dr. Knapp appeared to appreciate.
The credit facilities now available for farmers are adequate and the only disappointing aspect is that they are not being used sufficiently by farmers even when obvious advantages are to be secured by so doing. The lending arrangements of the Agricultural Credit Corporation have been relaxed so that farmers can secure loans of up to £400, on their personal security, and up to £500, when the application is recommended by a creamery or by an Agricultural Credit Corporation agent, with a deferment of repayment obligations. It is a remarkable fact that the number of applications which have been forwarded with creamery recommendations is very small and this indicates the need there is for a stronger educational effort to promote the use of credit.
State expenditure on agriculture has more than doubled during the past decade and will amount in this year to £43 million. This is a substantial contribution from the general taxpayer to help farmers to meet rising costs and to bring their incomes into better relationship with those of other sectors. Whatever we may achieve in industrial expansion the prosperity of this country rests on the health of its agriculture and so long as international trade in agricultural products continues in its present unsatisfactory state we regard it as good national business to continue to provide these very large annual sums to help to improve the efficiency of agricultural production and to offset the impact on farm incomes of uneconomic export prices.
The need for this exceptional help will pass only when, in the context of Common Market membership or the less likely prospect of worldwide commodity agreements, farmers get a new deal in international trade and fair trading arrangements are established for agricultural products to match the free trade arrangements which are developing for industrial products.
This is the policy of the Government. It has necessitated taxation on a scale which has caused political problems for the Government by reason of the attitudes of the Opposition Parties. It is a sound policy, however, a policy which cannot be abandoned without grave danger to the whole economy.
The purpose of all economic development is to facilitate social progress, to bring about better and more secure living for all sections expressed in terms of their food, their clothing, their housing, their education, their cultural and recreational facilities. So far as these social aims are concerned, it can be said that the pipelines have been laid through which the expanding resources of the community can be directed to these purposes. There are a few, but not many, problems of organisation yet to be solved and some further arrangements required which need not, however, be much more than extensions and adjustments of the foundations already constructed. As the nation's resources grow by reason of higher production, the expansion of this social programme is assured and, as I have frequently stated, it is the policy of the Government to bring this about.
There is, however, one social problem, that of rural development, where the need for definition of clear aims has not yet secured general acceptance and where the making of policy decisions is still impeded by emotional overtones and the mistaken idea that there may be some political advantage in vagueness and the usual wishful thinking that the clock could run backwards.
The drift of population from the land, which is the main characteristic of this rural problem, is a phenomenon which has developed in almost every country in the western hemisphere, in most cases in much more pronounced degree than here. In some respects this gives us a useful pool of experience and ideas from which to draw although the attitude to it differs in different countries. In some it is encouraged; in others, like Ireland, the economic and social problems to which it gives rise, and indeed from which it stems, are the cause of growing concern, and the general desire is to slow it down and to arrest it if possible.
We have only very general information as to all the motivations and circumstances which have set up and which maintain this movement. There is no simple explanation for all the factors that are at work. Some social studies have been carried out which have been very helpful but there is still sufficient uncertainty to permit a wide variety of individual views. Few, however, will deny that the main forces are, firstly, the attraction of higher incomes in urban occupations and secondly, the declining labour requirements of agriculture. The movement of population from one economic sector to another, particularly out of agriculture, from rural to urban occupations, is not in itself an unhealthy or an undesirable phenomenon provided it promotes higher productivity in agriculture and in the whole economy and promotes better living standards all round, and provided that industry and other rural and non-rural occupations can absorb more manpower without any economic pressure towards emigration. The difference between this problem as it presents itself in this country and in some other European countries is that our industrial expansion has not yet proceeded far enough or fast enough to prevent the outcome of the movement out of agriculture being emigration rather than an internal redistribution of population.
In our thinking about these rural population problems, it is necessary to distinguish between those arising out of agriculture's reduced need of labour and the other factors which are contributing to the decline of the rural population. They are not exactly the same thing, and notwithstanding changes in agricultural production and techniques which enable higher agricultural output to be achieved with less human labour, the rural population could be maintained to the extent that other non-agricultural rural occupations could be expanded.
We are basing our policy decisions on the assumption that any sound and comprehensive policy to cope with the social problem of a contracting rural population must embrace three main objectives: firstly, the most intensive use of the land so that the maximum number of people will be retained in agriculture; secondly, the creation of family farm units, with the minimum disturbance of population, of a size and quality which will enable energetic and competent families to secure a satisfactory income; and, thirdly, the development of other opportunities for rural employment to the maximum practical extent.
As regards the improvement of small farm incomes by the intensification of production, there are very many farmers in the small farm areas who could greatly increase the output and the income from their holdings with comparatively small outlay on their own part if they availed fully of the many agricultural schemes and credit facilities now available. Why do they not do so? This is a question to which a fully satisfactory answer has not emerged. What can we do about it? The expansion of the advisory service is part of the answer. Improved facilities for agricultural education may be another. The extension of co-operation based on a real understanding of its principles may be another. A practical demonstration of what is feasible under energetic local leadership, which is what the Government intends by its small farm pilot scheme, may be another.
The Government's plans cover all these aspects. Provision is being made for the extension of advisory services in the small farm counties. Facilities for agricultural education in all its forms are being improved. A campaign to promote a vigorous co-operative movement is envisaged and a small farm pilot area scheme is being launched. As regards this pilot area scheme the purpose is to show what any small farm area can accomplish given local co-operation and energetic leadership and using the existing Government schemes. I know some people have a different idea but this is what the Government have in mind.
If, arising out of experience of development of the pilot areas, the need for extending these Government schemes or introducing new schemes should emerge, what is done must be capable, both from the organisational and financial points of view, of extension to the whole country. The Government see no point whatever in taking the administration of the pilot area schemes away from the established local advisory service and the departmental services and entrusting their administration to a new organisation; or basing them on the injection of large sums of money into the pilot areas which would defeat the primary purpose which is to show by demonstration what can be done in any area. Both of these ideas have been advocated. The number of pilot areas can be extended as experience is gained and as the demand for it grows, as it surely will, and ultimately all the small farm areas are operating on the same lines and the pilot area idea will have withered away.
As regards the improvement of farm structures in these areas, the raising of the average small farm unit to a more economic size depends on increasing the intake of land by the Land Commission and opening up wider prospects of extending migration to other areas. There are, however, limits to the extent to which this is feasible without the undue disturbance of population. The Government decided they should work within these limits. That is the motive behind the Land Bill now before the Dáil. The difficulty and delay in securing its enactment in the Dáil is evidence of the continuing reluctance to tackle this question vigorously, as well as the muddled thinking of the Opposition Parties. No matter how successful we are in intensifying agricultural production and raising the average size of the farm unit, arresting the process of the contracting of rural populations will require still more extensive measures to facilitate the setting up of rural industries, the expansion of afforestation and of industries based on it and the development of the business of tourism in all its aspects. In coastal areas the expansion of sea fishing can play an important part.
Furthermore, physical living conditions in rural areas must be brought as closely as possible to urban standards so far as public amenities are concerned—housing, electric light and power, educational facilities, piped water, sewerage and better roads. Government policy is directed to all these ends. Particularly in the sphere of housing, the Government have recognised that a serious gap has existed in previous housing programmes so far as small farms are concerned.
