We are coming to the end of this debate on the Budget and I think this year we have had a very good and, I hope, constructive and fruitful discussion on where the country is going and on the direction which the Government feel proper to give economic policy in the country.
I should like to divide what I have to say between the budgetary proposals contained in the Minister's Financial Statement, on the one hand, and the question of economic policy and direction on the other. When I spoke on behalf of the Fine Gael Party immediately following the Minister's Budget Statement, I made it clear that, so far as the proposals in the Budget were concerned relating to social welfare benefits, we welcomed them. We welcome them, we expected them and we had campaigned for them. On that account we agreed immediately that we would support such taxation as was necessary to provide for these increases. I claimed on behalf of my Party that the measure and extent of the increases in social welfare payments were in large degree attributable to the Fine Gael policy, and the Fine Gael campaign in the last general election.
Needless to say, and again to be expected, that claim has been rejected and repudiated by the Taoiseach and by members of the Government. I do not think it matters in the slightest why or how it was decided that a measure of social justice should be provided for the old and the infirm. The important thing is that it has been decided. No matter how many speeches the Taoiseach may make or members of the Fianna Fáil Government may make, we will always be convinced that were it not for the fact that last month there was a general election, were it not for the fact that we went into that election in pursuance of a policy aimed at a just society, were it not for the fact that we succeeded in arousing throughout this country a public awareness of the existence of poverty and indigence in our midst, we are satisfied, and nothing will convince us otherwise, this Budget would not have taken the form it has taken.
Indeed, I am reminded of the fact that in the early days of the general election, on 29th of last March, the Taoiseach made reference in a speech in Galway to the form this Budget would take. I would remind members of the Fianna Fáil Party of what he then said because I think it indicates that probably the campaign that subsequently took place affected his prognostications as to the kind of Budget we were likely to have. The Taoiseach as reported in the daily press of 29th March said that, on a preliminary review, estimates suggested that no additions to existing taxation would be required, provided no new expenditure was undertaken in the coming year. That is a very balanced and, I think, a very careful statement. He went on to say that, if, however, it was decided to increase old age pensions and other social payments, strengthen the aid to farmers, extend the education services or develop in any major way other important services, some tax changes might be necessary.
That was the Taoiseach speaking on 29th of March in the early days of the election. He spoke as a man who was anxious to convince the country that there was going to be no increase in taxation unless it was decided to give some increase in old age pensions, some further benefits to farmers, extend our education services and matters of that kind. I think it is not unreasonable for me to say that, if the Taoiseach, or the Fianna Fáil Party, had always intended to do what they now have done, what the Taoiseach said on 29th of March at the outset of the election campaign would have been far different from what, in fact, he did say. I have little doubt that it was the tempo and the nature of the general election that subsequently won from him an undertaking on the eve of the general election that a measure of social relief for the aged and distressed would be provided. However, those are matters for debate. As I indicated, the important thing is that in this Budget, following the general election, an increase has been provided in the social welfare payments, an increase which is welcome and which we support in every way.
We indicated when the Financial Resolutions were being moved that we would support increased taxation on beer, tobacco and cigarettes for the objects contained in the Minister's Budget Statement, but that we felt the increased tax on petrol was not wise in the circumstances, that it certainly was not necessary and is not necessary for these increases. We therefore opposed the increased tax on petrol, but we did not oppose it to deprive anyone in any way of the social welfare benefits contained in the Budget because the revenue to be obtained from the increased petrol tax is not necessary to provide for the social welfare benefits. Now that we are discussing the General Resolution, and in order to make it quite clear that we support the proposals in the Budget for increased social welfare benefits, I should like to indicate at this stage that we do not intend to, and will not, oppose the passage of this General Resolution.
Having said that, I think it is necessary to prick in some way, if one can, the sense of complacency in which we have cloaked ourselves in this debate in the past few days. We are inclined to feel that, having provided an increase of 10/- per week for an old age pensioner who has no more than 10/- a week, and having provided an increase of 5/- per week for an old age pensioner who already has 10/- a week, we have gone a great step forward towards achieving better conditions for the old age pensioners. It would be a sorry day for all of us in this House and for the many hundreds and thousands of distressed people outside the House, if that complacent feeling were firmly held. I should like to bring us all down to earth to some extent by reminding Deputies—it is not necessary to remind the Minister—that even with these increases in the social welfare payments, this year we are spending a smaller percentage of current Government expenditure than we spent in previous years on the poor, the sick, distressed people, and those who are normally the object of social welfare payments.
That is a sobering thought. May I just refer the House to the figures? In 1959-60, 19.8 per cent of the then current Government expenditure was spent on social welfare benefits. That is close on 20 per cent. That means that almost 20 per cent of what the Government were spending that year was devoted to the old age pensioners, the sickness benefits of one kind or another, and to the care in one form or another of distressed and handicapped people. The following year the percentage dropped to 18.7. The year after that, it dropped dramatically to 16.9. The year after that, it dropped to 16.5, and it dropped again to 15.7 last year.
This year the figure has been increased merely by .3 per cent. All that represents a drop in those seven years of 3.8 per cent. In talking about percentages, one gets caught up in figures and I do not wish to do that. I merely wish to direct the attention of Deputies to the plain fact that, with all the jubilation and flagwaving, with the sort of self-gratification that has been going on in this House, this year we are spending almost four per cent less of current Government expenditure on social welfare benefits than we were spending seven years ago.
Of course an increase, and a substantial increase, in social welfare payments was necessary. It was overdue. Do not let anyone think that we have gone as far as we could. If we were as conscious of the necessary object of social justice as we were seven years ago, this year we would be providing much more than the Minister is providing in his Budget. Next year when the Minister brings in his Budget, I hope the slack will have been taken up, and the gap substantially filled, and that at least we will aim at providing the same measure of social justice as we were providing seven years ago when the percentage figure was 19.8.
Having said that, and having referred to the social welfare aspects of the Budget, I should like now to say something about the economic aspects of the Budget. The leader of the Fine Gael Party, Deputy Cosgrave, in the course of his speech, made clear his views, and the views of the Fine Gael Party, as to the role our Party should play in this Dáil, in Opposition. As the main Opposition Party, we intend to play, and we shall play, a constructive and, I hope, an intelligent role. We shall be constructive in the interests of the country. We shall seek in every way possible to encourage the course which in our view will lead to national advancement. That may involve, I hope frequently, our supporting Government action. I think that would be desirable—that one would see a Government taking the right decisions—but if it may appear the Government take the wrong decisions, that will involve from us very definite and vigorous opposition.
But it also means that we intend to probe into all spheres of Government activity in order to bring home to the Government, if necessary, the great sense of urgency that should possess all of us in this country as to the problems that require to be solved. I believe there has been in recent years a feeling of euphoria in the Government and possessing most people in this country. We have rather regarded ourselves as being able to choose our own rate of progress, as being entitled to set our own targets and to proceed at a rate of progress which is satisfactory to us but which to others might seem as a snail inching forward.
I believe the time has come to pick ourselves out of that sort of feeling. There are a few things that are not generally understood by all of us which should be. First of all, it is not generally appreciated in this country that the world today is suffering from a population explosion. There has been a dramatic, significant—words fail one to describe exactly what is happening—increase in world population in recent years that has led and will increasingly lead to the fiercest form of competition ever known to mankind.
It is a truism to say we are living in a competitive world. I wonder how many of our people realise that we on this island just cannot afford to have a situation in which we cannot contain our own population? We cannot afford to have a situation here in which our population will drift elsewhere because if we cannot provide for our own population, there will be, increasingly so, hungry eyes looking in our direction.
That is part of the urgency of the present situation. It will become increasingly urgent in the years that lie ahead. It is against that background and indeed that sense of urgency that the Fine Gael Party—we make no apology for it—have propounded and put forward their views as to the way in which the economy should be directed, if necessary, but certainly the way in which economic policy should be faced. We believe sincerely that this country just cannot afford the kind of economic programme which has been the policy of the Government and about which they have talked so much. We just cannot afford that kind of approach. It is too limited, the targets are too low, the rate of progress postulated is too small and it is not a sufficiently urgent concept of what requires to be done.
Deputies have referred to the Second Programme for Economic Expansion in various ways in this debate. I do not wish to go over the ground that has already been travelled but it should be stated and it should be realised that given everything that is hoped for in the Second Programme, in five years time this country may not be able to survive. Given a four per cent economic growth over the next three or four years, given emigration figures reduced to 18,000 a year, given an employment increase of 6,000 or 7,000 a year, where will we be in 1970 with the world population, with competition growing more and more acute?
If they are our targets, if that is the extent of our aim during the next five years, this country will continue to be, and even more so, the limping poor invalid in Europe. We cannot afford that. A four per cent growth rate, with most other countries in western Europe having a rate approaching twice that figure, is not nearly enough. We regard four per cent as sufficient though the gap between us and other European countries is widening.
It is bad enough that these should be the humble aims in the present economic programme but it is quite tragic that these aims apparently are not being achieved. We did achieve in the year just concluded a growth rate of something more than four per cent, but we had other features during the year which were disturbing. Instead of containing emigration at 18,000, it increased by 40 per cent or exceeded the programme figure by that percentage; instead of increasing employment by 6,000 or so—0.7 per cent—the increase in employment was merely 0.4 per cent, or 3,000 people. Instead of keeping unemployment at a rate around 40,000, there were close on 60,000 registered as unemployed during the year.
These are depressing figures. It is bad enough to seek a result under this Second Programme which would contain emigration at 18,000 a year and merely provide some 6,000 more jobs for our people. It is bad the target should be so low but it is far worse when in fact these limited aims are not being achieved. That indicates—I hope and intend to be constructive in what I have to say—that this Eighteenth Dáil has a great deal to do and the Government have a tremendous task ahead of them. Certainly so far as we are concerned, in the achievement of what must be done the only sound criterion will be the employment of more people in a higher standard of living and in the achieving of that a great deal still remains to be done.
It would be the height of folly for people to believe that everything is grand, that everything in the garden is rosy and wonderful as long as we are achieving an increase of four per cent in our gross national product. That would be the height of folly and I feel that many people, having listened to much that was said, understandably said, I suppose, in the general election, have begun to feel that we are progressing and that everything is satisfactory. The fact is that a great deal requires to be done and that a great deal of hard work will have to be done by the Government. I hope that in the hard work we can assist. Certainly it will be our concern and our duty in Opposition to assist in every way possible, and if the Government appear to be flagging, it will be our duty to spur them on.
Having said that in relation to our progress up to this, I should like to direct the attention of Deputies to the comments that have been made for the first time on the year's progress under the Second Programme by the National Industrial Economic Council. I fear that many people do not realise how important it is that there should be available a body, however composed— we have certain views about its composition—which is representative of bodies and organisations independent of the Government to give an objective comment on economic progress during the year. That body is the National Industrial Economic Council which published its comments on the Department of Finance review of the year 1964, the first year under the Second Programme. In the NIEC comment, there is, understandably if what I have said up to this is accurate and correct, an expression of concern as to the progress achieved in the past 12 months.
The NIEC comment refers to the fact that we have had an emigration figure as high as 25,000 in the year and it suggests four steps which might be taken by the Government in relation to employment. I do not know whether the Government considered the four proposals put forward by the National Industrial Economic Council. I am sure that some of them have been considered. Perhaps the Government feel that steps along these lines, or some of these lines, are already being taken, but I should like to hear, as I am sure we will hear, from the Minister for Finance the view of the Government on the proposals set forth in the second paragraph of the NIEC comment. These four proposals have already been referred to by Deputies and I do not wish to read them out again. I should like, however, to direct the attention of Deputies to the concern expressed by the NIEC in their fourth paragraph with regard to the rate of increase in industrial output in the closing months of the year just concluded.
They refer in paragraph four to the fact that there had been a slowing down in the rate of increase in industrial output in the last half of 1964. They go on to say:
While it is too soon to determine whether this is due to continuing rather than to temporary difficulties, the developing situation should be kept under review and preparations made for taking any necessary corrective action.
In other words, the NIEC refer to the fact that the rate of increase in industrial output has been slowing down, as indeed it has, quite markedly in the period under review and they therefore suggest that some stimulus is needed, some push is needed to keep things going. They suggest to the Government that preparations should be made for the taking of necessary corrective action. Now, the corrective action must be action which will push on the economy, which will liven things up. It cannot be action which will dampen things down or depress the economy. I should like to know from the Minister whether that recommendation has been considered by the Government, and if so, what action is proposed or will be taken to make sure that the economy will be kept increasing and working at as high a level at least as in the first part of 1964.
That paragraph with regard to corrective action leads me to deal with one other aspect of the Minister's Budget Statement, that is, the balance of payments. The Minister referred to the fact that the Central Bank proposed to have, and is probably having, consultations and discussions with the commercial banks. I hope the Minister will take the House fully into his confidence in this matter. There is, and there has been for some weeks back, a shortage of credit. This shortage of credit has hit many people, many sections of the community in a variety of ways.
I should like to deal with one aspect of the apparent credit shortage which has been most pronounced in relation to private building. Deputies will recollect one building society recently announced a limit of £3,000 on loans for the building of a house. We all know here particularly, but, indeed, in every country it is true, how serious and harmful and how distressing a general credit squeeze can be. Restriction on credit of general application can result in the most terrible hardship for ordinary people. It is, of course, a deflationary measure which is similar to the most severe taxation.
When the Minister mentioned that the Central Bank would have discussions with the commercial banks, he had in mind and was referring to a deficit in our balance of payments. I do not know how seriously the Minister, speaking on behalf of the Government, regards the present deficit in our balance of payments and, therefore, I do not know the object of the Central Bank discussions with the commercial banks. If the Central Bank hopes to achieve a situation with the commercial banks that available credit will be used for productive purposes, one can understand and approve of what is proposed to be done, but if the object of the Central Bank discussions with the commercial banks is to achieve willy-nilly a reduction this year in the deficit in our balance of payments, then I should like to have, on behalf of the Fine Gael Party certainly, a great deal more information because, from the information available to us—there may be more information available to the Government; I do not know—there seems to be a pretty concerted view that so far as our balance of payments situation is concerned at present, there is no need for any depression or deflationary measures in relation to our economy.
The Department of Finance in their Progress Report for 1964—it does show the change in attitude of the Department of Finance when one can quote them in these terms in this respect, with which the Department of Finance is concerned, although it is not entirely responsible for it—refer to the balance of payments situation at page 26 and say:
The increase in the trade deficit in 1964 is likely to have been partly offset by an increase in net visible receipts. The balance of payments deficit is estimated to have been of the order of £21 million as compared with £22 million in 1963. Despite a substantial increase in exports, the 1964 deficit was somewhat higher than the average envisaged for the period of the second programme. The rise in imports which brought it about, however, contributed to the large increase in capital formation and building up of export potential. As in 1962 and in 1963, the deficit was more than covered by an inflow of capital.
There is no evidence in that passage of any concern by the Department of Finance in regard to the balance of payments situation. They point out, as they are entitled to do, that whatever deficit was there, there was an increase in our export potential, an increase in the amount of capital formation and that, in fact, whatever we were bringing in was being used or would be used to enable the country to trade better in future. That, so far as we are concerned, is an important statement representing the view of the Department of Finance.
A view was also expressed by the National Industrial Economic Council on page 6 of their comments. They say in regard to the balance of payments in paragraph 3:
There was a small surplus in the current balance of payments in 1961, deficits of £14 million in 1962, £22 million in 1963, £30 million in 1964 and a deficit of the order of £25-£30 million is expected in 1965. In terms of constant 1960 prices, the average of the deficits during 1961-4 has been above the figure of £16 million for the current deficit envisaged for the period of the second programme. During 1962-4, the current deficits were more than covered by an inflow of capital, so that there was some increase in external reserves. While it is not possible to relate the current deficit to the behaviour of particular heads of national expenditure, it is nevertheless significant that the growth of the current deficits has been associated with the rapid increase in gross capital formation.
Again, the National Industrial Economic Council feel that a deficit of the order of £30 million or £31 million is more than is referred to in the Second Programme but that, nevertheless, we were getting in capital goods and as our potential for better trading was being increased, everything was all right. In the OECD Economic Survey for March of this year, which was mentioned by the Minister in his Financial Statement, I read on page 16 this comment on our balance of payments position:
In the last three years the growth of the Irish economy has been accompanied by the emergence of a growing current deficit on external account. A small surplus in 1961 became a deficit of £13 million in 1962, £22 million in 1963 and £30 million in 1964 and, on present trends, an appreciably lower figure is unlikely this year. At its present level, the deficit is relatively high and amounts to over 3 per cent of GNP. But the nature of the deficit, taken in conjunction with Ireland's external asset/liability position and the manner in which the deficit is being financed, suggest that the current account position should not at the present time give grounds for too much concern.
Those are three comments on our balance of payments position and they would, I should imagine, have represented the concerted advice to the Government as to what should be done in relation to the direction of the economy this year. It amounted to this, that, whatever deficit we had in our balance of payments, our rate of progress at home was so unsatisfactory, with unemployment running as high as 58,000, with emigration reaching 25,000, with a downturn in industrial output, the situation demanded a spurring on of the economy and nothing done to depress things.
It is against that background that, immediately prior to the Budget, the Central Bank Quarterly Report came out. I should have said before dealing with the Central Bank Report that the Department of Finance, in its Progress Report for the year 1964, starting at page 27, referred to the main developments expected in 1965. These are set out on page 27 and then, on page 28, the ninth of the expected developments for 1965 is a deficit of £30 million in balance of payments. So that, the Department of Finance, with equanimity, looks forward in its report on the year 1964 to a deficit in our balance of payments of £30 million in this year and does not regard that as in any way disturbing because it would be expected to be associated with the same situation as took place in 1964 —an increase in our potential for trading.
It is in those circumstances that the Central Bank Quarterly Report came out last month and there is a different picture painted here. In this report, page 16, an exercise is entered into as to what way things should be shaped for the coming year and on page 16 it is envisaged that there should be an aim to reduce by £10 million the deficit in our balance of payments for 1965 and that we should aim in the coming year to have a deficit in our balance of payments not exceeding £20 million.
When the Minister, in his Financial Statement, referred to the balance of payments situation, I do not know, and I do not think any Deputy in this House outside of the Government knows, whether he was rejecting or accepting the views contained in the Department of Finance Progress Report for 1964, in the NIEC comments on that Report, in the Economic Survey published by OECD, all of which indicated that our balance of payments situation, while it required attention, did not require any deflationary measure, or whether, on the other hand, the Minister accepted a £10 million reduction as suggested in the Central Bank Report. Therefore, I would hope that the Minister can indicate to us a little more fully what is involved in such discussions as are envisaged between the Central Bank and the commercial banks because a designed reduction in credit, a concealed or contrived reduction in credit at this stage of our economic development could be very serious, indeed, and could bring about a recession which none of us would care to see.
There has been reference by Deputies to some other things which had not been dealt with in the Budget and I just want to refer to one of these, that is, the question of rates. The Taoiseach indicated in his speech on the Budget that the problem of rates was engaging and would engage the attention of the Government. I do not want to be scoring debating points but I think it is not unreasonable for me to remind the Taoiseach that this is the time of the year in which Governments and, I suppose, particularly heads of Governments, become particularly concerned about rates but as the spring grows into summer and as the autumn begins to loom up the subject of rates can be very quickly forgotten. I do not think it is unreasonable to remind the Taoiseach and the Government that we have heard at Budget time throughout many years back the same kind of protestation that the subject of rates was going to engage the wholehearted attention of the Government. It is always something that is about to be done but it is something that very rarely is done.
The fact is that we have accepted and adopted in this country over the past 40 years a system of local taxation which is regressive, which is indefensible on the grounds of justice, a system of taxation which falls upon people irrespective of their ability to pay and that system of local taxation in respect of which all of us are critical has, in fact, never been changed. Efforts are made from time to time by Governments, by political parties, to cloak the impact of rates, to cushion their effect on particularly vocal sections of the community but the fact is that, as Deputy Lyons pointed out earlier today in this debate, the burden of rates is such that in Mayo at the moment it is almost 80/- in the £. In other parts of the country, the impact is almost as serious. The Taoiseach says it is going to command immediate Government attention and he refers to the possibility of a committee or a commission. I have very little faith in commissions or committees. It is a very old habit of the Taoiseach's to set up a commission to examine whatever problem currently happens to be difficult. We have had it in relation to burning problems here in the past.
I do not know whether a commission to examine the problem of rates will achieve anything. I would have thought that this problem would have so engaged the attention of the Government over recent years that they would now be in a position to put forward constructive proposals. Certainly, the rating system has not proved acceptable and drastic changes are required. Whether we are going to have ad hoc proposals by the Government or whether we are going to have a commission to examine the matter, I hope that between now and the Budget next year there will be fundamental changes in relation to our system of local taxation.
Again, I wish to indicate on behalf of my Party that we support the reliefs contained in the Budget. We believe that they are necessary. We indicate again that, necessary as they are, they do not represent anything more than is just and proper. The percentage we are now spending on social welfare benefits and payments is considerably smaller than we were spending seven years ago. I hope the Budget and the message it contains will mean that all of us will be more conscious of the fact that there are in our community a great many poor people, distressed people, who have difficulties to contend with that many of us do not realise and to whom living costs and rising ri = "2"prices represent a very real burden. It should be our concern to see that such measure of social relief as we provide for them at least is in accord, if not more than in accord, with changing values in money. These Budget increases, while they do not completely compensate for the fall in the value of money, are a step in the right direction and, accordingly, we will support this General Resolution.