asked the Minister for Finance if the present credit restrictions and the recommendations of the Central Bank can be reconciled with the increased tempo of economic expansion up to 1970 stated as necessary for economic well-being in the Second Programme for Economic Expansion; and how, in fact, a slowing down in economic activity and employment can be avoided.
Ceisteanna—Questions. Oral Answers. - Economic Activity and Employment.
12.
It was stated in Chapter 15 of the Second Programme for Economic Expansion that the objective of financial policy would be to maintain adequate—while avoiding excessive— demand and that it was desirable that total community spending should be sufficient to keep productive activity at the highest rate consistent with a competitive level of prices and costs and a reasonable degree of external balance. The programme warned against the dangers of excessive pressures of demand, which include the raising of prices and costs, the reduction of export competitiveness, the stimulation of imports and undue enlargement of the deficit in the balance of payments.
For the reasons given in my Budget statement measures have had to be taken this year in the credit field to control the adverse movement in the balance of payments. The recent trade figures have made the need for such control more apparent.
The advice of the Central Bank to the general effect that bank lending should not expand as rapidly as it had been doing and that main priority should be given to lending for productive purposes is therefore in accordance with the financial policy set out in the Second Programme and is intended to ensure the financial stability necessary to maintain the upward trend in production and employment.
That does not answer the question as to how one can reconcile restriction with expansion, how one can reconcile the policy of the commercial banks with an expansionist policy which we are told we must pursue until 1970, even to preserve the number of jobs we have.
There are certain economic difficulties at present and these are external, to a large extent. The measures taken are designed to ensure that we maintain control of our own economic position so that we can maintain the momentum in expansion of employment and production. Unless certain measures are taken at certain times in any country's progress, there is a danger that the progress made might be lost.
Does this mean that the targets in the Second Programme for Economic Expansion have been cut down to size as a result of the credit restrictions?
On the contrary. Taking one element of the present situation, the Government's capital programme was stated for this year in the Second Programme to be £96 million. In fact, in our capital Budget, we have provided for an expenditure of £104 million. It is important that we should try to contain that capital expenditure for many reasons, one of which is to give the private sector an opportunity of access to reasonable capital for its own purposes. That is only one aspect. It does not indicate we are cutting down on the targets.
The fact that the Minister indicates that there is increased public expenditure involved means restrictions on the amount of capital available.
This is becoming academic.