I hoped the Deputy would go on to the logical end of his argument in that respect. Unfortunately he was too overcome by a problem of his own to do so. Yesterday, the Taoiseach in introducing this Estimate tried to make the commercial community the scapegoat for the Government's blundering. He tried to make the commercial community the scapegoat for the failure of the Government, and the failure of the Taoiseach in particular, in relation to his own fraudulent deception of the people over recent years.
The speech he made yesterday was such a confession of failure as might have been made by Khrushchev and Malenkov when they were getting up in the Presidium and making a public confession of their failures in the hope of avoiding the punishment normally meted out in those countries. One thing after another, one plan after another made by the Government had gone wrong. It was indeed dismal reading to read through this speech. It was dismal reading to read through it the way in which he failed, adequately or properly, to face up to his own responsibility and the responsibility of his Government for what has transpired.
I want to make it perfectly clear that in criticising the failure of the Government to meet the situation at the appropriate time or in the appropriate way and the failure now to tell the truth in relation to that situation, I intend to do it in a critical and a constructive way. I do not intend to follow the lines followed by any of the people from the Front Benches opposite when they were on the Front Benches on this side of the House.
We can remember then, and the records will show it, the efforts Deputy Moran, as he then was, made to stampede the devaluation of the Irish pound with his questions and supplementary questions. We can remember the manner in which Deputy Blaney, as he then was, deliberately tried, with some assistance from Deputy MacEntee, to prevent the Taoiseach speaking at all on the Taoiseach's Estimate at that time. The leader of the Mafia, as he now is, the Minister for Local Government, as I must properly call him, then went out of his way deliberately to attempt to prevent the Taoiseach speaking on the economic ills of that time. Then we had that petulant fit of temper yesterday from the Taoiseach when he was asked a couple of questions.
I can remember, too, the manner in which Deputy O'Malley, as he then was, now Minister for Health, endeavoured to break up the building industry. I can remember, too, the manner in which a certain housing job was criticised. It was not done in a properly critical, constructive manner. The line taken by the former Deputy Briscoe, who was then Lord Mayor of Dublin, aided by another Deputy, was deliberately to sabotage the small dwellings loans scheme. I can even remember the manner in which the then Leader of the Fianna Fáil Party sat back himself and got his minions to throw dirt around.
There will not be any of that anti-national sabotage from Fine Gael on this occasion when the Government and the nation find themselves in difficulties, but there will be plenty of critical analysis and a detailed examination of the manner in which the Government have failed in their duty, and failed because they were prepared to put their own Party interests before the interests of the nation. Yesterday in relation to the Prices Bill, the Taoiseach tried to place the blame in that context. He also deliberately tried to place the blame for the problems with which we are beset on the commercial community. The fact of course is, as we all know, that these problems were generated by the Taoiseach himself in the first place, and were certainly accentuated by the actions and the line he and the Government have been taking.
In any situation in which a Government may find themselves from time to time, there is always an obligation to be entirely straight with the people, but I am afraid the Fianna Fáil Government cannot live up to that standard. In the general election in 1957, they made a pretence to the people that they only had to wave the magic wand of putting a Fianna Fáil Government in power for everything to be remedied overnight. I think history will show that the reason we had a recession after the balance of payments had been brought into line by March, 1957, was that the Fianna Fáil Party had sapped public confidence by suggesting that everything would change overnight if we had a change of Government. Of course there was far more to be done than merely that.
Similarly in the by-elections in February, 1964, a year and a half ago, the Leader of the Fianna Fáil Party went out of his way to suggest that we were floating ahead with such wonderful economic progress that we could afford to do virtually anything we liked, and that we would be able to digest it from an economic point of view. It is perfectly clear now—and the Taoiseach has impliedly admitted it is clear—that what was done at that time was done for the purpose of gaining political advantage for the Fianna Fáil Party and ensuring that they would win the two by-elections in Cork and Kildare. During the last general election, the Taoiseach in a speech, in Drogheda, I think, said that he would take any action to ensure the return to office of Fianna Fáil, and he made it clear that he was not going to take the people into his confidence as to the true state of the national economy. Now Nemesis has caught up with him and he has had to make an explanation, but the explanation is too late, and it is contradictory of everything said by the Government during the past year, and particularly during the past few months.
It is not as if no one else saw that these dangers were abroad. The Central Bank made it clear in their April, 1965, report, that the increase in imports gave rise to serious problems. In our policy published during the general election, we made it clear that we considered a most important aspect in financing Government expenditure is the state of the economy.
We were beginning to be worried then, but the Government were prepared to rush on regardless.
The report of OECD issued in March, 1965, made quite clear on almost every page the danger signs they saw, where they referred to the slowing down of output—a matter to which the Taoiseach referred only yesterday—where they referred to widespread increases in prices, where they referred to the capital inflow, which, they said, included some short-term funds from Britain which it was pretty obvious would not remain here indefinitely, where they referred critically to the rise in Budget Estimates and to the drop in exports, and where they suggested there should be a phased incomes policy which, I might add, had been suggested from this side of the House as far back as two years ago in discussions which are on the records of the House.
Even though all these warning signs were there, the Taoiseach and the Government not merely ignored them but decided they would add fuel to the fire. I am prepared to take each one of the 11 headings the Taoiseach took in his speech yesterday and show categorically that, in relation to almost every one of the steps which he indicated must be taken, what has been done by the Government in the past six months has been the reverse of the safety procedure, the reverse of the procedure he has now adumbrated, the reverse of the procedure which would have stopped these difficulties from coming upon us so acutely.
The Taoiseach started off by saying the Government proposed to reduce Government capital expenditure to the amount provided under the Second Programme for Economic Expansion. What are the facts? In 1964-65 the public capital programme out-turn was £1,700,000 in excess of the Second Programme estimate. In the quarter ending 30th June of this year, the figures published by the Department of Finance show that the issues above and below the line were £4,390,000 more than last year, and last year was ahead of the Programme. Even two weeks ago the Government were on a different course. They now suddenly find themselves in the position of having to change course. Incidentally, I should also add that there was one significant note in the Department of Finance return of 30th June, which was that the deferment of tobacco duty was some £426,000 less than last year.
Even taking capital expenditure as announced for this year we find in the Budget a contradiction of the correct analysis published in the Capital Budget memo for 1965. In case Deputy de Valera, who, I gather, will follow me, feels that this is being wise after the event, I invite him to read volume 215, No.9 of the Official Debates of 12th May last and he will find that these criticisms were all made then in detail. I said categorically that unless these steps were taken along some lines, we would find ourselves one day flat up against it. We find ourselves up against it, accelerated by action which the Government have taken by burying their heads in the sand in relation to all the warning signs.
Let me get back to the capital Budget. In the capital Budget statement issued by the Minister for Finance before the Budget it is stated:
The Voted Capital services listed in Table 6 of this paper amount, however, to £32.12 million or £4.07 million more. While the national accounts classification is appropriate for international statistical comparisons, it does not follow that that system or the classification at present used for budgetary purposes should govern the method of financing public capital expenditure in any given year. As systems of classifying expenditure, they serve a useful purpose in the realm of accounting.
Here is what I want to stress:
In the broader context of the national budget, however, the amount of total expenditure, both capital and current, to be met from taxation must, as explained in last year's Capital Budget paper, be determined by reference mainly to prevailing economic conditions.
Prevailing economic conditions were in the Budget. The £4 million which the Capital Budget statement said were not true capital were utilised and treated by the Minister for Finance as capital, borrowing for it on the never-never, adding fuel to the flames, making it clear that the Government of that time were doing nothing to damp down the excessive demand or the inflationary influences that were at work. All the same, of course, we must, in considering how this has been done, take account of the fact that the Budget deficits of £11 million over the past three years have had their part in building up this inflation, Budget deficits, I may add, on the current estimates, estimates which are taken in a very mild way as to what should be met below or above the line.
But, not content on 11th May with putting on the never-never finger £4 million that a few days before he had, in the Capital Budget paper, suggested could not and should not be met from current borrowing, the Minister for Finance added another £1,500,000 in his Budget to make an extra £5½ million additional borrowing on that aspect alone.
It is not a matter of whether it would be proper or fair or right to take the individual item and charge it to capital account. I think it might have been. But it is the overall picture which should have been a matter of general concern then. In spite of that, what happened was that the Minister for Finance adopted the easy way out and accelerated and brought on us these difficulties to which the Taoiseach had to refer yesterday. In consequence of that, the difficulties now are worse than if they had been tackled at the right time. The Taoiseach nominated, as I said, the first measure as being the reduction of Government capital expenditure to the amount limited by the Second Economic Programme. Where exactly will that get us?
The Second Programme provided for a total capital expenditure this year of £95,570,000. The estimate set out at the time of the Budget was £103,720,000, an increase of £8,130,000. The Taoiseach yesterday said that that £8,130,000 was going to be cut, that we were going to go back to the estimate provided on page 270 of volume 2 of the Second Programme. He did not tell us under which heading it would come. He did not tell us whether it would be a total, global cut or follow the individual decreases or increases, reducing them to decreases down the way of the items.
Let us consider for a moment the items that might be met by this. The increase in building and construction, according to the Minister's estimate over the Second Programme which now has to come off was £2,110,000. The increase in tourism was £50,000, the increase in agriculture was £1,210,000, the increase in agricultural credit was £1,450,000, Forestry remained the same. Fisheries increased £60,000; fuel and power increased £500,000; telephones increased £1 million; transport increased £440,000; industry, £180,000; industrial credit, £950,000; Radio Éireann, £100,000; and miscellaneous, £490,000, making a total of £8,130,000.
Will the Taoiseach tell us when he is concluding this debate where exactly he will get that £8,130,000 he promised yesterday when he said there will be a reduction of Government capital expenditure to the amount visualised in the Second Programme? Will it come off the individual increases to which I have referred? Will each individual heading be brought back to its original pristine figure or will there be a global cut which will mean that some items in the list will have to bear more than the others? If it is the individual ones, there is only one person who will be pleased, that is, the Minister for Transport and Power because the estimate for ports is £490,000 down on the amount included in the Second Programme at page 470.
I think the Taoiseach owes it to the House and to the country to tell us where this reduction of £8,130,000 will come from, under what heading, so that people can plan. We have the Minister for Local Government pretending that there is no squeeze in relation to building, that it is possible for people to complete purchases of houses or building just as they used to do, when everybody who is concerned with it at all knows that is entirely untrue and is not a fact. Will the amount for building and construction be cut? That is the largest increase. Or how is the point he made to be met?
What reorganisation of the Government capital programme is envisaged? Are we to see a reorganisation or a change which will ensure that the Government will not take, as they have been taking, and as the Taoiseach admits, too much out of the pool of resources available for lending so that there has on that account been a restriction on capital available for the private sector? These are questions which should have been answered if the Taoiseach was meeting the House fairly, openly and squarely and if the Government had been, as they should have been, considering the position for some time.
The second point made by the Taoiseach was that we are to have restriction on Government current expenditure in such a way as to avoid increased taxation. It is a little late for the Taoiseach to think of this. Is he not aware that current expenditure is £19,700,000 more than last year? Is it not about time he thought of restriction on Government current expenditure in view of the fact that he produced the largest Book of Estimates ever produced, quite apart from increases that have been put into it since? Is it not fair to say, when he says that that is an essential prerequisite for getting back to sound times, that he thought of it a bit late and that what the Government have been doing in this regard has been largely adding fuel to the flames?
The third way in which things are to be cut is a credit squeeze. For some time people on these benches have been endeavouring to get from the Government an acknowledgment of a fact, the fact being that of course there was a credit squeeze. For the past two months, it has been the experience of everybody who has had, in any form of business, the necessity to contact lending agencies that there was a squeeze of a fairly substantial nature. Notwithstanding that, members of the Government, one after the other, choose to put their heads in the sand and to suggest the contrary. There is a credit squeeze and, as the Taoiseach said yesterday, there must be a credit squeeze, because of the way the Government have let the situation get out of hand.
What is the position? Our net external assets in May 1965 amounted to £208.6 million. In May 1964, they amounted to £230 millions, showing a drop in that period of £21½ millions. I noticed, incidentally, that the Taoiseach when speaking yesterday referred to a drop in our net external assets of £33½ millions. I must of necessity refer to the stencilled Official Report as the printed reports are not available and on page K.2 in the penultimate paragraph, the Taoiseach referred to a drop of £33½ millions in our net external reserves. I must confess that unless the Taoiseach has received figures for June which are not available to the general public, I did not think the position was so bad because it seems to me that the drop between May 1965 and May 1964, on the last figures published, was somewhere in or around £21½ millions to £22 millions. Perhaps the June figures are available to the Government and have shown even greater reduction. In June 1964, the figure was £230½ millions. What it is in June this year the Government may know but on what has been published, it is not quite as bad as that figure. Even in May 1965 we had gone back to a situation in which we were worse than any May since 1960.
No wonder that in those circumstances we are faced with difficulties of the credit squeeze variety, difficulties which were accentuated because, as I said already, the Government were taking far too much from the public sector and drawing on the private sector of the economy as well. Now we are told by the Taoiseach that there is to be a credit squeeze. I should like the Taoiseach to let this House know before this debate is concluded to what figure of total advances the Government and the Central Bank have decided the economy must be brought back. To what figure of limitation are we to be faced in present circumstances? In other words, how much have the Government decided the belt is to be tightened? Up to this the suggestion was that there was no credit squeeze but that there was not as much expansion as previously but now we are told there is to be a credit squeeze. How bad is that squeeze to be? To what point of limitation is it to be taken? These are matters about which the Government should take the country into their confidence and enable the people as a result to see exactly where we are travelling, because there is one thing, and only one thing, that will get us out of our difficulties in relation to present circumstances, that is, in the Taoiseach's words, a general awareness of the whole position and a feeling amongst everybody that the whole truth is being told so that everybody can get together and pull together to get us out of these difficulties. Unfortunately, I did not see any signs of this in the speech he made yesterday.
The fourth point mentioned was the necessity for an increase in savings. Of course it is a truism that there must be an increase in savings. It is a hard world; we cannot isolate ourselves ourselves from that hard world, and fundamentally we have to realise that our improvement in living standards will depend on what we save and put by towards productive investment for the future, that nobody in this hard world is going to give us anything for the love of our blue eyes and that unless we face up to that fact and make it clear that we are going to gird our loins and do our utmost for ourselves, we will not be able to get out of the difficulties we face. How could there be an atmosphere for saving when Fianna Fáil, in the past 18 months, have been deliberately suggesting that everything in the garden was so beautifully lovely?
What effect did that have? Did it not inevitably have the effect that not merely did the people look for a larger share of the cake, but in addition felt that what they had they could spend safely because more was bound to come on the same lines? The attitude taken by the Government has accentuated and increased our difficulties and has done nothing to encourage the diversion from spending to saving; on the contrary, it has gone a long way towards encouraging a diversion from saving to spending.
When speaking here the day after the Budget, I referred to the issue of National Savings Bonds the Minister had announced the day before. I felt then, and I said so in a very mild way, that it was not the best way of encouraging savings. The fact is, of course— though, as I promised at that time, he did get a little of my money—that it was an utter flop, that it was the worst flop of any loan that was ever issued, so far as I can trace, by any Minister for Finance since the State was founded. The gross amount received was £1,092,800, of which £225,000 came from the Post Office Savings Bank and from Prize Bonds. The net gain, therefore, to the Exchequer in loan was £867,800. It would have been far better, as I suggested to the Minister at that time—quietly, mildly and almost in an aside because I did not want to say anything that would affect the issue as such—if he felt normal methods of loan issues were not sufficient, to adopt the system of index loans which exists in Sweden. So far as I can see, there has been no examination whatever of that system from the point of view of saving.
We are bound to have difficulties in relation to saving in Ireland so long as we are in the position that many of those who would naturally save can remember what happened to their savings (1) by the disastrous decrease in the price of money and (2) by the manner in which the prices of their stocks, even in nominal value, have been slashed following the increase in interest rates since the Daltonian era. People who invested 20 years ago— less, 15 years ago—in national loans at three and 3½ per cent now see that the £100 they put in at that time was worth only £70 in nominal value and that that £70 may perhaps today be worth only £35 or £40. Such people will not be encouraged, no matter what one may say, to invest in national loans in present circumstances to the extent that we need the capital for the continuance of a productive capital programme.
The Swedes had the same difficulty. They met their difficulty by introducing, as I have said, a system of index loans, loans that are tied to a cost of living index figure, so that people will be able to know, when they contribute to those loans, that, in the future, they will be paid back in real values and will not be paid back in values that may have depreciated perhaps by 30 or even 50 per cent over the years. That is what has been happening. Some new approach of that sort is one of the essential things I suggest is necessary to ensure that our habit of saving is increased and increased particularly at the present time, in the Taoiseach's words, in order to encourage a diversion from spending to saving.
We see by the Government no conception in that regard. We see by the Government no move at all towards encouraging saving except one, one that was not included in the Budget. Even at the time of the Budget, the Minister for Finance had not thought it worth his while to do anything to encourage saving. But, in the long drawn out period between the Budget and the publication of the Finance Bill, it apparently was born—a difficult birth apparently: perhaps his colleagues in the Government were against it and if they were, I think I know the reason why.
That one small mite was an increase from £25 to £50 of the amount of interest from deposits that was exempt for tax purposes. Of course, we know where that came from. It was merely a doubling of the figure which initially was thought of by the Government of which I had the honour to be a member and was introduced in the Finance Act, 1956. There was nothing new in it. All the Minister for Finance did— and that not even in the Budget—was to increase the figure somewhat. Out of all the mountain of energy and thought that was supposed to be going into the production of the Finance Bill to assist our economic position, one thing emerges and even that was not original, just merely increasing something the Minister for Finance in the inter-Party Government had done. As I have mentioned the Finance Bill, I may say, as regards the other things in it, that I do not think they are designed to increase savings, to increase the capital available to increase the resources that are required to deal with our present difficulties.
The fifth step the Taoiseach announced yesterday he will take to deal with the situation is a limitation of imports through the credit squeeze and hire purchase. I do not know how that will work in relation to the limitation of the credit squeeze on imports. I am giving the Taoiseach a present of the fact that I cannot see how it will work. I think it will be impossible to work and I do not think it will have the effect desired.
The Taoiseach said in his speech yesterday that they had considered the levies and had decided against them, had considered quantitative restrictions and had decided against them. Let me say at once that I agree that he was right to decide against quantitative restrictions. I was doing some of my homework upstairs while the Minister for Industry and Commerce was speaking and therefore I did not myself hear exactly what he said. However, I was told that he said that the reason the Government decided against levies was that the previous physician who had administered them had been too severe. If that was the only reason they decided against them, was it not a very bad one?
