I shall not detain the House very long because in the limited time left, some of my colleagues may be anxious to contribute. This Budget is remarkable not so much for what it contains but rather for what it is symptomatic of. It reveals an alarming situation which many people suspected for a time past was coming and which a great many people knew had arrived. The Budget proves conclusively and beyond all doubt that the economic policy of the Government has failed and particularly that the Second Programme for Economic Expansion has veen virtually a fiasco. My Limerick colleague, the Minister for Health, when speaking last week was very critical of the Opposition, particularly of Fine Gael, on the ground that, despite the issue by the Government in recent months of numerous publications explaining quite clearly the causes of the present situation, Fine Gael Deputies did not take the trouble to do their homework and study the various publications.
I have studied the various publications, the documents which have been quoted at length by Government spokesmen during the past couple of weeks. Politics being what it is, it is only natural we should take a different interpretation. Deputy Dowling last night quoted at length from many of these documents and Deputy Molloy followed his example this morning. My reading of the publications issued by the Government leaves me in no doubt whatsoever that the cause of the present situation, particularly the circumstances which forced the Minister to introduce this Budget, is solely the failure of the Second Programme.
The ordinary man in the street, whom I am proud to represent, is asking a very intelligent question. He is asking why it is that despite all the money that has been raised in taxation and by borrowing in recent years, the Government in 1966, in the middle of the Second Programme, should find it necessary to introduce a Budget of this sort. That is the question every Deputy, irrespective of the Party he belongs to, has been asked in recent weeks. Year after year for many years past, we have had new methods of taxation introduced, new methods of raising revenue. Among the most noteworthy have been the abolition of the food subsidies, saving £18 million in 1957, PAYE, netting £15 million in 1959 and the introduction of the turnover tax. As well, there have been increases in the taxes associated with the obvious commodities every year and again this year—cigarettes, tobacco, spirits and petrol.
Despite this continuous increase in taxation year after year, the Government in the past year have had to resort to what they call exceptional borrowing. The extent of that borrowing is very striking and very alarming. I quote from Capital Budget, 1966, page 13, paragraph 10:
The situation just described was dealt with (a) by raising exceptional finance amounting to £20 million from the Central Bank, (b) by making a drawing of £8 million from the IMF to support the national reserves, (c) by the issue of a Sterling/Deutschemark Loan for £7 million, and (d) by seeking bank accommodation of approximately £11 million.
Paragraph 11 points out that calls on the banking system for amounts of the order of £46½ million must clearly be exceptional. Paragraph 12 deals with foreign borrowing:
Foreign borrowing is expensive and the repayment periods are usually shorter than would apply in the case of domestic issues. Such borrowing, therefore, adds heavily to the taxation required to meet debt service charges.
On page 12, paragraph 3, we find:
The Public Capital Programme gives effect to a large extent to the Second Programme for Economic Expansion and a report on it, therefore, is very much a progress report on the Second Programme. The following general comments on public capital expenditure in 1965/66 and 1966/67 are intended to align what has happened or is planned with the projections of the Second Programme.
We also find that the expenditure for 1965-66 is expected to show an excess of £5.6 million on the figure for the same period in the previous year. It is apparent, therefore, that the assumptions made for the resources in the Second Programme are not being realised. Small savings and investment resources of departmental funds have fallen sharply. So we find that the financial projections of the Second Programme have been completely wrong and we have had to resort to what has been described as exceptional borrowing.
The outlook for 1966-67 again indicates that, in addition to the taxation imposed by the Budget, there will be further borrowing. With all this taxation and all this borrowing, what results have we got? That is the question the ordinary man in the street is asking. We have another document— The Second Programme for Economic Progress Report for 1965 which I intended quoting at length but I do not intend doing so now, in view of the limited time left. This Progress Report reveals a terrible situation. It reveals the situation that, in sector after sector of the economy, the targets have not been reached and the best criterion or test we can apply to any programme for economic expansion is employment. We find in the NIEC Report No. 13— Comments on Department of Finance Review of Economic Progress in 1965 and Prospects for 1966—and I quote from page 25, paragraph 36:
The growth in employment has fallen short of target in all sectors.
That is a terrible indictment of Government policy. It is a clear indication that the Second Programme for Economic Expansion has been a failure. In employment then we have the situation that in 1965 14,000 people left the land and there has been a net reduction in employment to the tune of 7,000. The NIEC Report goes on to comment on page 25, paragraph 37:
We are disquieted by the fact that total employment has fallen and we attach importance to the outcome of the examination of the policy measures that may be required to secure the fulfilment of the targets which is now proceeding in the Department of Finance.
So that the acid test of Government policy and the acid test of any programme for economic expansion is employment. In that test, this Programme has failed completely.
Again, in this Progress Report on the Second Programme for Economic Expansion, we find that in the major sectors such as agriculture, we have had a drop of 14,000 people; 14,000 people have left the land, and in sector after sector of the agricultural industry, there is a failure to meet production targets. In some of these branches of agriculture the reduction is very alarming. I referred here on Thursday last to the reduction in milk supplies. We find that in the month of January of this year, milk production is down by four per cent; three per cent in February, and the latest information I have had over the last weekend is that it is down, at the moment, for March to the tune of 12 per cent. Beet production is down by 15 per cent. Pig production reveals another alarming situation. What I am worried about is this—not merely does it reveal a very dangerous situation in our agricultural industry from the point of view of the farmer but it reveals a much more dangerous and alarming state of affairs by virtue of the fact that the commodities I have just mentioned which have shown a drastic reduction, such as beet production, milk production, pig production are the branches of agriculture which provide employment in the processing industries. I fear, therefore, for the employment content of our milk processing industries, for our bacon factories and for the sugar industry.
If there were any sense of priorities at all in Government planning and investment, it would surely indicate that the sector of our economy which contributes in the biggest way to exports should receive the greater attention. Despite all that has been said and the progress made in the development of industry, the stark naked fact still remains that agriculture is the foundation of our economy, and but for our agricultural exports in 1965, we would be in a situation today which one could not imagine. We found that even a small reduction in our cattle exports for 1965 has been a major factor in bringing about the present situation.
Therefore the situation revealed by this Budget is significant but it is also very alarming. It is unfortunate that in the Minister's speech on the Budget and in the Budget itself there is nothing to indicate these exceptional measures which are now necessary to lift the economy from the doldrums into which it has fallen. There is nothing in this Budget to stimulate our people to greater effort. In my view, that is the worst feature of the Budget. Many people, especially thinking people, as well as asking what has happened, where has all the money gone or how did the present situation come about, are now asking what went wrong with the Second Programme for Economic Expansion and why did it fail to produce the results which were so confidently forecast by the Taoiseach and other Government speakers in recent times?
I am not an economics expert but I studied these documents and I believe the Second Programme for Economic Expansion failed for the simple reason that it was only a programme. It is pointed out quite clearly in one of these NIEC publications that the Second Programme for Economic Expansion merely outlined the targets which might be achieved by 1970 but it did not mark out the road or path by which those targets could be achieved. I admit that reading the Second Programme is not the type of reading most people indulge in, but, for the want of something better to do some nights ago, I read, for the first time, that final chapter under the heading “The Methodology of the Second Programme for Economic Expansion”. While a lot of the statistical methods employed there, and the terminology and equations, and so on, did not make sense to me, nevertheless it is true to say that the Second Programme for Economic Expansion was nothing but a hypothetical academic exercise—and that is commented on. That is a way of saying what the NIEC have said, that it did not map out the road or path. Instead of saying what might be done, it did not say how these targets could be achieved. It is quite simple and it is an interesting exercise, if one had the time.
I wonder if the Department of Finance expert considered the social implications, the human and psychological problems and the many other factors that have to be met with in determining and drawing up a national policy. I believe and I am convinced now as never before, that the Second Programme for Economic Expansion is what I said it was, namely, a hypothetical academic exercise having no foundation in reality and no awareness whatever of the problems which had to be encountered and which have since had to be met. There is further evidence of this, in relation to investment, in the NIEC Report No. 13. I shall quote from paragraph 33 on page 23:
It seems to us, therefore, that some ceiling must be fixed for investment that will allow an acceptable increase in consumption and that will not push the balance of payments deficit beyond acceptable limits.
It goes on to point out that the choice of an investment that does not add to productive capacity in such a way as to facilitate, for example, an increase in exports means the permanent sacrifice of an investment that would. These two documents, Reports No. 11 and No. 13 of the NIEC, are more critical and, reading between the lines, far more critical than any Opposition Party could be of the methods employed in drawing up the Second Programme for Economic Expansion. It criticises the lack of financial statistical information. It criticises the very bad standard of investment management and the lack of efficiency in operation. All of these criticisms are made by the NIEC. I think that Deputies such as Deputy Molloy, who spoke for one and a half hours and quoted what X said in 1957 and what Y said in 1961, would be much better employed making use of the University Degree which he has by applying his mind to these problems. This NIEC Report reveals tremendous weakness in Government policy and in Government planning. When the Second Programme for Economic Expansion was introduced—particularly in relation to targets which were fixed for agriculture—I recall that, at that time, numerous organisations and many people who understand agriculture, who know the problems, criticised the targets not because they were too high but, mark you, because they were too low. I remember speaking here on the Budget two years ago and quoting the NFA green book publication where it states that the targets for agriculture in the Second Programme for Economic Expansion were far too low and unrealistic. Mr. Raymond Crotty produced an excellent document at that time and pointed out in no uncertain manner that, unless an annual gross rate of 5 per cent was achieved in the agricultural programme, total economic expansion could not be achieved on the target specified in the Second Programme. Mr. Allwood, who is management expert with the Agricultural Institute, in a paper about two years ago addressed to the Statistical and Social Society of Ireland pointed out, in relation to the development of the west, that industrial development was not enough and that unless an overall growth rate for agriculture, the basic industry, was achieved, the Second Programme targets could not be achieved. Despite the fact that the NFA, the ICMSA and other economists and independent experts criticised the Second Programme targets because they were too low, we now have the unbelievable situation that those low targets have not been achieved and, as far as we can gather, the progress rate of expansion in agriculture in 1965 was only 1 per cent.
I do not know what methods are used in the Department of Finance in the matter of investment analysis, in the matter of fixing priorities for investment, and so forth. Agriculture, and industries based on agriculture, is contributing the major portion of our exports.
Except for the £100,000 for small western farms, there is nothing in the Budget to enable this most important major industry to expand and develop. On the other hand, money has been invested in industries and in various projects which have proved to be unwise and unsound investments. A classic case, and an example which has been quoted quite frequently in this House and which has been the subject of numerous Questions, is the Potez Aircraft Factory at Baldonnel. I could never understand why, and on what ground, the Department of Industry and Commerce decided to invest a substantial amount of money in this industry. It was well known at the time that, for various reasons, this project had not an earthly chance of succeeding. The type of aircraft it was producing had become obsolete. The British aircraft manufacturing industry was in the doldrums. Was it conceivable that a French aircraft manufacturer could succeed in the industry at Baldonnel in this country, where there was no pool of the skilled technicians so necessary in aircraft manufacture, at a time when the British aircraft industry, with its long experience, was in the doldrums?
It is vitally essential that this House would be told by the Minister (a) on what grounds this money was allocated for that industry and (b) who vetted the proposal. On the other hand, while this money could be made available to industries which were very doubtful from the word "go", every Deputy, including myself, has had numerous complaints from small industrialists and small businessmen in our constituencies, about the extreme caution and the fine-combing methods of the Industrial Development Authority, and the almost impossible job it is to get a grant of a few thousand pounds for a small industry.
We must do a lot of rethinking in relation to this question of investment, and particularly investment in development projects. As I have said, the NIEC have been very critical of the Department of Finance. In their Report, No. 11, at page 50, paragraph 71, referring to the question of priorities, they state:
In particular, in the case of capital expenditure, a ranking of projects in order of national importance is necessary to ensure that the resources available for public and private investment, which are now scarce in relation to the demands being made upon them, are used to maximum advantage... If the new opportunities for growth are to be exploited to the full while at the same time maintaining stability, a stricter examination of the relative benefits from the various possible projects is required... In deciding on the appropriate rankings for productive investments and the share of resources to be devoted to each, close attention must be given to the increase in national output, and especially in exports, which is expected, relative to the size of the investment, to the length of time before the increased output accrues and to the relationship of different projects to each other... The priorities must be clearly defined if they are to be understood by the community at large.
There are numerous other paragraphs dealing with this particular subject. It is very significant that the NIEC, a Government-sponsored body, making an intelligent analysis and assessment of the Second Programme, should be so critical in so many spheres of development.
However, there is some indication that the Government, and the Department of Finance in particular, have learned a lesson from the failure of the Second Programme, and have taken note of the criticism of the NIEC Report because in the Capital Budget, 1966, at page 17, under the heading "Review and control" it is stated:
Particular attention is being given to methods of assessing the national value of investment projects in order to determine those investments which, in relation to their cost, yield the maximum economic and social benefits to the community.
This gives some hope that there is to be a new approach to the whole question of economic development. The selection of priorities for investment, the proper management of investment, and so forth, are all vitally important factors, but there is another important factor, that is, economies in the cost of public administration to which Deputy Costello referred last night. This is the age of the management consultant, the efficiency expert, the investment analyst. Over the past five or six years, we have had the Taoiseach and Government Ministers and spokesmen, exhorting businessmen and industrialists, and even farmers, to modernise their methods, to effect all the economies possible, and to strive for the most efficient possible methods of production.
This year, and every year recently, we found a colossal increase in the cost of public administration. Surely if the businessmen and industrialists and farmers, by the application of modern management techniques and methods, could achieve economies, the Government could do likewise. It is very bad example for the Government to be preaching this and not making any effort to set a lead themselves. That, in fact, is what the Government have been doing. There must be room for economies in the Civil Service, in the administration of the various Departments, and so forth.
Another important factor in righting the economic situation is the question of savings. The reduction in savings has been very disappointing, and has been a significant factor in leading to the present situation. Over the past four or five years in Budget speeches, I drew the attention of the Minister to a method of saving which has proved very successful, particularly in Britain and in the United States, a method of saving which is very attractive to the ordinary person. I refer to the unit trusts. I understand that some unit trusts are operating here. I do not know to what extent. I feel this method of saving is well worth looking into still further.
There are three questions: Where did the money go? Why did the Second Programme for Economic Expansion fail? What can be done now to save the situation? The situation will not be saved by coming in here with tomes from the Dáil Library and quoting what one Deputy said in 1957 and what another said in 1960. Deputy Molloy last night and this morning delayed the House for an hour and a half quoting from this, that and the other book. I did not hear him quote once from a Government publication.
