I move:—
That the Dáil at its rising this week for the Summer recess do adjourn until Tuesday, 27th September.
It has been usual at this time of the year either in connection with an Adjournment Debate or on the Estimate for the Department of the Taoiseach to give a survey of the more important matters bearing on the national economic situation. Notwithstanding some unusual features in the Dáil procedures on this occasion, I intend to avail of the opportunity of giving such a general review. This debate covers also two confidence motions which have appeared on the Order Paper by reason of the rather childish jockeying for political advantage and precedence in Dáil debates between the two Opposition Parties. I hope they will not feel offended if I do not take them very seriously. The important thing is that the Government should continue to have confidence in themselves and in their policies and should retain the support of a working majority in Dáil Éireann. I hope to demonstrate that these conditions prevail.
There are many Deputies who are, no doubt, familiar with all the relevant statistics relating to agricultural and industrial output, external trade, employment, prices and other matters of economic significance in recent years, and it is not necessary for me to recount them. Some Deputies have, indeed, complained of getting too many reports and statistical returns, but this information, even if its significance is given different interpretations according to the Party affiliations of Deputies, needs to be fully understood by any Deputy who desires to grasp the nature of the problems with which the Government and the country are faced at this time or may have to face in the future.
There are many features of our situation at this time which are justifiably a cause of concern, but there are many things also which are going right. The matters which are right far exceed in number and importance those that are wrong. Notwithstanding variations in our rate of progress, the country is still moving ahead. Under our two Programmes for Economic Expansion, the country emerged from a period of prolonged economic stagnation, of uncertain aims and diminishing confidence, and has achieved significant progress. If there is no desire to exaggerate and no advantage in exaggerating what has been accomplished, it should not be minimised either.
Progress has not been uniform either from one year to another or one branch of economic activity to another. As was not unexpected, various difficulties, some of which were foreseen and some unforeseen, have presented themselves, although in every single year, the rate of economic growth, even when it fell below that envisaged in the Programme, was substantially above the average experienced in earlier years. We have still a long way to go, and many difficult and complicated problems to settle, before we can be certain of achieving our aims of full employment and a substantial reduction of emigration with reasonable price stability and, taking one year with another, a balance in our external payments, but we remain convinced that these objectives are attainable.
The Second Programme was prepared, as Deputies will remember, on the assumption that the country would be fully within a free trade system, as a member of EEC, by 1970. In its preparation, every effort was made to anticipate the effects of free trade on the growth of agricultural and industrial output, on external trade and on employment. It was encouraging to be able to publish our conclusion that there were no insuperable barriers to the adaptation of the national economy to the requirements of free trade, in a way in which its continued growth could be not only assured but accelerated.
This does not mean that there are no barriers. On the contrary, it was recognised that very substantial changes would be necessary, particularly in the organisation and establishment of industry, and in all the services on which industry had to rely, and that getting these changes completed in time was going to require a very great national effort indeed, and would call for revolutionary alterations of outlook, on the part of industrial management in particular, but also within the leadership of our trade unions, and the formation of a new atmosphere in which dedication to efficiency and work would become an outstanding national characteristic. This work of adaptation and change is going on although it needs to be speeded up still further. There are too many forces pulling the wrong way to secure the results we need. The assumption of membership of EEC by 1970 is still valid, and the need for a very thorough overhall of the national economy is now reinforced by the commencement of operation of the Free Trade Agreement with Britain.
We have been keeping in close touch with developments in EEC and in the relations between the EEC and other applicant countries, particularly Britain. There is still a degree of uncertainty as to the extent and reality of the changes in attitudes relating to British membership which have been hinted at in newspaper comments, but sufficient grounds exist for the expectation that developments are likely to occur. The important thing for us to keep in mind is that when they happen they may come very quickly. It is very probable that, if formal negotiations for British membership should be resumed, they will not take nearly as long as in the 1961-62 period, and could well conclude in a very short time.
We are keeping in the closest possible touch with this position. Although we have no reason to think there is any lessening of understanding about our position in EEC circles, or anything useful which we could do to further our interests at this time and until the main problem affecting British membership has been settled, it is our intention, during the course of the Dáil Recess, to arrange for a Ministerial delegation to Brussels to explore the situation thoroughly.
The relationship between this situation and our national development policies needs no emphasis. It has to be reiterated that free trade, whether in the context of EEC membership or the British Agreement, means an intensification of competition in our home market and that it is only when all our producers have brought about the changes which will enable them to meet this competition that they can undertake with confidence the tasks involved in expanding exports, with real assurance of success, by their combined efforts, in building up the volume of trade, which will contribute to balancing our external payments. As we have frequently stated, it would be very unsafe to rely on any expectation that the period for dismantling our tariffs, negotiated in the British Agreement, can be carried over into EEC.
Membership of EEC, any more than the British Agreement, will not solve all our problems. It will be solely up to ourselves to use the opportunities that will be presented to us. Although, unlike some other countries in Western Europe, we have not attained full employment, we can note that in other respects the members of EEC have encountered much the same problems as we have, including the tendency of prices to keep on rising by reason of pressure on costs not offset by improvements in productivity.
Because of the very real progress which has been made in expanding total national output, the country is much better off than it used to be, although it is not as well off as we would like it to be or as it can become if we tackle our problems systematically and successfully. I have said that the rise in prosperity has not been uniform in all areas, or experienced equally in all social categories, and this is a matter for concern. No doubt, there will always be some disparities in a free economy, but it is and must remain the aim of policy to rectify them as they appear. In so far as this involves action by the Government, it means action through the Budget, for the redistribution of income in favour of farmers, or social welfare classes, or for the benefit of western regions, or in some other way, which represents a burden on the whole community which they must be willing to bear, with understanding of the need for it, if not always cheerfully.
The social aims underlying our economic policy, which have been restated on various occasions, are to raise up the living standards of all sections in line with increasing national income, and to bring about the gradual elimination of all undue disparities. The word "gradual" must be stressed in this context, because this is the way in which a free society must work and to attempt to impose a more rapid rate of change, by authoritarian methods, could very well disrupt and defeat the whole development campaign. It is also essential that the claims of any one section are not pressed so unduly as to prejudice the prospects of equivalent benefits for others. This is a constant problem in every free democracy and we have our full share of it.
In the effort to raise living standards and to eliminate undue disparities, action is necesstary on a very wide front. It is not simply a matter of farm price supports, or wage increases, or the expansion of social welfare arrangements. Particularly in the area of education and training, so far as workers are concerned and in the improvement of farm structures, so far as farmers are concerned, there is a great deal which has yet to be done. We are all of us upset by the realisation that some workers and some farmers have incomes so far below the national average as to be anomalous, and even if it is correct that this income represents the economic value of their work and their production, and notwithstanding that it is supplemented by such public services as children's allowances, the answer, or a large part of the answer, to the problem must be to increase their earning capacity, by training in new skills, or, in the case of farmers, by expanding the productive capacity of their holdings in area and fertility. Achieving these social aims of raising the living standards of all social groups and diminishing disparities between them must therefore involve action embracing all the Departments of Government and a comprehensive Government policy in which all aspects are covered and which can be applied uniformly and consistently.
The particular feature of our Irish situation which is paralleled in all other western European countries is the continuing contraction of the numbers occupied in agriculture notwithstanding the simultaneous expansion of agricultural output. This contraction is one of the most potent factors sustaining the rate of emigration. Emigration, although well below the level of ten years ago, has not declined as much as was envisaged in the Second Programme. Although employment in non-agricultural occupations has since 1960 risen faster than the numbers employed in agriculture declined, the margin is still much too narrow. This is one reason why we are now seeking to develop arrangements which will provide for training for new occupations and for the relocation in areas of expanding employment of those whom agricultural work no longer attracts or whom agriculture no longer needs for the purpose of sustaining the increase in output. This is a major social problem and it would be reckless to promise a quick or easy solution. It must be and be seen to be one of the main purposes of national endeavour in the years ahead of us.
The regional development programmes which are now being worked out are part of this operation and are intended to facilitate us in achieving the further aim of maintaining a fairly uniform distribution of population and of economic activities in all areas of the country. Regional policies such as we envisage cannot be executed without cost but we would regard them as a profitable investment because, apart from the social content, they will also facilitate the fuller utilisation of the nation's productive capacity.
The progress of the economy of any modern country is linked with science and its technical applications. There has been in recent years a veritable explosion of scientific knowledge which is having widespread economic consequences in every country. In this respect, however, small countries are inevitably handicapped. This is a handicap we have to live with and we must try to make up for our limited resources by the fullest and most economical use of the resources which are available and particularly by our willingness to concentrate them on the development of educational and technical training arrangements so that our main assets, the intelligence and adaptability of our people, are fully utilised.
The recent National Industrial and Economic Council comment on the earlier OECD Report on Investment in Education emphasises the need for a very considerable expansion of financial outlay on educational development which, as the NIEC pointed out, must mean either giving this form of development priority in the allocation of public funds over other expenditures however desirable or willingness to accept further taxation to make it possible.
The decision to give educational development the priority it deserves is the more practicable of these alternatives because, in regard to taxation, we must also avoid placing so heavy a burden on present production as to restrict its further expansion. There is no question, however, but that the capacity of the country to go ahead in the competitive conditions of the modern world will depend to a very great extent on our success in raising up the levels of skill in our industrial, professional and agricultural labour forces and applying the fruits of scientific discoveries in our industry and agriculture.
To an ever-increasing degree the policy of the Government will be directed to this end and we will have to endure the political criticisms which it may evoke from the unthinking as other desirable developments are necessarily slowed down to enable this essential educational programme to be fulfilled. The extent that the educational programme may require either the postponement or the slowing-down of developments in other areas or the imposition of further taxation will, of course, depend on the rate of economic growth that can be realised. Economic development policy is the key to all national problems. Everything turns on it, including our capacity as a small nation in a highly competitive world to survive at all as an independent economic entity.
Economic policy underlies all our plans and everything which delays or obstructs the achieving of economic aims is a blow to the achievement of national aims in every direction.
The possibility of maintaining the rate of economic growth envisaged in the Second Programme depends on many contingencies but of constant and particular importance is the achievement of a proper balance between the growth of physical production and monetary demands, which we have not yet achieved, and on the continuing expansion of exports based on increasing competitiveness, which is not yet sufficiently appreciated in many quarters.
The average annual rate of growth achieved between 1960 and 1965 was four per cent. This was a respectable achievement by any standard of comparison and a quite spectacular achievement compared with the record of our earlier years. Nevertheless, we have to try to improve on it. Earlier this year a prospect of a 3¾ per cent growth rate in 1966 was published in the progress Report for 1965. I think we must now face the probability that it may not be realised because of industrial stoppages at home and the effect of the British seamen's strike. Our growth rate in this year is more likely to be somewhere between 2½ and 3 per cent, say, 2¾ per cent. If this proves to be correct and taking into account the 2½ per cent rate of economic growth achieved in 1965, we would need to expand our production in every sector to give an average annual rate of 5.4 per cent in the remaining years of the decade if the Second Programme target for 1970 is to be attained. This would be something which we have accomplished only in one previous year—1960. It is, nevertheless, a not impossible target to set ourselves but we are unlikely to reach it unless we are willing to forgo the luxury of interrupting the growth of production for the purpose of trade disputes or other agitations.
All the present indications are, however, that the temporary difficulties which emerged in 1965 and which interrupted the smooth growth of the economy have been left behind and the prospects for the immediate future are hopeful. There has been a notable improvement in the balance of payments situation. The import excess for the first five months of 1966 was £20¾ million less than in the same period in 1965. Exports were £9.3 million or nearly 12 per cent greater than in the first five months of 1965. This improvement in trade occurred even though exports of live cattle have so far not made any substantial contribution to it. A further increase in exports can be expected with the entry into force of the Free Trade Area Agreement with Britain, the ending of the shipping strike and the prospect of the removal of the British surcharge later in the year. Coinciding with the improvement in the trading position, there has been a marked rise in the external assets of the banking system and departmental funds. These were almost £21 million greater in April, 1966, than at the same date last year.
Industrial production has been sluggish enough in the earlier months of the year and statistics for the March quarter, 1966, show the volume of output in transportable goods and manufacturing industries did not greatly exceed the level for the same period of last year, an increase of only one and a half per cent being recorded. However, there is reason to believe that the industrial sector will considerably improve upon this performance later in the year.
All the indications are that the action which was taken by the Government, to deal with the situation, has arrested, and brought under control, the unfavourable trends which, if not rectified, could have proved very harmful to our economic prospects. We intend to maintain such measures as are required to stop demand from outrunning available resources. Of course, forecasting is never an easy business, and past experience has shown that care has to be exercised when the question comes up of modifying the emphasis in economic management policy. Nevertheless, general economic conditions would now appear to favour a gradual release of more resources for productive purposes. The effect of this will be felt mainly in the private sector, but the Government are also considering the feasibility of releasing in some degree the limitations on the capital programme which were unavoidable earlier in the year and indeed which may still be so.
This expansion of output required to realise our development target has to be achieved in conditions which will give some assurance of price stability, of balancing our external payments, and of being able to maintain the high rate of capital commitment which is involved. Unless all these conditions are realised, we cannot succeed. The greatest danger lies in excessive demand for higher monetary incomes, and this is why this aspect of our affairs is stressed so frequently in Ministerial speeches. It is this which can cause private consumption expenditure to rise above the level that can be supported by national production, involving an inflation of imports and which, by forcing prices upwards, can result in a situation in which competitive export sales cannot be maintained, much less increased. We cannot go on running an excessive deficit on our external trade with the rest of the world: the world will not allow us to do it. Nor can we rely on a growing inflow of capital from abroad to cover up the consequences of any disorder in our internal economic arrangements. These are precisely the circumstances in which capital investment is inhibited.
This has been a year of sizeable taxation increases and of two Finance Acts to ensure the raising of sufficient revenue to enable the Government's commitments on current account to be met within a balanced Budget. If we should be forced by the level of personal incomes rising faster than resources into a situation in which the curtailment of the growth of public spending, whether on capital or current account became unavoidable, we would not only have to abandon our hopes in the areas of education, health, and social welfare, but also to accept that the overall growth rate envisaged for the national economy as a whole would be completely unrealisable. We do not have scope for cutting public spending without grave and immediate economic and social consequences.
I do not want to cover ground already trodden over in our recent financial debates but no review of our national situation which did not embrace this constant financial problem would be realistic. Our public spending, whether on current or capital account, as a percentage of total national income, is still very much below that which other European countries maintain, and this restricts us in our efforts to catch up with them, both in regard to the level of our economic activities, and in our personal living standards. We should not lightly consider the possibility of a drastic cut in the public services. We must therefore be willing to accept that excessive growth in private incomes and private consumption should be avoided or restrained by taxation so that greater provision can be made for public activity and particularly for investment in new production possibilities and in houses, hospitals, roads and schools. The standard of living of our people in the future will depend on the extent to which we are prepared to accept restraint now and to concur in taxation to maintain the standard of public services and the facilities on which future economic growth and social progress depends.
These considerations emphasise the growing importance in the fulfilment of economic and social policies of what, for want of a better term, is called Incomes Policy, which must aim at a fair improvement of the living standards of all social groups, while keeping the over-all expansion of money incomes, and of consumption expenditure, within reasonable bounds, by means which impose the minimum sacrifices for any particular class. We have never failed to recognise that the Government must play a leading role in bringing this about. It would be a very considerable contribution to national economic progress, and to financial stability, if we could envisage a stabilisation of tax rates over some period of years, keeping the growth of public spending within the limits of revenue buoyancy. It will be the aim of the Government to achieve this, but it would not be sensible to make this such a rigid objective of policy as to impose an impossible degree of restraint on the realisation of improvements and extensions of public services, such as education and health, for which public opinion is constantly pressing.
The rate of economic growth which we have programmed and which we need, requires for its realisation an even faster rate of growth of investment in productive capacity both public and private, than we have yet achieved. An ever-expanding growth of investment is essential to solve our economic problems. This must come about through private initiative and in large measure be achieved by the reinvestment of business profits. In circumstances where private saving is already insufficient for public investment needs, and where the capital market is tight, this seems to be the only feasible course. While to some members of the Dáil, profit is a dirty word, we have either to forgo our development prospects or accept that business firms must be permitted and facilitated to achieve reasonable profits subject to the requirements of dividend limitations and the obligation of increased reinvestment. Despite what I have said earlier in this connection, the scope for increasing public expenditure, in some desirable directions, by reducing it in others, is very restricted. Not even a draconian policy of curtailment would release a sufficient volume of resources to make a significant contribution, although reorganisation of methods and changes in the management of administration could perhaps enable some economies to be made.
It must not be forgotten that the bulk of Government spending represents income for many people and has to be judged in the light of social needs and our conceptions of social justice and social progress. Subsidies on production, in agriculture and industry, may be open to theoretical objections, and social welfare payments may yield no direct economic gains, but few will propose their curtailment in our present circumstances and the consequences of curtailment would be widespread.
If it would be feasible to define a plan for public spending both on current and capital accounts for a number of years and to stick to it, it would be helpful in determining the Budget problem we may have to face in the future, but again only at the risk of introducing a degree of rigidity into the management of our public finances that would be very restrictive in its effect. At this time, it is clear that the limiting factor in respect of the capital programme is our capacity to raise capital funds at home and abroad for its fulfilment.
Public financial policy is the central area of Government policy, but what is possible in this area depends not only on public needs and demands, in respect of the services to be provided, but also on the economic development forecasts, which can never be completely accurate. There is a constant need to avoid policies which involve an ever-mounting charge on public revenue, which are always fairly easy to start but involve an ever-increasing limitation on the Government's freedom of action in other spheres in future years. Notwithstanding all our present problems and those which we will inevitably encounter in the future whether arising from internal or external circumstances, there is nothing fundamentally wrong in our country's situation and we can be confident that national progress can be maintained in every sector of activity provided that understanding grows of the nature of our problems and of the magnitude of the opportunities which are open to us and that there exists in all the organs of Government, in business management and the trade unions, the capacity and the desire to give to the cause of national progress the priority over other considerations which is the distinctive characteristic of a democracy and the condition essential to its successful working.
In the Dáil, we have had our debates and controversies, the clash of Party interests and personal incompatibilities, but somehow the work gets done if not as expeditiously as we would wish nevertheless at a fairly uniform output. Because of the volume of business, particularly Estimates left over from this session, and because of the legislation in preparation, it is necessary to ask the Dáil to re-assemble earlier in the Autumn than is customary. I know that Deputies of all Parties need a fairly long adjournment at this time to enable them to renew contacts with their constituencies and to perform all the work of public representatives which is not related to Dáil business. I hope that we will be able to organise our affairs in future years so as to permit of summer adjournments of normal length. Nevertheless, I hope all Deputies will be able to make some use of the recess to secure a period of relaxation which will ensure that they will all return on September 27th in good health and in good humour.
