Deputy Coughlan: Expression of Regret. - Vote 6—Office of the Minister for Finance.

I move:

That a sum not exceeding £966,700 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of March, 1968, for the Salaries and Expenses of the Office of the Minister for Finance, including the Paymaster-General's Office, and for payment of a Grant-in-Aid.

Most of the services in this Estimate are by now well-established. I would, however, like to say something on two important items which were first introduced by way of Supplementary Estimate in 1966-67.

The first of these relates to western development. In 1966-67 a supplementary provision of £5,000 was taken for Special Aid to Projects in the West. In this year's original Estimate the provision was for £20,000. I announced in my Budget statement, however, that this provision of £20,000 would be increased to £250,000 in order to create a fund, to be known as the Special Regional Development Fund, out of which payments would be made to assist worthwhile projects in the West. I am taking a Supplementary Estimate along with the Main Estimate for this purpose.

The setting up of the Fund has given a great impetus to the efforts of the County Development Teams and the Team Secretaries and will, I hope, go a long way towards furthering the Government's policy of revitalising the West of Ireland.

To date over £125,000 has been committed by way of assistance from the Fund to 11 projects in nine counties. In addition agreement in principle has been given to the issue of over £30,000 in the case of three projects on which further investigation has to be carried out.

The second item to which I would like to refer is the Public Services Organisation Review Group.

This group was set up in September, 1966, with the following terms of reference:—

Having regard to the growing responsibilities of Government, to examine and report on the organisation of the Departments of State at the higher levels, including the appropriate distribution of functions as between both Departments themselves and Departments and other bodies.

The Chairman of the Group is Mr. Liam St. J. Devlin. The other Irish members are persons prominent in business and the public services. A member with special experience in the organisation field has generously been made available by the Norwegian Government.

The Group began their activities in October, 1966, and have been very active since that date. To help them in their deliberations they have, with my approval, engaged the services of an international firm of management consultants. The main charge against this provision is the cost of these consultants. I hope to have the report of the Group next year.

As Deputies know, it has been arranged that devaluation and its effects will be discussed in this debate and I now turn to this subject.

On 18 November the British Government announced the devaluation of the pound sterling by 14.3 per cent. Under the Currency Act, 1927, the Irish pound is statutorily linked to sterling and a devaluation of sterling is automatically followed by a devaluation of the Irish pound unless amending legislation is passed. Such legislation could, of course, be enacted at very short notice but the Government deliberately made no proposal to this effect. Having weighed all the pros and cons of alternative courses of action, they had decided that it would be seriously disadvantageous to the economy to disturb the existing parity with sterling. The Irish pound was consequently also devalued by 14.3 per cent on 18 November.

Some people profess to interpret the fact that our currency was devalued at the same time as sterling as meaning that we are utterly dependent in monetary and economic affairs on Britain. This idea, of course, does not stand up to objective examination. The decision to devalue was a free choice of the Government after a careful consideration of the various alternative courses of action. It was a business decision based solely on an assessment of how our national advantage would best be served. A number of other countries, including some who are not members of the sterling area, such as Israel, Denmark and Spain, also decided that it was in their best interests to follow the British devaluation and I do not think any one accuses them of lacking monetary or economic independence. On the occasion of the last sterling devaluation in 1949 the present Opposition were in office and they decided not to establish a different rate of exchange with sterling. They considered that the course of least disadvantage was to maintain parity. We have taken the same decision on this occasion.

Anyone who now wishes to criticise the Government's action in devaluing should bear in mind that they could have raised the question of a change in our exchange arrangements well in advance. The possibility of a devaluation of the pound sterling has never been very far from the surface in recent years. On 13th July, 1965, the Taoiseach, when Minister for Finance, in answer to a question by Deputy Cosgrave (Dáil Debates, Cols. 1008 and 1009) intimated that if the pound sterling was devalued the Irish pound would be devalued as well. Nobody asked for reconsideration of this reply.

The idea that we should have given ourselves a competitive advantagevis-á-vis the British and other devaluing countries by devaluing by a greater amount than these countries has nothing to recommend it. Since all imports would be dearer, and not just those from non-devaluing countries, such a step would have led to substantially higher prices and costs than are likely to result from the moderate devaluation which has actually occurred. A higher rate of devaluation than that of Britain would tend to raise doubts in the minds of foreign investors about the basic soundness of the economy and cause fears of further devaluations. The consequent loss of confidence would be a serious blow in view of our dependence on the capital inflow for the financing of an important part of our development needs.

In any case, since we are in balance of payments surplus at the moment a drastic step of this kind would be unnecessary. It would, apart from anything else, be impossible to justify to the International Monetary Fund whose Articles of Agreement provide that a member shall not propose a change in the par value of its currency except to correct a fundamental disequilibrium in the balance of payments. In view of our close economic ties with Britain, the Fund have accepted a devaluation of sterling as adequate justification for a corresponding devaluation of the Irish pound. They could scarcely be expected to accept in our present circumstances the need for a greater devaluation than that of sterling.

Not to have devalued at all—which is the only other possibility—would have been an indefensible decision in view of the close trading relationship between Britain and ourselves. It would have meant, in effect, the imposition of a tariff of 16.7 per cent on all our exports to Britain. The result may be gauged from our experience of the harmful effect on our industrial exports of the levy of 15 per cent imposed by the British authorities in November, 1964. The higher cost of holidays in Ireland would have had detrimental effects on our tourist trade. Adherence to the former exchange value would have raised barriers against the export expansion on which we rely for disposal of most of the increased production needed to provide new jobs and higher living standards.

It is too early to weigh up exactly the impact of devaluation on our economy. Certain disadvantages obviously follow from it—in particular, all purchases from the non-devaluing countries now cost more—but there are some compensating benefits. The extent of the price and cost repercussions of devaluation will be mainly determined by the amount of goods which we continue to import from non-devaluing countries, although there will also be a small indirect effect resulting from purchases of goods from Britain and other devaluing countries which have utilised raw materials from non-devaluing sources.

In the first eight months of 1967 merchandise imports from non-devaluing countries amounted to £115 million or about 45 per cent of total imports. If imports of all goods and services are taken, the proportion is about 35 per cent. In view of the price differential which now exists, it is clear that a demand for a certain amount of these imports will be diverted to Britain and other devaluing countries. To some extent also, demand may be met from Irish sources where the Irish goods are now cheaper than the imported articles. Even where goods continue to be imported from countries that have not devalued it is by no means certain that the suppliers will continue to market at full pre-devaluation prices. They may have to absorb some of the price rise themselves in order to hold their positions. The net result is likely to be a more moderate rise in the value of imports from non-devaluing sources than the pattern of existing trade would suggest.

On the other side of the external trade accounts, there should be considerable gains as a result of the devaluation, particularly as we still have unused capacity which will enable us to increase production quickly to take advantage of the improved opportunities. Of our total exports 20 per cent go to non-devaluing countries, particularly the United States and the EEC. The volume of manufactures exported to these countries is growing. Provided our industrialists are prepared to seize the opportunities offered and our additional competitiveness is not eroded by domestically initiated cost increases, the next year should see substantial increases in exports to these markets. Besides the actual direct gain to the balance of payments resulting from such an increase, this trend will also have the advantage of diversifying our exports.

Besides an expansion in merchandise export trade with non-devaluing countries, there can be an increase in exports to devaluing countries, particularly Britain, provided Irish goods retain a competitive advantage as against goods from non-devaluing countries. In addition, tourist receipts should be significantly increased. The American and Continental tourist markets have been showing a very good response recently to our promotional work in these areas. They should now receive a further stimulus. Tourists from these areas will now find costs in Ireland more attractive in terms of their own currencies and British tourists will find Ireland cheaper than the Continent.

Striking a balance between the effects of devaluation on the import and export sides of the external accounts, one can say that there need be no substantial alteration in the balance of payments position as a result of devaluation. Even if some disimprovement takes place, this can be faced since we are at present in surplus.

Among the principal commodities which we import from non-devaluing countries are crude and partly-refined petroleum, wheat (imports of which vary according to our own harvest experience), coal, fertilisers and certain animal feeding stuffs, tea, tobacco, certain fresh and dried fruits, wines and brandy and various raw materials. In some of these cases, such as tobacco and oil, the greater part of the retail price is accounted for by taxation, the basic import cost being relatively low. When allowance is made for purchases at pre-devaluation rates, it should be quite a while before prices of some commodities have to be raised because of devaluation. The position in the case of all the major commodities is under close examination. The circumstances vary from case to case and I cannot usefully do more at present than to reiterate the policy statement already made by the Minister for Industry and Commerce and to emphasise the moderate extent of the overall effect on the price level which devaluation of itself can be expected to have.

The Minister for Industry and Commerce has stated that he will require to be satisfied under existing price control arrangements that any proposed price increase is not intended to be applied until it is clear that devaluation is, in fact, affecting current costs. He has made it clear that he does not consider that there is any justification for increased prices where the goods themselves, or the raw materials for them, had been paid for at pre-devaluation rates. Importers will be expected to take all steps open to them to avoid or mitigate the effects of devaluation, such as switching to other sources of supply.

As to the overall effect of devaluation on the price level, it is reasonable to calculate that it should not be more than about two per cent. Imports from the non-devaluing countries represent about 14 per cent of GNP. If we continue to import the same amount from these countries and prices rose by the full amount of the devaluation, the price rise in respect of these imports would be 16.7 per cent and the consequential general price increase would be 2.3 per cent.

However, this calculation assumes that the entire effect of the rise in price of imports would be concentrated on domestically-used goods whereas a proportion of imports is later exported in some form. While allowance for this factor reduces the general price increase, this reduction is offset by the likelihood of some increase in the cost of goods imported from Britain owing to the effect of devaluation on Britain's own purchases of raw materials, oil, etc. On the other hand, there will be some switching of purchases from the non-devaluing countries to cheaper sources of supply and, moreover, the non-devaluing countries will not in all cases be in a position to allow the prices of their goods to rise, in terms of pounds, by the full amount of the devaluation.

To sum up then, the direct effect of devaluation on our general price level may be expected to be of the order of two per cent and this will appear only gradually according as stocks have to be replaced. The effect on the consumer price index, which covers a narrower range of goods, may be somewhat different but cannot be other than moderate.

In view of the moderate effect which devaluation is likely to have on prices and the spread of the increase over a period, there is no ground for suggestions that there should be immediate compensation to recipients of social welfare. It can be taken that, should there be significant price increases from whatever cause, the Government will give careful consideration to the position of the Social Welfare recipients. The Government have a good record in this respect. Improvements in social welfare in the past have by no means been confined to compensation for the rise in the cost of living.

On the question of demands for income increases at this juncture, whether or not they are associated with apprehensions about the effects of devaluation on living costs, I would like to explain the position as I see it.

The Government's general attitude to income increases has often been stated. The Government favour a progressive increase in workers' real incomes according as national production rises and Government policy is directed towards raising national production — and with it individual productivity—as fast as possible.

So long as the international trend is for money incomes to rise faster than productivity, a rising price level in the world is inescapable. The Government, in common with other Governments in Western Europe and North America, want to restore price stability so that money will hold its value but this cannot be done unless the rising trend in incomes is more closely aligned with improvements in productivity. When money increases are backed by a corresponding rise in output, they yield genuine improvements in living standards, whereas artificial and swollen increases are inevitably cut down to size by a rise in living costs.

If in Ireland prices and costs rise faster than in competitor countries, we harm our export trade and make it easier for foreigners to take even the home trade from Irish manufacturers. In other words, those who insist on excessive increases in incomes are damaging the country's prospects and condemning more of their fellow countrymen to unemployment or emigration.

Industrial workers in general have recently been making a big contribution to increased industrial output and this has been matched by improvements in their real earnings and conditions. Allowing for the 3.8 per cent increase which has occurred in consumer prices, the real earnings of industrial workers rose by 6 per cent in the first half of 1967 as compared with the same period of 1966. This is higher than the rate of increase in national output as a whole. Apart from actual increases in pay additional to the £1 a week increase of last year, there have been reductions in working hours, longer holidays with pay have been granted, service pay has become more general, and pensions schemes have been negotiated in a number of industries. All these have given a real increase in the reward for work.

New arrangements for training have been introduced under the Industrial Training Act of this year and the Redundancy Payments Bill recently passed by the Dáil offers further protection to industrial workers. It is estimated that about 250,000 workers have obtained reductions in working time averaging two hours a week and that a similar number will benefit progressively from longer holidays until, in three years' time, paid holidays will extend to three weeks.

I want to make clear that the Government are glad to see improvements occur and wish to see the trend continue according as the national economy progresses. But some words of warning against undue expectations are necessary, particularly in the light of the implications of devaluation.

Devaluation means that our domestic money has lost a certain amount of purchasing power over the products of the countries which have not devalued. We have to produce more to earn the same amount of these foreign currencies as before. We are, of course, helped by the fact that there will be a bigger foreign demand for our products, now that they are cheaper in foreign money, but it remains true that we must produce more to earn even the same foreign income as before and more still to increase our earnings of foreign exchange. Productivity efficiency is, therefore, more important than ever and no less essential is the preservation of the relative cheapness and attractiveness of our products in order that we may be able to sell more of them abroad. In Britain, the Government have emphasised that cost increases due to devaluation must not be used as a justification for wage increases and the British TUC have said that "they will not regard increases in prices arising from the reduced external purchasing power of the pound as constituting in themselves justification for increases in wages".

For us, however, the essential thing is to preserve and, if possible, improve our competitiveness. This means that any income increases during the year ahead must at least be covered by increased productivity. We must do everything possible to keep our unit costs from rising. It is, indeed, only by holding them behind British costs that we have a good prospect of continuing to do well in industrial exports to Britain during this period of severe restriction of the British economy. This is also the key to success in exploiting, for the benefit of employment in Ireland, the opportunity we now have of increasing our merchandise exports to, and our tourist income from, Continental Europe and North America. I would hope that no section of the community would be so impatient or so selfish as to imperil what is so obviously in the national interest. Instead, let us concentrate on improving our incomes through increased productivity, so that the advances in income made possible by a continuing upward trend in production will hold their worth and be consistent with a general expansion of employment.

There have been suggestions that devaluation, together with the effect of the higher interest rates resulting from the increase in British Bank Rate, will depress the economy. I do not accept that view. The growth rate at the moment is in the region of four per cent. This rate of expansion is substantially export-led. In the first six months of 1967, industrial exports were 28 per cent higher than in the first six months of 1966. Provided we keep our costs stable—covering any income increase by at least equivalent increases in productivity—devaluation will provide a further boost to exports and therefore to industrial expansion. Diversion of demand from foreign sources to cheaper domestic suppliers should also provide some stimulus to domestic production.

The measures introduced along with devaluation in Britain are likely to have a restrictive effect. They may postpone the upward trend in consumption which had been visualised for the British economy over the forthcoming months. While this is regrettable from our point of view, it is not a reason for dejection. It has been our experience, particularly emphasised this year, that growth of our exports and production is not closely related to the trend in Britain. In the first half of this year, despite static conditions in Britain, with both "squeeze" and "freeze" in operation, our industrial exports rose substantially while our overall growth rate recovered to four per cent.

Granted that the British market may continue depressed in the short-term, Continental and American markets are likely to be much more buoyant over the next year than at present. A growth rate of almost four per cent is projected for European OECD countries for 1968, compared with two per cent in 1967, while the United States growth rate should be five per cent, compared with 2½ per cent in 1967. It is precisely in these expanding markets that devaluation will give us a substantial cost advantage—and it is up to us not to throw it away. The consequent rise in exports and production should compensate for any temporary loss of momentum in sales to Britain.

There is one further point about the situation in Britain which I think should be stressed. The sterling devaluation and Britain's deflationary measures are intended to transform a chronic balance of payments deficit into a surplus and thus allow her to resume stable growth. We have a pronounced interest in the success of this objective. As long as Britain remains in large deficit on her external account our external trading position will continue to have an element of uncertainty in it. A strong Britain and a strong pound mean a strong market for our goods.

About 90 per cent of Irish official external reserves are held in sterling. In view of the large proportion of our trade which is with Britain and other devaluing countries it is the sterling value of the reserves which is of most account; the reduction in their value in terms of non-devaluing currencies is an unwelcome but inevitable result of devaluation. So also is the increased liability in Irish currency related to our dollar and deutschemark indebtedness.

A beneficial side-effect of devaluation will arise in regard to the capital inflow. Investment from Continental Europe and the United States should be stimulated both because of the lower cost, as a result of the devaluation, of setting up new factories and of the new opportunities for industrial exports which have been created.

To allay doubts raised in the minds of the public by Opposition spokesmen, I wish to make it clear that there is no intention whatsoever of our copying the British credit squeeze and other deflationary measures in this country. Our internal and external circumstances are much different from those of Britain at present and the Government do not consider that deflationary action is needed. In this the Government are, of course, exercising their freedom to formulate financial and economic policies most suitable to this country's needs.

In order to ensure that our savings, in the form of bank deposits, will continue to be available to finance domestic development needs, it has been necessary to raise our interest rates. Here also there is no question of slavishly following the British example. Some increase is necessary but it has been kept to the minimum and, indeed, overdraft rates here, while unfortunately high, have been kept at a full one per cent below those in Northern Ireland and Britain.

We hope that the increase in interest rates will soon be reversed. The present level of Bank rate in Britain is necessarily of a temporary character, designed to safeguard the new exchange rate by attracting short-term funds back to Britain. We can expect that it will be reduced in the near future to a more normal level.

I think I have covered the questions which Deputies have asked about devaluation and its effects. If other points are raised by Deputies, I shall deal with these in replying to the debate.

As Deputies are aware, I issued a booklet on decimal currency in June last inviting views as to the choice of system for this country. I had a good response to this invitation. A number of important representative organisations have recommended that we should adopt the same system here as in Britain and Northern Ireland while others favour one or other of the alternative systems. Similarly there is a variety of views in the replies received from firms and individuals. It was to be expected that there would be a conflict of opinion on this controversial subject. I am at present considering the replies and I hope to be in a position to make a recommendation to the Government early in the new year.

Finally, I wish to refer to decentralisation. The House is already aware from the Taoiseach's announcement on 16th November, 1967, that it has been decided that the headquarters work of the Department of Education be transferred to Athlone and that of the Department of Lands to Castlebar.

This decision was taken in the wider context of the Government's policy for regional development. The decentralisation of the administration, commerce and industry of the country to the greatest extent possible has always been an essential part of the programme of the present Government and their predecessors. The Government are determined to do whatever is feasible to redress the imbalance of population in the country. They are particularly concerned to revitalise the west of Ireland by action on a wide and imaginative scale.

It will take a number of years to give effect to the Government's decision, which will involve the erection of modern office blocks in Athlone and Castlebar and will also give rise to many other problems. These will include human problems which the Government intend to have treated with the utmost understanding and consideration. The staffing of the new offices will be effected as far as possible on a voluntary basis.

I have already met representatives of the staff organisations and I will be available for further meetings, if necessary. Detailed consideration of the whole matter has commenced at the General Council under the scheme of conciliation and arbitration for the civil service.

This is an important national project and it is vital in the national interest that it should succeed. There will be difficulties but I am confident that, with the co-operation of all the interests concerned, they will be overcome.

I move:

That the Vote be referred back for reconsideration.

We have sought this debate and proposed the referring back of the Minister's Estimate because as the Opposition Party of this country we felt that the manner in which this announcement of devaluation was conveyed to the people was unsatisfactory. We were not satisfied with the Minister's assurances as to the minimal effect of devaluation on the cost of living and on the lot of the poorer sections of the community. Secondly, we felt this entire matter should be debated and discussed here in the Dáil, the people's parliament.

It is worth noting that of all the countries affected by devaluation we are now, some ten days later, only discussing this matter in the parliament of the people. Even in the other part of this island the matter has been discussed fully. It was discussed within two days in the British Parliament. But because of the way in which we manage our affairs, there has to be a concession by the Government to enable a debate to take place here on something which may have a very serious and widespread effect on the lives of the ordinary people of the country.

However, that is by the way. Our primary concern was the display of Ministerial complacency which was communicated to our people last Saturday week; and indeed the complacency that the Minister gave expression to on television and radio a few minutes after the British announcement runs through his speech and his remarks here today. We have had far too much of this complacency on the part of Fianna Fáil Ministers in recent years. No matter how difficult things may have been for ordinary people, there was always a Fianna Fáil Minister for Finance or a Fianna Fáil Leader of the Government to stand up in the Dáil or elsewhere and tell the people that good times were coming, that they were just around the corner. But they never come and the problems continue to remain and to grow and our people continue to find employment difficult to get and have to continue to emigrate.

It is fair to say that from Fianna Fáil Governments during the past ten years we have had a plethora of promises and plans, an abundance of Ministerial assurances, but in fact the old doctrine has been preached to the people: "Live horse and you will get grass." The plain fact is that now in 1967, whether we are on the threshold of Europe we do not know, we have a growing unemployment problem, continuing emigration, a rising cost of living, rising taxation and mounting discontent among most sections of the people.

Devaluation has come about and this we were to accept without question following a bland Ministerial announcement, given in a post-prandial vein, that really it will not do anything to anyone, that it will not affect the people very much. This decision of the Government was announced by the Minister a few minutes after the British decision to devalue had been announced in London. The Minister made his announcement with a flourish, with a certain amount of drama. The Minister, having delivered himself of his remarks to the bankers, then received the intimation and proceeded to tell the people about it. The suggestion was that this was the Government's decision. In fact, I assert, by reason of the Government's inaction, that it was nothing of the kind. This Government, among other things, have failed to expand the policy initiated by Deputy Sweetman as Minister for Finance ten years ago, have failed to expand our holdings of external assets in the form of non-sterling securities. Today these assets stand at something less than the £10 million figure they stood at ten years ago. That is one thing. I do not suggest that a continual expansion of these holdings would have prevented the necessity for devaluation but it might have been some shield, some source of confidence at a time of difficulty for our currency, and I agree with the Minister that it is our currency and that it should be so treated.

The second point is in relation to the position the Minister and the Government found themselves in on Saturday week. Though the Central Bank of this country 2½ years ago indicated the need for a reform in our banking law, the Government have done nothing whatsoever about it. The Government have continued the legal obligation contained in our statute law of maintaining parity with sterling. Of course it can be changed, but we have the Minister here telling us that under the provisions of the Currency Act the statutory link with sterling had to be maintained.

In view of these facts—the failure to expand the holdings of the Central Bank in non-sterling securities, the failure to change the statutory obligation to maintain the link with sterling —when we hear the Taoiseach, as we did during the week, and the Minister for Finance today saying that devaluing the Irish pound by the same amount as the British devalued sterling was the best course to take, we listen with amazement. Was this course taken because no other course was possible? Was this decision taken because the Government had failed to foresee the likelihood of this development and had failed to initiate the necessary joint studies by the Department of Finance and the Central Bank to determine the best exchange rate for the Irish pound? Did the Government neglect these obvious precautions and, in doing so, leave themselves with no effective alternative to following Britain blindly?

I want to say, in so far as we are concerned, we can accept that the decision to devalue the Irish pound at the same rate as the British have devalued sterling may have been the right course for this country. It may even have been inevitable; but we are concerned that this decision should be taken freely by our Government here in the light of our circumstances— freely in the sense that our currency is an independent currency, not subject to decisions taken outside—and entirely in the interests of the Irish people. So far as this Party are concerned, we do not relish the spectacle of an Irish Minister for Finance reporting to the Irish people here at home decisions already taken in relation to their interests in London. We deprecate a situation in which the Irish Minister for Finance is in effect like a puppet on a string, a string held by the British Chancellor of the Exchequer.

I should like to remind the House that two and a half years ago this Party—not any other Party—this Party of Fine Gael in our policy documentTowards a Just Society, called for an effective national credit policy. We demanded in the interests of the people at that time that the Central Bank of this country should be an active, effective agent in defining and distilling the necessary credit policy to finance the undertakings of our people. How was that policy greeted by the Fianna Fáil Party—I am glad to see Deputy MacEntee in the House—and Deputy Lemass and the rest of them? They started a scare throughout the country that we were out to do down the banks.

There was derision and implacable hostility from Fianna Fáil two and a half years ago because we advocated a progressive measure that was already being applied in every other country in the world that fairly regarded itself as independent and entitled to decide its own destiny. No, it could not be, according to Fianna Fáil, in the general election of two and a half years ago; our credit policy was something that could not be tolerated, and the object was to cause uneasiness and anxiety and worry amongst those who were fortunate enough to have investments or money on deposit.

The general election is over. It is true to say now that within the following couple of months our policy was adopted in full by the Fianna Fáil Government and is now fully and properly in operation. The Minister can take pride in the fact that today in this country our Central Bank is acting as it should act, as a central bank advising and seeing that credit is controlled here in accordance with the interests and the requirements of our people. That was Fine Gael policy announced by us and derided by Fianna Fáil two and a half years ago. It is now in operation.

With that as an example, may I suggest now, on behalf of this Party, this decision having been taken either here or elsewhere, in the light of the appropriate facts, or otherwise, that the Government now introduce into this House the necessary amending legislation to give it the power possessed by every other European Government to determine the exchange rate of our currency in accordance with our own requirements and our own circumstances. I make that suggestion now when it can cause no panic anywhere. Devaluation has already come. Had we made that suggestion some time ago, no doubt we would have been met with cries from the Government of: "They are after the banks; they are out for your £". Now that devaluation has come, now that no issue of confidence can arise, the time has come to remove an out-of-date obstacle to the determination of our exchange rate. The ties by which we have bound ourselves to sterling, regardless of our economic and financial interests, must now be broken so that our currency may be seen to be, as it undoubtedly is, an independent currency and so that the Government can have the necessary power to decide these matters independent of any outside decisions.

That I say by way of introduction. However it came about, and whatever the merits of the decision, devaluation has taken place. I do not know of my own knowledge and, therefore, I must accept the Minister's word, that to devalue at the same rate as Britain devalued was the proper thing to do. Certainly I agree with the Minister that the alternative—doing nothing—could cause and would cause considerable difficulty for our country and could cause and would cause wholesale unemployment for our people.

Be that as it may, devaluation is an ugly word. It implies many things that affect people badly. But we have an open economy. We are subjected to many forces, many influences, many stresses which arise outside the country and which we cannot control. In regard to the British decision to devalue, obviously a situation was created for us in relation to which action had to be taken and in respect of which a decision had to be made. The decision was to devalue at the same rate as Britain. I wonder if I were to say in relation to that decision:

Devaluation is a tricky business and one by which every honest, industrious, thrifty man is a loser. On a short view it may appear the State gains by it, but on the long view, it loses; for devaluation is destructive of the public morale. By devaluing its currency, and forcing its citizens to accept something less than their original 20/- in the £ for their just claims upon it, the State becomes nothing better than a shyster debtor and weakens that public confidence in the integrity and capacity of its administration which is the basis of public credit.

The plain fact is that the Coalition by its policy has done grave injury to our people, to their standard of living, to our social and economic structures, to credit and to public confidence. Devaluation has made us all very much poorer than we should have been and this country of ours much more difficult to live in.

Had I said that in relation to the Minister's decision, the Minister would cry "Sabotage" and accuse me of irresponsibility. If I went on to say that this decision was cutting every old age pensioner in his pension, every widow and every orphan in their pensions, every social welfare recipient in his benefits, no doubt the Minister would say, as he said last Wednesday: "It would be very wrong and irresponsible that it should go out from this House that people's pensions will be worth less."

It is usual for a Deputy to say from what he is quoting.

I am quoting from the Fianna Fáil spokesman on Finance—God bless the mark—who wrote an article entitled "Diddlumdandy". It took the entire half page of theSunday Press of 13th November, 1949. Do not be bashful, Deputy MacEntee, take a bow. This was the Fianna Fáil reaction to the decision to devaluate in 1949—“The Government was a shyster debtor: grave injury had been done to the economic and social fabric of the State: the country was so much worse”—but, leave it. It ends with this wonderful stinging sentence: “The Government is dooming the Irish people to go down with the British ship.” I am not reacting in that way—because that was Deputy MacEntee and that was Fianna Fáil in Opposition, and irresponsible, trying to cause a panic and a chaos among the people and suggesting that pensions actually were being cut and that the Government at that time, in the face of a 30 per cent devaluation, were running away from their liability to meet just claims.

Now it is different. Deputy MacEntee now sits up there on the back bench of Fianna Fáil. He will support a decision to devaluate taken in different circumstances and different times because this is a Fianna Fáil decision, we are to be told, and now how different is the outlook.

It is not being suggested now that the economic and social fabric of the country has been ruined, that people's lots have been made worse, that everything will be cut and that people will suffer. No. It is a different story now. Following the announcement, the Minister spoke on television and on radio, subsequently giving press interviews and one here today. He had a number of things to say. He was reported in theSunday Independent of 19th November, 1967, as saying “he could see no reason why the cost of living should be affected here as a result of devaluation”. He could see no reason why the cost of living should be affected here as a result of devaluation ! He went on to say: “our exports, both visible and invisible, will be stimulated by this course”. Then he adds: “in the main our imports from non-sterling countries were of a capital nature, and, not being consumer goods, will not directly affect the ordinary citizen”. Finally, he said: “in so far as we would be using our reserves, we would be using them inside the sterling area”.

I started by saying that our patience with regard to ministerial complacency is beginning to be exhausted. I am going to assert that those four statements by the Minister were not only complacent but misleading and inaccurate and do not bear any examination.

The cost of living will not be affected, said the Minister last Saturday week. Today, at least he says it is too early to weigh up exactly the impact of devaluation on our economy. The cost of living was not to be affected. In the ten months or so, since October, 1966, our imports from non-devaluing countries amount to £160 million and that is 15 per cent of our national expenditure which is forecast by the Economic and Research Institute this year at £1,130 million. Fifteen per cent comes from devaluing countries. An increase of one-sixth, which is roughly the devaluation figure, in 50 per cent of national expenditure means at least a 2½ per cent increase in the cost of living and that is in so far as we buy from non-devaluing countries.

The Deputy is mixing up two things. He is mixing up GPL and the cost of living: they are two separate indexes. The general price level and the cost of living index are two separate things. The Deputy should read my speech again.

I do not think I am. I shall study it later. Secondly, in so far as our purchases from Britain are concerned, British production costs will increase and there is, in addition, the removal of British export rebates. This must have an effect in pushing up the cost of British exports to us and British exports to us represent one-quarter of our national expenditure.

I want to suggest that, following devaluation at the import stage, we face at least a three per cent increase. Goods will come in here. I think they will have a three per cent effect on the cost of living—and what will happen inside? We have an ineffective price control operated by the Government. I have little doubt that we shall have a three per cent increase in cost. With our ineffective price control, I think that will very easily swell to four per cent as a factor in the cost of living. I see that at least one person said recently that the total increase may be of the order will very easily swell to four per cent as of five per cent. However, be it three per cent or four per cent, if such an increase takes place it takes place in the circumstances obtaining here, under Fianna Fáil, because there always is an increase, each year, under a Fianna Fáil Government.

It is not unfair to say that, just taking the period between August, 1963, and August of this year, the cost of living has advanced by 21 per cent. In other words, it has increased at the rate of five per cent annually. If you go back further, if you want to go back to 1957, when the present Fianna Fáil Government came into office, the total increase has been over 40 per cent and it has gone up steadily five per cent each year.

The Minister may say: "Two per cent, 2½ per cent, a three per cent increase in the cost of living or even a four per cent increase does not matter." If it is to be added to the yearly increase, which has been our experience in the past few years, we may find rapidly, from this position, an advance in the cost of living this year of eight to nine per cent—and that is not unlikely. What is going to happen to bread? Is it not perfectly clear that bread will go up in price and the decision to increase the price of bread has nothing to do whatever with devaluation? The plain fact is that an extra £3 million which is now being given to the industry has to be found and it is going to be found by increasing the price of the small loaf of bread by 1d per lb. I suppose it will be announced as one of the unfortunate, unavoidable effects of devaluation. It will have nothing to do with devaluation and the fact is that any factor which advances our increase in the cost of living can have a frightening and disastrous effect on our economy. We depreciate our real earnings each year by an increase in prices and two per cent or three per cent or four per cent may bring about a very serious situation.

The Minister went on to say that our exports both visible and invisible will be stimulated by this course. He did not say that that remark could only apply to one-quarter of our exports, the one-quarter that goes to the non-sterling area countries that have not devalued. The balance of our exports, three-quarters, will continue to go to Britain and from Britain we will continue to get the vast bulk of our remittances, our dividends and interest payments. Britain now, however it came about, whatever wrong policies they adopted, or whatever ill-luck they may have run into, is a depressed market. It is going through a definite inflation. The result of this decision is that we must continue to sell three-quarters of our exports in a market which is depressed, to people who are suffering from government imposed financial restrictions of one kind or another. When the Minister says this decision will stimulate our exports it can only affect one-quarter and the Minister is not even telling a half-truth, it is a quarter truth at the most.

In relation to our imports from non-sterling countries, the Minister goes on to say that, in the main, our imports from these countries were of a capital nature and, not being consumer goods, would not affect the ordinary citizen. I do not know where the Minister gets his information. So far as I can ascertain, and I take it by capital goods the Minister means, in effect, machinery, last year our total imports of machinery amounted to £58 million and of this amount 60 per cent was imported from the United Kingdom. Our imports of capital goods from countries other than the United Kingdom, including countries that have devalued, came to something between £20 million and £25 million and our total imports from non-devaluing countries amounted to £135 million. Therefore, the fact is that only one-sixth of these imports from non-devaluing countries consists of capital goods but the Minister says that "in the main" they consist of capital goods. Am I being unfair in suggesting, if my figures are right, that either the Minister did not read his brief or was indulging once more in complacency of a kind which cannot be tolerated? The Minister goes on to say: "In so far as we would be using our resources we would be using them inside the sterling area."

That should be "reserves".

I have not got the quotation before me.

I have not got it either but I know the Deputy is wrong.

"In so far as we would be using our reserves we would be using them inside the sterling area." Again, maybe the Minister attaches different meanings to these words from what I do, or maybe he does know the facts of life. Our balance of payments with the sterling area at the moment is in credit, we have a surplus of £50 million. For the past ten years we have had a surplus every year with the sterling area of at least £20 million but with other countries outside the sterling area we have now a deficit of £60 million. If our reserves are to be used, they would be used to meet that deficit, the deficit created by our trade with countries that have not devalued. In the light of that situation, I cannot understand how the Minister can blandly say our reserves would be used only inside the sterling area. We have a surplus with the sterling area but we have an enormous deficit with non-sterling areas——

How do you pay that?

We cash our reserves. I am going to suggest that every statement made by the Minister was misleading or was inaccurate and untrue. The time has come to put the record right. I believe devaluation of the Irish poundvis-à-vis the currency of other countries in the immediate future will do more harm than good. We have got to face that. In the long term we may be able to get over initial disadvantages, but immediately there is no good trying to fool ourselves or deceive ourselves. Problems are created for us and our people and we have to look at them, face them and have a policy to deal with them. Our imports from non-devaluing countries are 50 per cent greater than our exports to them. This means that even if our trade with them benefited, even if we expanded our trade with them, we would still have to pay more for a larger volume of goods. This must have a further adverse effect on our external balance of payments. We should recognise that. The immediate effect in relation to our trade with non-devaluing countries is that our people are going to have to pay more. It may be we will advance our trade with them. That is a long-term factor. The immediate effect is that we are going to have to pay more to countries from which we buy 50 per cent more than we export to them.

Secondly—this must be faced—the effect of this decision of devaluation is clearly deflationary and is meant to be such. The Minister said today he has no intention, and I am sure the Government would not have any intention, of following the British line in relation to the restrictions imposed by Britain on her internal economy. But the plain fact in regard to this decision, whether it was inevitable or not, whether it could be avoided or not, is that its effect is going to be deflationary on our economy, the cost of living is going to go up and many effects will follow. As far as the economy here is concerned, we have been in a period of deflation for far too long. If living costs now advance, if we have to pay higher prices to people outside, this is bound to have a depressing effect.

Thirdly, if price increases take place, as I believe they will, they are going to cause hardship to unemployed people, to old people, to widows, to pensioners, to workers and to people generally. There is no good saying that a cost of living increase of two per cent may take place, or for the Minister and me to argue whether it is going to be two per cent or four per cent. The plain fact is that immediately people are going to find themselves paying more for coal, petrol, wool and for a whole lot of other things. That is going to affect the lot of the under-privileged and the less well off.

In my view you are going to have these three effects. You are going to have an adverse effect on our external balance of payments, a deflationary effect on the economy and, in particular, hardship caused to poorer sections. If that is a fair assessment of the effect of devaluation, it seems to me that, whatever other countries may be able to shrug it off, a small country like this cannot afford to brush aside a situation of this kind as if it never happened and as if it is not going to affect us. New measures are now urgently required to get the economy moving again. I have read carefully and listened carefully to what the Minister had to say. I detected in the Minister's statement no sign whatsoever of any policy or any proposal to deal with the present state of our economy.

Our growth rate is 4.3 per cent at the moment.

I will deal with that in a moment. It is not, in fact. It is two per cent. The balance is gone in discharging a deficit on our external payments which we might not have suffered. The position is that the Minister is a member of a Government that have a great deal to answer for, a Government that by sheer incompetence brought this country on the appalling spending spree of 1964. That was the period in which a home grown, fashioned and designed inflation was brought about by the Fianna Fáil administration. That was followed by the panicky decisions taken in 1965 by a team of frightened Ministers who were appalled by the results of their own incompetence and took fright. They proceeded in 1965 to depress business, to bring about unemployment and to make the poor people pay for their mistakes. That is what deflation means.

The decisions taken in 1965 had their effect. By the summer of 1966, the balance of payments had ceased to be the problem. By 15 months ago the purpose for which the restrictions of 1965 were introduced had been accomplished. Our balance of payment problem had ended. Nevertheless, for the past 15 months, by inaction, by lack of leadership, by lack of a policy, this Government have allowed the economy to drift along stagnated and depressed.

The Deputy must be talking about a different country. He is not talking about our circumstances at all.

This is well illustrated——

Is the Deputy looking at the right statistical books?

It is well illustrated by the publication issued by the Economic and Social Research Institute in September of this year. This body of economists, who have no axe to grind, made an objective study of the situation, and they indicted the Government in the clearest possible terms for the mistakes they have made, the mistakes they were making and for their failure to disclose any policy. They refer, on page 7, to the unstable boom which was allowed to develop in the early part of 1964 and to continue into the middle of 1965. They go on to say that the increase in money earnings, the ninth wage round, could not be regarded as the sole cause of the boom:

The very rapid rise in the Retail Sales Index in 1964 took place because Consumer Credit was allowed to risepari passu with Industrial Earnings. Had hire purchase controls been tightened and the growth of personal and professional advances been checked early in 1964, the rise in Personal Consumption as measured by the Retail Sales in that year would have been much more modest.

They go on to refer to the deflationary measures then taken, which they say were too vigorous. Then they criticise the Government not only for the steps that were taken which were too vigorous but for the fact that they were kept in operation too long, and they suggest that some easing was necessary. This is an unbiased, unprejudiced, objective view of our economy by economists. They end up by saying that official mistiming has aggravated if not indeed caused the economic difficulties of Ireland since 1964—official mistiming, mistiming in 1964, mistiming in 1965 to secure a deflation kept in operation too long, mistiming since. Here we are at another juncture in our affairs. Will there be more mistiming? Will we look back at this decision in relation to devaluation and pass it by because the Minister is complacent about it, has no policy to pronounce and nothing to say?

The Minister talks about a 4.3 per cent growth rate this year. I wonder how real that is. We have converted an external deficit into an external surplus. It may be that in our present circumstances this was unnecessary and possibly undesirable. However, I think it will be found on examination that the conversion of that deficit into a surplus absorbed whatever improvement in national output has taken place this year.

I do not follow that.

It has gone into paying the deficit.

There was no deficit: there was a surplus.

No, of course.

How can you pay a non-existing deficit?

The increase in national output has been absorbed in paying that deficit. Now what should be done? When we were still importing too much, when there was no devaluation, when things were difficult from a trading point of view, much more so than they are now, they called for a stimulus. Nothing was done about it.

Now, Deputy.

What had been done? Hire purchase restrictions have made no difference. The removal of consumer credit has made no difference. There is now the added fact of devaluation, and in these circumstances, we feel that whatever case may have been made for a stimulus earlier than this, now it cannot be avoided. Positive steps must now be taken and a definite stimulus must be given to the economy. What should be done? In our view, what is desirable from the economic point of view and what is socially necessary, in fact, coincide. In our view, there should be an immediate decision to reduce taxation in relation to commodities and goods affected by increased prices. There should be an immediate decision to increase social welfare benefits.

We urge the Minister to reduce forthwith the duty on petrol and hydrocarbon oil. We think this is worth doing. If it is done, it will prevent an increase in costs going into distribution and will possibly prevent a dislocation in our whole cost structure. Secondly, we believe the duty on tobacco should be reduced forthwith. Tobacco is an element in the cost of living. A reduction in the duty on tobacco could be made without prejudice to any longerterm policy in regard to tobacco. Certainly this step should be taken to prevent an otherwise unavoidable increase in the cost of living.

Thirdly, we think the Minister should reduce interest rates. For reasons which the Minister implied. and which are obvious, there is nothing very much the Minister can do about interest rates. They have to be accepted. But there can be no doubt that high interest rates and dear money will have an immediate effect on building costs and will put up the cost of building and, in that sense, make living costs dearer and higher. Again the people affected will be those who have no bulwark, no defence. We therefore suggest as a temporary measure that, while high interest rates continue, the Minister should subsidise interest rates in relation to housing. It could be done. It is not a very extreme step. It could be done either by utilising the money available at the moment for housing grants. It has not been altered since 1948 when it stood at £275. In fact £150 is taken in wholesale and turnover tax. It does not go in most cases to the person for whom the house is being built but to the builder. We suggest as one expedient that the interest rates should be subsidised in the interests of preventing a vast increase in building costs.

I am reminded that in relation to building at the moment one-fifth of the materials for ordinary houses come from non-devaluing countries so there is urgency in that. We urge the Minister to take his courage in his hands and to do this as an initial step to prevent devaluation corroding our economy at a time when we cannot afford it, and to prevent a ripple of a fresh increase in the cost of living causing more serious economic difficulties.

Reduce the tax on petrol, reduce the tax on tobacco, and subsidise the interest rates—these are three things which could be done and which would have an immediate effect. In addition, we believe the social welfare benefits should be increased forthwith by at least five per cent. That should be done and it is necessary, because otherwise many poor people will feel the pinch and will be hurt. We are aware that what we advocate is a reduction in taxation and an increase in Government expenditure. We appreciate that if the Minister wished he could say: "That cannot be done." I do not believe the Minister will or that he should. The time has come when we must be far more flexible than we have been with regard to economic policy.

What we are advocating we believe to be necessary and desirable now, even if it will cost money, and even if it will reduce revenue and increase expenditure. It is worth doing to tide us over the present situation. It may be that in six months time the difficulties will have been overcome. It may be that in six months time, we will have reached the situation in which devaluation has helped us and that we have got into markets with which we are increasing our export trade and costs have not gone up. As the Minister pointed out, there is a real danger in the present situation. If our costs go up, and if as a result of that, other things happen, our economy will suffer grievously.

We suggest, therefore, that these measures should be taken, and that in the face of this kind of situation, it is essential to have a flexible approach. The idea that taxation and social welfare benefits and other things should be decided every 365 days, at every Budget, and that in between nothing can be done, is outmoded and no longer suited to the requirements of our situation. The Government should be prepared to take a decision this month and to alter it, if necessary, next month. A situation must be taken on the hop. We cannot have a continuation of a situation in which the Research Institute can say that official mistiming has aggravated, if not caused, the economic difficulties of Ireland since 1964. "Mistiming" is a polite word for "mistakes". We cannot afford that. We are in a grave situation now.

I believe that we, as a small country, face fierce and growing competition from powerful economies in England and on the Continent that will tend to suck our people from us into their factories and elsewhere. I believe that that is happening and continuing to happen; our people are being sucked away because we have not been flexible enough in our approach. We have not had the kind of leadership we should have had; we have not had a Government that had courage and an honest dedication towards providing what should be the ultimate aim of any Government here—more jobs at home for Irish people and a better standard of living and better social conditions. We have had chops and changes by successive Fianna Fáil Governments; programmes announced and torn up; promises made and disregarded. The result has been that year after year we slipped further and further down. We are having more and more people unemployed and there is a general lack of confidence in the country.

Let us not make a further mistake. Let us not allow this decision in relation to devaluation further to complicate our vulnerable economy. I feel it can be avoided by a Minister and by a Government who know their minds and are prepared to act with courage.

Before I say what I have noted here, I should like to say that all of us would go along with what Deputy T.F. O'Higgins has said in regard to a reduction of taxation on certain commodities, if we knew from what source the moneys were to come in order to do this.

The Government must share a certain amount of blame in this whole matter of the devaluation of the pound and the confusion that undoubtedly exists in the minds of some people. My view is that the fact that they did not initiate a debate in this House is an admission, possibly an unintentional admission, of our dependence on Britain because it is contrasted not alone with the announcement, because they had an initial announcement by the British Government, but the speed with which they came before the public to talk to the public about devaluation, the necessity for it and the possible effects on the economy. I do not know whether or not it was a coincidence that the Minister for Finance happened to be at a dinner of the Bankers' Institute on that particular night. I suppose it would be fair to assume that he had information about this decision of the British Government to devalue early in the morning or at least early in the afternoon of the night on which he spoke to the bankers. It was a pure coincidence that the Fianna Fáil Árd-Fheis happened to be on some day last week where the Taoiseach made his comments about devaluation. Again, I say this is a reflection on the Government, something that they, for their own protection, should have been very, very careful about in coming immediately before the Irish people, not on the programme "Seven Days" to which I presume the Minister was invited. He did not ask Telefís Éireann for time to talk to the Irish people. It was the initiative of Telefís Éireann which was responsible for the various comments made by the Minister on that occasion. I can quite understand, having been subjected to interview by different people on Telefís Éireann the difficulties of the Minister. I suppose he could only answer directly the questions he was asked but let me repeat—and I said this on another occasion—I do not say it with any venom or spite, he did appear to be casual. It was not so much that he did not care but he appeared to minimise and to play down to the utmost extent devaluation and its effects on the Irish economy.

Deputy Cosgrave and I put down Private Notice questions for last Wednesday. I wonder whether, if we had not put down those questions, we would have had this discussion on devaluation. It is regrettable and indicative of the attitude of the Government towards this House and towards the problem of devaluation to see that it is simply lumped in with the Estimate for the Department of Finance, while conativ ceding that the major portion of the Minister's speech has been devoted to this particular subject.

What more appropriate opportunity could there be?

Immediately it happened.

The House was not sitting on Saturday night at half past nine.

There was not any announcement by the Minister for Finance or by the Government to the effect that the Minister would be prepared to make a statement on that particular day. The British Prime Minister went on television within 24 or 36 hours of the announcement.

So did I.

I have told the Minister about that and said that he had my sympathy more than anything else because, with all due respect to the programme, I do not think it was the proper programme for the Minister for Finance to talk to the Irish public on such an important subject as devaluation and its effects.

You cannot have it every way.

When talking about the devaluation of the pound we should also be concerned with the devaluation by the Government of this House. It seems—and this complaint has been made many times particularly in recent weeks—that all the important announcements are made outside the House. I know Fianna Fáil are pretty comfortable and to a large extent smug in the majority they have at present, but it does not do the Fianna Fáil Party any good and it does not do our political institutions any good to make all those announcements outside the House.

The first occasion on which the House met was Wednesday and on that occasion we offered you a debate today and you accepted. You made no protest.

You did not.

I did so.

The Minister did not offer a debate. He said, in reply to questions, that he would be dealing with this matter on his Estimate speech.

When it could be fully debated.

My view is that the Minister should have made a statement to the House, not necessarily even with discussion, on last Wednesday to acquaint the Members of this House, who are the public representatives, with the situation as he saw it and with regard to the possible effects of devaluation. However we seem to be complaining many times about this attitude, this disrespect for the House. We do not seem to get anywhere, but let me say that this may be all right for a Government that have a majority but it is not doing the political institutions of this country any good and in the long run——

We are debating it now.

Ten days afterwards. Can the Minister not see my point? This is devaluation; it does not happen every day of the week.

You can have a much more valuable discussion on it ten days afterwards when you see what the situation is around the world.

I believe as far as the Minister's speech is concerned that he did give all the information which I am sure he must have with regard to this problem. We have been subjected—I suppose of necessity—to a lot of financial jargon by economists in the newspapers and by financial experts, jargon that means nothing to people who will be affected by devaluation. I trust that the Minister in his reply and those who contribute to this debate will seriously discuss how this is going to affect ordinary people and so far the effects have not been made known to them fully enough. It is not sufficient for the Minister to say as he said last week— this is something which impresses the ordinary people but which unfortunately is not true—in an interjection to somebody on this side "Shut up" or "Stop" or words to that effect. I am not quoting him exactly and I withdraw that, if you like.

I did not say that.

The Minister said that it makes no difference because the £ today is the same value as it was two weeks ago. He knew perfectly well that this was a wrong thing to say.

This is not what I said. I said that in terms of percentage, the £ was the same as it was two weeks ago.

The Minister is on the record of the House as saying that the £ is the same value as it was two weeks ago.

So it is.

I do not believe it is. The plain fact of the matter is that the purchasing power of the £ is very much diminished and anybody who would suggest that it is not is talking through his hat.

I want to correct what I said.

You can deal with this when replying. You have got away with misrepresentation. I am just talking about the general attitude of the Minister when he said that the £ is now as good as it was a week ago.

I want to make it clear that devaluation does not apply to everything. There was a suggestion that our £ was worth 14.3 per cent less. That is nonsense.

I do not think that suggestion was made. I am talking about what the Minister is on record as saying—at least what I heard him say. He will have an opportunity of correcting what he says. The fact is that our savings have been devalued. Our external assets have been devalued to the extent of some millions of pounds. This is something, again, which will affect the way of life of our people.

That is not right.

The Minister says that is not right. I did not interject when he was speaking. I could have interjected when the Minister made certain comments about wages and said what I consider to be a stupid thing in his brief. The Minister should not be interrupting me.

I will not interrupt you again.

In any case, as far as I can calculate, and I have not the same financial advisors as the Minister, our external assets are now worth £70 million lessvis-à-vis non-devalued countries. If the Minister accepts that, there is no reason for me to explain why. Our external assets in April, 1967, were worth approximately £260 million. It is very difficult to assess what private investment would be but one could agree that it would be between £300 million and £400 million, if we are to relate this to the private investment interest as disclosed to us. As far as I can ascertain, in 1965, those amounted to something like £20 million. Therefore, it means that two weeks ago we had £700 million in external assets. This is now devalued to the extent of £100 million to £70 million, as related to the countries who did not devalue.

I think it was the Minister, or some political correspondent in one of the British newspapers, who said that the Labour Party were against devaluation. We have to accept the inevitable and say that in the circumstances in which we are, the Government and the Minister had no option but to devalue. If we had not done so, as has been described by Deputy T.F. O'Higgins and the Minister, we would have suffered grave consequences, particularly as far as my Party are concerned, in the matter of unemployment because we buy—again this may appear to be repetitious—from non-devalued countries commodities which have been mentioned such as oil and tea and this means that our Irish £ is certainly worth less and this must affect our economy. It must affect our wages, our incomes and our savings. They are all worth less now. There is no doubt in my mind about that. I do not know how the Minister can prove otherwise.

It has been assessed that there will be an increase of two per cent. I do not know who made that assessment but devaluation will certainly mean an increase above two per cent in the cost of living. Sometimes when figures are given by people who are supposed to be experts they are not correct. In such things like the gross national product, in respect of forecasts in regard to increases in the cost of living and as regard forecasts in the Second Programme for Economic Expansion in terms of increased employment they have been just all wet. We were told that there would be an increase in employment figures but it turned out in the first year that those figures were completely wrong. I do not want to be pessimistic because it affects those who support me and it affects the whole Irish people. I know the economic experts who advise the Department of Finance say that the increase will be two per cent but I would regard that as a very conservative figure indeed.

This is the sort of debate in which the emphasis should be on our dependence on the British economy. I do not think we should fool ourselves in this respect. While accepting in the special circumstances we have to do what the Minister for Finance and the Government think, there was no alternative for us but to devalue. We could have taken the same decision as New Zealand and devalued to a greater extent but that would have brought more difficulties for us. We had to devalue at the same rate as the British Government. In any case, as the Minister pointed out last week, it would have meant new legislation because we are committed to parity with the British £. Therefore, we devalued one minute after Great Britain.

The tragic thing about all this is that we talk about an Irish Republic and freedom in this country. We had no decision to make except the one we did make because we are bound by this statute of 1927, or whatever year it was. In any case, it is there in the legislation of Dáil Éireann. It is only a cod for anybody to assume that when Mr. Wilson decided to devalue there was a great huddling by the Irish Cabinet and we had to make this decision. There was no other decision which we could make. We had no choice in the matter. It should be emphasised in this debate that we had no choice either but to increase our bank rate to 8½ per cent and also to adjust our lending rates. Therefore, what is abundantly clear, and what should be brought home to the Irish people, is that in those two vital matters we are absolutely powerless. If Great Britain devalues we have to do likewise, and if Great Britain reduces her bank rate we have to follow suit.

One per cent.

There is this little difference but it always has to be maintained. There never has been, in my knowledge, any occasion when the British adjusted their bank rate that we did not adjust ours.

There has been.

There may have been only one or two instances of that but, generally speaking, since we got our independence in 1922, we have had to follow Britain exactly in all those matters.

Not in this case. We have to make an adjustment.

It did not stay static: because Britain made a change, we made a change.

America has, as well as most other countries.

That does not complicate it at all. There is a world crisis as far as this is concerned but any time Britain changed, we did. There was not this trouble with gold and the dollar. We always followed Britain. In these two vital matters, we are powerless. These are things that affect the Irish people and the Irish economy.

I do not know why it should give the Deputy so much masochistic pleasure to say these things.

Does the Minister say we are not following Britain?

I am sorry for interrupting the Deputy but it is in my striving for truth. That is the trouble.

I can well understand why the Minister is striving for truth.

It is to keep the facts right: I apologise.

It is difficult to reconcile or to relate the action we had to take when Britain took it, particularly with regard to devaluation. The Minister can educate me on this in his reply and I shall be glad to listen to him. Great Britain is in grave difficulties, on her own admission. Her balance of payments has been wrong since the war. She piled up debts during the war years and could not pay them and this has been the problem of British Governments since 1945. The British economy, it appears, is no longer competitive enough to correct that sort of situation.

We find ourselves with the Minister telling us that our economy is booming, that we have no problem as far as our balance of payments is concerned, that we will have a surplus at the end of this year, our gross national product will increase by—and I can only take the statistician's word—4.1 to 4.3 per cent. We were supposed to thank a booming economy when we were supposed to have an increase in overall employment in the past year or two of 3,500 persons. All the signs are right for us. All the signs, on their own admission, seem to be wrong for Britain and when they devalue the £, we have to follow suit. There were the physical restrictions we experienced up to a few years ago. British import rates were deliberately deflated. We all agree with the Prime Minister that devaluation in their circumstances was the best thing for them. This, as far as Britain is concerned, will make imports dearer and exports cheaper.

Let me say that these two decisions that have been taken can have a tremendous effect on the whole of our economy and on industry. It can have an effect on housing through interest rates, on industry as far as investment is concerned, and I am talking about Irish industry, and on agriculture, not alone on credit, because I assume that the Agriculture Credit Corporation can increase their rates, but on the purchase of raw materials and fertilisers which are needed to get increased production.

It is very difficult for a layman, particularly on reading the financial experts, to understand that devaluation by Great Britain is the chance of a lifetime. We are told it will mean more employment arising from manufactured exports. We are told there should be an export boom and an end of the balance of payments crisis. This will mean cutting the balance of payments by £500 million. not alone on devaluation but on all other restrictive measures which they have taken.

What does it mean for us since we are depending on Great Britain in those matters which could, I suppose, mean more success for us? I think the Minister was remiss when he did not explain to the House, so that the ordinary man in the street will understand him, how this could mean success for us, particularly in the matter of industrial employment. That is why I say that the Minister did not do justice to himself and certainly did not do justice to the subject about which he was speaking when he stated on television, or in some speech, that we would take all this in our stride. If the example of the Government in their approach to this is taking things in their stride, we will not get very far indeed.

We all will agree that this is something over which many people have no control. The inevitability of our economic dependence on Great Britain comes from their political and economic dominance of our finances for so long. That is why our finances and economies are so closely linked. In all these years, we have had free movement of cattle and goods which is to our advantage but, unfortunately, we have also had free movement of labour in the wrong direction.

I do not know how true it is to say that the banks in this country are independent. They are independent to the extent that they are established as Irish companies. Still they maintain large balances in Great Britain. Many have head offices in Great Britain. They maintain these large balances for trading purposes. In 1928 we went through the process of issuing our own currency. This was a departure that was clearly akin to post offices being green instead of red. As far as this country is concerned in finance, the Bank of England is the boss. We established a Central Bank which in recent times got a little more responsibility and control, only very little control, over the issue of credit. There is still only one money market as far as these two countries are concerned, and that is London. It is only foolish to pretend otherwise.

Dependence, therefore, arises by reason of the fact that our trade is primarily, or to the greatest degree, with Great Britain. One-half our imports are from Great Britain and threequarters of our exports are to Great Britain. The Irish pound, prices, wages and profits all seem to be related one way or another to British rates.

In view of all this, a decision not to devalue would result in increased unemployment because British imports would replace home-manufactured goods because these could be sent into this country at something like ten-15 per cent cheaper, and then you would have those engaged in the manufacture of similar articles in this country out of a job. Our exports to Great Britain would be somewhat changed as well.

There has been a litany, and I do not want to plug this litany any more, with regard to the effect of devaluation on prices. This inevitably occurs. It is suggested that there will be an increase of one penny on cigarettes and the price of petrol will go up—and this will affect our economy—we are told, by 2d. per gallon. These may be specific examples, but these are the things the people should be told so that they will know what the real value of their pound will be. Petrol going up 2d per gallon will, in my view, affect all production. It will affect generation of power and will be reflected in various ways, in bus fares or in transport of goods or livestock, or whatever you care to mention. It will have a cumulative effect and will be represented in many more ways than on the ordinary increase in the price of petrol.

One can talk about electricity in the same manner. I was surprised to learn that one-half of our electricity is generated by oil. Electricity is used in a widespread way, in transport and so on, and this will have an effect not alone on the price of electricity but on other commodities as well.

Coal has already been increased in price and one wonders whether the Minister for Industry and Commerce has sought an investigation into this increase to find out whether it is justified. We get 60 per cent of our coal from the USA and I understand a diminishing amount from Great Britain. Therefore, the bulk of our coal will come from a country that has not devalued and this must have an effect on the cost of living. Even though people say the effects will not be known until five or six months have passed, unless the Government are very careful and diligent in price control matters we shall see the effects in a very short time.

Needless to say, there is a high amount of Irish wheat in our bread but this item will also be increased in price and will have an impact on the cost of living of people in the lower income bracket. Freight charges have already gone up and I do not know whether the Minister for Industry and Commerce has satisfied himself that these increases were justified. The price of cloth will be affected because bulk wool for the manufacture of our clothing comes from Australia which has not devalued even though it is one of the Commonwealth countries.

I must speak about fertilisers, whether they be nitrogenous or otherwise. All the raw material comes from countries other than those which have devalued. This is an important factor. When people say that we get a lot of our raw materials from Britain they forget that these, in turn, are imported by Britain, again from countries that have not devalued. People are concerned about mortgage rates, about interest on loans they have negotiated for house building. Will these be increased and if so by how much?

If somebody suggests that even these few items will increase the cost of living index figure by only two per cent, I shall find it extremely difficult to believe him. The Minister was vocal today—he did not shout; he was his usual calm self—about wages and though he did not use the drophammer like his friend the Minister for Labour did during the weekend, there was the suggestion that there should be restraint as far as wages are concerned. I am sure he knows the association between the trade union movement in this country and Britain. In his statement, the Minister used a press release on behalf of the British TUC, which I quote:

They will not regard increases in prices arising from the reduced external purchasing power of the pound as constituting in themselves justification for increases in wages.

I do not know how far the Minister depends on that as an exhortation to Irish workers, not to seek to compensate themselves for increases arising out of devaluation but for increases that may have happened since the last rise. The Minister's quotation from the British TUC statement may not have been given in full and it certainly does not suggest to me that there will be a voluntary wage freeze by the British trade unions. I am not one who wishes to provoke or to promote any discord. I know the trade union movement in this country, perhaps not as well as my colleagues behind me, and I am aware that they know their business well; and if the Minister for Labour, Deputy Hillery, is to approach the trade union movement in the way he did last week, by way of personalities, the trade union movement will find it very difficult to co-operate with somebody who, from what he said, appears to be completely antagonistic to the movement.

The Minister today spoke about wages and said there should be restraint. He did not threaten a wage freeze or a standstill, but has he thought about the freezing of profits to pre-devaluation levels? This is something the Government should consider if they are seriously concerned about holding the line and about exhorting the workers not to seek increases. It is true to say that there has been an increase in production and consequential increases in incomes. This is so but we should not be ostriches and bury our heads in the sand from the fact that there are people working for £8 and £9 per week and that there are many thousands who have not the £12 10s 0d per week which one of the leaders of the trade union movement has suggested should be a minimum wage.

It is useless to talk about a blanket freeze in this country while there are people living on sub-standard wages which certainly do not give them a decent standard of living. We should be concerned in this debate about the effects of devaluation on the man with a wife and one child who can get only 30/- a week home assistance. I am sure Deputies, particularly those who are also local representatives, know that in this country there are families living on a couple of pounds a week. This is not entirely the fault of the Government: to some extent also it is the fault of local authorities.

These are things we prefer to sweep under the carpet. They are problems we should consider when talking about incomes and the depreciation in the value of the pound. I am not satisfied, and neither are my Party, that the price control machinery established under Act of this Parliament by Deputy Hillery as Minister for Industry and Commerce, is absolutely effective. I do not know what was in the mind of the Government when they introduced this machinery. We had been urging them for a long time to introduce it and everybody in the House was not enthusiastic about price control. However, we got it but I do not think the section in the Department are sufficiently equipped with officers to do the work efficiently.

There is one thing I wish to emphasise at this stage, that is, that I am very suspicious about this two per cent increase. Maybe as it is calculated, it should only be two per cent, but, when these little traders put on their mean increases, it will be found that the cost of living creeps up by three to 3½, four to 4½ or five per cent. We believe there should be stricter penalties for overcharging. The Minister for Finance talked about freezing wages, and about restriction on dividend payments, which is something the Danish Government have done.

I did not talk about freezing.

I apologise to the Minister, but I do not think I misinterpret him if I read into his speech an exhortation to the trade unions to "lay off".

The speech speaks for itself. I do not think it should be garbled, or incorrectly summarised or paraphrased.

The Minister has often interpreted me wrongly. I have my own interpretation. I admit the Minister is not as tough as some of his predecessors.

It is not a question of being tough. I am merely outlining the situation as it stands.

Be that as it may, the people who will suffer most are those in receipt of social welfare and local authority assistance. Immediate steps should be taken to compensate these people. The people on the £2 12s 6d a week and the people with four or five in family in receipt of £7 or £8 a week should be helped at least to the extent of compensating them with an extra 3/- or 4/- a week. Mark you, I say "at least".

The Minister was, I think, thinking in terms of exports when he talked about taking this devaluation in our stride and the advantage it would be to us to have exports to countries which have not devalued because they would get the products at a much cheaper rate. Are we certain this will be accepted by Irish industry? Are we certain new markets will be exploited by Irish industry? We had an example in recent years when Irish industry would not even bother to apply for the various grants offered in order to rationalise industry or to improve their premises. There must be an urgent drive, in my opinion, to ensure that this new market, this new outlet, will in fact be availed of by Irish manufacturers and Irish exporters.

We must remember, too, that there may be a slight recession as far as the British market is concerned because Britain has imposed certain credit restrictions. We must remember that they hope to cut down on their unfavourable balance of trade by about £500 million. I do not think they will make any particular exception of any country. That could mean that we may suffer a diminution in our exports to the British market.

Again, with regard to the Minister's reference to new outlets in Europe and in the United States of America, unless we reorganise our whole marketing system and our whole approach, we will not get any part of these markets. We do not, I believe, make sufficient use of our embassies. This has been referred to on previous occasions. It may seem to be something of a chestnut, but we do not believe it is. I will criticise neither our embassies nor our ambassadors, but I think they could be better engaged. It is difficult to know exactly what they are doing, beyond collecting information for the Minister for External Affairs to enable the Government to make certain judgments and decide on our positionvis-à-vis various world events. If necessary, we should enlarge our embassies in certain selected areas to ensure that new markets are found for Irish products and that these Irish products are pushed in those markets. Córas Tráchtála, too, should be employed to a far greater extent in this direction. We now have a chance to diversify our trade and, in my opinion, a greater diversification of our trade would lessen our dependence on Britain.

Hear, hear.

We are caught up now with Britain because economically we have to live with it. If we could get into other markets, we would not be dependent upon Britain to the extent that we must send 70 to 75 per cent of our goods there and must take in return a certain amount of her exports. This is the root cause of all our ills and, unless we make a serious effort to diversify our trade, then, if Britain devalues in five, seven or ten years time, we shall likewise have to devalue.

The Minister mentioned some time ago the establishment of an Irish money market. I do not know a great deal about money markets. Indeed, this is something that has bewildered people in the past few days. They have been puzzled by the frantic buying and selling of gold. They have been mesmerised by what has gone on. It seems to me that most decisions are made in the money markets of the world. It is in these markets the economy can be affected by a move this way, that way or the other way. The concern of the Central Bank for the establishment of an Irish money markets was brought to my notice. There may be such a market, but it is a very weak one. I do not know what impact it has on Government decisions or on the economy generally, but it seems that the Central Bank are concerning themselves with the possibility of the creation of an Irish money market. They have established a committee to examine the question.

The Minister should seriously concern himself about this matter. I am told that he is not particularly pally with the Economic and Social Research Institute to which Deputy T.F. O'Higgins referred earlier; I believe the Minister had occasion to rap them. However, that is neither here nor there, but in one of their articles in January, 1967, a gentleman by the name of John Hein gives very good reasons why there should be an Irish money market; he points out the enormous advantages there would be in the establishment of such a market.

We have a representative on the committee.

I do not know how hard the Minister rapped them.

We have a representative on the committee looking into the establishment of a money market.

Oh yes. This is arising out of the recommendation of the Central Bank? Yes. That is true. It does seem, in any case, rather silly that Irish Institutions, industrial and commercial concerns, should have to go to Britain to borrow money, sometimes large sums of money, in one case up to about £3 million, while, on the other hand. Irish banking institutions, insurance corporations and so on invest money in London. Therefore, we borrow in a London money market and invest in a London money market. I do not know whether or not it would be possible to establish a money market that would be concerned with shortterm loans. In any case, the time has come for us to try to be a little more independent than we are and not to be always dependent on the London Stock Exchange or London money market.

I do not know whether or not this is the opportune time to talk about various other things but there have been boasts recently by the various Ministers and by the Taoiseach of the progress we have made in this year, 1967. Again, let me say, as I always say on occasions like this, this is not reflected in employment. It certainly is not reflected in the unemployment figures published from week to week. We are now in the funny position that the First Programme for Economic Expansion is over and done with—I do not know that it completed its term— the Second Programme has been abandoned—that fell flat on its face and as far as plans or programmes for jobs were concerned it failed dismally.

Now, about this Third Programme, we are told that it will be framed in accordance with the effects of Ireland's membership of the European Economic Community. I do not know for how long or how many times the General has to say "No". The Taoiseach today said that this was not the end, that there is still going to be discussion before Christmas and then we will know whether or not we will get into the EEC or whether or not France will allow us in. I think the Taoiseach still clings vainly to the wish expressed by his predecessor and by himself that we would be a member of the Community by 1970. Now we have the diversion of devaluation. It used to be the Second Programme for Economic Expansion; then it was the EEC. It is very difficult to know what road the Government are travelling as far as general economic and social development is concerned.

It has been correctly stated by Deputy Dunne in a recent television discussion with the Minister that programmes are no good without plans. This is where the Government have fallen down with their First and Second Programmes. With the best intentions in the world, they wanted these things to happen but it was presumptuous on their part to have a programme without a plan. This Government have never had a real plan for industry, agriculture or social welfare. Even if their programme succeeded and productivity were to arrive at a certain figure and there was a certain amount of accumulated wealth, the Government did not have a social plan, and in their First and Second Programmes they did not state in any sort of detail what exactly was their plan for housing, education and the various other facets of our society. They will fall down again in connection with their Third Programme unless it is a programme with a plan.

I do not think they should wait for de Gaulle to change his mind. It is very difficult to know whether this is de Gaulle's mind, the mind of the French Cabinet or the mind of the French people. I assume that General de Gaulle is interpreting the mind of the French Government and people. It seems to me that we are not going to be a full member in the near future. I do not know what the Government's attitude is to a form of association or what the attitude of the British Government is to the suggestion that there should be a form of association. Again, the House has not been properly informed on all this and the debate that we asked for and got in July last with regard to our application for membership of the EEC was very unsatisfactory in that the Taoiseach did not tell us what we believed he knew. Therefore, I think we should go about our Third Programme in an independent way in order to try to get the things the Second Programme failed to achieve.

I know the difficulties of the Government. If we are offered associate membership and Britain is offered associate membership and Britain refuses to accept associate membership, what do we do then? Do we have to negotiate a further trade agreement with Great Britain whilst also maintaining some sort of association with the six or seven countries in Europe? I believe also that in the framing of this Third Programme—I presume it will be called "for Economic Expansion"—the Government will have regard to the NIEC Report on Full Employment. There the problem is detailed very well. Here is the problem for the Government as far as full employment is concerned. It is not unreasonable to say that it is the responsibility of the Government to produce, not alone a programme, but a plan in order to ensure that we will have full employment in the foreseeable future.

Does the Minister prevent the members of his Party from contributing to this debate or is it that none of them has any contribution to offer?

It was arranged that this debate would cover the events that took place some ten days ago but before going on to that general matter I want to refer to one thing that the Minister mentioned at the outset of his speech, indicating the purpose of the Supplementary Estimate of last year and what is required this year. It seems to me that the special regional development fund is merely another name for a thing introduced before and called a national development fund, which, as the Minister knows, sounded very well and, in fact, won for Fianna Fáil a by-election in East Galway and thereafter failed miserably to live up to the promise that was given in relation to it by the then Taoiseach one night in Ballinasloe. I find it difficult to see in relation to the fund that is now being indicated any substantial difference. As far as I can understand the Minister's point of view, and I looked at him on Sunday evening week on television and listened to what he said in this House by way of answer to questions and have read his speech with care now and have read his other pronouncements—I move to report progress.

Progress reported; Committee to sit again.