So long as it is not a monster we will not worry about its multiplicity. Certain it is that like all the others it will be followed by a yellow book in God's good time. I have got sick of this fraud of programmes. I have got sick of this vicious, cursed delusion which Professor Keynes foisted on the people of the world. I said in this House before that there were two great evil influences in the world in the last 100 years. There was Rousseau's philosophy of the world at the end of the 18th century. His horrible illusions have begotten the whole horrors of communist totalitarianism. Keynes in the post-war period after 1918 foisted on the world a new economic theory which was the advocacy of endless inflation and the illusion that such a thing as controlled inflation exists. It has wrought more havoc in the world than anything else has wrought and there have been many in my time.
I warn you today that if we cannot revise our views and recognise the fact that controlled inflation is a complete illusion, the younger men among you will live to see the death of freedom and individual liberty not only in this country but in every other country in which that illusion is suffered to prevail. It is true to say that some of the most tragic words that ever were uttered are "No one shouted stop".
Those of us who have seen inflation know that one of the horrors of it is that when it is in full flood, no one is more detested, no one is more unpopular and no one more disregarded than the person who warns of what the ultimate consequences can be. I am glad the Minister for Finance is here to hear me say that I smell 1929 in the air. I remember as a young man working in America and when I first went to America, I could walk out of my job, any job I had, and in less than one city block, I could get at least as good, and very frequently, a better job. I was there when President Hoover, who was one of the ablest Presidents the USA has had in the last century, said that his aim, which he hoped to realise, was a chicken in every pot and two cars in every garage in the USA. Within five years of those words being uttered, I think up to 5,000,000 men were on the streets of the USA shaking tin cups in the streets and asking: "Brother, can you spare a dime?"
I know, and the Minister for Finance knows, that conditions then were not the same as they are now. There were elements in that situation that are no longer there. I know that in 1929 and 1930 there was built into the American system the restriction of branch banking and the resultant multiplicity of small private banks all over the USA which had recklessly got into the practice of borrowing short and lending long on mortgages to the farmers of the USA. When the farmers defaulted and were unable to meet their mortgage requirements, the banks began to close all over the USA.
I know in 1929 and 1930 there was no SEC. By that I mean the controlling organisation of the New York Stock Exchange. There was no control of the purchasing of securities in the Stock Exchange, on credit and margin. I remember the time when the boy operating a lift would run out of it between the time of bringing it down and bringing it up and he would slip around to his broker's office around the corner. I know these things have now been brought under control and I know you have a system of federal bank insurance and your have larger banks. I know you have strict control of SEC operating to prevent marginal investment on the Stock Exchange but you have to bear in mind that new elements have entered into our economic life since then.
In those times I refer to, there was no hire purchase debt in this country at all. The procedure was unknown. Today we have £50 million and I do not think I exaggerate that figure. In the days about which I speak, the total hire purchase debt in the USA was in the order of £50 million or £100 million. Today it must run into billions. That is one new feature we have in the world in which we live. Remember that the hire purchase system is one of the most dynamic forces for expanding industrial output.
We have another. In 1929, the £ was on gold, as was the dollar. People and economists still spoke sophisticatedly of being as safe as the Bank of England. In 1925 the influence of Montague Norman was there. It now transpires that he was as mad as a coot, as anyone who reads his biography published in the last six months will see. Fort Knox was over-flowing with gold. People used to say that all the gold which was not in the Bank of England was in Fort Knox. The idea that you could dissociate the dollar from gold was as remote as that you could land a man on the moon. Today the £ is being devalued and people are asking themselves all over the world if it is enough. The balance of payments situation in the USA is extremely crucial.
People may ask: "What has this got to do with us?" We are caught between two great powers like a nut between a nutcracker. If devaluation should become the current feature of the two reserve currencies in the world, the dollar and sterling, there will develop a trade recession in the world such as the majority of you have never seen in your lives. If such a trade recession were to transpire, this country has never been in a more vulnerable position than it is at this particular moment.
I do not believe in being unduly pessimistic but I want to warn of the difficulties of the situation in which we are now as distinct from that in which our fathers found themselves 30 years ago. In 1932 when I first came into this House, we had reached the end of ten years of what had been a relatively conservative system of government. It was peculiarly conservative economically and financially and this island in which we live, Ireland, is practically the only country in the world which sailed through the period from 1929 to 1932 when Franklin Delano Roosevelt took over, almost unscathed. So unscathed were we that when Mr. de Valera took office as Prime Minister and launched the country into an Economic War, we were able, out of our own resources without borrowing a penny outside, to finance the huge housing drive and the huge programme of public works which were designed to mitigate the impact of the Economic War on the small farmers of rural Ireland and on the workers in the cities and towns. Do Deputies realise the miracle that was performed? We may say it was purchased at the expense of unduly slow economic expansion in the first ten years of our existence. I do not want to go into that story now but if anyone does say it, I do not believe it is true. I am merely trying to wake us up to the distinction between the situation in which we find ourselves today and the situation in which we found ourselves in the days of the last world depression.
Recently I said to a certain financier in the city: "I smell 1929 again in the air." It is very hard to put your finger on any particular feature which justifies you in saying that but you get, by studying world information coming through various press, radio and other communication sources available to you, a certain atmosphere and it was very remarkable that McChesney Martin, Chairman of the Federal Bank of the US, came along and said what I had said to my friend in Dublin 48 hours later. I feel that McChesney Martin was speaking with the same excessive emphasis as Enoch Powell used to describe the race relations and race problems elsewhere, but remember that while you may deprecate the emphasis a man uses, these men have learned by bitter experience the futility of stating the truth in simple words, for no one will listen and they recoil from the tragedy of having to concede that no one shouted "Stop". I believe that McChesney Martin and Enoch Powell were shouting: "Stop, listen and consider and, while the time is still appropriate, take measures to prevent uncontrollable evil overwhelming the world."
What McChesney Martin is talking about is the grim fact that prices have begun to rise in the US in the past 12 months or so and that the balance of payments is getting daily worse. When you look around the world at stable countries with prosperous, comfortable communities, outstanding among them you will find Switzerland. There are various explanations for that, but there is one feature which Switzerland and the US shared up to about 18 months ago, and that was that, despite vastly expanding prosperity and economic resources, their cost of living remained virtually stable. It is still relatively stable in Switzerland; it has begun to soar in the US, and when you have a soaring cost of living and chronic balance of payments difficulties, any country in that situation is heading for trouble. But since that situation manifests itself in both countries whose currencies constitute the reserve currency of international trade, then the world may well tremble because if these countries break down, there will be a collapse in international trade. If that transpires, then the whole pyramid of our instalment credit would begin to crumble in this country and thousands of men and women would be thrown out of work, and the cries we heard last night on the BBC by unemployed men in England that it was time the Irish went home would be redoubled in violence.
Those are the true economic facts of the background against which this country is working and when we talk about the Minister for Finance doing this or that, we should remember that we are all doing it together: Parliament is doing it. It is not only the Minister for Finance; it is every member of the House who should be conscious of the background against which we are working because we are jointly responsible for the long-term welfare of our people.
I want to say very definitely that I believe we are living in a period of acute difficulty and crisis and that it is one for which we should gird our loins economically to meet contingencies of which few people, outside those who really understand the problems of finance, know anything at all. I admit that the Minister for Finance, any Minister for Finance, has difficulty, in an atmosphere such as pertains at present, in explaining these things to the people, but the fact that they are difficult and unpopular imposes a peculiar obligation on the Minister for Finance to do just that and let the people know how dangerous the times in which we live really are.
I should like to hear the Minister tell us if he remembers Dr. Ryan as Minister for Finance introducing the turnover tax which was the root of most of the inflation that cursed this country for the past seven or eight years. Does he remember him telling us in this House that the reason he had determined to introduce the tax was that the traditional sources of taxation would no longer yield the revenue requisite to run the State? How is it, if that was true then, that since then those very traditional sources of revenue, beer, wine, spirits, tobacco and petrol, have yielded three times the total amount raised by the turnover tax? It was dishonest the day he said it; it was false then. He may have been misled into believing it but it was a very tragic day for this country when he staked not only his own reputation but the reputation of the Irish Minister for Finance on the veracity of that proposition which events now prove to be transparently false.
I want to say something in that context to which I think the Minister for Finance ought to give immediate and careful consideration. We have always maintained since the State was founded the tradition that when the Minister for Finance issued a National Loan and announced it here, the Leader of the Opposition got up and recommended it to the people as a sound security which he advised them to invest in; and the Leader of the Labour Party followed suit. The National Loan was then launched on the basis that there was universal agreement that it was a safe, prudent investment for all types of investors, including those who had relatively small contributions to make, to put their saving in.
I want to suggest that we can no longer in conscience make that recommendation to the small investor. It has been a source of acute concern to me that on many occasions I have participated in that ceremony either as a member of the Government or as a member of the Opposition, and the people to whom I made that recommendation have, in fact, lost their money. I want to suggest to the Minister that we should seriously consider adopting the practice of the Government of Finland, that is, in respect of any future national loans, that we should issue it at possibly a lower rate of interest, appropriately relative to the rates obtaining in the world, but with a proviso that its capital value will be attached to the value of money.
We have a cost of living index here which might provide a suitable index for that purpose, but which would mean that, if a person put £100 in the National Loan of 1968, when it fell to be paid in 20 or 30 years time, he would receive back capital the real value of which would be identical with that which he originally invested. I believe that would enable the Minister to secure a loan on terms which would enable all of us honestly to commend this investment to all sections of the people with a clear conscience. It would also justify the practice that has been consistently followed of demanding that insurance companies engaged in industrial insurance and the banks, who are the custodians of the savings of the simple people of this country, should invest a substantial part of their resources in loans of this character. However, it is not right and it is not just that the funds of industrial insurance companies should be virtually coerced into this type of security in the knowledge that is common to us all that it involves substantial loss of capital at the expense of a type of saver who cannot afford such losses.
Of course, we are all glad the Minister for Finance gave 7/6d to the old age pensioners, and everybody knows on this side of the House that the average Minister in any Government wants to give as much as it is physically possible to give to old age pensioners, just as the Fianna Fáil Government know that when we were in office, we wanted to do the same, but the limitation on what we were able to do was within the limitation of the resources available to us and the priorities we had to meet. Of course, we are glad, and I think it is an imaginative thing to do, to give them the radio licence and the television licence free. It will cost very little and it is a sensible thing to do.
I regret the imposition of the tax on petrol on purely economic grounds, because I believe the taxation on power works down through the whole economy and ultimately makes the maintenance of low export prices much more difficult. It is a hardship on many categories of the community, such as commercial travellers and other people, who must use a car to earn their bread, to pay that extra money. We voted against that.
I am sorry we have to put a tax on plug tobacco and on the pint of stout, because I recognise, as I always did in this House, the fact that we are giving it with one hand and taking it back with the other. However, the Minister is inclined to say: "I have got to get the money somewhere and can you tell me any better place to get it?" I am obliged to say to him: "If you want money to improve the old age pensions and you propose to get it from brandy, tobacco and wine, I have no serious complaint against you, save that you would want to watch your step in regard to brandy. I think you are approaching the point of diminishing returns." The Minister has said himself it has been already reached in regard to whiskey. He is in great danger of approaching the point of diminishing returns in regard to brandy, and bear in mind what happened 20 years ago. When the duty on wine was pushed up, one whole trade disappeared 25 years ago. Port wine was widely drunk in rural Ireland, much more widely than spirits or gin, and it completely disappeared as a result of one Budget. There was a ghastly miscalculation made. The price of port wine was pushed up beyond the level that people were prepared to pay and the whole trade moved over to spirits of one kind or another. The port wine trade never recovered. That is the peril of pushing a tax to the point of diminishing returns, particularly if you do it to excess, and the Minister is in great danger of approaching that point with brandy.
I do agree that the right thing to do is to push taxation on luxuries to the limit, but he would be very well advised to abandon this cursed turnover tax which has become a source of loathsome fraud, which is corrupting a large, decent section of our community, which is arbitrary and thoroughly evil, and substitute for it an added value tax. These concepts evolve slowly and I have really become fully informed on the workings of an added value tax only relatively recently. It has a selective potential; it has relative ease of collection and certainty of liability. If I had known as much about it in 1965 as I do now I would have said cheerfully: "Abolish the turnover tax and substitute for it an added value tax." It is in every sense a superior tax and, as I say, it is free from almost all the objections of the other tax, particularly in as much as it can be so selective and directed away from those areas of expenditure which involve an immediate hardship if an additional burden of tax falls upon them.
In the euphoria with which the Minister introduced this Budget, I doubt if there was absent from his mind the significant fact that the cost of living went up by five per cent in the past 12 months. How many Deputies realise that it has gone up 100 per cent in the past 20 years? The value of money has dropped by 50 per cent in the past 20 years. As we expand, or as we believe we expand, the social services, the steady erosion in the value of money means a reduction in the real value of what we believe are extra benefits which we are giving to those who avail of the social services. Does it not alarm the Minister for Industry and Commerce after all the programmes, after all the effort—and I do not deny that there was effort; I do not deny that there were hard work and good intentions on the part of the Minister for Industry and Commerce, Deputy Colley, and the Minister for Finance himself, and on the part of other Ministers with whom he shares responsibility and on the part of the Taoiseach—that 23,000 young people sought work in Great Britain last year? That is the heavy drain of emigration that is going on at this level at this time, after the cataclysm of the emigration that took place over the past ten years. It is not only to be deplored in itself, for the loss of the young who are going, but it is much more to be deplored for the fact that these young people are the producers and they are leaving the children and the old behind them who must be provided for.
That economic reaction is largely cloaked by the fact that these young people going to Great Britain do not get married for the first three or four years and during the period when they remain single, whether they are boys or girls, they steadily send home money. Anyone with a country shop is familiar with the picture. When I first stood behind a counter in my own shop in Ballaghaderreen, 90 per cent of the money which came in at Christmas came from America. Then, when the great tide of emigration to America subsided, that flood of American money did not collapse at once; it only subsided slowly as the diminishing level of emigrants progressively married and set up homes of their own in America. But then there began to rise the flood of English money. With the great tide of emigration to Great Britain in the years before and after the war, vast quantities of money came back not only by way of gifts but by way of investment when the emigrants asked their parents to put the money in the banks. I need not go into the reason for that particular phenomenon; it was partly done to avoid the impact of income tax in Britain. So the economic consequence of the immense loss of the productive element in our community is partially concealed, but the fact that it is still continuing ought to be a cause of the gravest possible alarm not only to the Minister for Finance but every Member of the Government.
Sometimes I think that members of the Fianna Fáil Party permit themselves to be deceived about the fundamentals of the present situation. It is true that the most agonising problem exists still in regard to housing and the answer to it is perfectly simple and there for anyone to read. Take a quinquennial period and we find that in the five years between 1948 and 1952, the total number of houses built was 52.251 and in the quinquennial period from 1953 to 1957, the total number was 51,701, which gives us a total of 103,000 houses built in that ten-year period. During that period and since that period, the old houses have been deteriorating and so many houses have fallen down and have become unfit for habitation every year. In the following quinquennial period, instead of building 52,000 houses, we built only 30,000 in the period 1958 to 1962 and from 1936 to 1967, we built 51,000. In the last decade, we built only 81,000 houses whereas in the previous decade we built 103,000 houses.
That is the root of our present housing problem. I am sure the Government have come to realise that but we are paying a terrible price in human suffering for our lack of foresight in reducing the rate at which we were building. In 1958 when Deputy Lemass sent for Dublin Corporation, he honestly thought that we had been building improvidently, that we were building too many houses and the time had come to call a halt. That was a terrific mistake and let it never happen again. There is no use talking about mistakes if we do not learn from them and this is a lesson we ought to learn.
I am obliged to the Minister for the valuable Budget material with which we were furnished prior to the Budget speech. I want to refer the House to the current Budget Tables for 1968. In Table II on page 5 there occurs one of the most significant factors in all the pre-Budget material supplied to us. At the bottom of this page, you will find that current Government expenditure is expressed as a percentage of the gross national product. In 1962, it was 21.6 per cent; in 1963, it was 22.3 per cent; in 1964, it was 23.4; in 1965, it was 24.6; in 1966, it was 25.5; and in 1967, it was 26.7. If you add to that the social service expenditure, you will find that taking social welfare expenditure and general expenditure, our outlay must represent 30 per cent of the total gross national product. That brings us fully half way up the table of all the States in Europe and higher than a great many much more affluent States than Ireland can ever hope to be.
One always feels a warm glow of satisfaction in spending more and more. We used to recoil in horror from having a figure in excess of £100 million on the Book of Estimates but the figure now is in excess of £300 millions. That is usually justified by a reference to our increasing gross national product but the percentage of the gross national product, represented by the figures I have given, is still climbing, and if you include, as you ought to include, the social services contribution, which remember now amounts to over £1 per week in respect of every man in employment, one-half of which is contributed by the employee and one-half by the employer by the cost of the stamp, it is no small additional levy upon the resources of the country.
But there is another figure on that page, the first figure on it, the service of the public debt. That figure has risen. Even since 1962 it has more than doubled. In 1962, interest and annual repayment for the reduction of national debt amounted to £34,370,000. The estimate for the coming year is £74,969,000. I wonder do Deputies realise that that represents more than £15 a head for every man, woman and child, including the infant in the cradle, for the service of debt? And it will grow substantially because the whole scheme on which we are proceeding is based on the borrowing of money. Now, so long as the expansion continues, everything in the garden will be lovely, but watch what may transpire if, with world developments, the position should be reversed.
I want to warn the House that there is a certain euphoria about our balance of payments that ought to be corrected. Our balance of payments is referred to at page 83 of the Government publication, Review of Progress 1964-1967, Table 24. At current prices and at constant prices, constant 1960 prices, there was a deficit in our balance of payments of £21 million in 1963, £39 million in 1964, £47 million in 1965, £28 million in 1966 and £12 million in 1967. Now, at current prices, the picture is substantially the same except that the deficit of 1967 was turned into a surplus of £10 million.
Does anyone ask himself of what does that surplus consist? I think the Minister will agree with me that it consists of imported capital. Some years imported capital was government borrowed, to wit, when we borrowed from the Bank of Nova Scotia and the Bank of Zurich; but it also consisted of people coming in here and investing money in real estate and property in this country. Thirdly, it consisted of people coming in to invest money in the promotion of industry and the establishment of industry for the employment of our people here and the export of the products. The third category is desirable from every point of view, though it can be carried to excess, and France and Canada are beginning to complain very bitterly, France that she will not allow it and Canada that she has allowed it to go too far.
Of what benefit is it to us if foreign capital comes in and proceeds to buy up the distributing services? Remember, in respect of every £1 million that is coming in here now in capital designed for the acquisition of Irish assets, the plan is that there shall be an annual export of £70,000 of interest on the investment here. If that is an investment which will generate exports that will pay that interest, then it is an economic advantage to the country over and above the social benefit of providing employment. But suppose it generates no exports and it becomes a levy on the gross national product of the country, then the advantage of such investment requires a very careful re-evaluation.
I should like the Minister for Finance—I do not want to delay the House unduly—to ask himself this question. He was himself Minister for Agriculture for a time, as I was. Bearing in mind the existing rise in the cost of living, how does he expect, or does he really expect at all, the small farmer, the man with 40 acres or less, to survive on the land of Ireland? How does he expect the man, the nature of whose calling is that he works seven days a week and, for the greater part of the year, 12 hours a day for a substantially constant income, the value of which is being steadily eroded by the decline in the value of money, how does he expect that man to survive on the land of Ireland? Sooner or later we shall have to face that problem because I warn the Minister that a very dramatic change took place, of which, I think, he has some knowledge himself, consequent on the collapse of cattle prices in 1965. Up to that time livestock was regarded as a kind of sheet anchor for the small farmer. Pigs went up and down. Sheep went up and down. You had a good year and you had a bad year, but there was always the steady saleability of cattle and relative stability of prices. That was the pattern for the past 20 years.
In 1965, however, the small farmer —the man who produced the store cattle, not the fat cattle—suddenly found himself walking the roads from fair to fair, as he did in the Economic War, but with a horrible apprehension, which did not exist during the Economic War, that this was not a purely political situation. Something had gone wrong basically economically and it was not possible to go over to London and settle the Economic War and the whole nightmare would be over. These small farmers began to doubt for the first time that they could live, that they could carry on, and I think a great many of them made up their minds they could not. That is why 23,000 of them went to England last year. The whole flow of emigration has been activated once more.
I do not underestimate the difficulties of restoring confidence to the small farmer. It is a very formidable problem. I think the present Minister for Finance when he was Minister for Agriculture and when he evolved the pilot scheme which, in substance, was a revival of the parish plan, and determined to concentrate all the resources of the advisory services of the Department on the congested areas was perfectly right. My only fear is that this was done too late and too little. From the collapse of that whole pattern of society in the West and North-west I recoil in horror. If the Minister wants to know why, I shall not trespass on this House to recite for him the whole of the contents of "The Report" but he will find it on the last page of Emily Lawless's book "With the Wild Geese"—not the one published by the Department of Education, which, God forgive them, they had the infamous audacity to bowdlerize but the original edition, which is rare and which was printed in 1906.
I do not think it is nostalgic on my part to feel we are making a terrible mistake if we throw away the last vestiges of a rural Irish society that survived in a deteriorating world, and which, because of its charm, dignity and nobility, draws admiring tourists in ever larger and, I am obliged to add, more incongruous hordes every year. As far as I am concerned, the only blessing is not, if winter comes, can spring be far behind but, "Oh! winter, if summer should come, can winter then be far behind?" in this our own beloved land?
Here is a question that I want to ask the Minister for Finance, a categorical question to which I should like an answer as early as it will be convenient for him to give it. He has abolished Schedule A and Schedule B of the income tax code. I can understand all the implications of the abolition of Schedule A. It means that income tax will no longer be payable on the five-fourths basis of the poor law valuation. What are the implications of the abolition of Schedule B?
