This Budget has one outstanding feature in that it is one of which the Government have no reason to be proud. It is a Budget which has the distinction of being the Budget that proposes to impose on the people of this country, the taxpayers, the greatest increase in taxation that has ever been imposed since the Oireachtas was established. I hope to show on a critical examination of these provisions that what they propose is largely, if not entirely, unnecessary. Certainly if the situation that confronts the country at the moment, economical or financial, required certain remedial measures to be taken the results desired could be achieved at lar less cost to the taxpayer and considerably less damage to the economic structure of the State.
Before I go into that examination I should like to direct attention, in order to get a proper explanation from the Taoiseach, to something which I regard as a breach of parliamentary convention, a gross disregard of parliamentary convention and propriety which has been recognised in all Parties since the establishment of the State. The Taoiseach in the early part of his introduction to this Budget referred to the increase in milk prices which the Government propose to allow to the milk producing farmers. He said that the proposals that were envisaged called for a further £625,000 this year and £1.65 million in a full year, in other words he indicated that part of the taxation proposals of this Budget were to raise taxation for the remainder of this year to the extent of £625,000 and in a full year £1.65 million. He then blandly referred to the fact that the Minister for Agriculture and Fisheries had announced that the day before.
This is the first time that a Budget secret was announced not merely by a Minister but by anybody before it was announced in this House. The House is entitled to get from the Taoiseach some explanation as to why the Minister for Agriculture and Fisheries took it upon himself—if he did take it upon himself and if he did not why did he get authority—to make that announcement in advance of the Budget. This is knowledge that should have been given to Members of this House first. It is the first time that this has happened. No explanation has been given and we are entitled to an explanation, all the more because of the fact that the Minister having announced it before the Budget subjected Deputies to irrelevant verbosities amounting almost to three hours talk last Thursday here in this House. He occupied the House for nearly three hours with what really amounted to a filibuster. One would have thought that, having broken the conventions of this House, he would have been satisfied. At all events we are entitled to get an explanation from the Taoiseach. This has always been a convention that has been very strictly adhered to and rigidly enforced. People have been accused at times of letting out secrets a few minutes before they should have been announced. I see no reason why the Minister for Agriculture and Fisheries should be given the permission that apparently he was given on this occasion.
The Taoiseach, as acting Minister for Finance, when he was introducing these Budget proposals in his peroration said that the Government were confident that the House and the people would realise that the proposals were intended and needed to safeguard our economic position. I assert that the people do not take that view at all. I also say, and I hope to prove before I sit down, that the proposals are not, whatever their intention may be, designed to safeguard the economic position of the country at the present time.
The last speaker, Deputy Collins, seemed to take a certain amount of pride in the knowledge that these proposals were going to get the Government some sort of unpopularity. They are going to get plenty of it. The kind of unpopularity they are going to get and the reasons for it were aptly and adequately stated by and on behalf of the Irish Housewives' Association when they made a statement which was published in the Evening Herald of last Wednesday. I quote:
Shock and horror was the reaction of members of the Irish Housewives' Association to the increases in the recent Supplementary Budget, according to a statement issued by the association.
Members, the statement said, could not understand how the Government could call for restraint in wage claims to 5 per cent while increasing postage rates by 20 per cent and public telephone calls by an "iniquitious 50 per cent".
The statement also criticises the wholesale tax because it "hits hardest at fixed income groups and lower paid workers, while doing little to curb the spending of the really affluent sectors".
That summarises the popular reaction to this Budget and if Deputy Collins and his friends in the Government take some pleasure in the fact—a sadistic pleasure I suggest—that they are going to be unpopular as a result of this Budget, then their satisfaction will be met to the full.
The policy underlying this Budget is one of diminishing incomes and thereby diminishing purchasing power and, as a necessary consequence, puts certain sections of the community in jeopardy of their jobs. This Budget is belated in its introduction and its real effect is intended, and obviously intended, to be prospective in its operation. It is done deliberately to get comparatively little money in the remainder of this year and to get a very substantial amount of money in the course of the next financial year. I shall have occasion to deal with this aspect of the case later in more detail.
The outstanding criticism of this Budget appears to me to be its timing. The timing is very significant. We waited until November to bring in this additional Budget and it is now clear that only one-quarter of the produce of this taxation can be obtained in the remaining months of the financial year. We can only get, I think, £4.2 million in the remainder of this year, although, according to the Taoiseach, in a full financial year the produce of taxation will amount to £15.4 million. It is obvious that this is done deliberately in order to gain the advantage of this additional taxation next year to the political advantage of the present Government. That is the position— £15.4 million to be obtained by this taxation in a full year but only £4.2 million to be got in this year. The Taoiseach in his introductory statement appears to found—although curiously enough he does not go into any very great detail in connection with the matter—his case on the paper which he refers to at column 2053 of the Official Report, No. 12, Volume 236. I quote:
A paper recently published by the Economic and Social Research Institute foreshadowed the possibility of a deficit of over £50 million in 1969 unless policy measures were taken to prevent it.
The House is entitled to expect and have their expectation realised that the Taoiseach should have gone a little bit further into the detail in that paper justifying the proposals which he referred to and on which he appears to found the case that he makes here for those drastic and very onerous proposals in this Budget. At all events we can all agree that this Economic and Social Research Institute from which this paper emanated is doing excellent work and first class research for the benefit of this country. We are entitled to look at this paper, examine it, and see what is proposed in it. We are entitled to ask why the Taoiseach did not refer to it at all and never mentioned in the whole course of his speech the proposals and recommendations made in that paper to deal with the situation created by the possibility, if not the probability, according to the author of the paper, Mr. T. J. Baker, of a deficit in the balance of payments amounting to £50 million and upwards next year. The Taoiseach did not agree with that estimate of £50 million. He said, and I think the majority of economists would agree with him, that £50 million is too pessimistic and that £30 million is what he accepts. However, taking that £30 million which the Taoiseach accepts and examining what the author of this paper, the distinguished economist, has to say in reference to his proposals for dealing with the situation that would be created if there was a £50 million deficit in the balance of payments next year, it is worthwhile reading for the benefit of the House some of these proposals. The House can consider how far the Government have approached in the proper way the problem they say they are faced with and to what extent they have really come to understand that problem. I think the House will conclude that what they have really done is to misunderstand the problem and recommend the wrong remedies.
This is a paper from the Economic and Social Research Institute by Mr. T. J. Baker published in September last. It is relevant to note the date but there is internal evidence which I should point out to the House that this paper was written long before September and that the contents of the paper were in the hands of the Government and certainly within the purview of the Department of Finance long before September and, at the very latest, in August.
One distinguished representative of the Department of Finance is mentioned by name in a note underneath the contents at the beginning of this paper where it is stated that helpful criticism was received from him and others. The House may take it that in considering the timing of these proposals the Government, and certainly the Department of Finance, had ample notice long before September and certainly long before the present time, of the problems that were likely to face the country in the immediate future but they waited until November. The House is entitled to an explanation as to why they did wait having regard to the fact that they had the notice of this particular paper and the warnings that were in it at the very latest in August and, I am sure, long before that.
The Minister for Agriculture and Fisheries wasted the time of the House last Wednesday night talking almost without stop, demonstrating how he could not know what was going to happen with the milk-producing farmers and the wheat-growing farmers and, therefore, he could do nothing before this. They knew the problem and it was not a problem of milk or wheat but a problem of a £50 million balance of trade deficit anticipated in the year 1969. That is the problem they have to meet at present. That is the problem, according to the Taoiseach in introducing this Budget as Acting Minister for Finance.
I want to refer Deputies to the very first page of this paper where the author states the problem and suggests what is to be done and also to subsequent pages. In the last paragraph on the first page he says:
Thus the time appears ripe for the responsible authorities to decide whether they can tolerate the probability of a large deficit on the Balance of Payments in the coming year. If they decide they cannot, then some modest action very soon to lessen the rate of growth of private consumption and of total building would appear appropriate. Slowing down the boom now should avoid the need to halt it altogether later. The possibility of taking appropriate action is not, of course, confined to public authorities.
I emphasise, and endeavoured to emphasise it in reading, this passage from the paper where he, first of all, refers to the decision being in the hands of the responsible authority, namely the Government, and then states what they have to decide, whether they can tolerate a large deficit in the balance of payments for the coming year; if they decide they cannot, as they have now by their action in bringing in this Budget decided, all that is required, according to this distinguished economist, is modest or moderating action. You will find afterwards he called it moderate action. That is what this man says is required to deal with what he says will be a £50 million deficit in the balance of payments but which the Taoiseach says will be only £30 million. Can anybody say the action taken in this Budget we are discussing can be regarded as moderate action—this Budget that imposes the greatest amount of taxation imposed by any Budget in the last 50 years since the State was established? Can that be regarded as modest action when it is described by people who are going to feel its full effects as producing reactions of shock and horror? It is certainly not modest action and I think it will be found by the time we are finished with this debate that it is not appropriate action.
He said that £5 million possibly or probably would be the deficit on the balance of payments and that modest action must be taken soon. We did not take action soon; we waited until midNovember until this kind of action was taken and that is not taking the action the man who drew the attention of the Government to the problem recommends should be adopted.
I turn now to page 23 of this publication and again he has some very significant recommendations to make which have not been adopted. Having analysed the position of certain imports and the balance of payments deficit he deals on page 23 in paragraph 3.14 with "Policy Implications" and says:
If the foregoing analysis is accepted, the decision as to whether or not to initiate changes in the policy of demand management depends on the relative weight attached to different policy objectives.
It may be felt that in the light of the present state of the external reserves, and the possibility of an increase in the long term capital inflow as private investment grows and corporate profits improve, the likelihood of a very substantial current account deficit is a worthwhile price to pay for rapid economic growth and a substantial increase in nonagricultural employment. If this view is taken, no action is necessary at the present time, and the period of high deficit can be endured in the hope that exports will subsequently resume a more rapid rate of growth.
This means that this economist dealing with the problem and analysing it says it was within the competence and reasonable discretion of the Government to decide what to do, that they could take the view that even if there was this £50 million deficit in the balance of payments that he says is likely to arise it would be open to them to say, having regard to certain matters which he refers to and to which I shall refer in a few moments, that it would be a worthwhile price to pay for rapid economic growth and a substantial increase in nonagricultural employment. The Taoiseach has not dealt with that. What is his answer to that? Why did he not accept that it would be a worthwhile price to pay for an increase in nonagricultural employment and rapid economic growth, that you could put up with the position and endure it having regard to our external reserves and the growth in the economy at present?
He goes on to give the alternatives —put up with the £50 million deficit; we are well able to stand it having regard to the economic position. You could take that decision if you liked. He does not say it is a wrong view to take. He says you can take it.
Then he goes on to say:
On the other hand it may be considered that the probability of a deficit in the region of £50 million, with the possibility that it could be even worse, cannot be regarded with equanimity.
That is the view that the Taoiseach has taken, as acting Minister for Finance. The writer goes on to say:
In this case it is almost certainly better that some moderate action be taken now——
I emphasise that he had spoken in the beginning of his paper of modest action. He said some moderate action should be taken now and he goes on:
——to curb the rate of expansion, particularly with regard to private consumption and building activity, rather than delay until the middle of 1969 when much more drastic steps might have to be taken. If it is decided to restrain the growth of demand, action to moderate the apparent rapid increase in private credit, particularly consumer credit, would appear to be the most sensible first step. If, through such measures as mild hire purchase controls and Central Bank advice to the Associated Banks, the rate of growth of consumer credit were held to half that assumed in the projection for 1969, it seems likely that the result would be a rise in current price Gross National Product of around 8 per cent rather than 10 per cent, a growth rate of perhaps just under 4 per cent rather than just over, a slower rise in prices, and a balance of payments deficit of around £30 million rather than £50 million. On this calculation quite modest action, taken soon, would suffice to keep the situation well under control.
He goes on to say at page 24:
The decision remains one for the responsible authorities, and according to the relative importance attached to the growth rate, employment, internal prices and the state of the reserves, a plausible case could be made for either taking action or not. One warning however bears repetition. If it is decided that a large deficit is not tolerable, but nevertheless to wait until overwhelming evidence is available before taking any action, the correct moment for that action will almost certainly be past.
That can be summarised by saying that it was open to the Government, having regard to the warnings they have received that there is a possible or a probable deficit of £30 million—if the Taoiseach does not accept £50 million — to take either no action, relying on the reserves and the state of the economy, or to take certain mild, modest action which will not disrupt the economy in the way proposed in this.
All this talk from the Government to the effect that they do not mind being unpopular, that they are the great fellows doing their duty, is all nonsense. There is no necessity to do what they are doing here. The writer of this paper says that the decision remains one for the responsible authorities. However, we are told here by the Taoiseach, and I presume by others, that if this action is not taken the economy will be disrupted and we will face a threat of inflation. This man says it is not so. The facts show it is not so. It can be demonstrated, from what I have just said, that there was no necessity whatsoever for the introduction of this drastic Budget and for the outrageous impositions that it is proposed to place on the taxpayers of this country.
What is the position? It is a remarkable fact that, in addition to allowing the Constitutional convention or political convention to be overridden by the Minister, he does not carry on the tradition that we established in this House, that is, that the Budget was regarded as an instrument of economic policy and should be shown to be such, and that each Budget should give a resumé of the financial and economic position of the country and the policies that were available to deal with the situation.
The speech made by the Taoiseach, as acting Minister for Finance, gives no indication of the Budget being used as an instrument of economic policy. He says, however, at the beginning of his speech that Ireland has had two excellent years and that increased industrial production has made a big contribution to the national progress. He says, and I quote:
The volume of output of transportable goods industries rose by nine per cent in 1967 and even faster in the first half of 1968. Activity in building and construction has been much greater in both years, while agricultural output, which had fallen between 1964 and 1966, rose by two per cent in 1967 and should show a similar increase this year. An important factor in the increase in national output has been the vigorous expansion of exports.
This is all he says about the bright side of the economy. He gives a few outstanding features of the bright side of the economy at the present time. There is no doubt that there have been indications this year of expansion in the economy and improvement in the financial structure of the State. We have been coming out of the inflation of the past two years. We have been overcoming the incompetence of the Government in handling the financial situation and the country has been showing signs of getting back on its feet again. The remedy that is proposed by the Government is to bring forward the proposals which, I believe, will affect and disrupt the economy and slow down the progress that, no doubt, has started to be made. These proposals, therefore, are entirely unnecessary and certainly ineffectual. The Taoiseach, in introducing this Budget, does not show both sides. He says:
There are clear indications that the economy is gathering speed too quickly at present and that if the brake were not applied we would run into trouble in 1969.
As with driving, it is bad to apply the brakes too quickly and too forcibly and that is what is being done at the present time. The vehicle which is carrying the Government is, according to the Taoiseach, gathering speed too quickly. It is being renovated and repaired for the past few years, is being run-in, is showing some signs of improvement and of being able to do its job. That is not a vehicle to which the brake should be applied quickly or forcibly — certainly not to the extent that is being done at the moment.
Let us look at what the final effect of this Budget is. The Taoiseach says that there will be a deficit of £15 million this year, notwithstanding the huge amount of money which will be gathered in from the taxpayer as a result of the April Budget of this year. He then says that as a result of this Budget there will be a collection of taxes for the remaining portion of the financial year amounting to £4.2 million, and in a full year that £15.4 million will be produced from all the taxes including, apparently, the Post Office charges. Therefore, when you add the additional taxes imposed by the previous Budget of £3.5 million plus the £15.4 million and the £3.5 million additional taxation you have the position that the Government next year, when they face the Budget in April or May, will have £22 million in hand before they impose one penny taxation. Yet the Taoiseach says that they estimated in the April Budget for a buoyancy of revenue of £24 million but it is apparent now that they are going to have an increase of £7½ million in that buoyancy so that they will have an unexpected bonus of £31.5 million next year. You will have the £22 million that will be available as a result of this Budget, without an increase of one penny in taxation next year, available to the Minister for Finance to hand out benefits in the light of a general election if it is forthcoming. Is there any doubt, therefore, that the inescapable conclusion of all this is that this Budget has been brought in belatedly not to do what, in fact, it is not doing, meet a problem created by a possible increase in the balance of payments deficit, but for the purpose of putting themselves in a position next year where they will have something like £40 million available to distribute in benefits by way of political expediency to meet a possible general election shortly after the Budget? Is it not an inescapable fact that they are doing that?
The Taoiseach gives five items of additional expenditure in his speech, education, the farmers, milk, and so on, and, of course, the inevitable slap at salaries, all amounting to, and quite rightly, £27 million, but for all that expenditure which he says faces them next year he has about £40 million in hand before he starts to impose one penny taxation to deal with that situation of £27 million additional expenditure and also a large amount to hand out by way of benefits to all and sundry, for political purposes.
That is one aspect of this Budget. The other aspect, perhaps, is to be looked at in a more economic way and certainly in a way devoid of political overtones. I have already emphasised the position as stated by the learned author of this paper from the Economic and Social Research Institute where he said a modest action, or no action at all, if you like, will serve the position sufficiently to enable us to do nothing in order to overcome the possible balance of £50 million. He says £50 million while the Taoiseach says £30 million. He says to do nothing because the position is sufficiently strong to entitle us to do nothing. Some of the items dealing with the strength of the position will corroborate the suggestion made by this economist.
We have in the statistical supplement of the Quarterly Bulletin of the Central Bank of Ireland at Table 7 the figures for our external monetary reserves and it appears from the second column of that table that in September, 1967 the gold reserves were £7.8 million while in December of that year the figure was £8 million. What were they in September of this year? From September, 1967 to September, 1968 the gold reserve rose from £7.8 million to £32.2 million, four times what they were in September 1967. Therefore, the gold reserves have quadrupled in 12 months but nothing was said by the Taoiseach about that. That is one of the matters which you are entitled to take into account in assessing the problem and seeing how you can solve it. Taking all our reserves together, our total external monetary reserves in September, 1967 amounted to £292.2 million while in September of this year they amounted to £295.5 million. In 12 months there has been an increase of £3 million in our external reserves. On top of that the capital inflow has shown a tendency to increase, and, indeed, not merely a tendency but an actual increase.
Taking all together, the substantial amount of gold reserves, our external reserves, and our capital inflow, they all show that the country is doing well and would continue to do well if it was allowed to. We have nearly £300 million external reserves or, in other words, we have 20 times the amount in reserves of our deficit on the Budget which was anticipated for this financial year and we have ten times in reserves the amount of the adverse balance which the Taoiseach put at £30 million. What are reserves for if they are not to meet a situation of that kind? As I say, we have ten times the amount of reserves necessary to meet the situation at the present time and according to Mr. Baker the Government would be quite justified in taking no action and could say: "We will not disrupt the economy any more but give it a chance to get better as it seems to be doing at present." That is what they could have done if they wished to do nothing. We have those reserves and, as I said, what is the use of having reserves if you cannot use them. But what did they proceed to do? They proceeded to increase taxation to the extent of £15.4 million in a full year, to get something like over £11 million from the general taxation, on spirits, tobacco and wholesale tax, and to get in the remainder of the year £400,000 from the post office charges and £1.6 million, I think it will be, in a full year. These are the kind of charges that are being imposed in this Budget.
Take this case of tobacco. We are all familiar with the phrase about the "traditional method of raising revenue by means of increased taxation on tobacco, beer and whiskey". I would remind the Minister for Finance, the Taoiseach and the Government in general that the tobacco people were induced to set up business here because of tariffs imposed by a Fianna Fáil Government from 1932 onwards. These tobacco manufacturers set up their organisations and put themselves in a position in which they had to face, and have to face, all sorts of competition. They give excellent employment to a considerable number of people.
Over the years they have been made the butt of the Minister for Finance. In every Budget the tax on cigarettes and tobacco is increased, thereby making it even more difficult for these people to carry on business, to make ends meet and go on giving good employment. Because of increased taxation the jobs of those employed are jeopardised. In addition, life is made a little less comfortable for those who are addicted to smoking. Added to all that is the fact that these tobacco manufacturers are now being "hung" in the interests of public health. They will not be allowed to advertise on television or radio. Other steps have been taken to which I cannot refer, unfortunately, since I am professionally interested, steps of a kind of which the Government should be ashamed. The Government are "hanging" these people, the people who were induced to establish themselves here at the behest of the Fianna Fáil Government. It is time these people got some sort of letup.
Beer and spirits carry increased taxes. We have here one of the best manufacturers and employers in the world. I refer to Messrs Guinness. They are doing tremendous good for the country, not merely from the employment point of view but also from the point of view of the cultural, scientific and economic advancement of the country.
What about the manufacturers of whiskey? They are paying a huge amount in taxation. Their product is native to the country. They have been endeavouring to build up an export trade in the United States and elsewhere in the teeth of fierce competition from Scotch whiskey. Instead of helping our whiskey distillers to meet on some terms the proprietors of Scotch whisky our Government hinders the efforts of our distillers by increasing the tax on the product they manufacture. Not until quite recently did Irish whiskey succeed in finding a footing in the United States. Indeed, it was Deputy Norton, Minister for Industry and Commerce in that much maligned, as Fianna Fáil are pleased to call it, Coalition Government, who gave Irish whiskey distillers a chance for the first time of exporting this product. These are the commodities the Fianna Fáil Government tax in every Budget they introduce and additional taxation increases tremendously the difficulties of the distillers in finding and keeping an export market.
We have then the wholesale tax. That was devised by the Government, in their wisdom, and they netted a vast sum of money out of it at the expense of the consumers of ordinary commodities. It is proposed now to double that tax by imposing an additional 5 per cent. There was a pamphlet circulated to Deputies recently dealing with the added value tax. That pamphlet was distributed on behalf of the Minister for Finance. I refer, in particular, to the last sentence of paragraph 13 on page 35:
If food, drink, medicines, clothing, fuel, tobacco, petrol and oil continue to be excluded from the wholesale tax a tax of about 15 per cent should have theoretically produced £25 million——
This is what I want to emphasise—
but a sudden increase to such a high rate might lead to a fall in sales with serious results for business and employment.
It is not 15 per cent. It is 10 per cent, very near the amount which, according to the Minister, might lead to "a fall in sales with serious results for business and employment". What are they doing here in the teeth of their own advice in this document? They have doubled the wholesale tax, with the inevitable result of a fall in sales because of increased prices and ultimate unemployment. That is what the added value tax would have done. That is what this increased wholesale tax will do.
Post Office charges have been increased. Additional revenue to the extent of £400,000 in the remainder of this year and £1.6 million in a full year will be collected as a result of these increased charges. The excuse is the old cliché to which we have listened so often here; the Department of Posts and Telegraphs must be run on business lines as a commercial undertaking; it must pay its way and the taxpayer must not be called upon to discharge any deficit in Post Office revenue. That is the alleged principle of operation. The Taoiseach referred to the fact that there had been no increases in these charges since 1964.
I want to direct the attention of Deputies to what happened in 1964 when charges were increased. We on this side of the House objected to the increases and I put the case that, if these increased charges were being justified on the basis that the Post Office must be run as a commercial concern and in accordance with commercial principles, Deputies were entitled to be assured and given conclusive evidence of the fact that the Post Office was being run as a commercial undertaking would be run and that all possible economies were effected. The Taoiseach, now Deputy Lemass, made his usual flat-footed observation — not merely flat-footed, indeed, but as windy as most of the expressions he habitually used—and said at column 1781 of volume 208 of the Official Report of 15th April, 1964:
The principle that the Post Office should pay for itself and not be subsidised from taxation is not merely sound but, as far as I know, has never heretofore been questioned in the Dáil.
I emphasise the following:
There is, I agree, an obligation on the Government to ensure that the cost of these services is not unduly inflated and the Minister for Posts and Telegraphs is now about to initiate a drive for economies in the Post Office by the adjustment of the services to the reasonable needs of the people and by changes in procedures which will, it is hoped, increase individual productivity.
Following that speech, I made a speech in which I took him up on those matters. I asked why, if the Minister was about to do all those things that day, that Wednesday, had he not done them before. I asked was he really going to do them at all. From that day to this, Deputies have not heard a word about what the Minister was to do —"to initiate a drive for economies in the Post Office by the adjustment of the services to the reasonable needs of the people and by changes in procedures which will, it is hoped, increase individual productivity."
Four years afterwards we are asked to agree to an increase in Post Office charges without any indication that one single thing was done by the then Minister, or his successor, to carry out what the windy Taoiseach said was going to be done that day. We have not heard a single word about whether he did it or not, whether he drove or did not drive, or whether he did nothing which he always does. Now we are asked to agree to an increase in the Post Office charges without any indication that the undertaking of the then Taoiseach has been carried out. I think the House should very seriously consider the position before they do anything of the sort.
In introducing these proposals the Taoiseach said his object was twofold — I am summarising what he said—and that he had to decrease consuming power and encourage savings. At the end of his statement we had the gloomy announcement that there had been a considerable drop in savings. I want to say with all the emphasis at my command that this Government did more than any other Government to prevent people saving. What is the use in giving an increase of half per cent? The Taoiseach said that in order to meet the economic difficulties that still exist they must take the purchasing power out of the hands of the community and get people to save. How they will do that I do not know. How will you encourage people to save when that is the only incentive given in this Budget which apparently will make the Government unpopular and, at the same time, bring disruption and possibly dislocation to the economy?
As reported at column 2059, volume 236 of the Official Report the Taoiseach said:
The intake from small savings has been disappointing for some time. In the current year so far there has been a net outflow of £1.6 million from the Savings Banks. This is a disimprovement of £4.7 million as compared with the corresponding period last year.
That shows a very serious falling-off in savings. Everyone, every economist, every Government, insists that one essential way to build up the economy, and to provide the means whereby the Government can carry on, and whereby there can be expenditure in the interests of the country and people can be saved from increased taxation, is by increased savings. The incentive here is that they decided to increase the rate of interest by half per cent. You could get over seven per cent in a building society, or 7½ per cent in a national loan, but for the Savings Banks the incentive is an increase of half per cent. That may be justifiable having regard to the history of the Post Office Savings Banks. You get a small amount of interest because you are entitled to withdraw your money fairly quickly.
What I object to is that the entire policy of the Government over the past ten or 15 years has been directed, not by accident or mistake but by design, in such a way as to discourage anyone from saving. I have spoken again and again in this House about the plight of people who are self employed. They have to do the best they can by saving over the years to put aside a certain amount of money for their old age, or for their wives and families if anything happens to them. Very frequently when people save it is not for themselves in their old age but their families, but the Government take most of their savings from them. Their policy has brought about a depreciation in the value of money. It has fallen catastrophically in the past ten years or so. If you insure your life you pay a big premium and when the policy matures it has depreciated in value as a result of Government policy, and they then proceed to take a big lump by way of death duties. That is also done by deliberate design.
I think it was in the Budget of 1965 that the Government increased the period during which you would be entitled to transfer certain savings to your wife or children from three years to five years. That was done deliberately in the Finance Act. People asked — and I asked it myself —"What is the use in saving? Why keep it up when the Government will take a big lump at the end in death duties?" I want to insist very strongly on this: unless the Government give an incentive — and not this half per cent which is ludicrous and laughable — by way of relief of income tax, or preferably by way of death duties relief, and people who save, provided they can be established as savings out of earnings during the years, will be entitled to pass their savings over within a year or so at the outside to their wives and children and will not be charged death duties, there will not be savings.
This provision of five years was put in deliberately by the Government at the instance of the Revenue Commissioners. I think it was in the same Budget that the development tax was brought in by the then Minister for Finance who is now the Taoiseach. That development tax had to be repealed this year by his successor, in the Finance (Miscellaneous Provisions) Act, 1968. It was bad and it was proved to be bad. The Minister had to humiliate his predecessor, not to talk of himself, by repealing an entire section of the Finance Act, 1965, which had been recommended to the then Minister by the Revenue Commissioners, and accepted by the Department of Finance without any critical examination. At that time we exposed it in this House and we were laughed at, but subsequently it had to be repealed.
There will be no savings unless there are some incentives. The Savings Committee have done very good work. They deserve the thanks of the public for their efforts but they were up against the impossible almost. People asked: "What is the use in saving because when I die the Government will take one-third and sometimes onehalf of it?" Until that is got rid of there will be no incentives to save, and the Minister for Finance in Budget after Budget will have to report, as the Taoiseach had to report this year, an almost catastrophic drop in savings. That is bad for the country. It is bad for the economy and it is still worse for the individual outlook of people as to whether they should or should not save or spend. It is a matter that requires the greatest consideration from the Government at the present time. As on this question of saving, their attitude on death duties is entirely incorrect. I have listened or heard or read speech after speech on the subject by the Deputies of Fianna Fáil who have spoken on this. There is not a speech made on this or any other relevant matter that does not draw down the abuse they would like to hurl at the Coalition Government. It is no part of my job or duty nor do I intend to occupy the time of the House in going over the record of the Coalition Government. I am proud of its achievements. I am conscious of the lies told by some of the Members now occupying ministerial positions in the Government. During the general election that led to their subsequent occupation they told lie after lie. They told the people of this country the Coalition Government was responsible for the Suez Canal crisis and the petrol position. They persuaded the people by their false propaganda. I would not like to sit here having spoken for only two or three minutes on it.
Any prosperity this country has at the present time can be traced back to the policy initiated for the first time by the inter-Party Government of 1948 and particularly the policies of the former Deputy McGilligan. He established the principle of capital Budgets, the principle of spending by the Government for productive capital purposes, of capital expenditure that had been unknown at the time the Fianna Fáil Party had been in office. They are now talking about it as if they themselves thought about it. We started the export board. It is now called Coras Tráchtála. It was we who gave the incentives for exports which were the foundation of the export trade now in existence without which it would not have been in existence. That is something to be proud of. We never get anything but lies from the Fianna Fáil Party. We do not expect anything else. I am saying this to have it put on the record. We gave them the incentives at that time which laid the foundation of our export trade and if we had not done that at that time Fianna Fáil would not have done it ever and we would have one-quarter of the trade we now have. We have ample export trade. We gave them the incentives and we gave them the markets.
We established the Industrial Development Authority. I want to say to the Fianna Fáil Deputies who cast aspersions on our work that we established the Industrial Development Authority and Deputy Lemass gave a solid undertaking when that Act was being passed that when they would get into office they would repeal that Act and dismiss the people we had appointed. I had the utmost difficulty in persuading the people we intended to appoint that he dare not do that and that constitutionally he could not do it even if he tried. In spite of that threat we set up the Industrial Development Authority and it has been a source, a tremendous source of good to the people and to industry. Deputy Lemass did not change it despite the fact that he gave a public undertaking. He did not do so.
Deputy Collins speaking this afternoon about our record referred to the fact that Deputy Lemass, frequently quoted in this House, acknowledged, when they resumed office after the last inter-Party Government in 1957, that there was no housing problem in the city of Dublin. Deputy Collins tried to say there was no housing problem because there were no people. There was no housing problem because I had to go on the radio and ask our people who had gone abroad to England— tradesmen and skilled labourers—to come back and that we would guarantee them ten years work. We got houses built. We have a record of housing that can bear any scrutiny or any lies on the part of Fianna Fáil.
I could tell how we made the Fianna Fáil Party give the old age pensioners 2s 6d, which they had refused. With the widows and orphans it was the same record. Our record is there to be seen. I was compelled to make these remarks. I did it merely for the purpose of at least bringing some sort of charity into this House in connection with this matter and letting the young people know that what is now being falsely said is quite incapable of being substantiated. In my view this Budget will have the effect of disrupting the economy of the country and bringing about a serious financial situation. It is wholly unnecessary. It is utterly wrong. It may be that there is a case to be made for something to be done. This is not the way to do it. We only come, as I said before, to the inescapable conclusion that they are adopting this device of a prospective Budget to get £11.4 million next year or whatever the amount is in order that, adding that to the amount already imposed by the April Budget of this year and anticipated increases in revenue, they will have about £40 million available to discharge £27 million which the Taoiseach said we will have to pay, and he will have a large amount of money to buy himself votes in the next election.