Before coming to the Budget itself I should like to stand back from the present situation and try to set it in context. We are at the beginning of a decade and for various reasons this particular time may be a time when changes will occur and are occurring in our economy which may make the seventies a different period economically and in other ways from the sixties. As the Minister for Health said, and has said frequently, we have over the last ten years made considerable economic progress. Over this period the economy has grown at a rate of something like 4 per cent. It is not spectacular. Possibly it is somewhat less than that achieved in Western Europe as a whole but it is very close to the European average and it compares so favourably with the failure of economic growth in the 1950s, which I may say persisted just as much in the period of Fianna Fáil Government as in that of the inter-Party Government, that we have naturally felt ourselves to be in a better and a different situation.
We have not, I think, drawn conclusions from this that we should have drawn and this is the lesson that must be hammered home in this House. Again and again I have tried to point out that we have failed to adjust. Particularly this Government have failed in their attitudes and policies to respond to this new situation. In a sense, they have been taken by surprise by the economic growth of this period. They did not expect to find themselves in this situation. This was for reasons largely outside their competence. We all know that what launched this was the First Programme. We all know from the appendix to the First Programme that it was not the idea of the present Government, nor was the content attributable to the Government but to their advisers. The impetus came from them as did the advice. The Government had the courage at that time not only to adopt this programme but to publish the advice given to them and they deserve credit for doing so. We know from that the extent to which we owe a debt to certain public servants in this respect.
But, presented with this bonanza in the early sixties, the Government failed, and have persistently failed since then, to adapt themselves to the situation. It is remarkable that we are here today, ten years later, and Government policies in such fields as the provision of drainage and sewerage facilities for towns and cities, the provision of housing and water supplies, are policies which would have been inadequate ten years ago and are incredibly inappropriate at this stage.
Throughout this whole period the Government acted as if they could not believe their luck in facing this economic growth and as if it was something that might go away in the morning: that it would be a great mistake to accept its existence and do anything about planning to utilise it or planning to face the problems it would create. Government attitudes, on the whole, have been those of expecting stagnation to recur and not facing up to the problems of growth. One cannot stress this too much because, in this House by the tone of our utterances, I think we can push the Government into action, embarrass them into action, if we keep hammering away at certain areas where the Government have failed. It is right that we should do that.
I now want to consider the seventies rather than the sixties. The Minister for Health said—I thought it was remarkably inappropriate—that we have short memories. In the context of what he said this is probably true. It is right that we do not remember clearly enough the particular years he mentioned. It is right that for a brief period we did secure economic growth without price increases or income increases, but to say that people in this country have short memories is something that could be said only by somebody who does not listen to much that is said in this House.
I do not think we should dwell all the time on the past. We should consider where we are going. I should like to consider this question of the economic growth in the seventies. If we adapted ourselves to change, if we were prepared to tackle energetically the problems of growth, if the resistance to change to be found everywhere —and I am afraid most of all in the public service and the Government— could be overcome, we could not only secure the benefits of economic growth, some of which we have not secured by a failure to face the problems it created in the sixties, but we could also I believe secure an acceleration of economic growth.
If we could overcome our present difficulties and if we could, above all, overcome the problems of which the Minister for Health spoke towards the end of his speech, problems connected with the growth of incomes—and particularly when we overcome the problems associated with the freeing of trade both with Britain and the EEC —in the latter part of the seventies we could find ourselves in a period of significantly rapid growth.
I want to stress this because it is right that we should contrast on the one hand the prospects that lie ahead of us, the very real possibility of a very real continuing and perhaps accelerated betterment of the conditions of our people, with what in fact looks like happening because of the way things are now going. It is perhaps only by contrasting the disastrous consequences of present policies and attitudes, not alone on the part of the Government but on the part of many sections of the community, with what could come about if we and the Government were prepared to act in a more responsible manner, that we can measure how unfortunate present policies are, how dangerous they are and how important it is that they should be changed.
I believe this 4 per cent growth rate can be accelerated. There are certain basic almost arithmetic reasons for this. We all know that in our economy at present—and, indeed, this will be true in the future except perhaps for a short period while we adjust to the Common Market conditions—the growth of industrial output is far more rapid than the growth of agricultural output. As a result of this, between 1957 and 1970 industrial output has grown from less than that of agriculture to twice that of agriculture. This means that the agricultural sector although growing slowly, and very slowly, is diminishing in relative importance.
As time goes on, even if indefinitely the growth rates of these two sectors remained individually unchanged, even if we went on for the next ten, 15 or 20 years with a 1 per cent growth rate in agriculture, which is an optimistic assessment of what has been attained over the past ten, 15 or 20 years, and with a 7 per cent growth rate in industry, which is what we have attained roughly over the past ten years, the arithmetic consequences of these two separate growth rates would be an acceleration of national growth because, as time went on, the faster growth rate in the case of industry would itself, as it has been doing, expand the industrial sector so that a bigger and bigger sector of the economy would be benefiting from the higher growth rate and a relatively smaller sector would be suffering from the slow growth rate of agriculture.
Therefore, even if nothing changed, even if we went on as we have been going, with agriculture barely securing any increase in output but with industry forging ahead at a rate which has been throughout this period on the whole satisfactory we would, in fact, tend in time to secure a faster national growth rate. If, in addition to this, several other things happened, this acceleration in economic growth could be even faster.
If we become members of the European Economic Community, during the period of transition we will face changes which on the industrial side will tend to slow down growth and on the agricultural side will tend to accelerate it. I suspect myself that there will be several years during which the net effect of these changes will be adverse but, after that period, there will be a period during which the effects of the agricultural policy of the EEC will continue to operate, after we have overcome the difficulties in the industrial sector. I can see, therefore, a period in the latter part of the 'seventies when industrial growth will be at least at its present rate and, at least for some years as we adjust to the quite different level of output appropriate to the much higher level of prices in the EEC, our agricultural growth rate can be significantly higher.
At the same time, the continued growth of savings is giving us a bigger amount to invest. The proportion of national output available for investment is rising, nothing like half fast enough for the increased demands of investment but rising nonetheless and, as the years go by, and as we invest a higher and higher proportion of our national output this, in turn, should tend to yield a higher growth rate. These are factors working in our favour. There is another factor. I have not referred to the acceleration in the growth of foreign investment as a result of the activities of the IDA with growing success. These factors together should yield us over the ten years ahead an accelerated rate of growth moving towards, even if not quite attaining, the kind of growth which the Report on Full Employment of the NIEC visualised as being likely to give us full employment by 1980. That, I think, is an optimistic target. We could conceivably be in sight of full employment as we enter the 'eighties. That is a rational and fair and perhaps somewhat optimistic view of what could lie ahead.
I do not think anyone, economist or serious politician, or any observer of our economy, could at this stage have anything but fear lest this vision of the future be destroyed in the years immediately ahead. It is striking that, at the very moment when we can look forward at last to a longer-term possibility of going a long way towards solving our economic problems, we proceed under the guidance of the Government to wreck these prospects, to undermine the growth which we have achieved and create in our country a situation much more serious than anything we have experienced economically since the foundation of the State.
The trends that we see at work at present are of more fundamental danger to this economy even than the Economic War and could lead to a crisis more serious than that of 1956 to 1958. They are self-imposed. It is not that there is a world inflation that has got out of hand and we are caught up in it and can do nothing about it. That was true, I think, in 1951 in the period of the Korean War inflation. Indeed, in 1957 our position was aggravated by the Suez War and the closure of the Suez Canal, but not to a very significant degree.
Today, however, we have no such excuse. Of course, other countries have problems. Of course, there are certain inflationary pressures elsewhere, but they are not a significant factor in our problems. The simple fact is that our economy is well on the way to being wrecked. If it is in that position it is we ourselves who have brought it about and by "we ourselves," I mean this country under the guidance of the Government. I am not saying that the entire direct responsibility for this critical situation rests with the Government. Of course, it does not. Every group in the community must carry some of the blame.
First of all, the Government are the Government, and the Government of the day must take responsibility. Secondly, for much of the direct cause of our present situation and certainly for the failure to correct it, the blame rests squarely and fairly on the shoulders of the Government. It is not that the Government lacked economic advice. It is not that they got conflicting advice. One could see a Government, torn between the conflicting views of economists telling them to go in different directions, shrugging their shoulders and making up their minds as best they could to go their own way.
One could sympathise with such a Government but I do not recall any time in this country since I became interested in economics when the unanimity of the advice given to the Government has been so great. Nor do I recall any time when the rejection of this advice by a Government was so absolute. That is the position in which we find ourselves. I should like to set what I have to say against that background, a background of very real hope of the solution of our economic problems within ten or 15 years and the prospect that, just as it appears on the horizon, it is likely to be wrecked by irresponsibility on the part of the Government and, indeed, much of the rest of the community as well.
Let us consider in that context the Budget which was presented to us. I intend to speak of the Budget in economic terms. I would not for one moment deny that there are good things in the Budget. Of course, there are. Most of the benefits in the Budget are not only to be applauded in their own right but are, in many cases, well judged and well balanced. In fact, as a Budget for another year it could be a very good Budget. Even in this year, if the Government had been prepared to pay for the benefits, or to require the people to pay for the benefits they are lashing out, the Budget might not perhaps be open to so much criticism. It is not that this Budget has been enormously over-generous in what it gives away but rather that the failure to balance the Budget and the over-optimistic attitude adopted creates serious dangers.
Let us consider the background to the Budget. What kind of situation has led up to this and why are we where we are? I was amused listening to the Minister for Health; he spent the first part of his speech telling us why the Government should ignore the NIEC Report No. 28 dealing with the economy and he pointed out that the Government could not be tied down by the NIEC or the economists, and then he said that we must all do what the NIEC Report No. 27 told us to do. I do not think he was conscious of the contrast; there were two parts of his speech which should have been made by two different people. They certainly were not reconcilable with each other by any standards.
In the NIEC Report No. 28—which the Minister did not dwell on and to the views of which he does not defer— reference is made to what the NIEC had stated the previous year. The NIEC then concluded that further action by way of fiscal or monetary policy and/or new approaches in the growth in money incomes would be appropriate in 1969 to restrain the growth in domestic demand. Even at that stage the NIEC were calling for some restraint. A sharply deflationary policy was not needed because action taken in time need not be drastic. The NIEC reported that disappointingly little was achieved in the course of the year. That is indeed an epitaph for the work of the Government in a vital year.
The NIEC stated that for the financial year 1969-70 fiscal policy was, on balance, expansionary. This was in a situation where the Government were advised that a mildly deflationary policy was advisable, where we should have been cutting back slightly to keep things under control. The NIEC stated that the increase in public capital expenditure was of the same order in 1969-70 as in 1968-69; there was no moderation in the growth of public capital expenditure and last year's Budget tended to offset the deflationary impact of the November, 1968, measures. The NIEC said in polite terms what some of us have been saying from platforms in more political tones in recent months: that the November, 1968, measures taken by the Government, possibly even too harsh at that time, were not followed up and reinforced by the April, 1969, Budget. On the contrary, the Government sabotaged their own measures by introducting an inflationary Budget in April, 1969, and there need be no doubt as to the reason. It was because we were immediately before a general election. There is clear condemnation of this in the NIEC Report. They remark also that Government guidelines for money incomes were announced in 1969 but they seemed to have had little effect. The reason for this, of course, is that they were not followed up by the Government. Nothing was done about the inflationary momentum that continued in 1969 and there was no attempt to deal with the situation.
That is a brief description of the NIEC's report of what happened during the year. It has led to a situation where they felt obliged to call for pretty drastic deflationary action— possibly too drastic. All the various reports we have had recommending that the Government should take action to bring the situation under control vary in tone. The document issued by the Department of Finance, while it is not very explicit on what needs to be done and does not alert people to the dangers, displays undue optimism; on the other hand, the NIEC may be erring too much on the side of deflation. A balance must be maintained but when one speaks of a balance one is talking of a balance between different degrees of deflation. However, the Government have inflated the economy in a Budget which clearly is likely to have a deficit rather than a surplus.
What kind of advice did the Government get? They got advice from various sources. Of course the Department of Finance are more inhibited in their document; they could not state in advance of the Budget what they thought should be done, especially when dealing with a Government who are quite capable of rejecting advice. The Department adopted a roundabout approach. First, they set up an Aunt Sally in the form of the kinds of things that might happen to the economy if everything went well. They started off by telling us about the excessive increases in incomes and then said— as if they did not know what had been happening in the last few months —that if the Government's norm of 7 per cent for the first year of a new agreement were accepted for agreements falling due for renewal in 1970 the resulting increase in 1970 in non-agricultural wages, salaries and pensions, allowing for wage drift, increased employment and carry-over of awards made in 1969, would be of the order of 11 per cent. Allowance for a moderate rise in agricultural incomes and a slower rise than in 1969 outside agriculture should result in an increase of consumer expenditure of 9 per cent and a rise in consumer prices of 4½ to 5 per cent. On these assumptions, particularly the acceptance of the Government's norm of 7 per cent, the balance of payments deficit would be significantly smaller than in 1969 and should not exceed £50 million.
However, should the pattern laid down by the maintenance men's settlement become general throughout the economy—as if they did not know that this had happened—the effects, in the absence of corrective measures, would give grounds for concern. The report went on to say what would happen in those circumstances, including the 15 per cent increase in non-agricultural wages and salaries and a balance of payments deficit up to £80 million. I suppose that was the best the Department of Finance could do; they could not say that the economy is now in a position where, because of the growth of incomes beyond the Government's norm, the situation facing us is an external deficit of £80 million and that it requires action. The Government were not taking action and they, therefore, set up an imaginary situation, stating that if the Government's advice was heeded everything would be all right but if at some distant point in the future it was not heeded action would be required. They knew of course that the Government's advice about 7 per cent came too late to have any effect and was, in fact, outdated by events.
The Economic and Social Research Institute, who have tended to be relatively optimistic, have written that there seems to be a case for moderate fiscal action of a deflationary nature. They visualise an external deficit of not more than £76 million as against the £90 million envisaged by the NIEC, but even the Economic and Social Research Institute stated that action of a deflationary nature is necessary. They stated that a small increase in the current Budget surplus would counteract some of the effective increased money incomes and might avert the need for a further tightening of monetary controls which could have dangerous effects on investment prospects. They stated if such a policy is adopted, if the Government have a Budget surplus and if it seems inevitable, in spite of a revenue buoyancy to be expected in 1970, that this would involve an increase in rates of taxation there are strong grounds for advocating an increase in direct rather than indirect taxes.
Having dealt with the question of the form the extra taxation should take, the report of the Economic and Social Research Institute says that the immediate implications of the excessive rise in money incomes can be regarded as "just manageable" by a combination of severe, though not drastic, fiscal and monetary measures. The long-term implications are more damaging. Here is the most optimistic advice given to the Government and this suggests that the present situation may be "just manageable" by a combination of severe fiscal and monetary measures to control credit and increases in taxation designed to yield a Budget surplus.
That was the advice given by the Economic and Social Research Institute. The NIEC is more pessimistic. At the end of a long account it gives of the situation and the proposals it makes—I shall not go through them all; they make such depressing reading and I do not want to depress the House any more—it suggests the situation is such that it is necessary to reduce total expenditure by £80 million to £90 million, a figure which I think myself is excessive. They say it was obvious the Government would not cut public expenditure. They thought it should not come out of private investment and must, therefore, come out of consumption and called for this to be achieved within the calendar year.
I do not know how they did their sums but I reckon this would mean cutting personal consumption by ten per cent in the next eight months. That seems to me excessively drastic, but it is a measure of the seriousness of the situation that this body of employers, trade unionists, civil servants and representatives of the public interest should call for such drastic action as that. They spell out the need for a Budget surplus:
The measures outlined in the previous paragraph would transfer purchasing power from the private sector to the public sector and produce a surplus in the current Budget. This surplus would be available to finance public capital expenditures and to that extent less new bank lending and external borrowing would be required by the public sector. At the same time the fact that this surplus was raised by reducing private expenditures would help to reduce the demands for bank credit in the private sector.
It sees the need, therefore, for credit restraint measures and a Budget surplus.
Then there is the Central Bank, which, like the Department of Finance, sets out two hypotheses, although it does not commit itself to the Department of Finance suggestion that the first hypothesis is possible. However, it shows what might have happened and then what is likely to happen with present trends of income, and it concludes that it is necessary to cut back the growth of credit from £120 million to £75 million. It is inexplicit on the subject of a Budget surplus. Here it was inhibited in saying what it thought but the omission is an obvious one. It is clear it was intentional because it indicates on the first hypothesis, "if things had worked out better" the kind of situation we might have had. It starts off listing certain assumptions, and these assumptions include three as regards public finance, including the assumption that the public capital programme would rise by substantially less than it rose by last year, an assumption which has been validated by the public capital programme presented to us in which the increase is one-third less than last year.
Its second assumption is that public current expenditure will rise by less than it rose by in the previous year. This assumption has been invalidated by the Budget, as a result of which the increase in public current expenditure this year will be £6 million more than last year even if not a halfpenny extra is spent over and above the sum provided, and I know from past experience that at least £9 million or £10 million extra will be spent.
Their third assumption is a balanced Budget. Having said that an increase in credit of £120 million would lead to a balance of payments deficit of £80 million to £90 million, a very dangerous situation, they then go on to say: Therefore we have to take remedial measures. We have to cut the growth of credit from £120 million to £75 million. It then repeats these assumptions, but omits the assumption in respect of the balanced Budget. This omission was significant because clearly what they intended was a Budget surplus. However, having certain relationship with the Department of Finance, they felt it tactful not to mention that.
The fact that both the NIEC and the Central Bank documents start from the hypothesis that failure to take action would lead to a deficit of £80 million to £90 million in the balance of payments, that the taking of action could reduce this to £50 million, and that the kind of action, where it is made explicit, is similar, and that the chairman of both bodies is the same—the Governor of the Central Bank and the Chairman of the NIEC—makes it clear they are working on parallel lines and that the Central Bank must also have been thinking of a Budget surplus, even though considerations of tact prevented it from saying so explicitly.
This volume of advice varies in strength, the NIEC, perhaps, overstating what needs to be done and the Economic and Social Research Institute, perhaps, being a little on the optimistic side. However, the whole range of advice indicates that several things are needed, moderation in the growth of credit and fiscal action leading to a Budget surplus. The clear statement emerging from this is that a Budget surplus is needed to take some money out of circulation, to cut back demands in order to prevent our facing an intolerable level of external deficit requiring then far more drastic action. It also emerges that a Budget surplus was needed to help finance a capital Budget which otherwise would require a massive injection of foreign borrowing which the Central Bank itself said was undesirable.
That is the recipe put to the Government and the Government were in a position to do it. The Government were re-elected last June by the people on the mistaken assumption that "if you elect this Government instead of having one of these weak, wishy-washy coalitions who are not prepared to take action, you will get thorough men who are prepared to do the right thing by the country." Was it because they lost two by-elections they were terrified into this panic measure? I do not know. Perhaps the Budget was planned before that, but this Government which was re-elected to govern the country strongly although it has four years to go now, nevertheless, are so terrified of the Irish people that they were unprepared to take the necessary action and are prepared to let matters drift and take the consequential risks of doing so.
The Tánaiste has said you cannot always take economic advice. I think he is right. First of all, economic advice is sometimes conflicting and, secondly, the Government must make up their minds on the advice given. Nevertheless, there are times when the truth that is staring one in the face is of such a character that it is flying in the face of Providence to refuse to take it.
While I can understand the Government having divided views as to the amount of deflation required and while no one could say with any kind of dogmatism "you ought to have this size of Budget surplus or that kind of deflation", it is clear some measure of deflation was needed. The first sign they were not prepared to do their duty on this occasion came when they published a suspiciously short time before the Budget the Estimates of Receipts and Expenditure. I wonder why this was not published the week before the Budget as was always the case, as far as I can recall. I have been working on this document as an economic commentator, latterly as a politician, for many years now. I do not recall ever being faced with this document on the day before the Budget. It was usually available the previous week. Why? Was it because it was revelatory of the Government's intentions? Perhaps the Minister or whoever is replying on his behalf would explain why we did not get it until the day before the Budget.
This document produced a picture of what is likely to happen if things are left alone, if you do not add expenditure or increase taxation in the Budget. It is astonishing because it was clear to anybody looking at the picture that if you left things alone on any normal assumptions or any rational, responsible assumptions of revenue and expenditure, you would not get a Budget surplus in the year ahead but, if anything, a small deficit. Yet this document emerges the day before the Budget with an imaginary surplus of £9 million for the Government to play with, to give away. How was it arrived at? Let us see how it was calculated. The calculation of the buoyancy of revenue in this kind of statement here is something that is usually carried out responsibly.
The method adopted is to make an assessment of the likely growth of personal consumption and of non-agricultural incomes and from these figures to assess the likely growth of indirect taxation, turnover tax, wholesale tax and excise duties on the one hand and of income tax and surtax on the other hand relating this to the growth of our agricultural income. The calculation is somewhat complicated because when one comes to calculate the growth of motor vehicle duty one has to assess the extent to which the growth of demand will outrun the growth of consumption generally, but there are good guidelines from the elasticity figures obtained from past performance. Again, on the income tax side it is not quite so simple as just looking at the likely growth of our agricultural incomes because at a certain stage, with a given level of personal allowances and a given wage structure, the situation arises where a number of people are suddenly brought within the income tax net because of a wage round, and this brings about a buoyancy of income. These require careful study, but the Department of Finance is well equipped to do this and it is able each year to assess the likely buoyancy of revenue.
The kind of buoyancy arrived at by that calculation has never up to now been fully taken account of in pre-Budget statements. Having arrived at these figures, the Department of Finance do not put in the full figure; they cautiously deduct something from it because, although they can predict with reasonable accuracy what the buoyancy of revenue will be in the year ahead, assuming there are no sharp deflationary measures which will cut back consumption, they cannot in the same way assess accurately and item by item the growth of expenditure. They are required to list expenditure under different Votes and it is impossible for a Government looking at the year ahead to think of all the things that might happen. It would be improvident of a Government to make in every Vote contingency provisions for things which might not happen at all.
In practice what happens is that the Book of Estimates is produced on certain assumptions and everyone knows that actual expenditure will exceed this by a significant margin, either because of public service pay increases or other increases. The Government know this and so does the Department of Finance. If they aim to produce a balanced Budget they do not take full credit for buoyancy of revenue; they deduct something from the buoyancy of revenue as first arrived at and set it aside to meet unspecified increases in expenditure which are certain to occur. In that way the Budget is normally reasonably balanced, although not every year. More often than not it is to some degree in deficit because the amount of buoyancy held back, although considerable, is not sufficient to cover extremely buoyant expenditure which outruns expectations. By and large, an attempt is made to secure a balance and, by and large, it succeeds reasonably well.
Let us turn now to the actual figures and see the kind of fiddling which went on this year. When the Government prepared the Budget for 1969 they must have done this calculation. They must have arrived at a figure of buoyancy of revenue, judging by the forecasts available to them from such sources as the Economic and Social Research Institute, of between £40 million and £50 million. I would hazard a guess that it lay between £40 million and £45 million. In fact, they did not take full account of this, they took credit for only £28½ million of natural buoyancy. In addition to that they were able to count on another £13½ million, overflow effect of the November, 1968, Budget, the second Budget of that year. This was the harshest Budget ever introduced here, yielding an increase of £19½ million in a full year, of which about £6 million could accrue and did accrue in the financial year 1968-69. As the Government entered the year 1969-70 they knew they were going to get £13½ million extra from the November, 1968, Budget for the months April to October. In addition, they took credit for £28½ million of natural buoyancy, the buoyancy of revenue one gets from any given tax rate. That gave them £42 million altogether. In fact, when the £13½ million was added in, they knew they would get a figure of the order of £55 million. But they cut it back to £42 million, including the £13½ million from the previous year's taxation.
In the current year we were faced with a year of credit restrictions likely to cut back the growth of consumption. The picture facing the Government of the growth of consumption and incomes, again shown by the Economic and Social Research Institute forecast, is one which, before taking account of the credit restrictions, was somewhat more buoyant than that of the previous year. In fact, the expectations of the institute and of the Department of Finance must have been somewhat similar because the two sets of forecasts are consistent with each other, in so far as the Department of Finance have given us any specific guidance about their thinking. They forecast an increase in incomes for the year 1970-71 and it was expected that the increase in personal expenditure if there were no deflationary measures at all and no cuts in bank credit, would be 25 per cent greater. If there was to be no deflation of any kind the Government could count on getting £55 million in the current year. They got £46 million from natural buoyancy last year and they could therefore count on getting £55 million this year. In fact, the Central Bank has taken measures to control credit which is going to cut consumption. In those circumstances it is clear already from the steps that have been taken that the buoyancy of revenue is unlikely this year to exceed £50 million.
What allowances do the Government make on the revenue side for the unexpected increases in expenditure which they know will occur? Whereas last year they assumed a natural buoyancy of revenue at existing taxation levels of £28½ million, this year they assume a natural buoyancy of £50 million—the entire figure—even though the measures taken by the Central Bank show that consumption is not likely to rise by more than in the previous year and incomes by not very much more. This is grossly optimistic. I think the Government will probably get £50 million but there is no leeway of any kind for a halfpenny of extra expenditure to occur.
The scale on which excess expenditure occurs beyond what is provided for in the Book of Estimates is now very considerable. Last year excess expenditure over what was in the Book of Estimates was £16½ million. Of this, it is true, £7½ million consisted of increases in remuneration, and the Government have this year made provision in the Budget for increases in remuneration amounting to £10 million. To that extent they have covered unexpected future increases in expenditure. Last year, extra expenditure, excluding increases in public service remuneration, not provided for in the Book of Estimates, amounted to £9 million and in the year before it was £9½ million. We know from past experience that the bill facing the Government for the year ahead will be £9 million or £10 million more than what is in the Book of Estimates. But no money is available to pay this bill because the Government have taken credit in the Budget for the entire buoyancy of revenue and the reserve which is normally kept to meet such extra expenditure has been dispensed with.
What this means is that, if things take their course, this Budget is likely to show a deficit of up to £10 million —let us say cautiously £5 million to £10 million. That is what the Government have done in spite of the fact that they were advised by every source of economic advice, not just outside commentators but responsible bodies such as the Central Bank, to produce a Budget with a surplus; instead they have budgeted for a deficit. It is difficult to think of a more irresponsible act on the part of the Government in our present critical position. One could understand a Government cautiously discounting the advice and budgeting for a small surplus. As the Minister for Health has said, there is always something to be said for waiting before taking drastic action. I sympathise with that view. I think the Government could legitimately have produced a Budget with a small surplus. This might not have been enough. It might have led to a situation which would require further action later in the year. That would be legitimate; what is illegitimate and irresponsible is to produce a Budget which, far from having even a small surplus, is likely to produce a deficit and which will inflate the economy further. In simple terms, the Government have lashed out £22 million in extra expenditure and increased taxation by a net £12½ million.
That is what an inflationary Budget means. It is a Budget in which decisions taken by the Minister involve increasing expenditure more than increasing income. Against all the advice given to him he has done that. That is the position facing us. Frankly, I do not understand why the Government have acted in this irresponsible way. One could understand it politically, while deploring it economically and nationally, if it were before an election. But, as I remarked rather bitterly the other day, what is the use of the people electing a Fianna Fáil Government if they go on producing election Budgets when the election is over? It is not what they were elected for. When one elects a Fianna Fáil Government one expects one election Budget four years later, not four in a row, which is what we seem to be in for at the moment.
What kind of reaction has the Budget had? The Minister for Health claims he found some consolation from some economist in This Week saying something not too critical about the Budget. I must not have read the same things as he. I read the papers the day after the Budget. “Budget Proves a Damp Squib—No measures to check Inflation.” There are a number of other comments in the same paper. “It is magnificent, but it is not a Budget.” I am not too sure about the magnificence but I agree with the latter part of the statement.
