Financial Statement. Budget, 1971.

Review of 1970

It is customary at the outset of the budget statement to review recent economic trends and to sketch the prospects for the year ahead. The summary of the economic background is, as usual, brief because the ground has been covered in detail in recent publications.

The year 1970 was a mixed year for the Irish economy as it was for quite a number of other economies. Growth slackened and unfavourable trends in incomes and prices developed. However, exports retained their buoyancy and there was an improvement in the balance of payments on current account, although the deficit was still large.

National output expanded by 1½ per cent. The sluggishness of industrial production, caused mainly by industrial disputes, was largely responsible for this relatively slow growth. Nevertheless, employment outside agriculture continued to rise although not strongly enough to absorb the outflow of workers from agriculture. Agricultural output showed only a small increase over the year.

Further large increases in incomes were recorded with the total non-agricultural wage bill rising by 13 per cent. This, together with other factors such as higher import prices, led to a very high increase of 8¼ per cent in consumer prices.

Outlook for 1971

The indications now, however, are that the economy is on the mend. Activity is reviving and the industrial peace we all hope for should provide a more stable environment within which this recovery can continue.

Much will depend on the trend of income increases in 1971. Present indications are that the increase in the non-agricultural wage bill will be some percentage points less than in 1970, notwithstanding the substantial carry-over effects of the high settlements reached last year. Allowing for an anticipated improvement in productivity, this would mean a more favourable cost/ price position.

Demand at home is expected to recover from last year's relatively low level. The volume of consumer spending may rise by 2½ to 3 per cent as against last year's rise of about 1½ per cent. Investment, aided by a revival in building and construction, is expected to be well above last year's low level and should lead to a welcome increase in opportunities for employment.

We would hope that industrial exports will continue to climb steadily with the aid of improved competitiveness. The prospects for agricultural exports are quite favourable. On the debit side, the higher level of activity this year may be expected to boost the import bill. Large imports of capital goods, including some £25 million for aircraft, are expected. Given a reasonable increase in net invisible earnings, the balance of payments on current account (excluding imports of ships and aircraft) should, however, show an improvement.

Present indications are that the economy should grow at about 3 per cent this year. While this is below our aspirations in other circumstances, it would be a welcome advance on last year and is probably the most we could hope to achieve without reinforcing inflationary trends.

EEC

On the international plane, our negotiations for entry to the EEC are proceeding satisfactorily. As indicated in the comprehensive review recently circulated by the Minister for Foreign Affairs, discussions in the coming months will concentrate on the transitional measures in the industrial and agricultural sectors and on the applicant countries' contributions to Community finances in the transitional period. The successful conclusion of these negotiations this year should enable our accession to the Community to be made at the beginning of 1973.

We have therefore little more than a year and a half in which to complete our preparations for membership. If the economy is to be able to meet the obligations which that will impose —and I must stress that the new environment in which it will have to compete will be radically different from that to which we have become accustomed—we must now eradicate those factors which have retarded growth over the past two years. This gives added urgency to the central theme which I shall be propounding in this budget—minimising the inflationary pressures in the economy and strengthening the factors conducive to steady and sustainable growth.

Price Increases

The accelerating trend in price increases in the past two or three years gives grounds for anxiety. In the early sixties, consumer prices increased by an average of 3 per cent a year but in the three years 1968 to 1970 the rise averaged almost 7 per cent a year. Undoubtedly there are some elements in the price increases over which we have little or no control. These consist mainly of the effect of rising import prices and those increases in agricultural prices which are largely determined in external markets. Our situation is inescapably influenced and affected by what is happening in the world around us and in the countries with which we trade. Economically the map is deceptive. There are not islands on the economic globe. Having made that point, however, I wish to emphasise that the main cause of our inflation has been accelerating wages and salaries and increased indirect taxes— which themselves reflect higher wage and salary costs for services provided by government.

In this situation fiscal and monetary policies can help and, indeed, must be designed to avoid creating a climate in which inflationary pressures would be likely to emerge. However, while such policies may slow down inflation, they will not halt it unless applied with a severity which would be unacceptable in terms of sharply increased unemployment. We reject the concept of strength through misery. The main emphasis, therefore, must be on prices and incomes policy.

National Pay Agreement

The National Pay Agreement could be an important step forward in containing incomes inflation. We must, however, be realistic about it. The agreement is clearly inflationary. Its main importance is the hope it holds out that current inflationary pressures can be moderated in an atmosphere of industrial peace. We must ensure that the agreement is a permanent advance and not a "once-for-all" effort which, when it terminates, will leave the basic problems much as they were before.

If the agreement is fully observed, the year 1971 could mark a break with recent experience of rapidly rising money incomes pushing costs upwards even more rapidly. Even a short and modest respite might drive home the lesson that money incomes which outstrip the growth in national productivity bring lasting benefits to none, cause hardship to many and jeopardise the economic prospects of all sections of our community. I should like therefore to stress as strongly as possible the importance of giving the hard-won terms of the national agreement a fair chance of succeeding.

It is the Government's hope that the agreement will lead towards a better system of income bargaining and industrial relations with less disruption of employment and a welcome reduction in unemployment. Improvements in the system have the support of those involved and it was for this reason that the Government welcomed the NIEC Report on Incomes and Prices Policy which made proposals for new institutional arrangements and highlighted certain deficiencies in our present system of collective bargaining.

The agreement emphasises that the rate of increase in costs and prices must be moderated substantially and sets out the ways in which wages and salaries should develop if this is to be achieved. The Government, for their part, intend to press ahead speedily with steps to ensure that non-wage incomes will be subject to the same sort of discipline as wages and salaries. Legislation is being prepared by the Minister for Industry and Commerce to amend the scope of the Prices Acts and the Restrictive Trade Practices Acts and to extend them to activities and services not at present covered. The present arrangements for price control are being reviewed with a view to improving their effectiveness and the submission made by the Irish Congress of Trade Unions is being sympathetically examined.

The Government have already announced the conditions under which pay increases will be accepted as justifying higher prices. Price additions must be fully justified and must conform with the terms of the National Pay Agreement. While the agreement should contribute to an easing of inflationary pressures, it will not result in any immediate or spectacular easing of the pressure on prices. I want to stress this in case there is any misunderstanding. There will be further price increases this year. Apart from higher import prices, the large money increases given in the 12th round are still affecting prices and will continue to do so during most of 1971. I am hopeful, however, that, if the agreement is respected by all concerned, the rate of increase in prices will slow down in 1971 and that there will be a further improvement next year. If this can be achieved, the stage will be set for a further advance towards increased employment and higher real incomes, particularly for the lower-paid and for those depending on social welfare payments.

Demand management

A recent OECD report on inflation has stressed that member countries should pursue cautious demand management policies in 1971. It recommended that, until price increases level off and show a more stable pattern, countries should be willing to accept a temporary reduction in growth below what might otherwise be possible. The relevance of this advice for Ireland is clear. We are faced with three interrelated problems of rising prices, excessive external deficits and a growth rate below our long-term potential. Our objectives are also threefold—to moderate the growth in prices, to reduce to manageable proportions the external deficits and to increase the national growth rate. In the short term we cannot advance on all three fronts simultaneously and with equal effect. Economic policy must, therefore, aim at striking a reasonable balance between these objectives. There is clearly no point in aiming at maximum growth in the immediate future if this would push both the external deficit and prices to dangerously high levels. This would mean purchasing short-term growth at the expense of longer-term prospects for sound and sustainable expansion.

Inflationary costs and price increases go hand in hand with balance of payments difficulties. Loss of competitiveness through higher unit wage costs results in greater imports and lower exports. The OECD report on Ireland warned us that the increase in our export prices in 1970 was amongst the highest in OECD countries. We are fortunate in that the underlying trend of both national production and the balance of payments is towards improvement and that our official external reserves have been rising, but the level of the external deficit still remains much higher than would be considered desirable in the long term. The upward trend in reserves reflects the large continuing net capital inflow and thus the confidence of external investors in the economy and its future prospects. However, annual repayments of profits, interest and capital automatically tend to rise with increases in the net capital inflow and will constitute a greater annual liability in the balance of payments in future years. For this reason demand management policy must be directed towards keeping the balance of payments deficit within reasonable bounds.

Monetary policy

The past year has been one of exceptional difficulty for monetary policy. Because of the inflationary pressures in the economy and the balance of payments position, continued restraint of credit growth was necessary and the Central Bank guidelines provided accordingly. In the event, the effectiveness of these guidelines was impaired by the bank closure which— although the situation has not yet been fully clarified—appears in its overall effect to have been inflationary. In present economic circumstances, continuance of restraint in the coming year is unavoidable. The Central Bank will issue credit guidelines to the commercial banks in the near future and has already indicated that the total appropriate increase is likely to be about the same as that originally advised for last year. These guidelines will continue to give priority to productive purposes. Consumer credit must continue to be kept under control in the coming year and for this reason the hire purchase restrictions introduced early last year, which have not been as effective as was expected, must be continued.

The reduction in lending rates for industrial, commercial and service enterprises, which was announced to-day by the commercial banks follows a general downward tendency throughout the world. I wish to make it clear that this welcome reduction in the cost of credit does not imply any lessening of the need to curtail the expansion of credit in the coming year.

Inflation and the budget

For some time the Government have been concerned because public expenditure has been rising at a rate substantially faster than national production. If this were allowed to go unchecked, it would soon give rise to financial and economic problems of an acute and dangerous kind. There are many reasons for the upward trend. They include the need to provide services and finance on a growing scale for agriculture, commerce and industry; the desire of the Government to meet the pressing demands of social justice; and the rising cost of servicing the national debt. These and other forces operate to expand the role and cost of Government.

In addition, there is the impact of price and wage inflation on the labour-intensive public sector, for which pay alone now amounts to £154 million, and on the wide range of goods which must be purchased out of Exchequer funds.

A substantial part of the claims of the weaker sections of the community on the public purse is needed solely to maintain their position in the face of rising prices. All these additional costs must be met before improvements in services or benefits can be considered. Financing these costs can, of course, be itself inflationary because of the effects of extra taxation on both prices and incomes.

Control of expenditure

It is essential therefore to slow down the rate of growth of Government current expenditure to something more closely approaching the automatic growth in revenues at existing rates of taxation. The economy could not continue to devote to public expenditure the rising proportion of gross national product which became commonplace in the past decade. Concerted steps are therefore being taken to improve the arrangements for planning, approving and controlling the budget. New procedures are being instituted to ensure that expenditure is more closely aligned to the resources likely to be available. At an early stage in the preceding year, the level of aggregate expenditure for the coming year will be determined by the Government in the light of such factors as the yield of tax revenues at unchanged rates, the desirable level of domestic and foreign borrowing and current and prospective economic trends. This aggregate will be divided into block allocations for each service and Ministers will then be free, within broad limits, to decide the detailed subdivision of their allocations. This should strengthen the resolve of the Departments to discover ways and means of increasing the efficacy of each £1 spent and to optimise the benefits to be derived from their limited allocations. The fact that block allocations will be determined well in advance should assist Departments in making the policy and administrative changes required to keep expenditure within the limits assigned to them.

Programme budgeting

Experimental studies in programme budgeting have been proceeding in the Department of Education and in the Forest and Wildlife Service of the Department of Lands. Draft programme budgets for those services covering the period up to 1975-76 have recently been completed. Four more Departments have now been included in the experiment and it is intended ultimately to cover all Departments at a pace determined by the availability of certain skilled staffs which are quite scarce at present.

Multi-annual budgeting

As an interim measure until programme budgeting becomes fully operational, multi-annual budgeting on what might be described as traditional lines is being developed. This involves extending the present annual expenditure estimates for a further two years ahead—that is, estimating for three years in all—and making provisional allocations in respect of those estimates based on a projection of resources. This procedure should enable more systematic control to be exercised over expenditure in the light of expected resources and facilitate Departments in planning their expenditure over a longer period.

The public service

The staffing requirements of the public service are determined by the extension and improvement of Government services. At present the remuneration of the public service in all its branches —civil service, Army, Garda Síochána, teachers, health staffs and so on—pre-empts a considerable proportion of total revenue. It will cost £154 million in 1971-72 out of a total expenditure figure of £542 million. Apart from its large and growing size, the pay cost of the public service creates major budgeting problems in a time of rapidly rising pay such as we have experienced acutely in recent years. It is now difficult to predict and provide accurately in a budget for the cost of pay increases likely to occur in the year ahead. With a total remuneration of £154 million, even a small deviation can entail several million pounds. When it is considered that public service pay is affected by national pay rounds in outside employment generally, by particular pay adjustments in comparable sectors of outside employment and by claims to alter or maintain differentials and relativities within its own grading structure, the difficulty of precise budgeting for public service pay becomes apparent.

As the second phase of the twelfth round agreement for the public service generally covers the calendar year 1971, the cost of remuneration can be estimated with greater certainty than was possible last year, but there is nevertheless an area where the estimates are still somewhat tentative. The amount to be provided for the removal of existing anomalies within the terms of the National Pay Agreement cannot be predicted with confidence. The best estimate that can be made to cover both this and the cost of the 13th round after January, 1972, is, on present information, £6.5 million. This sum has been included as a contingency in the pre-budget estimates.

The Government are seriously concerned at the extent to which national budgetary and financial policy has been upset in recent years by the need to meet additional pay liabilities far in excess of the amount provided in the budget. In the supplementary budgets introduced in 1968 and 1970, public service pay increases were one of the greatest items of additional expenditure to be met. Such unexpectedly large mid-year additions to current liabilities can frustrate the Government's attempts to budget rationally. The Government propose, therefore, to consider what action can be taken to safeguard budgetary plans against disruptions of this nature. Any proposals to change the present system will, of course, be discussed with the staff associations.

Conciliation and arbitration

To allay any staff misapprehensions, I wish to make it clear that the Government fully accept the principle of conciliation and arbitration. Some changes in the present conciliation and arbitration machinery may, however, be desirable. There are four major arbitration boards covering the civil service, the local authority service, teachers and gardaí, as well as other boards for smaller groups. They have emerged at different times in the past 20 years and it has been a matter of some concern that there has been no co-ordinated approach between the public service arbitration boards themselves or between them and the major body in this field, the Labour Court.

This led the Government to propose in 1966 that all arbitration claims be dealt with by the Labour Court. Regrettably, the proposal was not acceptable to the staff. It was then suggested that a tribunal be set up under the aegis of the Labour Court to deal with all public service arbitration claims. This proposal, too, was not acceptable. Ultimately, the 1969 Industrial Relations Act provided for the addition of two Labour Court members to public service arbitration boards. While this improvement, when it becomes effective, will no doubt be of help, the problems are such that they can be solved, or at least minimised, only by a fully coordinated approach to claims at arbitration level.

Report of the Public Services Organisation Review Group

Action on the recommendations of the Public Services Organisation Review Group is continuing and I have introduced legislation for the setting up of a Department of the Public Service. While I do not wish to anticipate the debate on the broader aspects of the group's report to which the passage of this legislation will give rise, I would like to stress two points here. First, the functions of organisation and personnel will be given enhanced status, both in the new Public Service Department and in Departments generally, to reflect the importance attached by the Government to the management of the public service. Second, the Government are determined to press ahead with all steps necessary to increase the efficiency and minimise the cost of the public service.

Outturn of current budget 1970-71

The budget of April, 1970, aimed at a balance between current expenditure and revenue at the level of £475 million. However, during the course of the year heavy additional liabilities totalling about £20 million were incurred principally on public service pay, additional assistance to CIE, social welfare and health costs and defence. It was therefore necessary to introduce a supplementary budget which aimed at reducing the likely deficit to £8.6 million by a combination of reductions in expenditure and increased taxation.

The outturn, as shown in the budget tables, does not significantly differ from the position as projected in October. The deficit of £8.9 million, which had to be financed by additions to our residual borrowing in 1970-71, has of course affected the outturn on the capital budget for that year.

Capital budget 1970-71

The bookletCapital Budget 1971 which was published some days ago shows that expenditure on the capital budget in 1970-71 was very close to the April 1970 estimate. It included the current budget deficit of £8.9 million. The projected pattern of financing the budget, and in particular the residual borrowing, was substantially altered mainly as a consequence of the effects of the bank dispute. This is set out in detail in the booklet.

Budgetary policy

I have given careful thought to the question of the budgetary measures best suited to our present economic situation which, as I have already mentioned, presents three interlinked problems of rising prices, excessive external deficits and a slow rate of growth. The forces of inflation would be given a further impetus if the upward trend of Government spending, both capital and current, were allowed to continue unchecked. This total rose by 18 per cent in 1968-69, 16 per cent in 1969-70 and 18 per cent last year, necessitating undue recourse to domestic and foreign borrowing and increased taxation which contributed to sharply rising prices. A marked increase in public spending would adversely affect our balance of payments deficit, and while it might give us some short-term prosperity, the price would be too high and the benefits transitory.

We decided that the rise in Government spending would have to be moderated and the original current and capital expenditure programme of £797 million for 1971-72 has been reduced to the total of £721 million—an increase of 9½ per cent on last year's outturn. This very substantial reduction, which was not achieved without difficulty, represents the main effort of my budgetary policy for 1971-72 and is of much greater significance for our economic well-being than the changes I shall announce to-day.

Capital budget 1971-72

The capital budget for 1971-72 totals £217 million. The public capital programme which makes up the bulk of the outlay represents an increase of about 6½ per cent over the outturn for 1970-71. In these comparisons the expenditures of the air companies and Irish Shipping are excluded: most of them are incurred abroad and financed from foreign borrowings and have little direct effect on domestic resources and demand. It is planned to keep total residual borrowing at a level of £73 million.

Provided that movements in wages and costs generally are contained within moderate limits, the programme proposed should ensure steady economic and social advance. Two items deserve special mention. First, the allocation for industrial grants is up from £18.5 million to £23 million—the highest level ever. Second, the allocation for housing and ancillary services, at £43.5 million, is £4 million greater than the outturn in 1970-71. These two increases, totalling £8.5 million, should add significantly to the job opportunities available this year.

The problem of financing the capital budget is not limited to finding the money, from whatever source, to cover the total outlays. Nor is it a matter solely of finding the cheapest sources of capital, although the cost to the Exchequer cannot be ignored. We must also have regard to the impact on the monetary system and on the economy generally of the different sources of finance used. It is here that budgetary policy and monetary policy have a meeting place and where one policy can complement the other.

An appropriate monetary policy could not, on the basis of present information, be maintained during 1971-72 if bank and foreign borrowing by the Exchequer were to rise significantly above the £73 million proposed. It is hoped to raise £48 million of this requirement from the banking sector and £25 million from abroad. In the past, borrowing from the domestic banks was confined almost exclusively to the associated banks, but in view of the growth of deposits with the other financial institutions, an approach is now being made to the non-associated banks for part of the £48 million.

Borrowing from the Irish public

The normal sources of capital finance, chiefly small savings and national loans, are generally regarded as the safest and most desirable way to raise capital for the Exchequer. Too much reliance on bank credit can run the risk of swelling the money supply to inflationary levels, while foreign borrowing can have similar effects. All aspects of Government stocks and other means of raising money on the domestic market are being reviewed. Irish Government stocks are at present giving generous yields by comparison with British securities, but other aspects are being looked at with a view to providing attractive investment opportunities for the public and the various investing institutions. Underwriting discounts and brokerage commissions have been increased on new issues and conversions, and stocks are being issued with maturities which best suit the needs of the Irish investor.

Last February £41 million of national loans came due for redemption. Of this, £25 million was converted into new stock. At the same time three new stocks were issued for public subscription and these attracted funds of over £21 million. The Government therefore borrowed £46 million in a single operation. It was the largest of its kind ever attempted and betokens a gratifying degree of confidence in the continued progress of the economy.

Small savings

Small savings continue to be a valuable source of finance for the public capital programme, and while I do not expect a repetition of the record level reached last year, because of the bank closure, I hope that the public will continue to recognise the advantages which the various Government media provide for the saver. The National Instalment Savings Scheme introduced last September has obviously proved attractive. So far, some 30,000 agreements have been entered into providing for total saving under the scheme in its first year of nearly £5 million. The new Prize Bond scheme introduced in March has got off to a good start, and up to £1.8 million has been subscribed since then.

It seems to me, however, that the present issue of Savings Certificates, which were put on sale in March, 1966, are now outdated, and I accordingly propose to withdraw them from sale and to introduce a new decimal certificate. This will have a shorter life of five years, and will be issued in £1 units which will accumulate to £1.35 at the end of the five year period, giving an effective net interest rate of 6 per cent per annum free of tax. This is equivalent to a gross return of 9¼ per cent to the saver who is liable to tax at the standard rate.

I also propose to improve the services of the Post Office Savings Bank by providing for speedier withdrawal facilities. I hope that these will encourage more people to make use of the Bank.

Current budget 1971-72

The deficit of almost £9 million incurred in the current budget for last year would disclose an even more serious underlying imbalance between revenue at existing tax rates and expenditure, were it not for the fact that the taxation imposed last October—which yielded only £5.3 million in 1970-71— will produce a further £6 million in 1971-72. The pre-budgetary publications show that total current expenditure for 1971-72 is about 10½ per cent up on last year's outturn. This represents a virtual halving of last year's increase of over 19 per cent and it leaves me with a nominal opening surplus of £119,000.

Given the need for additional State assistance for those sections of the community who have been worst hit by rising prices, additional taxation will obviously be necessary if even the most pressing requirements are to be met. But any increase in taxation must be minimised for both long-term and more immediate reasons. During the sixties the percentage of GNP taken in total taxation rose from about 21 per cent to 31 per cent and, if present trends were not checked, that percentage might well rise by a further ten points in the seventies. In the context of 1971, it is of the utmost importance to safeguard the National Pay Agreement from the price effects of any avoidable increase in taxation. Although its terms are far from ideal, the agreement holds out the prospect of a more balanced approach to income settlements in 1971 and in the next few years. The Government consider that it must be given every chance to succeed this year and to lead the way to greater moderation after its first phase is completed. This means that I must reduce to the absolute minimum any budgetary impact on prices. I propose therefore to add only £9.37 million in the form of budget concessions to the estimate of expenditure.

Social Welfare

The Government consider that, although extra taxation is necessary to meet the cost, priority must be given to increasing the social welfare payments in view of the rise in the cost of living in the past year. The increases apply to both the personal and adult dependant rates, as distinct from last year when they applied to personal rates only.

For example, the personal rate of the old age contributory pension will be increased by 50p to £5.50 a week while the rate for a person with an adult dependant will be increased from £8.50 to £9.35. The old age non-contributory pension will be increased by 40p to £4.65. Widow's contributory pension will be increased by 50p to £5.00 while the widow's non-contributory pension and the deserted wives' allowance will be increased by 40p to £4.65.

The personal and adult dependant rates of disability benefit, unemployment benefit, invalidity pensions and retirement pensions, maternity allowances, orphan's allowances and unemployment assistance are also being increased. Full particulars will be circulated to Deputies at the conclusion of this statement.

The special needs of widows and deserted wives with dependent children have been the focus of a growing measure of social concern in recent years. The Government have decided this year to improve their position exceptionally. At present the first two dependent children of a contributory widow pensioner qualify for 90p each and the remaining children for 65p each. These rates will be increased to a uniform £1 per week for each dependent child. Likewise the corresponding sums of 75p and 50p which non-contributory widow pensioners and deserted wives receive for their children will be increased to a uniform 90p per week for each dependent child.

In addition, to improve still further the position of working non-contributory widows and deserted wives, the present concession whereby £39 per annum of earnings is disregarded in respect of each child in the assessment of means will be doubled to £78. Special provision is also being made for the widows of military service pensioners; I shall announce the details in a few minutes. I shall also announce substantial additional reliefs for widows and dependent children in the field of estate duty.

The disabled persons maintenance allowance and the infectious diseases maintenance allowance, administered by the Department of Health, will be increased in line with the improvements in the social assistance rates.

The increases in the assistance rates and in the health allowances will take effect from the beginning of August, while the increases in insurance benefits will, as last year, be paid from the beginning of October.

Recent improvements include the raising of the remuneration limit from £1,200 to £1,600 per annum and the making of regulations which will greatly reduce the number of cases in which loss of benefit can arise due to an employer's failure to stamp insurance cards.

The cost to the Exchequer arising from these various increases, improvements and extensions of services will be £3.1 million in this financial year. A further sum of £0.55 million is being provided to cover payment of unemployment assistance to men without dependants in urban areas and further exemptions from the recent Employment Period Order under an amending order which the Minister for Social Welfare is making today. This order will enable unemployment assistance to be paid with immediate effect to men, without dependants, resident on coastal islands and to men without dependants, aged 50 years or more in rural areas.

(Cavan): Good old Joe.

You have it today and it is gone tomorrow.

Where is Des Foley?

The party of reality.

Local improvements scheme

As has been announced already, an additional sum of £0.5 million is being made available for local improvements schemes which will create additional opportunities for employment in rural areas, especially in the West.

Agriculture

As regards agriculture, the Government are sympathetic to the situation that farmers have found themselves in over the past couple of years whereby as a result of inflation incomes in certain other sectors have increased at a faster rate than those of farmers. Inflation has increased farmers' costs and reduced the purchasing power of their income. Other groups besides farmers were of course similarly affected.

However, in the year gone by, the Government gave increases in direct Exchequer supports to agriculture at budget time, and again later in the year, the full-year cost of which is some £10 million. This support and the indirect effects it had on market prices of particular commodities, together with the increased prices authorised for liquid milk and the increase given in the contract acreage for beet, are estimated to have supported farm income by some £16 million a year. Expenditure in relation to agriculture is now running at £101 million approximately as against £91 million this time last year.

These additional supports should clearly demonstrate the Government's wish to do what they can for agriculture within the limits set by available resources and the needs of other sectors such as education, health, and so on— which also benefit farmers.

While the Government will do all they can, farmers, who, after all, are self-employed, have to rely on their own efforts to make up some of the widening differential between their incomes and those of other sectors of the community. It is accepted that there are limitations to what they can do in this respect but there are indications of a welcome upward movement in output in many sectors of agriculture this year.

The Government have now decided to introduce the following measures to improve farmers' incomes still further in this financial year.

As announced last month, the price levels on which the export support payments for carcase beef and lamb are calculated are being increased. While the overall cost of the increases in the carcase beef price level had first been estimated at nearly £2 million, it is now expected that the firmer trend in beef market prices will continue and that the actual extra cost to the Exchequer of export support payments in the present financial year will not exceed £1.4 million, which sum I am now providing in this budget. No extra cost to the Exchequer is expected in the present financial year as a result of the increase in the export price support level for carcase lamb.

The Government have decided to provide an additional £2.2 million in the present financial year to improve the position of creamery milk suppliers. This will be distributed as follows: the milk price allowance on the first 7,000 gallons will be increased from 11 old pence to 5 new pence per gallon as from 1st May. This new rate of allowance will be extended from the first 7,000 gallons to the first 10,000 gallons in two stages—a rate of 4 new pence will be paid as from 1st May and 5 new pence as from 1st September next. The aim is to eliminate the differential between the 7,000 gallon supplier and the 10,000 gallon supplier completely as from 1st September. The rates of allowance for gallonage levels above 10,000 gallons will also be marginally increased. The present milk quality allowance of two old pence per gallon will also be increased to 1 new penny.

Because of further increases in pig production costs, £0.5 million is being provided to enable the guaranteed minimum prices of the top grades of pigs to be increased by an average of 50 pence per cwt dead-weight with consequential adjustment of the level of bacon export price support. The suitability of existing grading standards will be reviewed.

The prospects for sheep production are good and there is scope for expanding flocks and improving sheep husbandry generally. To stimulate further progress, the Government have decided to increase the subsidy payable this year on hogget ewes under the Sheep Subsidy Scheme from £1.50 to £2.00 per head. The cost will be £0.25 million.

The Small Farm (Incentive Bonus) Scheme has been in operation since 1968 and has about 8,000 participants. Appraisal of the scheme has shown that the participants are achieving excellent results and there is general agreement that the scheme is a valuable one. To encourage greater participation, the Government have decided to increase the payment at the end of the first year for new participants from £50 to £75 thus bringing the total amount of bonus grants which may be earned by the farmer to £325.

Other improvements in aids and incentives to farmers, details of which will be announced by the Minister for Agriculture and Fisheries, are (1) extension of the Forage Harvester Grant Scheme to provide a higher rate of grant for a new and more efficient type of harvester; (2) an improvement in the grant rate for farm silos; and (3) new grants for additional equipment for pig farrowing and dry-sow stalling accommodation.

The total cost of these improvements is about £4.35 million in the current year and about £6 million in a full year. It is estimated that they will support farm incomes by about £12 million in a full year.

To complete the picture in regard to agriculture I should add that the Minister for Agriculture and Fisheries will be announcing an increase as from the 1st May in the minimum prices to producers of milk in the Dublin and Cork liquid milk areas.

Manpower and training

In making provision for the Department of Labour for 1971-72 the Government decided to increase significantly the allocation for manpower services and, in particular, the amount for training which is over 20 per cent greater than in 1970-71.

An Chomhairle Oiliúna provide courses, which have already been completed by 700 trainees, in skills in which there are potential shortages and over 200 apprentices have been trained to meet the needs of the building industry. A survey of vacancies for skilled workers has been carried out by the National Manpower Service. A register has been prepared and circulated to industry of qualified personnel seeking jobs in Ireland. In addition, the placement officer service is being strengthened and will soon be in operation over the greater part of the State.

These measures and others which are being developed under the Government's manpower policy can make an important contribution to the solution of our employment problems. Increased training is particularly important. By correcting imbalances in the labour market it can help to reduce inflation. By ensuring that skills are available when required it helps in the promotion of new and developing industries. The additional employment created is not confined to those who have benefited from training since the number of other workers required is often much greater than that of skilled workers. In the circumstances an additional £200,000 is being allocated this year for the accelerated development of training services under two main headings.

I propose that a capital allocation of £100,000 will be made to enable AnCO to establish and equip a new training centre where workers will be trained up to fully skilled level. This project is conditional on the successful outcome of negotiations aimed at ensuring acceptance into the skilled work-force of persons trained in the centre. On the assumption that these negotiations will be successful and that the centre will be set up in a few months time, I am providing £50,000 for operating costs. The intention is to locate this project in Cork where the shortages of skilled workers threaten to become more serious than elsewhere in the country. Industrial development plans coming to fruition in the next few years will call for a substantial increase in the numbers of certain categories of skilled workers and special steps must be taken now to ensure that these skills are available in time.

Another gap in our developing manpower services has been the lack of immediate re-training facilities for workers disemployed, especially in areas heavily dependent on particular industries, where the industry may have to curtail production or close down. It would improve the prospects of early re-employment of the displaced workers and it could also be a significant attraction to the promoter of a new industry if re-training facilities were provided locally on anad hoc basis immediately the range of skills required by the new project were known. To put AnCO in a position to make re-training arrangements available in such circumstances, I propose to set aside for this purpose the remaining £50,000 of the additional sum of £200,000 now being provided.

I am anxious that young Gaeltacht workers should be trained in the skills required for modern industry of the kind suitable for the Gaeltacht areas. AnCO and Gaeltarra Éireann are in consultation with the aim of establishing a specially-designed training centre in the Gaeltacht. Training in this centre, provisionally planned for the Donegal Gaeltacht, will be carried out in the Irish language and the contents of courses and other details will be settled by AnCO and Gaeltarra Éireann by reference to the skills needed for projects approved for the Gaeltacht. I am hopeful of having the centre established before the end of the year. Expenditure during the current year will not, however, be substantial and I expect that it can be met from moneys already allocated for manpower services and Gaeltacht development.

The Minister for Labour will give detailed information on these new training projects when moving the necessary Supplementary Estimate.

Public service pensions

Over the years the Government have demonstrated their concern for the position of public service pensioners by a succession of pensions increases which were designed to combat, as far as resources permitted, the effects of inflation on these pensions. In 1969, the principle of raising public service pensions to parity with those based on current pay levels was accepted but, as indicated at that time, this desirable objective can only be achieved over a number of years because of the substantial cost involved. Thus, in 1969, pensions were revised by reference to February, 1964 pay levels while last year they were brought forward to June, 1968, pay rates. The annual cost of these two increases was about £2.8 million.

Despite the difficult financial circumstances obtaining this year, I have decided to continue the progress of recent years by bringing pensions up to the levels appropriate to pay rates generally in force on 1st June, 1969. This increase will benefit the various groups of public service pensioners including retired civil servants, gardaí, teachers, members of the Defence Forces, local authority staffs and their widows. Corresponding increases will be paid to recipients of military service pensions and other Army pensions, including special allowances.

The increases will apply as from 1st October next and will cost about £0.6 million in the current year and almost £1.35 million in a full year.

Military service pensions

In recent years the Government have endeavoured to improve the lot of members of the Old IRA by granting pensions increases and the facility of free travel. This year, in addition to the increase in pensions which I have just announced, I have given special consideration to the position of the widows of military service pensioners who played such an important role in securing our independence. I have decided, therefore, that the widow of such a pensioner will be eligible to receive a pension equal to half her husband's pensions subject to a minimum of £1 a week. This minimum will also be extended to the military service pensioners themselves. It will take some time to establish the machinery for payment of the new pensions to widows and I propose therefore that both these proposals shall come into effect on 1st October next. The cost will be £110,000 in the current year and about £280,000 in a full year.

Free travel

Representations have been made on several occasions to extend the free travel schemes to one group or another but they have had to be refused on the grounds that the ultimate cost would be too great. There is, however, one deserving group in whose case I would like to make an exception, and where I feel that the social considerations far outweigh the modest cost involved. Parents who have a child for any considerable time in an institution, such as a hospital, a school for the mentally handicapped, or a reformatory or industrial school, should not be prevented from visiting the child because they cannot pay the travelling costs. Apart from the humanitarian aspects involved, parental visits of this kind can have a beneficial psychological effect on the children.

I propose, therefore, to allow free travel facilities to cover a limited number of visits by the parents of such children in cases where the travelling costs would impose a hardship on the family.

The details of the scheme have yet to be settled and will be announced as soon as possible. It is not expected that the cost will exceed £100,000 this year.

Health expenditure and local authority rates

Despite difficult budgetary circumstances, the Government have made a significant contribution to easing the scale of the health demands on local authority rates by providing this year an additional £3.68 million for this purpose over and above the statutory requirement of 50 per cent. A further £4.8 million was provided in a supplementary estimate last month to make an extra contribution from the Exchequer to health costs which would otherwise have to be met this year from the rates.

The fast-growing cost of the health services has been imposing an increasingly heavy financial burden on the Exchequer which obviously could not continue to meet this rising demand without seriously adding to the general level of taxation.

A scheme of compulsory health contributions for the middle income group to ease the burden of health costs on the Exchequer has been under consideration for some time. The Government have been examining the feasibility of such a scheme and they have now decided to introduce legislation for a scheme of health contributions to be payable by insured persons, farmers and other self-employed persons in the middle income group who are entitled to hospital services under the Health Acts. Hospital charges for those paying contributions—at present up to 50p per person per day—will be abolished and all hospital services will be available free of charge to contributors from the commencement of the scheme.

Subject to the necessary legislation being passed, the scheme will be brought into operation later in the present financial year. When it is fully in operation, contributions will be related to the insured person's income. Initially, however, so as to enable the scheme to be brought into operation in 1971-72, contributions will be at a flat rate. The contribution income from the scheme is expected to amount to £2 million in the present financial year and this has been taken into account in the estimates. Full details will be given by the Minister for Health in introducing the necessary legislation.

Tax increases

I must now turn from the pleasant task of making budgetary concessions to the more difficult one of finding money to pay for them. The reliefs I have announced will cost £9.37 million, and when account is taken of the small opening surplus, they leave me with the problem of raising a total of £9.25 million. While, for the reasons I mentioned earlier. I am reluctant to increase the rates of indirect taxation, circumstances outside my immediate control leave me with no alternative to increasing the rates of duty on beer and spirits.

The brewers and the distillers have made application to the Minister for Industry and Commerce for permission to raise the prices of their products because of increases in their costs. The brewers are seeking an increase of half a new penny on the pint of beer; some of them have asked for more than that. The Minister for Industry and Commerce, after a thorough examination of their operating costs, is prepared to allow them to raise their prices by the equivalent of just under half a new penny on the pint of beer. This would, of course, give rise to difficulty in fixing the retail price of the half pint.

The Minister for Industry and Commerce would not agree with that.

It is proposed, therefore, to let the price of beer rise by the equivalent of one new penny on the pint and to take 0.55 new pence of this in the form of an increase in the rate of duty including turnover tax. This will yield £1 million to the Exchequer this year.

Spirits

The distillers have applied for an increase representing less than half a new penny on the glass of spirits and the Minister for Industry and Commerce is prepared to accede to this request which he considers justifiable by increased costs including pay increases. Here again, prices would, of necessity, advance by more than the amount sought for the same reasons as I mentioned in relation to beer.

I propose, therefore, that the price of a glass of all spirits will rise by the equivalent of 2 new pence.

There is a rounding up.

In the case of home-produced spirits the duty content (including turnover tax) will take 1.6 new pence and the distillers will take 0.26 new pence. The duty (including turnover tax) on United Kingdom spirits will also be increased by 1.6 new pence and the duty (including turnover tax) on other imported spirits will be increased by 1.86 new pence. These increases in duty will yield £1 million this year.

The balance of the increase of 2 new pence in each case will go to the trade. The Minister for Industry and Commerce is satisfied that the increases for the trade are necessary to meet increased costs. He will not be prepared to tolerate increases at retail level of more than 2 new pence on the glass of spirits, I new penny on the half-glass, I new penny on the pint of beer and half a new penny on the half-pint.

The increases in duty on beer and spirits will take effect from 12 o'clock to-night. I estimate that the duty changes I have mentioned will increase the cost-of-living index by less than 0.4 of a point. Apart from these increases in the duty on beer and spirits, which are part and parcel of adjustments arising from price applications, I do not propose any further changes in indirect taxes.

Income tax

In the circumstances which I have outlined I find it essential to have recourse to income taxation to provide a considerable part of the additional revenue needed. I decided that an increase in the standard rate of income tax, which would of course apply to companies' profits as well as to personal incomes, should be avoided since these profits were singled out for additional taxation in the autumn budget of last year. As an alternative, I propose to repeal with effect from the current year the provisions under which the first £100 of taxable income is charged at two-thirds of the standard rate. The maximum additional burden which this will impose on any taxpayer will be less than £1 a month. At the same time the minimum allowance for purposes of earned income relief will be raised from £125 to £150 for single and widowed persons and from £225 to £250 for married persons. This means that approximately 20,000 taxpayers will be removed from the income tax net altogether and that single and widowed persons with incomes below £449 and £474, respectively, and married persons with incomes below £724 will pay less tax than for last year. Appropriate adjustments will be made in respect of age relief and small income relief.

The effect of these measures, taken together, will be to improve the position of taxpayers in the lowest income brackets and to spread the burden of the increased taxation evenly amongst the remainder. The net gain to the Exchequer is estimated at £5.0 million in the current year and £5.5 million in a full year.

New reliefs

I have received a number of representations urging that relief from income tax be given in various special circumstances. Although this year is not an opportune one for major concessions, I propose to grant relief in two cases of hardship which merit immediate recognition.

An unmarried mother who undertakes the care of her child does not qualify under existing law for the housekeeper allowance. I intend to provide that that allowance will be granted where the mother is engaged full-time in employment or business and requires the services of a housekeeper to care for the child. I have also been greatly impressed by the case for exceptional treatment for blind persons. The Finance Bill will therefore contain a provision according, for income tax purposes, a special allowance of £100 to a blind person and of £200 where husband and wife are both blind. The qualifying degree of blindness will be determined in consultation with the Department of Health.

Tax avoidance

I also propose to deal with certain avoidance devices which have come to notice in the income tax field.

Some persons whose foreign income is chargeable to Irish tax on the basis of the amounts remitted here have been avoiding tax by applying the foreign income abroad in repayment of loans enjoyed in this country. This loophole will be closed.

I also propose to introduce a provision to mitigate the loss of revenue due to the exploitation of the income tax provisions governing the cessation of a trade, profession or vocation. The provision will bring under review not only the assessment for the penultimate year but also that for the year before that.

An anomaly relating to covenants made by parents in favour of their children in the year of birth will also be removed.

Interest on unpaid tax

Under existing law, tax which remains unpaid for more than three months attracts interest at the rate of 6 per cent per annum. Having regard to the prevailing level of interest rates, the 6 per cent is no longer adequate. I propose therefore to raise it to 9 per cent and to reduce the period of grace from three months to two months.

Under existing arrangements, interest is not chargeable on tax which is in arrear if the assessment is under appeal. In such cases, interest does not ordinarily become chargeable until the amount of tax in dispute has been finally determined. There is evidence of some abuse of this deferment of the interest liability and so I propose that tax in an assessment under appeal will become due on the same date as it would have applied if there had been no appeal. This will be modified where a satisfactory payment on account is made within two months from the due date and any balance is paid within two months from the settlement of the appeal. Any overpayment of tax which emerges on settlement of an appeal will, of course, be repaid with interest at the rate of 9 per cent per annum.

It is estimated that these proposals will improve collection this year to the extent of £2 million.

I propose that where tax is undercharged because of fraud or neglect, interest will run from the dates on which the tax would have been payable if there had been no fraud or neglect. This will not affect tax for any year earlier than 1971-72.

Company taxation

Concern has been expressed in many quarters at the present burden of taxation on company profits. But when our present combined income tax and corporation profits tax rates of 58 per cent are compared with the rates prevailing in other countries, it is often overlooked that under our system the shareholder is not taxed again to income tax on the dividends he receives out of the company profits. The result is that, effectively, company tax is paid, in many cases, at a rate much lower than 58 per cent. In the United Kingdom, for example, in addition to the tax paid by the company on its profits, the individual shareholder must pay tax on his dividends out of those profits. But in this country, if the company distributes 40 per cent of its pre-tax profits to its shareholders the rate effectively borne by the Irish company on its profits is not 58 per cent but 44 per cent.

In making any judgment on our rate of company taxation account must be taken of the complete relief from tax accorded to profits from new or increased exports and of the very valuable allowances for capital investment. These concessions substantially mitigate the tax charge on the profits of most industries.

I am conscious of the continuing need to encourage investment in our industries, and I believe that the tax relief for such investment is the most effective means to this end. The initial allowance of 60 per cent for machioery or plant is given for investment of this type up to 31st March, 1971. As a special measure to encourage a concentration of capital investment in 1971-72 and 1972-73, I propose to apply free depreciation to the whole country for a limited period. This will apply to expenditure incurred between 1st April, 1971, and 31st March, 1973, on new machinery and plant, other than road vehicles. It will enable an industrialist to write off 100 per cent of his expenditure in the first year if he so desires. It is my hope that this may act as a major stimulus to greater investment in manufacturing industry and thus stimulate economic activity and make a decisive contribution towards improving our competitive position and reducing unemployment. I must make it clear that this exceptional arrangement will not be continued beyond 31st March, 1973. Industrialists who wish to share its benefits must therefore act quickly. Free depreciation will not involve any cost to the Exchequer until 1972-73. The extra cost is estimated at £2.75 million for that year and at £5.66 million for 1973-74.

Free depreciation is available at present in the designated areas. In order to preserve their comparative advantage I propose to introduce, also for a period of two years only, a system of investment allowances for new machinery and plant—other than road vehicles—used in those areas. The rate of allowance will be 20 per cent. It will be given in addition to free depreciation. The essential feature of the investment allowance is that it is not treated as diminishing the cost of the machinery or plant for purposes of free depreciation or annual allowance, nor is it taken into account in computing a balancing allowance or balancing charge.

The first year in which the new investment allowance will be felt as a cost to the Exchequer will be 1972-73. The cost for that year is estimated at £0.22 million and £0.44 million for 1973-74. I also propose to continue for a further two years up to 31st March, 1973, the period of operation of the existing initial allowance of 20 per cent in respect of expenditure on industrial buildings. I propose to introduce an inexpensive relief relating to the taxation of profits whereby allowance will be given, as a business expense, for the cost of registration or renewal of trade marks.

I have considered the question of continuing the exemption from corporation profits tax granted to certain public utility companies and other concerns. As this extends to building societies whose operations are at present the subject of investigation by an interdepartmental working group, I have decided to continue the exemption for only one year pending receipt of the group's report.

Death duties

The present scale of rates of estate duty has remained unchanged since 1961. This year I am proposing to increase the rates for estates over £55,000 in value. Above that point, the rate of 30 per cent will be raised to 33 per cent and the rates applicable to estates of greater value will be scaled upwards to a maximum of 55 per cent, instead of 40 per cent, on estates of over £200,000. The rate of interest on duty in arrear, which has remained unchanged at 4 per cent since 1919, will be brought up to a more realistic 9 per cent.

I feel that it is unfair that estate duty on personal property should bear interest from the date of death of the deceased and accordingly I propose that duty on such property should be free of interest for four months after the death. Interest on duty on real estate does not, of course, commence to accrue until after 12 months from the date of death. I have decided that further relief from estate duty should be granted in cases where an estate passes to a widow. At present, where duty is payable by a widow, it is abated by a sum of £1,000 together with a sum of £500 for each dependent child. I propose that these abatements be increased to £1,500 and £750 respectively. This will mean that where an estate passes to a widow and there are no dependent children, no duty will be payable unless the estate is over £15,300. If there are two dependent children, the effective exemption limit will be £21,400; if there are four dependent children, the exemption limit will be £28,000 and if there are six dependent children, the exemption limit will be £33,000.

Complaints are often made that wealthy people can escape their due share of the burden of death duties by various avoidance measures. I am satisfied that many of these complaints are well-founded and I propose to remove some of them by strengthening the death duty code when the Finance Bill is introduced.

The better known avoidance devices include the use of private family companies where the statutory definitions of "companies controlled by the deceased" and of "relatives" are unduly narrow; the purchase of land outside the State; the "grant and lease-back" of land; and the concessionary provisions in relation to gifts and artistic objects. In addition to dealing with these devices, I propose to revise the provisions for the artificial valuation of agricultural land to ensure that duty will be payable on the market value if the land is sold within six years after the death.

The provisions for collection from trustees and beneficiaries will be widened in certain cases and the penalty provisions for failure to comply with the Estate Duty Acts will be brought up to date.

These charges are estimated to yield an additional net sum of £250,000 in the current year and £1 million in a full year.

Tax reform

Deputies will be aware that the general question of company taxation in this country has been under active examination for some time. I expect to publish the results of some aspects of the examination, and my views as to the conclusions to be drawn from those results, before the end of this financial year. This subject is currently engaging attention in the European Economic Community with particular reference to the harmonisation of the structures of corporation taxes and of the taxation system applied to dividends. Developments in these and other areas will have to be taken into account in determining the path to be followed here. Having regard to the close connection between company taxation and personal taxation, we must be quite satisfied about the most suitable system of company taxation for our particular circumstances before embarking on any radical restructuring of the personal taxation system. The question whether the effective burden of tax on companies can be reduced will, of course, receive attention in the course of this examination.

The last decade has seen a profound change in the structure of our taxation system. From being a simple machine for the collection of revenue on a relatively narrow economic base, it has evolved into a more flexible instrument for economic and social reform. The introduction of the turnover tax and wholesale tax in the mid-sixties helped to broaden its base and reduce the heavy dependence on a few major revenue-earners. The transformation of the sales taxes into a value-added tax early next year will mark another major step in the evolution of an efficient and flexible system.

Value-added tax

The Government recently issued a White Paper on the proposed value-added tax. Copies have been sent to all persons registered for the turnover and wholesale taxes and I would urge them to familiarise themselves as early as possible with the broad principles of the new system. Copies have also been sent to the trade associations who have been asked to convey their views to the Revenue Commissioners before 1st June, 1971. When the suggestions have been examined, a draft Bill will be prepared and circulated. I hope that this will be done before the Summer Recess.

The proposals for the value-added tax are designed to effect a conversion from the existing system of sales taxation in such a way that the incidence of tax will remain as nearly as possible unchanged. Representations for various reliefs and exemptions under the new system have been made to me, but I consider that it would be preferable to avoid any major alterations in the scope or impact of the tax at the time of the changeover. I shall, however, look at the position most carefully when the new tax is fully in operation and shall consider what modifications might be desirable.

One of the consequences of admission to the EEC will be that our general tax policy will be affected by the fiscal and budgetary aspects of the Community's plan for economic and monetary integration. Recent agreements within the EEC, based on the "Werner" proposals, provide for the creation of an institutional framework for co-ordinating monetary and fiscal policies among member countries. The plan includes proposals for the harmonisation of the structures of the principal excise taxes, the adoption of a common system of value-added tax and the standardisation of the form of company taxation. These steps will be followed by the gradual harmonisation of the rates of the excise taxes and the value-added tax. Depending on the level at which the harmonisation of rates takes place—and this is, as yet, not known—substantial changes in the incidence of our existing indirect taxes could be required, which would have repercussions throughout the whole tax system. It would be unwise, therefore, to undertake further major reforms at this juncture when our needs and commitmentsvis-á-vis the EEC are as yet unclear.

Budgetary balance

The concessions and the tax increases which I have announced bring revenue and current expenditure into balance at £551 million which is £61 million or 12½ per cent greater than the outturn in 1970-71.

My main concern has been to arrest the strong upward trend of current expenditure in recent years and to minimise additional taxation in the interest of safeguarding the National Pay Agreement.

This year's policy on additional taxation precludes the possibility of budgeting for a surplus which could be used to finance capital investment, but I shall endeavour to keep the option open for future years.

As I stated earlier, the main thrust of budgetary policy will be found not so much in the changes announced to-day as in the severe pruning of the Government expenditure programme as set out in the volume of estimates and the Capital Budget booklet which were published last week. Substantial reductions have been made right across the board and it will be the Government's responsibility, as it is our firm resolution, to ensure that these reductions are achieved throughout the year even though we know that this may entail some hardship and the disappointing of reasonable expectations.

Conclusion

I have now completed the budgetary presentation for 1971. Its main purpose is to retard the rate of inflation which has depressed the economy in recent years. I do not think that the general public, the worker, the man in the street, even the business man, fully appreciates the horror of unchecked inflation. Both employers and trade unions have a common interest here, even though they may disagree about cause and effect. I would like them to consider using their influence jointly with the Government to alert the community to the hazards of inflation. The Government are determined to use this Budget, with the co-operation of the community, to ensure that we hold inflationary trends in check. There is no joy in being a millionaire if you must pay £1 for a box of matches.

I have stressed the importance of maintaining the terms of the National Pay Agreement because I believe that it contains the greatest promise, not only for 1971 but for the following years, if the spirit of co-operation and voluntary restraint underlying it can be prolonged and extended. It could form the foundation of a better structure of industrial relations, help us on the road to full employment and reduce the inflation which continues to hamper the economy and inflict hardship on many sections of our people. The substantial economies in Government spending and the restraint in adding to the tax burden are designed to create a climate favourable to the implementation and development of the agreement.

Our target of 3 per cent for economic growth is modest compared with our underlying potential, but if it is realised in 1971 it will greatly facilitate further growth in 1972.

My budgetary strategy necessarily limits the amount available for concessions but I believe that I have distributed it to maximum advantage. While some expectations may have been disappointed, I think there should be little reason for serious complaint. I believe that our people in general will welcome the Budget as a rational attempt to restore order and balance in the economy and I shall be satisfied if it is so received.

Our people have in the past decade achieved a great deal. Our economy has been transformed. We have made a rapid transition from a predominantly agricultural economy to a modern industrial State. Today, the products of our new factories, the products of Irish skill and craftsmanship are on the markets of the world. The fruits of the economic advance of the past decade are evident in higher living standards and a continuing improvement in our social services, in health services and in educational opportunities. This Budget is designed to protect the gains we have made and to ensure that all we have achieved does not vanish in an inflationary whirlpool. It aims to get us back on course towards a soundly based prosperity. We want to see real economic growth creating the new wealth which alone will enable us to build a better. more humane and more enlightened society for all our people.

Seo an chéad uair dom a bheith os comhair na Dála le gnáth-cháinaisnéis bhliantúil. Tá a fhios agam nach mbeidh chuile dhuine sásta leis na forálacha atá ann: ní fhéadfadh aon Aire Airgeadais ar thalamh an domhain bheith ag súil leis sin. Ach tá súil agam nach mbeidh mórán míshástachta dá bharr. Is mian liom go nglacfaí leis mar iarracht lán-dáiríre le cúrsaí géilleagrach na tíre a fheabhsú. Tá an cháinaisnéis seo dírithe ar fhás chaitheachas poiblí a smachtú; ar staid na bhfeirmeoirí agus staid an aicme leasa shóisialaigh a chaomhnú agus ar eacnamaíocht na hÉireann a neartú ionas go mbeidh bun-chloch daingean ann le fás cothrom leanúnach a fhorbairt ar mhaithe len ár ndaoine uilig.

TABLE EXPLANATORY OF THE CURRENT BUDGET, 1971.

REVENUE

EXPENDITURE

£m.

£m.

1. Tax revenue (excluding 2 below)

443.95

1. Debt service and other central fund charges

98.44

2. Motor vehicle duties

17.90

2. Payments to Road Fund

13.70

3. Non-tax revenue

79.94

3. Supply services (non-capital)

429.53

541.79

541.67

4. Add:—

£m.

4. Add:—

£m.

Beer

1.00

Agriculture

4.35

Spirits

1.00

Social welfare, etc.

3.65

Income tax (net)

5.00

Local improvements scheme

0.50

Improved collection

2.00

Public service pensions

0.56

Estate duty (net)

0.25

Manpower and training

0.10

——

9.25

Military service pensions

0.11

Free travel

0.10

——

9.37

551.04

551.04

DEPARTMENT OF FINANCE.

28April, 1971.

CURRENT BUDGET TABLES

1971

INDEX

TABLE I. Comparison between (i) budget estimates and (ii) actual revenue and expenditure in 1970-71

TABLE II. Main heads of current government expenditure

TABLE III. Receipts and issues of Road Fund in 1970-71 and 1971 72

TABLE IV. Certain receipts and expenditure of the Exchequer and of local authorities

TABLE V. State expenditure in relation to agriculture

Tables relating to public capital expenditure will be found in the separate publication entitled “Capital Budget 1971”.

Note—The Tables do not take account of 1971 budgetary adjustments.

TABLE I

COMPARISON BETWEEN (i) BUDGET ESTIMATES AND (ii) ACTUAL REVENUE AND EXPENDITURE IN 1970-71.

Estimated

Actual

Estimated

Actual

£m.

£m.

£m.

£m.

1. Tax revenue (excluding 2 below)

398.10 (a)

398.04

1. Central Fund Services (excluding 2 below)

88.36

88.16

2. Motor vehicle duties

15.73

16.06

2. Payments to Road Fund

12.85

13.08

3. Non-tax Revenue—

3. Supply Services (non-capital)

389.82 (a)

389.19

Post Office

30.75 (b)

29.85

Miscellaneous

37.79

37.56

Deficit

8.66

8.92

TOTAL

491.03

490.43

TOTAL

491.03

490.43

(a) Takes account of adjustments made by the April and October Budgets.

(b) Post Office charges were increased with effect from 1 October, 1970.

TABLE II

MAIN HEADS OF CURRENT GOVERNMENT EXPENDITURE

£000

1965/66

1966/67

1967/68

1968/69

1969/70

1970/71 Provisional

1971/72 Estimate

Service of Public Debt

49,035

56,462

63,726

75,923

88,841

101,440

113,366

Social Services

84,165

93,095

102,928

118,748

144,271

178,768

192,715

Social Welfare

38,683

42,975

45,110

49,055

59,010

72,390

75,326

Education

29,586

31,257

35,758

44,005

53,143

62,782

72,326

Health

15,896

18,863

22,060

25,688

32,118

43,596

45,063

Economic Services

55,172

59,877

75,187

84,433

98,234

110,241

119,056

Agriculture

35,795

40,802

53,342

60,008

71,225

76,809

84,885

Industry

4,693(a)

4,775(a)

6,604(a)

7,458

8,980

10,385

12,941

Transport

12,518

12,131

12,990

14,365

15,003

19,419

16,839

Forestry and Fisheries

2,166

2,169

2,251

2,602

3,026

3,628

4,391

General Services

43,016

44,126

46,429

51,236

58,346

74,319

80,232

Post Office

13,846

14,866

15,348

17,206

19,942

25,695

26,758

Defence

11,666

10,368

11,376

12,860

14,602

18,681

19,165

Justice, including Gardaí

8,431

9,274

9,383

10,238

11,810

14,759

17,429

Public Service Pensions

9,073

9,618

10,322

10,932

11,992

15,184

16,880

Other Expenditure

16,599

17,060

18,687

20,467

22,633

25,661

29,804

TOTAL

247,987

270,620

306,957

350,807

412,325

490,429

535,173(b)

Remuneration included in above figures (c)

75,502

80,935

84,803

93,898

108,833

133,985

147,650(b)

1965

1966

1967

1968

1969

1970

£m.

£m.

£m.

£m.

£m.

£m.

Gross National Product

1,020

1,074

1,169

1,319

1,481

1,648

Current Government Expenditure as % of GNP

24.3%

25.2%

26.3%

26.6%

27.8%

29.8%

(a) Excludes temporary assistance to industry of £2.10m., £2.21m., £0.28m. respectively.

(b) Does not include additional provision of £6.5 million for public service pay increases.

(c) Comprises the pay of civil servants (including industrial employees), national and secondary teachers, the Defence Forces, Gardaí, and the Exchequer contribution to the pay of health authority staffs and vocational teachers.

TABLE III

ROAD FUND

RECEIPTS AND ISSUES

RECEIPTS

ISSUES

1970/71

1971/72 (Estimated)

1970/71

1971/72 (Estimated)

£000

£000

£000

£000

1. Opening balance

1. Road grants (a)

11,471

11,800

2. Motor taxation, etc.

13,075

13,700

2. Administration, etc.

1,604

1,900

TOTAL

13,075

13,700

TOTAL

13,075

13,700

(a) Including payments on foot of previous years allocations.

TABLE IV

CERTAIN RECEIPTS AND EXPENDITURE OF THE EXCHEQUER AND OF LOCAL AUTHORITIES

Exchequer

Local Authorities

Revenue

Non-capital issues

Expenditure from revenue (a)

State grants received

Rates collected

£000

£000

£000

£000

£000

1959-60

129,856

128,682

55,104

24,480

21,412

1960-61

138,839

139,565

57,885

26,476

22,058

1961-62

151,686

152,393

64,165

28,792

23,203

1962-63

163,478

168,335

67,379

32,725

22,776

1963-64

184,419

186,638

71,323

34,871

24,466

1964-65

219,045

222,011

82,973

41,210

26,061

1965-66

240,761

248,542

90,588

46,465

29,761

1966-67

272,843

272,051

98,959

50,676

31,534

1967-68

305,409

305,621

107,430

57,472

34,702

1968-69

345,480

353,849

119,595

64,728

38,294

1969-70

411,012

411,550

144,668 (b)

74,671 (b)

44,048 (b)

1970-71

481,506

490,429

164,179 (b)

86,520 (b)

49,420 (b)

1971-72

541,792 (c)

541,673 (d)

181,053 (c)

94,979 (c)

59,300 (c)

NOTES:—

(a) The revenue of local authorities comprises rates, State grants and other receipts, e.g., rents, fees, etc.

(b) Approximate.

(c) Estimated.

(d) Estimated; includes provision of £6.5 million for public service pay increases.

TABLE V

STATE EXPENDITURE* IN RELATION TO AGRICULTURE

FROM 1967-68

1967-68

1968-69

1969-70

1970-71 Provisional

1971-72 Estimate

£000

£000

£000

£000

£000

1. Price Supports and Marketing Aids:

Dairy produce

19,295

25,402

30,820

30,500

30,000

Beef, mutton and lamb

5,284

1,052

1,116

2,750

1,400

Bacon and pork

1,418

2,950

3,600

3,150

4,200

Oats

15

13

25

25

Wheat

908

500

275

180

TOTAL

25,997

30,327

36,049

36,700

35,805

2. Production Incentives paid direct to Producers:

Beef cattle incentive grants

1,912

4,750

5,300

Sheep grants

175

366

596

1,326

1,500

Farrowed sows

275

190

159

100

75

Small farm incentive bonus

100

274

450

Calved heifers

1,233

1,070

1,039

TOTAL

1,683

1,626

3,806

6,450

7,325

3. Payments to Reduce Production and Overhead Costs:

Lime and fertilisers subsidies

5,874

6,816

7,067

6,875

7,105

Reduction of land annuities

1,113

1,148

1,191

1,257

1,337

Relief of rates on agricultural land

15,625

16,977

18,926

20,740

24,771

TOTAL

22,612

24,941

27,184

28,872

33,213

4. Long-Term Development Aids (mainly of a capital nature):

Arterial drainage

1,253

1,369

1,347

1,637

1,383

Land reclamation

3,443

3,576

3,844

3,726

3,725

Farm buildings and water supplies

2,405

2,597

2,866

2,937

2,970

Equipment grants (milk coolers, forage harvesters and poultry)

167

195

234

165

141

Improvement of livestock

85

197

201

396

430

Capital for Agricultural Credit Corporation

900

1,500

1,000

Rural electrification

1,166

801

1,560

1,800

1,150

Improvement of Land Commission Estates

851

900

905

771

972

Other rural improvement schemes

580

611

748

585

641

Horticulture

150

418

471

450

519

TOTAL

11,010

12,074

13,176

12,467

11,931

5. Disease Eradication:

Bovine T. B.

2,104

2,366

2,494

2,900

2,000

Brucellosis

335

318

326

800

1,500

TOTAL

2,439

2,648

2,820

3,700

3,500

6. Education Research and Advisory Services:

Education

967

1,331

1,544

1,780

2,537

Research

1,785

1,935

2,336

2,937

3,036

Advisory services

796

848

970

1,085

1,132

Technical services

373

434

478

575

611

Rural organisations

38

35

41

38

38

Land and buildings for Department of Agriculture

220

140

181

103

218

TOTAL

4,179

4,723

5,550

6,518

7,572

7. Administration of Acts Regulations and Schemes

760

819

912

1,063

1,178

GRAND TOTAL

68,680

77,194

89,497

95,770

100,524

NOTE:— Figures are net of appropriations-in-aid.

*Includes both capital and non-capital expenditure.

This Budget marks time because neither the Minister nor the Government have the inclination or the political courage or the unity to take the action they know to be necessary. The Minister concluded by referring to an inflationary whirlpool. The word "inflation" runs through this Budget Statement as it ran through the Budget Statements of October, 1970, of April, 1970, and of May, 1969. Inflation is an economic disease which corrodes and destroys the earning power of the people; it forces up living costs, endangers employment and results inevitably in the poor becoming poorer and the rich becoming richer.

The competence and the dedication of any government ought well be judged by the manner in which they face up to and deal with this danger. It is interesting to record that in the 1969 Budget, Deputy Haughey, as Minister for Finance, having made the usual references to inflation concluded by saying:

I dare to hope that this Budget will be regarded as enlightened and that it will take its place in the financial calender as one which made a real contribution to improving the present, and safeguarding the future, for the ordinary people of Ireland.

Enlightenment was singularly lacking because inflation continued and the Budget of this time 12 months ago which was read by the Taoiseach in the regretted absence of Deputy Haughey was concluded with a statement which again referred to inflation. The Taoiseach said:

This Budget seeks, by a judicious redistribution of incomes, to protect those worst hit by inflation from its severest impact. If its purpose is recognised and its message of social concern accepted, then the one tax change it contains will be looked upon simply as a tempering, in the interests of justice, of increases already received and not as a stimulus to further demand. I believe that it will, and that the balance of equity having now to some extent been restored, all sections will combine in restraint to give the nation and the economy the respite it urgently needs.

Great beliefs and great expectations but inflation continued. Then on 28th October last the Minister at the conclusion of the autumn Budget Statement said:

It is our firm belief that the measures we are now taking will give it a breathing space in which to recover from the effects of the inflationary developments of the past year or two. This short pause will give the economy time to renew its strength and resume the advance towards the realisation of its full potential for economic and social expansion.

Fine words and pious expectations but today we have an inflationary whirlpool if we are to accept the concluding words of the Minister's statement. Confidence in a government is generally desirable but competence from a government is absolutely essential. The management of the country's economy during recent years by a stale and a tired Fianna Fáil administration has been a sorry story of mistake heaped upon mistake. Our inflation, instead of being controlled by the Government, has been compounded by the Government's own incompetence. Here we are in 1971 with no incomes policy and no prices policy. We have excessive Government expenditure and we have inflated and highly dangerous foreign borrowing.

Deputies

Hear, hear.

The Second Programme for Economic Expansion has already collapsed in disorder and disarray. Our Third Programme, if we are to accept the Government's own review, is now tottering towards the same destination. Look at what transpires: the planned population increase is 34,000 instead of the 74,000 that was to be expected; employment at this stage is 1,000 less than the increase of 7,000 envisaged in the Third Programme; unemployment is up this year by 7,000 instead of being reduced by 13,000 as envisaged in the Third Programme; output, instead of 4½ per cent; as envisaged, is merely 2¾ per cent; agricultural output is down by 3 per cent instead of being up by 4¼ per cent.

Exports are one-third off target. Housing investment is down by 9 per cent. Investment in education about which we hear so much is 40 per cent below target. This is what is to be reported at this stage when this Budget is introduced but public expenditure and taxation is 40 per cent higher than was envisaged in the Third Programme drawn up only two years ago. Therefore from this incompetence, from this failure even to observe the rules which this Government laid down for themselves we have had in the last two to three years a period of steeply rising Government expenditure, an inevitable but gradual slowing of the growth of national output; we have had steeply rising prices and rising costs, building up to a real threat to our competitive position in international trading, while looming over the entire economic situation there is now almost a chronic balance of payments deficit of £60 million to £63 million or £64 million.

This is in all respects a blueprint for disaster and it stems directly from the fact that a divided and feuding Fianna Fáil Party have not been able to give to the affairs of the people the prudent, careful and competent management which they require. The quarterly bulletin and report of the Central Bank, published last Saturday, gives this verdict, this judgement on the events of the last year, and coming from an objective source it surely is the most complete indictment that any Government would have to meet. On page 5 of the report there is this paragraph:

To look back on developments in 1970 is disagreeable.

I am sure the Taoiseach will agree with that.

It is obvious that the health of the economy would be gravely threatened by a continuance of a deterioration which has left Ireland with one of the highest inflation rates in the western world, with a growth of national production cut to less than half its potential by excessive costs increases and prolonged industrial disputes, with unemployment raised and a balance of payments deficit running in a third year at far too high a level.

That certainly is an indictment which questions the confidence and the dedication to their task not merely of the Minister or of the Taoiseach but of every member of the Government. The last three years have been wasted years —inefficiency, concern about other things, looking over their shoulders instead of having their minds on their jobs. But who suffers? Who are the people who have to pay the price for the mistakes and the inefficiency of Fianna Fáil? I will tell you. It is the women, the wage earners, the poor, the social welfare recipients, the pensioners, those living on fixed incomes, the people who have been hit by soaring prices, particularly in the last 12 months, hit to such an extent that at this time there can be reported a 10 per cent rise in living costs over the last 12 month period, the highest rise known. It is this, in chief, that has been felt by the poorest in the land.

People in employment, those who 12 months ago looked forward with confidence to being able to continue in decent employment have had to pay the price in the last 12 months. Irish firms and companies fighting merely for a place in our own home market have gone into bankruptcy and liquidation, hit by inflation and hit by excessive taxation, with the result that unemployment has now reached 70,000, a figure which last week was quickly and notionally reduced by a dole order and even this operation could not be carried out efficiently by the Government. The people generally have suffered. Our growth rate, on the eve of a possible entry into Europe, in this last 12 months has been less than 2 per cent with, as I said, a balance of payments deficit of £62 million.

What does this Budget do? What does it propose to do in relation to this situation? In the first place this Budget is phony. This Budget does not face up to what is needed. The Minister in this Budget has taken a buoyancy figure of £54 million, making an allowance for £6½ million overflow of taxation from last year. Whether he gets that buoyancy figure or not, he is making no allowance whatever for £15 million to £17 million which experience shows will have to be provided for unprovided increases in expenditure. Even in relation to the full year there is, under his own figures, a gap between revenue and expenditure of at least £3 million so that this Budget is budgeting for a deficit because the Minister has neither the will, nor the united will behind him, to be able to do what is required and face up to the problems. This is a two-way bet in so far as budgeting is concerned, making sure that if the divisions lead to an election they will have something to go on.

Also in this Budget the reliefs in relation to companies will have no effect until next year so that they will have no remedial effect in mitigating the disastrous increases in company taxation imposed last October. There is at the moment a situation as a result of the recent British Budget in which British companies competing for the Irish home market now carry the benediction of the Irish Government because they have a tax position of 40 per cent while Irish companies, endeavouring to retain their position in the home market, must pay taxation at the rate of 58 per cent. Of course every week there are companies going into liquidation, companies going bankrupt and decent workers are being thrown out of work. The Minister knows that that was an error made last year and it is a big man and a principled man who would accept that he made an error and take steps to remedy it. The Minister has not done it and the allowance made in relation to depreciation does not go one-quarter of the way and has no effect in my view in relation to this year.

I am glad that the Minister let one cat out of the bag in this Budget. He has to provide in this Budget, he says, £550,000 for the payment of unemployment assistance to men without dependants in urban areas. Did every Deputy note that? If you look at the Book of Estimates you will see that a saving of £1.6 million in unemployment assistance was provided for. There was no error in the dole order; it is now perfectly clear that the dole order was the decision of a Government which panicked when the events were known. It is about time this Government began to come clean with the people. Once again some poor, civil servant had to be blamed; once again some unnamed individual was asked to face the fire because the Government boobed and they knew it. Thank God there was a vigilant Opposition to find out what they were doing and ensure that the poorest of the poor would get what they were entitled to get.

In the Budget the Minister provides some relief for widows and deserted wives. I am glad he took notice of the Fine Gael motion advocating this which was discussed in the Dáil some three weeks ago. I am glad he has done something in relation to pension parity as advocated so often from these benches. May I, in a personal way, refer to health insurance? How many times and to what purpose was the idea of a health insurance scheme advocated from these benches? Not only was it advocated but a detailed scheme, costed and worked out, was handed over to a previous Minister for Health but the demands in that regard were consistently rejected but now we have health insurance, compulsory health insurance to provide for the hospital costs of the middle income group. The mountain was in labour and produced a right scrawny mouse—hospital bills. It is a pity that the Government in the end, having realised the futility of their stand on health insurance, did not take a reasonable step forward and begin to think of what is going to come here as sure as day follows night, a comprehensive medical scheme based on the principle of insurance and available to all the population. That is what we stand for and this, at least, is a beginning and to that extent we welcome it.

I note also a hasty last-minute provision made in the Budget for industrial training. Again, that is something that has been pointed out from these benches to no avail. It took the comment in the OECD Economy Survey to galvanise the Government into action and so some partial step is being taken to improve industrial training.

Having said that, let me turn to taxation. The Minister was warned in the Central Bank report of the danger involved in increasing taxation this year. He was advised not only by the Central Bank but by other institutions and people as to the need to restrict Government expenditure. We now have an increase in taxation. I suggest that it is wrong, that it is dangerous. I am quite certain that a considerable amount of Government expenditure could be cut without harming the economy, without endangering employment. One has just to look at the Book of Estimates. You will see that Government expenditure on entertainment is being increased by £30,000 this year. What is the meaning of that kind of increase? It has gone up to £75,000 in a year in which moderation is required but the Minister stands over that while at the same time every single man, unemployed and unable to work in rural Ireland, is knocked off the few shillings unemployment assistance that he is entitled to expect but sumptuous dining can go on. Every person associated with the establishment may continue to spend money on entertainment—double it, if you please—at a time when moderation is urgently required.

There is to be an increase in taxation. I want to remind the House in regard to income tax that the Minister now provides that the first £100 that every taxpayer earns will be liable to full tax. Shades of Deputy MacEntee. When he was a Member of this House he used refer to a poll tax and rightly said it was regressive taxation, that it was wrong, unfair and regrettable. Under this proposal every married man, even the lowest paid worker, will pay the same increase as the richest man in Ireland. He will pay £11 and this is supposed to be taxation which is paraded here as being socially just. The only people excluded are single people earning up to £9 per week and married people earning up to £14 per week. Would the Minister indicate what class of worker is in that category today in Ireland? They are the only people excluded from this poll tax of £11 per year.

I think this increase in taxation is highly dangerous. We have a delicate balance of forces potentially dangerous to the future of the country. The Minister, instead of facing up to his obligation to match Government expenditure to the needs of the time, has erred in imposing this burden and I fear the consequences.

This is the 14th year of the present Fianna Fáil administration and the 14th time that a spring Budget has been introduced and I think the 25th or 26th time that budgetary proposals have been brought forward by Fianna Fáil Ministers. The 14 years in which this Administration have been in office have been marked by cloudy thinking, by leadership which at times has been indecisive. Great expansion has taken place throughout western Europe and during these 14 years the living standards of the ordinary people in western Europe have been enhanced and advanced. Here, despite all the programming which has been announced and despite all the planning which has been trumpeted abroad, we have achieved a growth figure which has averaged only 4 per cent. The tragedy is that we have been proud of this, not realising that the growth rate is significantly lower than that of any other country in western Europe. The result is that during these 14 years the gap between this country and the rest of Europe has widened significantly and dramatically.

The Second Economic Programme has collapsed and the Third Programme is well on its way to collapse. The people are losing confidence in their country, I regret to say, and this is reflected in the steep decline in real terms of national savings. This has forced the Government to go outside the country to borrow dearly. In the last two years over £1 million has been borrowed from abroad and further borrowing is envisaged this year. By reason of the Government's incompetence they have, unfortunately, been mortgaging the future of the people of this country.

Deputies

Hear, hear.

We are here today with the Third Programme in ruins, with a Government which is divided, a Government which is uncertain, a Government which is incompetent, and a Government which, if it retains honour, should leave office and allow a successor to take its place.

This Government has been so dishonest during the last two years that it is not easy for us to accept that this is the only Budget for the year 1971-72. We have no assurance that the Minister for Finance will not have a re-think and, like his predecessors, introduce another Budget in the autumn.

I do not think he will be there in the autumn.

The Minister's speech can only be described as a patch up or temporary job. As far as this Budget is concerned, it appears to me that the Government are merely taking out insurance against the possibility of a general election this year.

I wonder if the Minister realises the reflection he has made on recent former Ministers for Finance when, by inference, he accused them of over-expenditure and by inference suggested that the inflationary situation we have at the present time is due to increased indirect taxation? If anybody expects the Minister's proposals are going to correct the serious ills that the country is suffering from at the present time they have another think coming.

The Minister has said nothing new in his Budget speech. He has not made any concrete suggestions for curing the five main difficulties we have at present. We cannot accept the word of the Taoiseach—although this has been a device used in the past by various Ministers for Finance—who, prior to the Budget, told people in Cork that it was going to be a "tough Budget". I have my reservations about the Budget proposals, both those which give things and those which take away things, but I do not think this Budget can be said to be as tough a Budget as the 1963 Budget which introduced the turnover tax, a subsequent Budget which introduced the wholesale tax and another Budget which increased turnover tax. For this reason we are entitled to be suspicious and are entitled not to accept the word of the Minister for Finance that this is the final bill to the nation for this particular year.

The Minister and his advisers should have been in a position to prepare proposals to ensure that there would be no further imposts on the taxpayers. I do not know what the Taoiseach meant by a "tough Budget", I do not know whether or not he wanted to frighten his followers, and I do not know whether or not this is the only sort of Budget which will keep the Fianna Fáil Party together.

As far as budgetary policy is concerned, the Minister subscribes to the view that there should be five main objectives. In a television interview recently he said that the Budget was an instrument which should attempt to aim at full employment, growth in the economy, ensure favourable balance of payments, ensure price stability and— most important of all—ensure an equitable distribution of the country's wealth. Despite what the Minister has done in his social welfare proposals and despite the changes he proposes in the income tax code, he has not gone any appreciable way towards coming to the assistance of those who at the present time are forced to live on such miserable incomes. I do not believe either that he has made any attempt to ask the people who "have" to bear the biggest share of the burden in order that those who "have not" could get a little more of the national cake.

This is one of the few Budget documents which in its index does not include a paragraph on "employment or unemployment". The Minister paid little if any attention at all to the problems of unemployment and redundancy. This document does not deal in any detail with the problems of economic growth, balance of payments or price stability—perhaps I should say instability—for which the Government are entirely responsible.

I recently read a speech made by the Minister for Foreign Affairs—a speech which was sent to every Deputy—to the Confederation of Irish Industries at which one of the EEC Commissioners in Brussels, Signor Spinelli, was present. In that speech the Minister for Foreign Affairs gave the impression— although I am sure his Irish audience were not impressed—to the Commissioner that Ireland, with just a few reservations, was now ready to become a member of the EEC. Again, he did not mention employment. He was not over anxious to talk about our adverse balance of payments and he was not over anxious to talk about the lack of growth in the economy over the last ten years. We in the Labour Party are practical people and our concern is to see that men and women are employed in this country at good wages and salaries. I do not think our unemployment record does us any credit when we come down to facts and figures. The rate averaged 7.2 per cent in 1970. It is twice as high as the British rate. More than that, it is the highest rate of unemployment, with one or two exceptions perhaps, of any country in Western Europe.

We have to judge this Government under the headings of full employment, economic growth, balance of payments, price stability and an equitable distribution of the country's wealth. We cannot hide the fact that in 1970 there was a drop of 7,000 in the numbers employed compared to an increase of 6,000 in the numbers employed in 1969. This may be explained away by various excuses made by the Minister for Finance and members of the Government front bench. We know, of course, that they have been for quite a long time now preoccupied with their own internal difficulties and they have not much concern or, should I say, being charitable towards them, not much time for thinking about the unemployment figures, or much time for reading those newspapers which report thousands of redundancies, particularly over the last three months, and the closure of factories all over the country.

Last year, 1970, was the worst in many respects for the last ten years. The increase in non-agricultural jobs was only 5,000. In 1970 there was a drop of 12,000 in rural employment. Mark you, the significant thing is that, when we talk about economic growth, that increase of 5,000 was represented by an increase in employment as far as the services were concerned, a very poor performance indeed, due mainly to the last Budget, the Budget that was delivered here by the Taoiseach and arising mainly because of mismanagement of the economy.

Last year's Budget had, of course, the effect of increasing prices—the Minister will admit this—by 3 per cent to 4 per cent. The Government cannot be held blameless because of their neglect in the bank strike and the cement strike, both of which were responsible to a very large extent for the drop in the numbers of those who were employed. The building industry dropped 5,000 in employment last year. The Government cannot claim that they were not entirely responsible remembering that this is a semi-State concern. In that situation and in the situation of the bank strike we saw the Minister for Labour shelving responsibility and in blasé fashion announcing he had no function. We would like to know what function has the Minister for Labour. He has something to do in Social Welfare but, as far as Labour is concerned, it is one of the Ministries which, if it is not going to be properly occupied, should be scrapped.

Both these strikes depressed manufacturing in 1970. I do not think we can boast of our record particularly when we remember the First, the Second and the Third Programmes for Economic Expansion and remember that, in the ten years from 1960 to 1970, the total increase in the numbers at work was only 11,000. I think it was the First Programme for Economic Expansion which said that, in order to achieve full employment by 1975—I think that was the year—we needed an increase at the rate of 7,000 to 8,000 workers a year. The NIEC estimate for full employment was 100,000 jobs during the period 1960 to 1970.

The Government failed miserably in achieving that target because, for every ten jobs that were needed, only one was provided. That is a shameful record for a party alleged to have promised away back in the fifties 100,000 new jobs. It is a shameful record for the party that boasts about the number of industries that have been established. It is a shameful thing for a party which now wants to lead us into Europe, as a full member, to take the full blast of the competition not alone from those in the Six but from the other applicant countries as well.

This is the story, not alone in respect of 1970 but in respect of every year for the past ten years. It is an indication of the failure of the Government party not just for one year but for the last ten years. Last year, apart altogether from the political situation, was the worst year for ten years as far as economic growth is concerned. Gross national product increased by only 1½ per cent in 1970 compared with 4 per cent in 1969 and 7.9 per cent in 1968. I do not think we have had a full explanation from the Minister as to the reason for this. The only reason we can give is the ineptitude of the Government and their blasé attitude towards the electorate and, particularly, towards the working people. Gross national product is not expected to increase very much in 1971. Last year was bad. This year, if we heed what we have been told, will be no better.

We wonder why there was no mention in the Minister's speech today or in any public utterances anywhere of the Third Programme for Economic Expansion. What has happened to it? Was it just another try-on? Was it another pie-in-the-sky effort offered to unfortunate people who have no jobs or whose jobs are unsafe for various reasons?

I have spoken about the building industry and talked about the poor performance in 1970. In 1970 in the building industry there was a drop of 3 per cent in output. In the agricultural industry there was a rise of only ½ per cent. I have not had time to examine the details, but I do not believe the £4 million or £5 million the Minister now proposes to devote to agriculture will improve output to any degree in that particular industry this year. The Minister must realise, as must his colleague, the Minister for Agriculture, that this silly exercise of throwing £100,000 there, £500,000 here and £2 million somewhere else will not make the agricultural industry the viable and profitable industry it should be. The Minister has got to realise that there must be more thinking as to how agriculture should be developed, not only financially but structurally as well.

In 1970 there was a rise of only 3 per cent in industrial output compared with 7 per cent in 1969. I know there were various factors at work last year, apart from the political crisis we had. We had the bank strike and the cement strike. There was also—we recognise this and I am sure members of the Fianna Fáil Party, who are honest enough to admit it, must recognise it as well—an absolute lack of confidence by the public in the Government because of the antics of various members of the Fianna Fáil Party in matters which had nothing to do with the welfare of the country. There was no leadership. There was no guidance. There were contradictory statements. There were allegations and counter-allegations. How could one expect that in industry, even in the Civil Service or in agriculture, there could be any confidence, there could be any trust in a Government that engaged in such scandalous brawls during 1970? They were preoccupied with their internal party affairs and neglected—they must have neglected—their public duties during all that awful period.

A Government must be judged on the balance of payments situation and in this again they have a very sorry record. In this as well they have failed. What has happened since 1967? In 1967, as far as the balance of payments was concerned, we had a surplus of £15 million. In a short three years this surplus of £15 million has been turned into a deficit in 1970 of £62 million? We are told by the forecasters, if we can believe them, that the deficit for 1971 will be in the region of £80 million. Is there anything at all in this Budget Statement that tries to do anything in order that at least the forecast figure of £80 million will be substantially reduced? One of the main objectives of a Budget is to correct the balance of payments. There does not seem to me to be anything exciting or outstanding in the Minister's proposals that would correct it. The last three Budgets have failed in that regard.

I do not remember hearing the Minister mention five words that were very much on the lips of members of the Fianna Fáil Party six years ago—the Anglo-Irish Free Trade Agreement.

Perhaps the Minister could tell us something about this. We contend that the Anglo-Irish Free Trade Agreement is, in the main, responsible for the big deficit we have at present in our balance of payments. In 1967 we had £15 million of a surplus and in 1970 that was converted into a deficit of £62 million. Also significant is that in 1967 we had a trade surplus with Britain to the tune of £9 million and in 1970 that surplus was converted to a deficit of £65 million. I am afraid I shall have to repeat myself for the Minister, now that the caucus is over.

My apologies.

In 1967 we had a surplus in the balance of payments of £15 million. That was converted in a short three years to a deficit of £62 million. As far as trade with Britain is concerned it is also significant that in 1967 we had a surplus with Britain of £9 million and that was converted in 1970 into a deficit of £65 million. I do not think one would need a terrific imagination to suggest that the responsibility for that is, in the main, in the Anglo-Irish Free Trade Agreement which was boasted of so much by the members of the Fianna Fáil Party when it was negotiated six or seven years ago.

It is interesting that our deficit in the balance of payments is practically the same as our trade deficit with Britain. I suggest, therefore, and it is very difficult to know what is happening in Brussels apart from the vague statements that are sent out by the Minister for Foreign Affairs, that the Anglo-Irish Free Trade Agreement should be scrapped as soon as possible and if it is a Fianna Fáil Government that is to negotiate it they ought not to go over in the same frame of mind as they did the last time and they should negotiate in a tougher manner than they appear to have done five or six years ago for a trade agreement that would not be so over-balanced in favour of Britain.

They have only until 1st July of this year to do it.

The Government have failed as far as a prices policy is concerned. In the last seven years the consumer price index has increased by 45 per cent and last year, the year of the political and economic crisis, there was an increase of 8.2 per cent. Again, the Government must take responsibility for this and not try to put the blame on the workers or on the trade union movement. Of this 8.2 per cent, 4.1 per cent of it occurred in the second quarter of 1970. That was, of course, the period during which the turnover tax was raised substantially in the— we do not know what to call it— Haughey/Lynch Budget. There have been no attempts to control prices. In relation to prices we have the unenviable record of being practically at the top of the league as far as European countries are concerned. I know the Minister may have a one-track mind as his colleagues may have in regard to prices and say: "If it is prices it must be incomes as well." His colleague, Deputy Childers, the Tánaiste, often quotes Europe to us. There are countries in Europe which have no wage freeze but which have price control. A price freeze has been introduced in Sweden, in Denmark, in Holland and in Belgium.

I think it was right for the Minister to refer today to the national wage agreement and to compliment those who negotiated it and to hope, as we all do, that it will obtain for the time for which it is supposed to obtain. Mind you, the Minister was no help in that himself. I do not want to go over the discussions we had here in Dáil Éireann about the Prices and Incomes Bill but the Minister was certainly not a great help as far as that was concerned. May I also remind the Minister that there is an Act for which the Minister for Industry and Commerce is responsible, the Prices Act, which can, in my view, be effectively worked but this has never been attempted in any serious way by Deputy Lalor or any other Minister for Industry and Commerce and the present Minister for Finance acted in that capacity at one time. We just cannot blame the trade unions if there is an increase in prices. The Government must take responsibility for the positive actions they took in introducing turnover tax, in increasing turnover tax and in introducing the wholesale tax. The countries I mentioned did not introduce a wage freeze but appear to be having some effective control over prices.

The Minister spoke today about the value added tax, details of which we have not got at present. I should like to warn the Minister that the introduction of this sort of tax could be the subject of exploitation by unscrupulous people as, indeed, there was exploitation by unscrupulous people when decimal currency was introduced and as there is exploitation when there are new prices by way of increased taxation on various commodities at Budget time. I would ask the Minister, therefore, to ensure that if the value added tax is to be introduced there will not be the same exploitation that consumers in this country have been subjected to and that those in other countries where the value added tax was introduced were subjected to as well.

I pose the question: "What will this Budget do?" It will not correct the employment situation; it will do very little, if anything at all, for economic growth; it does not appear, nor does the Minister say he is optimistic, that it will bring about a reduction in the balance of payments and it seems, as well, as if this Government have no intention of seeking price stability.

This Budget, as I said at the beginning, might hold the party together for a short term. I do not know whether, if their crisis blows over, there is a possibility that there will be another Budget. They may postpone their internal difficulties, but by doing this they are not doing anything positive for the country. In view of what has been happening in the political, economic and social fields, the honourable thing the Government could do is, as has been suggested to their cumainn, prepare for a general election in June of this year.