I should like to test this Bill against the needs of the present situation, the kind of structure of taxation we have, and whether this Bill provides us with the structure appropriate to our domestic economy and to the situation in which we find ourselves in regard to EEC membership. This is relevant when we come to measure this Bill and to consider its adequacy.
First, I shall refer to our domestic economy to the extent our taxation system is related to the needs of our economy. There have been references in this debate to the condition of inflation in which we find ourselves. The references are well merited. Although the subject of inflation tends to be spoken of in season and out of season, there could not be a more appropriate time to dwell on it than at present. Recently we saw our country identified as topping the list so far as inflation in European countries is concerned. We have talked about it so often and at such length, that although the situation has reached a position of real gravity it has become such a matter of routine that it does not attract the serious attention it merits. It has attracted comment and speeches on all sides. Members of the Government have adverted to the inflationary problems we now face but I do not detect in the approach of the Government, either in this House or outside, or in the Budget, any real appreciation of the seriousness of the situation.
Of course, a measure of inflation in the sense of some increase in prices, some tendency of incomes to out-run productivity, is a feature of all modern States. There are economists who claim that some small degree of inflation is helpful rather than otherwise, although any inflation can introduce inequities between different groups. However, I do not think anyone would attempt to defend the rate of inflation we have experienced in the last few years. It runs not only beyond anything in our past experience but beyond anything experienced by other European countries. There is nothing in our basic economic situation that permits us the luxury of this kind of inflation without having to face the penalties that follow from permitting our economy to be inflated in this way. There may be countries whose affairs were so well run for a period of years that a temporary outburst of inflation, especially inflation of a clearly temporary character, can be tolerated and accepted without arousing undue concern. But ours is not a strong economy. Ours cannot tolerate that. It has not been run during the last five or six years in a manner that would leave it leeway to face the kind of problems this type of inflation brings in its train.
Our whole relationship with other countries in terms of trade is not such as to permit us the luxury of allowing our costs to get out of line with those of other countries. There is no evidence that in the past the levels of costs of production here, particularly of industrial goods, have been so favourable vis-à-vis other countries that we can afford to allow them to rise more rapidly than other countries and tolerate a situation in which these costs catch up and eventually pass out those of other countries. In fact, our situation so far as cost levels are concerned has never been a very favourable one. Because of the lower level of productivity here, for a variety of complex reasons, and because of the fact that our incomes are expressed in terms of a monetary unit which is the same as that of a great and powerful industrial neighbour, we always face this problem with a certain tension here.
Had we a currency expressed in different terms altogether, a currency which did not appear to the public to be the same as or identical to the currency of this neighbouring country, our problem might be less acute. If we had an Irish púnt whose relationship in sterling was 4.82 púnt to the £, or something like that, the average worker, the average farmer and even, perhaps, the average industrialist would be less clear on comparisons between ourselves and the neighbouring country and the unremitting pressure for incomes here to approximate to and, in some cases, even exceed those of Britain and Northern Ireland would be much less strong had we a different currency. The fact is we have inherited, for historical reasons, a currency which we have maintained, for good reasons, I think, at parity with the £. I am not suggesting any departure from that parity would be desirable, but it might have been better if, at the very beginning, we had fixed a currency unit of our own different in character and related to the £, with a starting point the same as unity but expressed in some other relationship, so that it would not be immediately apparent to everybody, when making comparisons in the case of incomes and prices, for example, with prices and incomes in the neighbouring country, as to whether there was or was not a direct comparability.
There is a problem here, the problem that so many of our people look outside our shores. Indeed, they do not have to look outside our shores; they merely have to look across the Border to Newry and Derry to see the income and price levels there. Because of our failure to solve our economic problems in the first half century of economic independence, and there has been such a failure, so many of our people have emigrated, so many have come back to visit us, so many of their relations have gone to visit them that there are no two countries between which there is such close contact and such familiarity with the social and economic conditions of each other's country. At least, so far as Irish people are concerned, there is a great familiarity with conditions in Britain and the combination of an identical currency unit at parity in the two countries, plus the enormous volume of social intercourse between the two countries, has created the position in which Irish ambitions and Irish aims in terms of incomes and Irish expectations in terms of prices are measured in terms of the position in Britain. That has created a very serious problem for us, a problem to which we have not, perhaps, given enough thought because the expectations created have aroused pressures to raise Irish incomes to British levels.
These pressures, up to about 1960, were kept fairly in check. A disparity between incomes existed. It varied a good deal. There were cases where incomes were on the same level. In other cases there were small differences. In others there were large differences. But, since 1960, the growing expectation of prosperity here and the growing unrest and dissatisfaction with the failures of past economic policies, together with easier communication through the medium of Press, radio and television between the two countries, all these have made our people restless, restless so far as incomes are concerned and restless so far as differences in prices are concerned between ourselves and Britain. The pressure has grown during this period, on the one hand, to raise such Irish incomes as were lower than those in Britain, and that was the normal pattern, towards the British level and, on the other hand, to resent the disparity in prices.
It is not easy to explain to an ordinary Irish worker who has not had the benefit of a course in economics why he should have to pay so much more for a lb. of Irish butter than his counterpart does in Britain for the same butter. This is the kind of question which bothers people. I had experience a few months ago of being invited to speak on productivity, a rather formidable subject with a dull-sounding name, in a factory in Dublin. The workers consisted almost exclusively of girls in the age group of 17 to 20, the majority of whom had no education beyond primary school. A few had intermediate certificate. A film on productivity was shown and then they were invited to ask questions of the guest lecturer, who happened to be me. What impressed me was the extraordinary range of interest in economic matters expressed by the girls concerned, the acuteness and relevance of their questions, and the extreme difficulty of giving them answers that would satisfy them. When they asked questions as to why, for instance, we had to pay more for our butter it was not easy to give a rational explanation in terms acceptable to an Irish working girl living in the city of Dublin. One might, perhaps, explain it more easily in rural Ireland in terms of the need to give assistance to our farmers, an argument which did not go down well with my audience. Indeed, during a break in the session I was accused by a number of them of being some kind of secret agent for the Irish farmers and they regarded me with great suspicion for having suggested there was any reason to assist the farmers. There are divergent views between the city and the country.
The point is that their expectations in relation to prices were related to conditions in Britain. None had any doubts as to what the price of Irish butter was in Britain. This was a familiar fact to them. If you asked them the price of butter in France or Germany they would not have known, not alone because of the greater distance and lesser communication but also because of differences in currency parities. I myself, if asked quickly, how does the price of petrol or butter in France compare with the price here, even if I knew the price, would take a little time to convert francs per kilo into pence per lb. It is only when one does that calculation that one can see with any assurance the nature of the price difference. The same measurements, the same currencies, great social intercourse and easy communication through the medium of Press, radio and television have meant that our people think in these terms.
The pressures created in the past ten years here by the growing and increasingly strong expectation of our people that they should have the same incomes as in Britain and pay the same prices when, in fact, the average productivity per head here is much lower lie behind the problems we face today. I do not suggest that in identifying the problem I am resolving it. There is no easy solution to it but the first step in coping with it is to recognise it. We have failed to recognise it in these terms; we have failed to recognise now powerful are the forces at work. We have failed to recognise how often when Irish workers at any level, clerical, manual, administrative or higher, seek increases in salaries, they are motivated by and have regard to levels elsewhere. The only cases where this is not so is where they discover to their embarrassment that their salaries or wages are higher than elsewhere. They then try to devise some other method of justifying an increase. Over the whole range of occupations where there is a difference in salary or wage levels the expectation or desire to equate with levels in Britain is a powerful force at work.
In our economy the average level of productivity per head is not as high as in Britain. I should not like to put a precise figure on it but it must be somewhere in the region of two-thirds to three-quarters. It is lower for several reasons. One is because of the different mix of our economy, the fact that in our economy agriculture looms so large and that for reasons not entirely in our own control the average level of incomes in agriculture is so low. If you have a sector employing 27 per cent of the population whose incomes are little more than half what they are in that sector in Britain and if in Britain that sector comprises three per cent of the population and incomes in that sector are twice as high as they are here, then even if everybody else in the country earned, produced and was paid exactly the same as his opposite number in Britain, because of those disparities in the mix of the two economies and the income levels in agriculture, these factors alone would account for a very large part—probably something approaching half—of the difference between the average level of productivity and the average level of real income and purchasing power in the two countries.
There are other factors. We do not have the heavy industries here which are predominantly male employers and industries in which male wages are relatively high. Fifteen years ago, and again in the past week or two, I have made comparisons between the levels of wages and incomes in this part of the country and in Northern Ireland and I have been struck by the fact that so little has changed in the relative patterns of these two areas in that 15 years, between 1956 and 1971. I found that in quite a number of industries earnings here are identical with or very close to—either slightly above or slightly below—those in Northern Ireland but that in the heavy industries with which Northern Ireland is better equipped there is a significant disparity. The adult male wage in the engineering industries in Northern Ireland is higher than it is in those industries here. In agriculture, of course, there is a big difference also and there are differences in the services sector and in public administration. But the actual industrial earnings outside the heavy industries sector are very much the same in the two parts of Ireland. Yet, because of differences in income levels in the others sectors and more particularly because of the mix of the two economies, the different mix of agricultural industry, of heavy and light industry and services, you get quite a significant disparity in average productivity and average income between them.
We are in this position and it will not easily be changed. It will certainly be significantly improved and a significant part of the gap bridged by EEC membership when our agricultural sector ceases to suffer from the disability of having its incomes kept down to not much more than half the level of those of farmers in an equivalent position in Britain and the EEC countries. This will obviously make a difference but it will not resolve the problem. Even when that happens the incomes of Irish farmers will, as to a large proportion of them, remain lower than those of people engaged in industry. The fact that in our economy agriculture will remain an important sector will, through the operation of this mix, have the effect of keeping our income levels below those of Britain and other European countries.
But a large part of the gap will be bridged by EEC membership and its effect on prices and on incomes indirectly through the impact price increases will have on output. Even when that happens there will still be a difference. One cannot foresee within ten years, 15 or even 20 years a complete bridging of the gap between ourselves and Britain or between ourselves and other EEC countries. I would hesitate to suggest that in this century we would catch up completely in levels of income and purchasing power and living standards with some of the wealthier EEC countries. I believe we could catch up with Britain within a period of, perhaps, not much more than two decades although a good deal would depend on whether EEC membership stimulates the British economy to some kind of economic growth and gets it out of the doldrums it has been in for decades past. Even if the British economy is spurred on and even if there is a faster rate of economic growth in Britain within the EEC there is good reason to believe that we shall catch up gradually over the years and that in, perhaps, 20 years time or longer our living standards will be very close to those in Britain. Until that happens, for the reasons I have mentioned, the different mix of the two economies, the lower level of productivity in heavy industries particularly and the consequent lower level of earnings and the lower level of productivity, perhaps, in the services sector also, the overall level of productivity here is and will remain—though, perhaps, to a diminishing degree—lower than that in Britain and the other EEC countries. So long as that is true, we cannot pay ourselves the same incomes and expect the same prices as in Britain. It is arithmetically improbable. Yet, unfortunately, it is the aim towards which our people aspire and, perhaps are being led to aspire by the fact that very rarely politicians have attempted to explain to them that there is difficulty about achieving such an aspiration.
This is the basic problem that faces us today. It is here the roots of inflation are to be found and unless we can resolve this in some way and get across to people that if they insist at every level on every group in society having the same money incomes expressed in terms of pounds sterling or Irish pounds at parity with each other as in Britain, this will mean a level of prices here far higher than in Britain and will make it impossible to sustain the existing parity between our two currencies. The only reason we have maintained parity is that the difference between productivity in the two countries—say 30 per cent lower here than there—has been matched throughout the history of this State by almost exactly equivalent differences between incomes in the two countries and because both productivity and incomes have been lower here by the same percentage it has been possible to retain parity between the two currencies. If you disturb that relationship and raise the relative income level here closer to the British level more rapidly than you raise the productivity level so that at some point incomes here are only 15 or 20 per cent lower than in Britain while productivity is still 30 per cent lower, that cannot be sustained because then the cost per unit produced in terms of the Irish pound will be so high that nobody in Britain will be fool enough to buy our products when they could buy them so much more cheaply from their own producers and from countries overseas. Indeed few people in Ireland would be fool enough to buy Irish goods when British goods could be bought so much more cheaply.
So, the battle that must be fought and that this Government have so notably failed to fight—one wonders if they are aware that there is a battle—is the battle to persuade our people not to allow their legitimate ambition to catch up with our neighbour to mislead them into raising incomes at such a rate, so far beyond the rate of increase in output per worker, that the parity of our currency is threatened and that our ability to earn a livelihood to pay for our imports and buy the things we need, give ourselves the living standard we deserve, is diminished or undermined completely.
The Government have advisers who know what I have said and know it better than I do and could, perhaps, put more precise figures on it. I have to presume that these advisers tell the Government these things. I know they do. I have to presume, therefore, although not having much confidence in the average level of ability of the present Government, that they are capable of taking in enough to grasp the basic relationship which I am putting forward. Indeed, the present posture of the Government representative opposite suggests that he must know already all I have said since his degree of interest in what I am saying is not very obvious at the moment.
In that situation what must bother us is why the Government, which must know all that I have said which must be aware of this and which must even on the most pessimistic assessment have the limited intelligence necessary to take in the key elements in relation to what I have mentioned, have not bothered to communicate this to the people knowing, as they must know, that their failure to do so is threatening the economy of our country and the livelihood of our people.
No one looking at the way our affairs have been run since 1964 and more precisely since 1968 could conceivably suggest that this Government have shown signs of grasping the problem and communicating it. The word "leadership" is not the word which springs to mind when we think of this Government in relation to the problems of our economy in the past three years. Once or twice they have woken from their slumber; perhaps that is unkind but once or twice they have been distracted from their other interests for a moment or two to rush on to television and tell us there is a crisis. Observing that talk of a crisis might disturb the confidence of people in the Government any crisis announced on television is switched off very quickly when some immediate, temporary effect has been achieved, but that is not the way to govern and it is not the way to meet the problems which face us today.
Our people are not going to be convinced that they cannot pursue the path which they are instinctively pursuing without disastrous results unless they get from the Government of the day leadership and example neither of which they have had. I do not think the most enthusiastic supporter of the Government can be heard in the pubs around the country saying to his pals: "Is it not wonderful to have a Government which is giving us such a lead and showing us how to get over the difficulties?" Whatever the supporters of Fianna Fáil may be saying I do not think it is cast in those words. Their attitude is, perhaps, more defensive than aggressive and more depressive than optimistic but I do not think anyone, including any member of the present Government, believes that they are exercising or have exercised in the past three years any kind of leadership in this matter.
In fact, what is noticeable about the present situation is the way in which the Government by its own torpor has managed to communicate this torpor to the community as a whole. I do not think if one listens to conversations in pubs or at street corners that what one hears suggests any realisation on the part of the community as a whole of just how critical our position is. I do not think the fault for that lies on the shoulders of the Opposition. That is not to say I claim anything approaching perfection for the Opposition or for my own party in Opposition. Of course, we have our defects and our failures. We have not always been as energetic as we should have been in putting across the dangers facing the country but, by and large, over the past three years we have done our job pretty well. I do not think anyone reading the speeches of the Opposition in two or three years time could accuse us of having failed to be alert to the dangers and problems facing us. They might say the Opposition cried "wolf" so often that it was not to be believed but I would have thought the position has been put with sufficient clarity, sufficiently loudly and in sufficiently compelling terms to alert people to the problems the country is facing, if the Opposition's leadership in this matter were matched by leadership from the Government. It is not because the Opposition are not doing their job that people are unaware of the problems. It is because the Government prefer to sweep them under the carpet and continue on their way careless of the consequences.
Indeed, in the past year the Government have increasingly had the air of a Government conscious of the fact that they will not be there much longer and, therefore, careless of the consequences of their action. If Fianna Fáil believed with any conviction that they would be in Government next year and the year after they would be taking a great deal more care of the economy than they are now. They would be making sure the people knew of the problems sufficiently in order to bring the people with them in resolving them. It is only because of the unhappy situation in which we find ourselves, with a Government not alone in whom the people have no confidence but who have no confidence in themselves to continue in office that I fear for the country at the present time.
Even a Fianna Fáil Government of the kind we had up to a year or so ago led by men for whom one could have little admiration in respect of their moral attitudes had at least the merit of sufficient confidence, portraying themselves all too frequently with such arrogance that they would be in office next year and the year after as not to be concerned about the future. What is depressing is that the crew in front of us now—I am not referring to the particular member of the crew there; I am speaking more of the sight which meets our eyes at Question Time, not that there are not some men on the front bench with ability and integrity but they form a remarkably small minority of the front bench—