That a sum not exceeding £157,000 be granted to defray the charge which will come in course of payment during the period beginning the 1st April, 1974 and ending the 31st day of December, 1974, for the Salaries and expenses of the Department of the Taoiseach.
I propose to deal briefly with the Estimate for my Department and, in accordance with the normal practice, to review national progress and the Government's policies and actions, particularly in so far as the greatest single domestic problem now facing us is concerned. I refer, of course, to the problem of inflation. I also intend to say something about our policies and attitudes in relation to certain aspects of international affairs. Other Ministers will speak in the debate and deal in greater detail with the matters which come within the ambit of their own Departments.
I do not intend to go in any detail into the Northern Ireland situation. We had a debate on developments affecting the North less than one month ago and, as I indicated in reply to a recent Parliamentary Question, the lines of policy enunciated by myself and other Government speakers in that debate remain valid. It is clear that a peaceful settlement based on justice can only be reached with the agreement of all sections of the Northern community. It is clear to all that the Irish dimension exists, as a fact. So far as we are concerned, the lines of policy are clear. We will seek by all means in our power to achieve peace and reconciliation between the communities in the North. We will help so far as we can in the achievement of power sharing there. And with the evidence so clearly before us of the pain and destruction caused by violence in the North, we will adhere to the policy of helping to contain it, so far as we in this part of the country can, and of seeking progress by discussion and consent.
In common with Estimates generally, the Estimate for my Department is based on the nine-month period 1st April, 1974 to 31st December, 1974. On a 12-month basis, there would be an increase of approximately £10,000. This is accounted for by increased expenditure on salaries, wages and allowances, attributable to increases in staff numbers, which more than offset a decrease under the subhead for information and public relations services, due to the termination of the Markpress account.
The OECD Economic Survey of Ireland, published in March this year, stated that "1973 was, in most respects, a particularly successful year for Irish economic management". This success showed itself in many ways—in the growth rate of the economy generally which at 7 per cent was a near record; in the significant increase in living standards brought about by this expansion; in the quickening of interest in our country as a site for new industrial development; in the increase of over 6,000 in industrial employment; in the evidence of net immigration; in the prosperity of our agriculture; in the greatest distribution of all time to social welfare beneficiaries; in the achievement of the highest level of house-building ever recorded; in substantially increased public spending on education, health and other services; and in the completion, not only without serious mishap, but, I would venture to say, with a fair measure of success, of our first full year of membership of the European Economic Community.
When I spoke in this House last December on a supplementary vote for my Department, I mentioned the hope that the situation caused by the oil crisis would not become so serious that jobs would be threatened, the expansion of the economy halted and, indeed, our standard of living reduced. I expressed this hope as signs of these developments were emerging in many western countries in the wake of an unprecedented boom. The onset of the energy crisis turned the prospect of an economic slowdown into grim reality. Even though the initial impact of the crisis, in terms of actual and threatened shortages of oil has now been spent, the increases in oil prices are still working their way through international and domestic economies.
The increases have accentuated the pressures on prices being exerted by domestic inflationary influences in many countries and by the abnormal rises in other raw material prices. The latest OECD figures show that, in the most recent 12 month period for which they have information, the percentage rise in prices was in double figures in 17 out of the 24 member countries of the organisation. This experience is expected to be repeated again this year in all member-countries of the EEC, except Germany.
The impact of the increased cost of oil imports on countries' balance of payments has been dramatic. The OECD estimates that the aggregate deterioration in the current payments of oil-importing countries in 1974 will be of the order of $50,000 million— equivalent to between seven and eight times the total Gross National Product of this country. Most of the increased receipts will accrue to Arab countries. A number of the major beneficiaries have small populations and the economies of all of them have a limited capacity in the short term to absorb imports or indeed economic development. For some time to come, at least, the increase in their purchases will go nowhere near matching the transfer of purchasing power from other countries. Unless, therefore, their increased receipts can be recycled, back to the oil-importing countries, on terms which these countries can bear, the shadow of deflation hangs over the world economy for the present and the near future, at least.
The efforts so far made to arrange such recycling through international organisations have been attended with only moderate success. Recycling through international capital markets has been fairly successful to date. However, some doubts have been expressed about the ability of the Euromarkets to bear the burden on them involved in such a massive recycling operation and indeed there have been some signs of strain in these markets in recent months.
The appropriate response to oil-related increases in external deficits has been the subject of considerable debate in all the countries affected and in the international organisations concerned. It seemed to be generally agreed that there was nothing to be gained and much to be lost by efforts on the part of the industrialised countries to offset consequential increases in their deficit by short-term deflationary action or other traditional adjustment measures. The main result would simply be to redistribute the total deficit among them with the likelihood of a rash of competitive and mutually impoverishing actions. It was argued that there was little need for action to squeeze home economies so as to make room for increased exports to the oil exporters as it would only be gradually and over a period of years and decades that they would demand increased exports from the industrialised countries in payment for their oil.
However, some countries have introduced measures designed to curb demand and to improve their balance of payments. In doing so, they were doubtless influenced by the threat posed by double-figure inflation. In some cases, there was also a need to reverse a widening of what I might term the "non-oil deficit". A further factor may have been recognition of the undeniable fact that over the longer-term, fundamental adjustments are needed in oil-importing economies in response to the increase in the price of this vital fuel and a feeling that the present was a good time to initiate these changes. No substantial consumer of oil can go on blithely as before, ignoring the effect on his domestic prices and balance of payments position of perhaps a threefold increase in price.
Whatever the varying reasons for the restrictions, they have led to some concern that an international downturn could be precipitated by a general extension of such measures.
An opposing view is that the greater danger is that of accentuating inflation running in most western countries at a rate, which if continued, will destroy belief in money as a medium of exchange, as we know it. In this view, any resort to widespread reflation could only increase the danger of runaway inflation. Faced with these starkly contrasting options most industrialised countries have accepted that growth expectations for this year are necessarily much lower than would have been possible before the increase in oil prices. Indeed, it is forecast that in Britain the growth rate will be negative, that there will be little, if any, growth in Italy and that German growth will be only 2½ per cent. Simultaneously, the growth of international trade, affected by curbs on demand and monetary uncertainties, is not expected to exceed 4½ per cent, compared with an estimated growth of 13 per cent last year.
For 1975, most official comment in forums such as the EEC and OECD suggests that economic growth in the main member countries will be somewhat better than in 1974. This view is dependent to a large extent on an upturn in the US and German economies as the authorities there pursue more expansionary policies. While this may not happen, the probability is that most industrialised countries will recognise the interdependency of their economies and accept the need to pursue policies that will ensure a continuation of growth.
I have gone in some detail into this rather sombre international background because as every Deputy knows, our economy, perhaps more than most in Western Europe, is influenced by what happens outside it. Exports and imports together form an unusually high proportion of our total Gross National Product. We cannot, even if we wished to do so, ignore what is happening elsewhere.
In common with most oil-importing countries, we have experienced a sharp deterioration in our balance of trade in the first six months of this year. Total imports have risen by £263 million or 48 per cent compared with the same period last year. The increase in exports was £125 million or 32 per cent. The trade gap, therefore, widened by £138 million.
The most important single factor responsible for this has been the increased cost of our oil imports, the value of which rose by £55 million in the first half of the year, despite the fact that there is likely to have been some decline in volume. There were also indirect effects on the prices of other imports arising from the oil price increase.
The figures also reflect the increases in the prices of a wide range of other basic commodities which reached a new peak in the first quarter of the year. These latter two factors are reflected in the increase of £147 million in the value of imports for further production. Overall, a rapid acceleration in the rate of increase in import prices has undoubtedly been a major influence in the huge rise in the value of imports. However, it is not possible to quantify the degree of this influence as import price indices are only available up to September, 1973, due to unavoidable delays involved in the changeover from the former official import and export lists to a new, integrated tariff/statistical list as the basis for compilation of all external trade statistics. The new list contains over 11,000 headings compared with about 1,200 import and 700 export headings in the former lists. Difficulties in the changeover to metrication have also caused delay.
Our exporters have faced considerable difficulties in the past nine months. First, there were demand restrictions in many countries. Depressed cattle prices have led to relatively slow growth in the value of agricultural exports. Exporters of industrial goods had to contend with the disruption of oil supplies, massive increases in price when supplies again began to flow and the scarcity of many raw materials exacerbated by the three-day working week in Britain. Despite these unfavourable conditions, industrial exports in the first half of the year are estimated to have increased by 42 per cent in value. Even when allowance is made for substantial increases in prices this represents an appreciable growth in the volume of these exports and great credit is due to exporters for this remarkable performance in most difficult conditions. Part of the credit is also due to the decision of the Government to set up a raw materials supply information service. Operated jointly by Córas Tráchtála and the Industrial Development Authority, the service has assisted firms seeking alternative sources of supply for a wide variety of materials.
Despite difficulties, may of them due to the situation in Northern Ireland—without which it has been estimated our earnings from tourism would be approximately twice what they are now—tourism earnings this year are also likely to show an increase. According to Bord Fáilte, tourist numbers so far this year were more than 5 per cent higher than last year.
Despite the increase in the trade deficit, the external reserves have remained at a high level. At the end of June they stood at £398 million, marginally lower than a year earlier. This indicates a sizeable capital inflow in recent months. It is worth nothing, however, that much of this inflow is now due to borrowing abroad by the Government and semi-State bodies to sustain their investment programmes. Overall, within the economy the level of investment in fixed assets is estimated to have risen last year by 13 per cent, and its ratio to GNP, at 23¾ per cent, reached its highest level ever. I need hardly stress the importance of these figures. Without investment in new buildings, plant and methods the country cannot prosper—nor indeed maintain even its present standards in the highly competitive world in which we live.
Consumer demand was exceptionally buoyant last year. The volume of expenditure went up by more than 6 per cent and the number of new cars registered was more than 18 per cent higher than in 1972. The energy crisis, however, dashed any hope of a continuation of this momentum, certainly so far as the early months of this year were concerned. The volume of retail sales in the first four months of the year, the latest available figures, was less than 1 per cent greater than in the corresponding period last year. The principal factor tending to depress sales was the poor demand for cars.
Some indication that the outlook for consumer demand is brightening is given by the 2 per cent rise in the volume of total retail sales in April. Current indicators of investment are few. I would draw attention, however, to the encouraging 35 per cent increase in imports of capital goods in the first quarter of the year and to the fact that the majority of respondents to the most recent quarterly survey of business intentions expected their investment to be higher in the coming year than in the previous year. The results indicated some decline in the buoyancy of intentions as compared with previous surveys.
I have been speaking so far about trends in investment and consumption as categories of demand on the resources of the economy. Hard statistics in output and employment trends are not quite so up-to-date. The preliminary figures for the first quarter of the year suggest that the output of manufacturing industry was over 8 per cent higher than in the first quarter of 1973. This is a most praiseworthy achievement in the unfavourable circumstances of the early part of the year.
The provisional results also indicate that the acceleration in the growth of industrial employment which continued throughout 1973 may have been halted in the first quarter of the present year. Employment in manufacturing and mining was over 7,000 or about 3½ per cent higher in March this year than in March 1973. These figures may reflect a time-lag before trends in production are manifested in changes in employment. Indeed, the most recent statistics of unemployment show an increase of almost 3,000 between the first weeks of July, 1973 and July, 1974. This was probably a reflection of the decelerating trend in the rate of growth in industrial employment. It is possible that continuing net immigration may also have been a contributory factor.
I will have more to say on industry and on agriculture later, but first I want to refer to the prospects for the economy as a whole this year and to the fiscal and monetary policies being applied in its management. When the Budget was being framed in the early part of the year, we were faced with a marked slowdown in growth. The best assessment that could be made was that without greater stimulus on current account than was given by the financial outcome for 1973-74, growth would be of the order of 3¾ per cent. As this rate seemed unlikely to sustain any increase in employment, the Government decided to give the economy a further shot in the arm by introducing a deficit budget. We had been exhorted to adopt an expansionary policy by various national and international organisations. Apart from this general theme, we were also advised against taxing commodities like beer, spirits and tobacco on the grounds that they would drive up the cost of living and in this way further increase the pressure for inflationary wage and salary claims. The budgetary measures were expected to add 1 per cent to the pre-budget forecast, thus raising the growth rate close to the average potential growth rate over the medium-term and maintaining the momentum towards increased employment.
However, as a result of a number of adverse factors whose effects can now be gauged more clearly, including the disimprovement in the external environment and the effects of industrial disputes, it now looks as if the growth rate aimed at will not be achieved. While the pace of economic activity is expected to continue fairly strongly throughout the remainder of the year, as domestic consumption and investment benefit from the stimuins given in the Budget, it is now estimated that the growth rate for the year will be of the order of 4 per cent. A comparison with the forecasts for other countries to which I referred earlier will show that the revised growth expectation for the Irish economy gives grounds for satisfaction.
Monetary policy for the remainder of this year, as set out in a statement issued by the Central Bank on the 21st of June, has been framed to support the Government's desire for growth, while helping to contain inflation and the balance of payments deficit. Towards the end of the first quarter bank lending resumed the rapid growth which occurred in the second half of 1973. The rise in non-Government lending was at an annual rate of 40 per cent and was clearly excessive.
The Central Bank have now directed that all additions to credit should be reserved for the purposes most productive in terms of increasing output and employment and have requested banks to permit no net increase in lending in the coming months.
The results attained by the Industrial Development Authority recently in the field of job creation indicate the benefits to be reaped if only we can maintain our attractiveness to promoters of new industrial projects. The last year was the most successful to date. Actual job creation in grant-aided projects in 1973 was 10,700. Even more significant was the fact that projects approved for grant by the authority during the year ended March, 1974, have a total employment potential of 22,000 which is over 50 per cent higher than the level in the previous year and also significantly higher than the target of 16,000 which the authority had set for the year. The planned investment in the projects approved reached £280 million compared with £135 million in 1972-73. This deflects the high capital-intensity of a number of projects. The promoters include companies of wide international repute such as Gillette, Syntex, Wellworthy, Black and Decker, Alcan, Courtaulds, Berck, Hollister Asahi.
The capital investment planned by Irish industries also increased substantially, especially in the food processing sector where the IDA approved grants of £9 million towards fixed investment of some £30 million. IDA capital expenditure in the year to March, 1974, was almost £25 million. Among the principle factors contributing to this encouraging performance were the resurgance of interest in Ireland by British firms, the greater number of proposals resulting from the increased tempo of the IDA's marketing programme in previous years. Ireland's accession to the European Economic Community, as well as, of course, the general boom conditions which prevailed last year.
The IDA will be endeavouring to maintain last year's level of job creation throughout the remainder of 1974 and the authority have set a target of 16,500 potential jobs from approved projects for the nine months April to December, 1974. Present indications are that the high level of job creation is being maintained and that there are good prospects of achieving the target. I recognise fully the contribution to this record of success made by the staff of the IDA and all others involved in industrial promotion whose efforts, indeed, I warmly commend. I think it is fair to say that the increased interest shown by investors and entrepreneurs is a clear demonstration of international confidence in the soundness and potential of our economy and in its handling by the Government.
Indeed the pace of industrial development is creating other problems. The number, size and type of project require that careful assessments and judgments be made of the likely impact on the environment. Control powers are being strengthened by the amendment of the 1963 Planning Act and new legislation is in preparation to deal with water pollution. The tempo of industrial development must also be co-ordinated with the provision of the necessary infrastructure, particularly water and sewerage, for which a substantially expanded programme is now operating. Schemes to a total value of £31.7 million were approved up to the 1st April last and a further £6.4 million has since been approved.
A noteworthy feature of industry and services in this country is the multiplicity of trade unions. This has created problems in many ways. Where there are too many unions in a firm this complicates negotiations. There is also the likelihood that where so many individual unions cater for workers the service available to the ordinary member will not be up to the standard which he requires in today's conditions. We have in Ireland up to a half-a-million workers organised in 100 trade unions whereas in, for example, West Germany 6½ million workers are organised in 16 industrial unions. We have, therefore, introduced the Trade Union (Amalgamations) Bill, 1974, to facilitate rationalisation. I should make it clear there is no compulsion involved in the Bill, but it is our hope that it will facilitate further cohesion of the trade union movement, and its development in the way best suited to Irish conditions and the prosperity of the Irish people, as a whole.
In a situation where the incentives offered by many countries to attract foreign capital are extremely competitive, one of our greatest advantages is our labour force. Training in itself is important in that it enables individuals to realise their full potential, something which has been denied many Irish people because of lack of opportunity in the past.
In view of the importance of industrial training, the Government intend expanding our training capacity in our direct training centres fourfold by 1978. Centres are already in operation all over the country and it is intended to increase their number still further.
As a contributor to the national income, employment and the balance of payments the agricultural industry remains of vital importance in the economic life of the nation. In the past two years there have been remarkable increases in both agricultural output and income. Last year the value of output rose by over £140 million or 30 per cent on top of a rise of 24 per cent in 1972. Farm income rose by 32 per cent to £364 million on top of a rise of 38 per cent in 1972. While these income increases were much greater than those secured by other sections of the community, it must not be forgotten that in the past farm income lagged behind and farmers had considerable leeway to make up. One very welcome feature of the improvement in farmers' income is the fact that farmers are now able to secure the bulk of their income directly from the market so that the burden on the Exchequer is greatly reduced.
One of the most important tasks of the Minister for Agriculture and Fisheries has been the negotiation in the EEC Council of agricultural prices which are fixed in the context of the Common Agricultural Policy. For 1974-75 the Commission's original price proposals provided for an overall increase in farm prices of just over 7 per cent but after hard bargaining an improved price agreement was negotiated which represented an overall price increase of around 9 per cent. Due to a variety of reasons—not least, consumer resistance to higher retail prices—market returns for cattle have been far from satisfactory. The Minister for Agriculture and Fisheries has been working to improve this situation.
Deputies will be aware that important remedial decisions were taken at the meeting of the Council of Agricultural Ministers on 15th-16th July. I would refer, in particular, to the ban until 1st November on imports from all sources of all cattle, beef and veal, with the exception of certain quotas to which the Community is committed under GATT. Another important measure designed to promote more orderly marketing and consequently improved returns to farmers was the authorisation to member States to grant premiums to farmers who hold on to adult cattle, excluding cows, for varying periods: the details of this scheme will be worked out in the coming weeks. Measures like these should renew the confidence of farmers in the common agricultural policy which the Government are determined, will be maintained and developed in order to ensure increased incomes for our farmers with all the resulting benefits to the economy.
The EEC measures mentioned will be supplemented by the new loan scheme announced by the Agricultural Credit Corporation on 12th of this month which is designed to aid farmers who want to hold on to their store and young cattle during the present period of poor prices for these categories of cattle. Loans are expected to be for up to £2,000 and no security is required.
Conditions in the dairying industry are satisfactory. Although weather conditions so far this year have been somewhat unfavourable for milk production it is expected that total deliveries to creameries will approximate to last year's level which was 35 million gallons up on the previous year. Average milk prices for the year should be about 12½ per cent above the 1973 level. The effects of the prices for store and fat cattle have, however, had their effect on calf prices. Cattle numbers, particularly the breeding herds, are continuing to rise. The December, 1973, returns showed total cattle numbers up by 548,000 head and breeding stocks up by 172,000 head.
Farmers, of course, in common with others, have had to meet increases in their costs of production. This has been particularly the case with feed, fertilisers and fuel. Efficiency in the use of inputs is now more important than ever.
Considerable progress is being made in the implementation of measures for the structural reform of agriculture. The farm modernisation scheme introduced earlier this year provides realistic levels of assistance towards investment on Irish farms. The scheme introduced earlier this year provides realistic levels of assistance towards investment on Irish farms. The scheme is a comprehensive one and involves all our farmers, large and small. The aids are provided so that our farmers have every incentive to undertake the degree of investment needed to expand our agricultural industry for only in this way can we exploit the opportunities and meet the competition facing the industry in EEC conditions.
In addition, of course, to the new scheme to which I referred a few moments ago, the Agricultural Credit Corporation make loans for a wide range of agricultural investments. The high level of resources available to the corporation—some £34 million for the nine-months' financial year, an increase of 17 per cent on the amount disbursed in the same period last year—should ensure that farmers should be able to fill their present requirements.
A major social measure introduced this year by the Minister for Lands is the new voluntary retirement scheme for farmers. The object of this scheme is to enable the smaller farmer, who so wishes, to retire with dignity and reasonable financial security while he can still pursue an active life.
Progress is also being made in the formulation of two other structural reform measures. The first is the scheme of assistance for the hill and disadvantaged areas. This will supplement the income of farmers in the poorer areas and encourage them to remain in farming thus helping to maintain population numbers and to protect the environment. The second measures will apply the socio-economic directive of the EEC in order to provide the farming population with information and guidance as to the choices and opportunities open to them for the purpose of extending the facilities available for training in the skills required for modern farming.
Before leaving the subject of agriculture I should like to say a few more words in connection with certain aspects of the common agricultural policy. First of all, may I say that some of the criticisms made in this country about the Community's agricultural system relate to matters that were settled even before Ireland joined. We had to accept the position as it was, and seek modifications as part of the on-going work of the Community.
Some people seem to think that we can pick and choose in regard to the Community's agricultural arrangements. They seem to be under the impression that we can accept or adopt only those parts of the Community system which benefit us and those parts which involve some disadvantage or inconvenience for us, or impose some burden on us, can be ignored or readily altered. Some of the other member states do not like certain parts of the Community agricultural system which we regard as most attractive, and indeed of vital importance. But no member state can have the agricultural system precisely as it would wish. Of course, there is a tendency for member states to try to bend Community rules in one way or another. However, in view of our particular dependence on agriculture and our position as one of the smaller member states, it is in our overall long-term interests that the Community system should operate as uniformly as possible over the entire Community. All member states have to take the rough with the smooth, and it is quite definite that so far the advantages and benefits for Irish agriculture have greatly outweighed the very limited disadvantages.
What I have said about the application and operation of the Community agricultural system does not, of course, mean that we should not seek adjustments or modifications to meet our circumstances. Indeed, the Minister for Agriculture and Fisheries has been most active in seeking, and securing, special arrangements to solve particular problems which we have had or to meet difficulties which arose. Thus, in order to offset a temporary subsidy on pigs slaughtered in the UK, Ireland is currently receiving a special FEOGA subsidy on pigs slaughtered here. Similarly, during the three months, August to October, Ireland alone will be receiving FEOGA funds to meet the cost of a cattle slaughter premium. This again will not apply in any other member state. The Minister has also secured a special arrangement whereby Irish cattle slaughtered in the UK will qualify for the same slaughter premiums as will be paid on similar UK home-bred cattle.
These examples of special arrangements secured by the Minister for Agriculture and Fisheries are of major importance to the livestock sector. The pig subsidy has been of the greatest assistance to our pig producers during the current market difficulties, and the FEOGA aid for cattle slaughtered here and the application of the UK premium to Irish cattle slaughtered in the UK will contribute significantly towards strengthening cattle prices and helping our producers to overcome the critical beef market situation that exists at present not merely throughout the Community but in world markets generally.
I have referred already to some of the effects of the increase in oil prices in the past year. The crisis of last winter underlined how dependent on imported oil our own and other European economies were. The Government have given a lot of attention to energy policy in recent months and, although it is difficult to determine the final shape of policy until the position in relation to possible oil and gas reserves in our continental shelf becomes clearer, a considerable amount of progress has been made.
I should like to advert for a moment to the common agricultural policy to say that the Minister for Agriculture and Fisheries has been pursuing the question of a formal proposal relating to the "Green £" made to the Commission, to the Council of Ministers, and urging the Council to approve it. He is pursuing this matter actively both in the Council of Ministers and outside it. It was specially discussed at the Council meeting last week. It is now being considered by the Commission and will come before the Council of Ministers again in September.
In connection with the oil supply situation, both the supplies of crude oil and petroleum products are at present satisfactory and all restrictions on the distribution of oil have been removed. The supply situation is kept, however, under close surveillance, by the Department of Transport and Power and, as a safeguard against further shortages, fully up-to-date plans have been drawn up for oil allocation and petrol rationing based on the experience of the last period of restricted supplies.
Steps are also being taken to increase this country's strategic oil reserves. Discussions have been going on with representatives of the oil companies over recent months to ensure compliance with the 65 days reserve requirement of the EEC. This requirement as Deputies are aware will be raised to 90 days as from 1st January, 1975. The provision of the necessary storage facilities will involve substantial capital expenditure by the industry. We are also playing our full part in the discussions which are taking place on energy matters in various international organisations including the EEC, OECD and the Energy Co-ordinating Group set up following the Washington Energy Conference last February. The co-ordinating Group has made good progress in formulating a programme for allocating oil among participating countries in the event of an emergency. We are naturally interested in this matter as any disruption in oil supplies would have very serious implications for the economy as a whole.
The most obvious response to the difficulties recently experienced in both the supply and cost of energy is to economise in its use. There are a number of schemes under which grants are given towards expenditure to increase fuel efficiency. These are operated by the Departments of Transport and Power and Local Government and by the Industrial Development Authority. The question of establishing some central unit to co-ordinate and develop conservation schemes and practices in all sectors of the economy is under examination.
The recent substantial increases in the price of oil have made turf more competitive as an energy source and have made it feasible to develop bog areas which had earlier been regarded as uneconomic in face of low cost imported fuels. Bord na Móna are preparing a third turf development programme with the aim of bringing these bogs into production. Details of the programme have not yet been completed but it is hoped to increase substantially the production of milled peat for the generation of electricity. It must be emphasised that the financing of this scheme will cost a lot and will, of course, require detailed examination at Government level. In addition to increasing the level of assured supplies of energy sources and reducing our balance of payments problems, the scheme should provide a substantial increase in employment. While any further development of traditional power sources is to be welcomed, we will have to look largely to new sources for future growth. Significant discoveries of hydrocarbons in our off-shore seas could transform our situation. So far, only a relatively small find of natural gas about 29 miles south-east of Kinsale has been confirmed.
It is intended that the gas will be piped ashore adjacent to Cork city and this will in itself attract a certain amount of industrial and constructional activity in the area. The deposit should, when fully developed, be capable of giving a daily flow rate of 125 million cubic feet of natural gas for a period of about 20 years. Of this Nitrigin Éireann Teoranta are being allocated 52 million cubic feet a day and the Electricity Supply Board will initially be using 13 million cubic feet a day at a 75 megawatt gas fired plant at Marina. In subsequent years up to 1982 ESB usage will rise to about 89 million cubic feet a day; a number of gas-fired plants will be provided at Whitegate which with the addition of steam turbines using the waste heat will generate approximately 500 megawatts.
Some people may object that the use of the natural gas for the generation of electricity is not the most efficient use of high grade fuel. However, we must base our power generation on domestic fuel sources as far as we can. Moreover, the combination of gas-fired gas turbines with the subsequent addition of steam turbines using the waste heat will ensure that the gas is used with the greatest possible efficiency. The gas is suitable for the manufacture of ammonia. Nitrigin Éireann Teoranta are setting up an ammonia plant at Cork which will meet the potential demand for ammonia of the nitrogenous fertiliser industry in the next decade.
The recent news of an oil "show" increases our hopes that substantial deposits may be found on our Continental Shelf. However, we all know the danger of counting chickens before they are hatched. The Government are anxious that drilling in the areas of our Shelf not covered by the exclusive exploration licence held by Marathon Petroleum should be started soon. Consideration of the financial and other terms for the issue of further exclusive licences is at an advanced stage.
In November last, the Government approved, in principle, an ESB proposal to construct a nuclear power station for the generation of electricity. Preparations are being made by the Board to give effect to the Government decision. It is anticipated that planning of the project will be sufficiently advanced by the end of 1975 to enable a final decision to be taken at that stage. Selection of the site is primarily a matter for the Electricity Supply Board. The Nuclear Energy Board which was recently established has the responsibility of advising the Minister for Transport and Power and the Government on all aspects of proposals for the construction of nuclear power stations. The Electricity Supply Board have expressed their preference for a site at Carnsore, Co. Wexford but a final decision as to the choice of site must await further investigation and the advice of the Nuclear Energy Board. Through our membership of the specialised committee of Euratom and the International Atomic Energy Agency we are keeping in close touch with all developments in the nuclear field.
I want to say something about the Government's commitment to social reform which is being implemented by direct improvements in social security and health schemes, by reforms in the taxation system and by changes in the law governing working conditions and the rights of the disadvantaged in our society. Full implementation of this programme will transform the quality of life in Ireland and ensure social justice for all our people.
Everyone who cares to examine the record of social legislation enacted and introduced and the many non-legislative steps taken by the Government will see that we have already made major advances on the road to those objectives and redeemed most of the specific pledges we gave.
In money terms the yearly rate of spending on social welfare has increased from £167 million, based on the 1972 budget provisions to £295 million, based on the Budget this year—an increase of 77 per cent. These figures do not include the cost of the changes in the taxation system which have also, in themselves, contributed notably to the benefit of the recipients of social welfare. They cover only social welfare payments proper and, large as they are, they do not take into account the increases which have taken place in other cognate areas such as health and housing.
Translated into benefits for the individual, the changes made in the 1973 budget provided for what were then the highest ever increases in social security payments. Weekly benefits, pensions allowances were raised by £1.00 in the personal rates and by at least 50p in respect of every qualified dependant. The monthly allowances under the children's allowances scheme were increased by £1.50 for each child. This year's budget maintained the pattern established in 1973. The improvements provided for in these two budgets resulted, for example, in a married man with three children receiving an increase from £13.00 to £19 a week in unemployment or disability benefit— that is an extra £6.00 a week or an increase of 46 per cent. In the case of an elderly married couple receiving contributory old age pension the increase meant an extra £4.65, or 45 per cent, a week. The percentage rise in the monthly children's allowances was greater still. For example, one-child families received an increase of 360 per cent, two-child families received an increase of 180 per cent and three-child families received an increase of 127 per cent.
In addition to increase in benefit rates, many more people have been made eligible for social insurance and assistance payments by other improvements and extensions in existing schemes and by the introduction of new schemes. The qualifying age for old age pension and for free travel, free electricity and free television licences has been reduced from 70 to 68 years—the first reduction since old age pensions were introduced—increasing the number of old age pensioners by about 25,000. A further 12,000 persons have become eligible for pensions as a result of the substantial relaxation of the means test. Provision has also been made for the payment of an extra £3.65 a week to a non-contributory old age pensioner whose wife, or invalid husband, was not receiving any personal payment. The age limit for receipt of children's allowances has been increased from 16 years to 18 years in the case of children who are continuing in full-time education, are apprenticed or are incapacitated and likely to remain so for a prolonged period. This improvement has brought an additional 70,000 young persons within the scope of the children's allowances scheme. In the case of deserted wives, the period for which they have to be deserted to qualify for payment was reduced from six to three months.
A new scheme of allowances for unmarried mothers who keep their children has been introduced. The Commission on the Status of Women recommended the introduction of such an allowance for a period of not less than one year after the birth of the child but the new allowance continues in payment until the child ceases to be a dependant of the unmarried mother— age 18 years or, if the child remains at school, 21 years. Some 1,800 unmarried mothers are already benefiting under the scheme. A new benefit, based on insurance, has been introduced for deserted wives as an alternative to the means-test allowance already in existence. We have also provided for two new social assistance schemes applying to single women aged 58 and over who were unable to benefit under the existing schemes and to the wives of prisoners serving sentences of six months or more.
Social insurance was extended to all employees on the 1st April of this year, with the abolition, from that date, of the £1,600 remuneration limit which applied to non-manual workers. In the same month a system of pay-related benefits was introduced for insured workers who became sick or unemployed and for women entitled to maternity allowance. Title to children's allowances has been vested in mothers instead of fathers as the Commission on the Status of Women recommended.
Further improvements and extensions are being considered. The home assistance scheme has been reviewed in detail and it is hoped that changes will be possible in the near future on the basis of recommendations drawn up by the Department of Social Welfare. An examination of the implications of extending social insurance to the self-employed—a development which is seen as a priority—is in progress in that Department. The establishment of an Advisory Committee on pilot schemes to combat poverty in May last will, I hope, help in dealing with the problems of poverty and their solution—which depend more often than we may realise, not so much on money as on sympathy and understanding.
Another very important step has been the Government's decision in principle to support the establishment and operation of community information centres in a number of areas to advise and help people concerning all aspects of the social security services administered by the Department of Social Welfare. This network of information centres will be established as rapidly as possible.
The changes introduced by the Minister for Finance in his recent budgets have also contributed in their way to the social programme of the Government. In the aftermath of the lengthy debate in some detail in this House on the Finance Bill to implement provisions of the last budget it is not necessary for me to go in detail here into these changes.
In so far as the law governing working conditions and the rights of the disadvantaged are concerned, the Government have given workers the right to three weeks' holiday and have added an extra public holiday this year. We have given workers the right to a minimum period of notice of up to eight weeks in the case of dismissal and we have improved considerably the position of workers who become redundant.
A Bill was introduced last week by Long and Short Titles to tackle the problem of child labour and to protect young people who are at present open to exploitation. Following the Report of the Commission on the Status of Women, we have enacted legislation to eliminate discrimination and improve the position of women in our society. Women are now guaranteed in law equal pay by 1975 with the enactment recently of the Anti-Discrimination (Pay) Bill, 1974. The marriage bar in the public service has been removed; allowances have been given to unmarried mothers keeping their children; wives can now be paid children's allowances; improvements are being made in regard to desertion, maintenance and so on. Later in the year it is intended to enact further legislation to improve the position of women in employment. It is our objective as an administration to enable women—who account for 52 per cent of our population—to play a full part in the life of the State and to eliminate those barriers which prevent them from doing so.
The recent adoption legislation will, among other desirable changes, make it possible for couples in a mixed marriage to adopt, while the Maintenance Orders Act, 1974, enables effect to be given in this country to a proposed agreement with Britain and Northern Ireland for the reciprocal enforcement of maintenance and affiliation orders, which should relieve the position of deserted wives.
As Deputies will be aware, the Government decided, as part of their general programme of social reform that every member of the community, irrespective of income and type of employment, should be entitled to free hospital in-patient and out-patient service, free maternity services, free infant care services and assistance towards the cost of drugs, so that no family would have to pay more than £4 a month for drugs. Difficulties with the medical organisations have delayed full implementation of the scheme. However, since 1st April last, there has been a partial easing of the restrictions on entitlement, including the rasing from £1,600 to £2,250 of the annual income limit for the eligibility of insured, non-manual workers for certain services. I would hope that it will soon be possible to resolve the difficulties which have been experienced so that free hospital services can be made available to all.
The Government's achievements and policies in the field of housing were set out by the Minister for Local Government in his Estimate speech last week. I would simply refer to the announcement last Friday that we are making available an extra £9 million to local authorities for home loans in the current nine-month period. The total provision is now equivalent to more than £35 million in a full year, compared with expenditure of £11 million in the year before the Government took office. This is clear evidence of our commitment to providing decent housing for all our people. We are keeping the whole situation in relation to house building and housing finance under close and continuous review so that changes and developments which may occur will be watched in order to ensure that adequate facilities are available for the industry.
Ba mhaith liom anois roinnt a rá faoi pholasaí an Rialtais i leith na Gaeilge agus na Gaeltachta. In oráidí a thug mé le bliain anuas, ag labhairt dom faoi Thuaisceart na hÉireann agus faoi phobal na hÉireann uile, thagair mé do na snáthanna eágsúla sinsireachta agus dúchais as ar fáisceadh muintir na hÉireann sa lá atá inniu ann. Ní hé a bhí i gceist agam ins na tagairtí sin céimsíos a thabhairt don Ghaeilge ná don chultúr Gaelach. Is amhlaidh a theastaigh uaim an fhírinne a léiriú mar atá sé.
Aithníonn an Rialtas gurb í an Ghaeltacht foinse agus tobar an snáth Gaelach inár bhéin úiacht, agus is é an beartas atá ná lánfhostaíocht agus caighdeán maith maireachtála a chur ar fáil do phobal na Gaeltachta sna seachtóidí. Chun forbairt eacnamaíoch, shóisialach, theangaíoch, agus chultúrtha na Gaeltachta a chur chun cinn ar na bealaí is éifeachtaí bunófar Údarás na Gaeltachta ina mbeidh guth láidir ag pobal na Gaeltachta féin. Is faoi scáth Roinn na Gaeltachta a bheidh an tÚdarás agus beidh cumhachtaí leathana feidhmiúcháin aige chun clár uileghabhálach a chur i bhfeidhm.
Beidh Acht le rith chun na socruithe nua a dhéanamh, agus, idir an dá linn, tá Roinn na Gaeltachta agus Gaeltarra Éireann ag brú ar aghaidh go tréan le forbairt na Gaeltachta agus tá méadú mór déanta ag an Rialtais ar an airgead a bhíonn ar fáil dóibh. Ní beag an dul chun cinn atá déanta cheana féin.
Mar shampla, na tionscail nua ar fud na Gaeltachta a bhfuil cúnamh ceadaithe ag Gaeltarra Éireann dóibh, meastar go gcuirfidh siad fostaíoch ar fáil do suas le 4,000 cainteoir Gaeilge ina gceantair dhúchais.
Is mian leis an Rialtas freisin an pobal a spreagadh ar thaobh úsáid na Gaeilge ar fud na tíre agus, don chéad uair, beidh an phríomhfhreagacht i bhfeidhmiú an bheartais ghinearálta sin ar Roinn ar leith—Roinn na Gaeltachta. Faoi scáth na Roinne bunófar Bord na Gaeilge agus cumhachtaí feidhmiúcháin aige chun leas na Gaeilge a chur chun cinn. Bord reachtúil a bheidh ann tar eís Act cuí a rith ach bunófar go luath é ar bhonn ad hoc. Chun freastal ar na socruithe nua don Ghaeltacht agus don Ghaeilge déanfar atheagrú cuí ar structúr Roinn na Gaeltachta agus aistreofar oiread agus is féidir d'obair na Roinne go dtí na Forbacha i nGaeltacht na Gaillimhe.
Our membership of the European Economic Community has extended now for a period of more than one year. While there are features of our membership which may have been the cause of disappointment, we have, on the whole, gained substantial benefits both material and otherwise, from membership. The net flow of funds from the Community towards our country was of the order of £33 million in 1973 and further substantial sums have been approved but have yet to be paid. We have benefited from Community arrangements in agriculture, and as members of one of the largest and most dynamic industrial markets in the world, we have become an even more desirable location for new industry—as the figures I have quoted earlier for the value of new industrial projects approved by the Industrial Development Authority imply. Further, there is for us the intangible, though nonetheless real, benefit arising from the development of our sense of identity with our European heritage. The Third Report on Developments in the European Communities, laid recently before both Houses of the Oireachtas, ranged in more detail over developments in the various areas of Community activity.
As Deputies will be aware, the British Government have tabled in the Council of the Community a number of requests for amendment of the existing arrangements of the Communities. The most important of these requests related to British contributions to the Community budget. The British have here made the case that the present provisions are "inequitable". In response to the British case, the Commission is examining the economic and financial situation of the Community as a whole since enlargement and its likely future development. Other British requests relate to Community agricultural arrangements, trade policy, development aid and national industrial, regional and fiscal policies. These matters are all being considered as part of the on-going work of the Community and within the existing framework.
In general, we take the view that Community solidarity requires serious examination of problems raised by any member state. We also wish to see the Community maintained with its present membership. In the light of these considerations we have been happy to note the British intention to negotiate within the terms of the Community treaties. Our reactions to any proposals designed to meet the British case will, as the Minister for Foreign Affairs has pointed out, be largely conditioned by the degree to which these would promote the prospect of achieving real progress towards a democratically-controlled European union.
During the first six months of 1975 Ireland will hold the presidency of the Council of the European Communities. It will be Ireland's opportunity to provide chairmen for all committees and working groups of the Council as well as meetings of the Council itself during this period. Preparations are currently being made in Government Departments to enable this country to discharge fully its responsibilities.
Our presidency next year also covers the inter-governmental political co-operation activity of the member states which is quite separate from the Community framework. We will have the responsibility in 1975 of chairing all meetings of the Nine in this political framework. The major difference of organisation between these two sets of activity is that European political co-operation meetings are held in the capital of the presidency, which means that we will be called upon to provide in Dublin all the necessary secretarial and infrastructural services in addition to performing the function of chairman. As well as a number of meetings of Foreign Ministers and conceivably a meeting at higher level, there will be a large number of meetings, at official level, possibly 30 or more, over the six-month period. Apart from preparing those meetings and presiding over them, Ireland will have the important and demanding task of acting as spokesman for the Nine in their collective dealings with other countries.
The objective of this political co-operation procedure is to ensure close co-operation in foreign policy matters between the Governments of the Nine with a view to achieving better mutual understanding on major international problems and to strengthen their solidarity by harmonisation of views, co-ordination of positions and, where possible and desirable, common action. Ireland has participated actively in the framework since our accession to the Communities in January, 1973. At present consultations are held among the Nine on a wide range of foreign policy subjects. This framework has provided a valuable opportunity for the elaboration of common positions and attitudes on subjects such as the conference on security and co-operation in Europe, the situation in the Middle East, the proposed Euro-Arab dialogue, relations with the United States, and the situation in countries such as Chile, Portugal and Cyprus.
One of the topics which has been of particular interest in the past year has been that of arrangements for consultations between the Nine and other countries, and in particular the United States. It has now been agreed that consultations on issues of interest to the Nine and to the US should be carried out through the presidency in each case where the issue is raised by one of the Nine and where there is consensus in favour of such consultations. This appears to be a very satisfactory foundation on which to develop future relations and Ireland, as a member state of the Nine with many strong links of friendship with the United States, welcomes this agreement which ensures that the interests of both the Nine and the United States receive due consideration at all times.
An important initiative taken this year by the Community, acting together in the framework of political co-operation, was the decision to open a long-term dialogue with the states of the Arab world. Agreement in principle has been reached by both sides on this dialogue, the detailed content of which remains to be elaborated.
The broad aim of this dialogue is the long-term development of relations between Europe and the Arab world and co-operation over a wide variety of fields. We have participated fully in this initiative and we have indicated our willingness to contribute as far as possible to the successful achievement of its objectives. Discussions are also in hand among the Nine on the coordination of European proposals for inclusion in the dialogue; this is a matter of particular significance to us in the context of Ireland's tenure of the presidency in 1975.
We have been co-operating closely with our partners in the Nine in the conference on security and co-operation in Europe, the second phase of which is currently in session in Geneva. We share the concern of our partners that the results of this conference, the first major East-West dialogue in post-war years, should be sufficiently positive in all fields—that of increased freedom of human contacts and the diffusion of information, no less than those of trade and security—to enable it to succeed in its basic objectives of the furtherance of detenté and ensuring the future stability of the continent. I believe that we have been able to make a useful contribution both towards the development of a common position of the Nine, and in the conference itself, where we have, of course, benefited from the support of our partners in putting forward the Irish position where questions of particular interest to us arose.
I would now like to refer to a matter in the area of international affairs, not directly related to the EEC, but which is of tremendous potential importance for this country. The Law of the Sea conference which is being held at present in Caracas ranges over a very wide area, including such matters as territorial seas, contiguous zones, international navigation, exclusive economic zones, marine environment, marine research and an international regime for the sea bed.
One of the main purposes of the conference is to seek a new regime for the ocean bed outside national jurisdiction, with the probable creating of an international authority to control this area and its exploitation with particular concern for the needs of poorer countries. While international conventions do already exist, they do not in the light of present technological advances and the growth of the economic needs, deal with large areas of the law of the sea.
While acknowledging that the seas and their fruits are the common heritage of mankind and supporting the establishment of an international authority with an effective constitution, we will also be looking for the recognition of the preferential rights of coastal states. We will be seeking for this country the largest profitable area of national maritime jurisdiction in the form of an extension of the territorial seas and contiguous zones, and a wide economic zone. We see this as the most beneficial way of exploiting the seas both for the coastal state and, internationally, by ensuring the control of pollution, the conservation of living and non-living resources and the promotion of marine technology in these areas.
I said at the outset that inflation was probably the greatest single problem facing us. I want to preface what I have to say by some remarks on the growth of public expenditure. In the 12 months to March next, the Government have budgeted to spend £180 million more on the current side and £65 million more on capital development than in the previous 12 months.
Public service pay increases, that is the pay of civil servants, teachers, Army, Garda and health board staffs, account for a very significant part of the overall increase in current Government expenditure. The cost in 1974-75 of meeting standard increases under the national pay agreement 1974 for the public service is about £40 million and increases in staff numbers account for a further £14 million. These increased numbers are required for expansion in the fields of social welfare, education, health, telephone development, in EEC work and in the security forces.
These pay increases, together with the annual rise in the cost of servicing the national debt—now estimated to cost almost £190 million annually —absorb a very high proportion of tax buoyancy and limit the Government's room for manoeuvre in regard to desirable expansion in other areas. Nevertheless, in 1974-75 the Government are spending an extra £34 million on social welfare mainly on improvements in benefits, including children's allowances, and the lowering of the old age pension age to 68. An extra £17 million—not including pay—is being spent on various expansions and improvements in the health services including the cost of transferring a further instalment of health charges from the rates to the Exchequer.
In 1974-75 the Exchequer will provide £126 million towards current health costs and the rates will provide £19 million. In education apart from the increased costs of teachers' pay and the cost of increases in teacher numbers, about £6 million is being provided for various improvements, including increased expenditure on teacher training, school transport, higher education grants and free education grants. In local government an extra £5 million is being provided for housing subsidy, the Road Fund grant is being increased by £3.1 million and provision is made for continuing the interest subsidy to building societies which the Government introduced in May of last year. There are also substantial increases in the amounts provided for expenditure under the Public Capital Programme on services like housing, industrial development, agriculture and so on.
The rapid increase, in recent years, in both current and capital expenditure has resulted in a sharp rise in the amount of total expenditure not covered by tax or other receipts. This increase in the net borrowing requirement has been all the greater because of the limited room for manoeuvre on the tax front combined with the necessity to revise the personal tax allowances. Not only do we get a higher proportion of our revenue from indirect taxes than any of the other EEC member states but the burden of taxation in Ireland in recent years, has been growing faster than in most other member states.
The net borrowing requirement is financed from two major sources viz:- (a) normal Exchequer resources, and (b) residual Exchequer borrowing. While there is a reasonable assurance of realising most of the amounts under the ‘normal resources' heading, sales of securities to the public are exceptionally volatile and react sharply to events outside the Government's control, in particular to trends in international interest rates, and cannot, therefore, be predicted with any degree of accuracy.
Because the domestic resources available to the Exchequer have failed to keep pace with the growth in expenditure, there has been a rapid increase in the amount of money raised abroad in recent years. Apart from the element of uncertainty if not hazard which this gives rise to, there is also the consideration that foreign borrowing is becoming increasingly costly and the repayment period increasingly shorter.
All of these factors point to the need for a most careful and critical appraisal of State expenditure both in the current and in future years. This leads me to deal with a subject closely related to the high rate of increase in public expenditure in recent years. I mean the phenomenon of inflation. Inflation has been described as the enemy of economic progress, of social justice, of the young seeking jobs in Ireland, of the saver and, indeed, of democracy itself. With these sentiments I fully concur.
The extent of inflation in our economy is indicated by the rise in the 12 months ended mid-May last, of over 16 per cent in the consumer price index. This compares with a rise in the year to December last of approximately 19 per cent in average industrial earnings.
Much of the rise in prices is due to external influences. In fact, nearly 50 per cent of the increase in 1973 is accounted for by the rise in the price of imports, as compared with only 10 per cent of the increase in 1972 and less than 20 per cent in 1971. The effects of the oil price increases are reflected in the dramatic increase in the contributions of fuel, light and transport to the total increase in consumer prices. This was 31 per cent in the second quarter of 1974 as compared with about 10 per cent in the final three quarters of 1973.
Over the last 12 months, increases in material costs generally have become important as causes of price increases. In December last, they accounted for nearly 90 per cent of total cost increases. In the first four months of this year the corresponding figure was about 80 per cent. This fell in May and June but the explanation for this decline lies not in any reduction in the absolute size of the rise in material costs but rather in the increase in the percentage accounted for by wage costs claimed in price applications as a result of the 1974 national pay agreement.
In the drive against inflation it is obviously necessary to ensure that only price rises justified by increases in costs which cannot be avoided or offset are permitted. The main agency for this is the National Prices Commission whose work has ensured substantial savings to consumers. Increased annual costs of £119 million were claimed in nearly 1,200 applications for price increases considered by the Commission in the 11 months up to 21st May, 1974. Only £100 million were actually allowed. It is, of course, impossible to say the purposes on which the money saved to consumers would have been spent if it had remained with the firms the subject of the controls. Part of it may well have been invested, directly or indirectly, in increasing or improving methods of production. This is one of the costs of price control, which though not quantified, we should not forget. It is one of the inefficiencies which inflation compels us to build into our economic structure.
In dealing with prices we are dealing with the symptoms, not the causes, of inflation. I have not referred to the external pressures forcing prices up to distract attention from the domestic causes of inflation. Even in a period when import prices soared, domestic causes accounted for more than half the rise in consumer prices.
The dominant influence here is the increase in incomes of all kinds, far in excess of the rise in the volume of national output. For example, the rise of 19 per cent in employee incomes in the industrial sector in 1973 compares with a productivity increase of only 7 per cent. This resulted in an increase of 11 per cent in unit wage costs. In itself, this might not be too dangerous if trends in other countries were similar. But the rise in unit costs here has been well above the increase in most industrialised countries.
I need hardly spell out the consequences of a continuation of this trend. If our prices are not competitive we will be unable to sell the goods and services we produce. Persons will lose their present employment and the attractions of the country as a location for new industry —on which our future prosperity depends—will be diminished or dissipated.
The 1974 national agreement which was ratified only after months of hard negotiation will be one of the key factors here. Not only did it sort out and provide a solution for various problems arising from widely differing terminal dates of industry agreements, but it is producing and will produce very substantial pay increases for workers generally. In addition, it has guaranteed that increases in the cost of living index in excess of 10 per cent in the 12 months to November, 1974, will be fully compensated for.
In strictly economic terms, however, the agreement, will add to, rather than alleviate, the pressure on costs and prices. It is essential, theremore, that its terms should be observed and supported by all. The basic pay increases provided for are substantial, by any reckoning; indeed the economy will have great difficulty in trying to absorb the increased labour costs involved. Even before the agreement expires, moderation in pressing anomaly items over and above the standard increases could be of significant help. Indeed, the extent to which claims have been pressed for increases over and above the standard provisions has been a source of disappointment to the Government.
Also discouraging has been an increasing readiness to ignore the peace clauses of the agreement. Over the past few years our economy has been transformed from one characterised by a high strike record to one in which our industrial relations performance has been amongst the best in Europe. Unfortunately the trends which have developed in the first half of this year are in the opposite direction. In that period we have lost about twice as many man-days through strikes as we lost in each of the three preceding years. A few disputes accounted for the vast majority of the man-days lost. If this trend were to continue we would as a community lose one of the prime advantages of national agreements.
The over-riding priority on the economic front now is for Government and other various interests concerned to work out ways and means of winding down the present rate of inflation. Luckily, the external pressures seem to be easing. The rise in food prices is slackening, commodity prices have declined in recent weeks and may well declined further. The future course of oil prices is more difficult to predict. The moves towards fuller State participation by the Governments of the producing countries may tend to raise prices somewhat. On the other hand, the supply demand situation points to the likelihood of some fall in prices. We may hope, at least, that any increase will be moderate. In these circumstances, we must ensure that this opportunity of turning back inflation is not thrown away by actions in areas within our own control. The Government are fully conscious of the influence of expenditure within their own programmes on the pressures of demand within the economy generally.
Basically, as I have indicated, we must concentrate on the domestic causes of inflation. This is not to deny or minimise the extent of imported inflation. It is simply to recognise that externally generated inflation is largely beyond our control. We will, of course, support any well conceived international initiatives to moderate it and it will be the Government's concern to cushion the poorer sections of the community against its worst effects. But the hard fact remains that it is only on the domestic elements of our inflation that we can exercise any really significant influence.
To exert such influence demands a certain minimum of agreement between the main parties concerned on what needs to be done and, most important it demands the will to do it, despite the sectional pressures that are bound to arise. As I have said, the most powerful of the domestic causes of the present inflation has been the extent to which the rate of increase in money incomes has out-paced the growth in national productivity. The national agreements made so far have, despite the other advantages which encouraged the Government to support them whole-heartedly, added to inflationary pressures. What may have been good enough when the rate of price increase was lower, however, cannot be risked when the rate is running, as it is at present, at over 16 per cent. It is not too early, therefore, for urgent examination of the ways in which whatever new arrangements replace the current agreement can help to slow down inflation drastically.
The Government recognise, of course, that in such arrangements, since price increases cannot be stopped overnight, real moderation by workers in their wage demand may need to be matched by provisions which, as far as possible, protect their existing wages against the ravages of price increases.
I have spent some time on wages because of their importance but all other forms of incomes and prices need equally critical scrutiny, the criterion in all cases being, whether developments in these areas can be harnessed in the fight against inflation.
One of the matters which will engage the Government's attention is whether, and if so what, improvements are needed in the relationship between the way we determine income increases and the way we take decisions at national level on major economic, fiscal and social policies. It is important that decisions on income increases should harmonise with the community's decisions on those wider issues. On the institutional side this means looking at how such bodies as, for example, the Employer-Labour Conference, the National Prices Commission and the National Economic and Social Council relate to one another in their work and aims and how they, in turn, relate to Government Departments and the legislature. Mere tinkering with institutional machinery can do more harm than good and that is not what I have in mind. It is, however, obviously desirable that income increases be determined with full awareness of how they fit into the wider context of the country's economic and social policies. The institutional framework can help or hinder this.
To sustain employment for a labour force which is expected to increase in the years ahead, while maintaining a rising standard of living and an equitable distribution of income, requires, in turn, an increasing level of public expenditure which is incompatible with the existing high rate of inflation and with the likely lower growth rate which this inflation will ultimately engender. There is now before us as a community an unavoidable choice between a stabilisation policy aimed at safeguarding employment and social equity or the persistence of the existing rate of inflation with its dire consequences for employment and living standards. The Government will ensure that the course in the best interests of the entire community is followed and the only course in the national interests.