At the latest Westminster election Northern Ireland candidates of the United Ulster Unionist Council received about 58 per cent of the votes cast, the Social Democratic and Labour Party about 22 per cent, the Alliance Party about 6 per cent, with 3 per cent each going to the Republican Clubs and to the Unionist Party of Northern Ireland.
It is easy to put a gloss on these figures but the one thing that is clear is that, in the face of continued violence from the Provisional IRA, and the appalling counter-violence they have evoked, political opinion amongst the majority section of the Northern community has hardened increasingly to the point where agreement on a solution that could yield peace and justice in this area has been pushed further and further away. We can understand the reaction of the majority, in the face of all they have had to face during these years. But we are conscious that those who have suffered most, from intimidation and kangaroo court murders, from sectarian assassinations and some security activities are the minority section of the community. The very fact that they are a minority, and in some parts of Northern Ireland a very isolated minority, makes their fears all the more intense. We would not be human if our hearts did not go out to them in this terrible situation.
We have attempted to reduce the tensions in Northern Ireland that have contributed to these sufferings. We have done this by seeking to alleviate the unreasoning fears of the majority section of the Northern community, through our solemn commitment to the principle of unity by consent—that political unity can be achieved in Ireland only with the consent of a majority in Northern Ireland. Clearly it is on us in this part of Ireland that much of the onus devolves to earn that consent.
There are, as we know, many obstacles in the way. They are economic—in the lower incomes and different taxation systems and in the differences in employment opportunities here and in the North. These differences are diminishing rapidly with the economic progress we have made and with the changes in social welfare in the last two budgets.
Perhaps above all, the obstacles are psychological—in the different historical traditions and beliefs to which the two parts of the country subscribe; and, perhaps more than anything else, in the beliefs so firmly held by so many in the North that we here are in some way a threat to them and their way of life. Nothing could be further from the truth. We do not seek any conquest by force. We are not interested in violence, and the record of this Government and of the courts is there to prove it.
Again I would say that our best overall hope lies in the recognition by all of the futility of violence. We are part of a community of nations now which conceives of unity not so much in national terms as in the only possible framework in which it can work in today's world—that of continents. It has taken two world wars, the loss of tens of millions of lives and the destruction of cities, towns and villages, indeed civilisations—the whole physical heritage of some areas—to bring about the attempt to realise and to revitalise that concept in Europe. We here in this island have always claimed our part in the European heritage. The North and this part of the country have had their fill of death and destruction. We have seen enough of the barren hatred which violence brings. Can we not learn now what we must eventually accept—as the men of Europe have learned and accepted—that only through the political process, by discussion and negotiation, and often by compromise can the result which we all want to be achieved be achieved. It is true to say that the gun does not convert: it merely maims and kills.
This Government came to office on a platform of social reform. We undertook to remedy the results of neglect of years, to effect major advances in the position of the disadvantaged in our society and to ensure social justice for all our people. The elimination of poverty and deprivation is not the work of one year or two. It is a task that will take time and resources but also sympathy and imagination.
We gave a special priority in the two budgets that have been introduced to the development of the social services. This is reflected in the growth of Government expenditure, current and capital, in this area. Current Government expenditure on the social services, including social welfare, health and education, has risen from £247 million in 1972-73 to an annual rate of £421 million in the current financial period—an increase of 70 per cent, in a period when total current Government expenditure rose by just under 50 per cent and the consumer price index has risen by almost 30 per cent. All categories have risen substantially, especially health and social welfare. There has also been a substantial increase in the amount devoted to capital expenditure on the social services.
The annual rate of spending on social welfare benefits proper like pensions and unemployment benefits has increased from £167 million, based on the 1972 budget provisions, to £295 million, based on this year's budget— an increase of 77 per cent. Our 1973 budget saw the greatest contribution and distribution of all time to social welfare beneficiaries. This year's budget continued that pattern.
In speaking in the Adjournment Debate some Deputies criticised this and I gave examples of what the improvements in these two budgets meant for recipients in various circumstances from which it was clear that the allegation was baseless. Lest anyone might think the examples I gave on that occasion were selective, let me say that I have details here, with 23 examples in all, examples which were not chosen selectively to support my case, that in all of these 23 cases the percentage increases in the cash value of the benefits are well in excess of the increase in prices since February, 1973.
In addition to increases in rates of benefit, we have made many more people eligible for social insurance and assistance payments by the improvements and extensions in existing schemes and by the introduction of new schemes. The characteristic of all these changes was the humanity and concern which shaped the new measures in favour of such varied groups as unmarried mothers, old age pensioners with non-pensioner spouses, deserted wives, single women over 58 and the wives of prisoners.
As was announced recently the Tánaiste has taken over responsibility for the services in respect of children and he is preparing a new Children's Bill. It is our intention to do for children what we have already done for the women of Ireland of differing marital status.
One of the areas in which some criticism has been expressed has been in regard to agriculture. That there are great problems I do not deny. But I reject outright any suggestion that they are attributable to any actions or omissions of the Government. If it was not for the Government's action, in particular the work of the Minister for Agriculture and Fisheries, the situation might have been much worse.
I know, and the farmers know, that the Minister for Agriculture and Fisheries has done trojan work on their behalf, that he has personal practical experience of their problems and of the industry and his dedication in their interests is without question. They know that if this country had been represented abroad otherwise, many of the measures taken might not have been taken, and the fundamental principles of the common agricultural policy would have been in danger.
It is a truism that the fortunes of our agriculture are largely decided in the markets of the world. This has been the case since the foundation of the State. The basic cause of the present difficulties in the beef and cattle sector, difficulties which are shared by farmers throughout Europe and the United States, is an imbalance in the world between supply and effective demand.
Accession to the Community was the right decision for our farmers in 1972 and it is still right today. Given all the defects in the way intervention has worked, it is pertinent to ask where would our farmers have been without it.
It is basic to the common agricultural policy that it is a common policy, involving common management and prices governed by collective decisions by the Ministers reached in a spirit of Community solidarity. This means that it is in our long term interests to act in accordance with the decisions reached in common—and to insist that others do likewise. There will be times when this principle of action may inhibit us from acting just as we would wish but this is unavoidable and has to be accepted if we are to reap the substantial net gains of participation in the CAP. If others break the rules, it is not for us to follow them and take unilateral action as was suggested here. If we had acted in that way, and it is well that the House and country should know this, we would not have been able to show when seeking a variation in the rate for the green £, that we had not taken action contrary to the terms of CAP. This was particularly important recently when the German authorities demonstrated their opposition to national aids.
This is not the way to protect our farmers' interests. The way is to do all we can, as a Government, to ensure that the common policy is strengthened and made more effective. This is what we have done, and by timing our initiatives rightly, we have achieved the maximum success possible a Community of divergent interests. The House is aware that when a decision was taken to permit beef from outside to come into the Community the Minister for Agriculture and Fisheries voted against it. That decision was taken on a 5 to 4 vote.
Since last December, the Minister for Agriculture and Fisheries has been active, with all the force at his command, to ban imports of beef and cattle from third countries. The decision to do so was only taken at the Council meeting on the 15th and 16th July after his continuous pressure and that of others over a period.
I should like to refer to the arrangement whereby during the period from August up to the end of this month, Ireland, alone among member states, is receiving FEOGA funds to meet the cost of the cattle slaughter premium; the special arrangement whereby Irish cattle slaughtered in the UK qualify for the same slaughter premium as is paid on similar UK home-bred cattle; the FEOGA funding of compensatory amounts on our cattle and beef exports to the UK when that country was authorised last March not to make the full alignment step in their cattle guide prices due under the transitional arrangements of the Accession Treaty; the payment by FEOGA of export refunds to offset the cost of monetary compensatory amounts on our exports of cow beef to the USA, and the implementation of the farm modernisation scheme in a way which, firstly, exploited to the full the room for manoeuvre allowed by the relevant EEC directive to cater for the special needs of smaller farmers and, secondly, provided a level of aid which is not only by and large better than what was previously available and in many respects is more favourable than what is available to small farmers in any other member state.
The Government are conscious that the various measures taken by the Community have not yet brought about a satisfactory situation in the cattle trade in this country. In particular, we are conscious that small farmers with young cattle are faced with particularly serious fodder difficulties. For this reason it was recently announced that a scheme of loans at very low interest rates for which we are expecting the very early approval of Brussels, was approved by the Government, in addition to the special ACC scheme of unsecured credit introduced last August.
Perhaps, the greatest success in the Brussels package was in respect of the green £. The effect of this agreement will be to increase farm income by over £50 million over the next year. Up to April of this year the only advantage which would have resulted from varying the green £ would have been in the dairying side which was doing reasonably well in any case and where the cost to consumers here would be greatest. There would have effectively been no benefit to the cattle and beef sector.
Thereafter, the balance of advantage shifted particularly in relation to cattle and beef and the Government having re-assessed the situation decided that the benefits to be gained justified seeking Community agreement for a change. The Minister for Agriculture and Fisheries pursued the matter vigorously to a highly successful outcome. This is the factual situation. Had we moved earlier the benefits to be gained would have been limited and the chances of success considerably more remote.
It has been alleged, that the Agricultural Commissioner, M. Lardinois, said earlier this year that there should be no problem in getting EEC clearance for a change in the Irish green £. What the Commissioner indicated, and his subsequent attitude clearly showed that this was so, was that he saw no problem in obtaining agreement to a joint British and Irish reduction in the green £ rate. The prospect of securing any British move in this matter was as Deputies know, much less likely early in the year.
The Minister for Education has been the subject of some comment here and there.
To use the jargon of the educationists, education is a slow developer, in that the results become apparent very often a long time after action begins. I think it is correct to say that the Minister, who is less than two years in office has made a number of important changes and the fruits of his action will be seen in time.
As the Minister said very recently, the cornerstone of our education structure is the national school, because primary education embraces all the children of the nation. The teachers in the national schools have over many years sought an extension of the period of initial training and a university degree on the successful termination of that training. The Minister has extended the course of initial training to three years and has initiated discussions with the universities on the matter of the award of a degree.
There are two areas of the primary system where improvement can have immediate effect. These are (i) the provision of new schools and (ii) the care and maintenance of existing schools. In the school-year 1972-73 a sum of £3,831,000, was spent on new buildings and on the enlargement of existing buildings. In 1973-74 this Government spent £6,629,000 on these activities, and next year we propose to spend £10 million for the same purposes. Even allowing for the increased cost of materials and for wage increases the increases we have made in this provision of new schools is substantial.
The Minister has recently announced what he himself termed a breakthrough in the system of State support for the care and maintenance of national schools. His words have been echoed by the managers' associations. Here again comparisons are enlightening. In 1972-73 the provision was £790,000. It was increased to £923,600 in 1973-74 and for 1975 there is a sum of £3,231,000, which will increase the 1972-73 provision fourfold. His scheme offers £6 for every £1.50 contributed locally, subject to an overall maximum governed by the number of pupils in the school. I want to make quite clear that there is no levy on pupils. The scheme recognises the existence of a traditional local contribution but has increased vastly the proportion of the running costs borne by the State. This new scheme meets the request of the school managers who assert that, at present, by far the greater portion of the running costs of national schools has to be met by local contribution. The condition that parents should have a say in the management of schools is one that will be generally welcomed.
These increases in the allocation of tax-payer funds for education have been made despite the critical nature of our economic conditions and environment. They are a clear indication of the Government's commitment and our investment in the future which is one of the principal characteristics of the expenditure of time, money and effort in education.
With regard to second-level education, which has been the cock-pit of discussion in the country for over a decade, I do not wish to say much because time prevents it, but I want to mention that we will encourage the establishment of community schools whenever and wherever we can.
Finally, in respect of third-level education, ever since Donogh O'Malley proposed a merger of the two Dublin colleges, UCD and Trinity, we have had reports and recommendations galore but no action or decision. It is a thorny and difficult problem and every solution offered meets some vehement opposition from one section or another. But the problem must be faced because of the vast sums of money which are being and must continue to be invested by the State and because of the need for a clear-cut policy about technological education. It has been left to us to face the problem, and I hope in the near future to announce Government decisions on the matter.
In regard to housing I want to adhere strictly to the facts. As the Minister for Local Government recently announced, last year more than 25,000 houses were completed. The present indications are that about the same number should again be completed in the year to the 31st March, 1975. Persons may dispute the future but there can be no doubt as to what has happened and is happening. In 1973-74 and probably again in 1974-75, there will be a greater number of houses built than at any time previously.
An adequate supply of mortgage finance is essential to private housing. The Government have taken exceptional measures to ensure that the money will be available for this purpose. Last year we introduced a special interest subsidy for borrowers from the building societies which is costing about £2.4 million a year. This is in addition to the relief from corporation profits tax enjoyed by the societies and the arrangements for the payment of income tax by the societies at a composite rate, which taken with the interest subsidy, are now costing the Exchequer approximately £9 million a year. The Government have also negotiated through the Central Bank stand-by credit facilities for the societies totalling £11 million from the Associated Banks to tide them over any temporary difficulties. These loans are guaranteed by the Minister for Finance and interest on money borrowed by the societies under this arrangement is subsidised.
The House is aware of recent changes announced by the Minister for Local Government to relax the conditions on which building societies may make loans. These changes will not only enable the societies to lend for housing with a greater degree of flexibility but also by freeing loans for secondhand houses, be of considerable assistance to those seeking this type of house.
The figures indicate an immense rate of progress throughout the industry. The figures I have mentioned and the adjustments to which I referred in the course of the Adjournment Debate last July, particularly in regard to building societies, may mean, however, that in order to sustain the housing programme at an acceptable level and to ensure that the employment it gives, not only in the construction of houses, but in the ancillary materials and furnishing industries, is maintained, funds must continue to be attracted to the societies and certain changes will have to be made to continue to ensure that these funds will be so attracted.
At the same time, the number of houses built by local authorities has been increased very substantially. Last year, a total of 6,500 houses were provided by local authorities and the total number provided by the local authorities, in dwellings completed with the aid of grants from the Department of Local Government, amounted to 25,300.
The debate will afford other Ministers an opportunity to speak on particular aspects of their individual Departments, but I want to say a few words, before concluding, on the general economic situation. In my speech on the Estimate for my Department last July I referred to the current world economic situation, to the adverse international situation which affected this country and the impact it had on our economy and on the prospects for employment. I mentioned that the international economic organisations forecast that economic growth next year would be somewhat better than in the current year but I pointed out that this view was dependent on an up-turn in the US and German economies where it was expected that the authorities would pursue more expansionary policies. This hope is no longer well-founded. In America, a concentration of effort on reducing inflation is leading the Administration to plan on running down the economy in the next few years. The German Government have made it clear that they will not move to stimulate the economy unless other countries succeed in their efforts to reduce inflation. Other EEC countries such as France, Italy and Denmark have also resorted to restrictive measures.
Here, the home market has had its difficulties. The impact of the budget has not yet been reflected in a rise in consumer demand where slackness persisted in the second quarter. The inroads of inflation are sapping purchasing power and also, perhaps, inducing caution among consumers. Another factor affecting the sales of our goods is competition from imports. I am afraid that here we are reaping the bitter fruits of the more rapid rise in our costs than in those of our competitors. When the economy was booming, keen prices were not crucial in selling. In the more difficult and the leaner times of today, price competitiveness has again assumed major importance. This applies, of course, with even greater force on export markets where our performance has so far been very creditable but, nevertheless, not a matter for self-congratulation if we compare our performance with the increases recorded by some other EEC countries.
Deputies will be aware that the increase in the consumer price index in the year to August last was almost 18 per cent. I want to make two points about this. The first is to refer to the way the rate of increases has accelerated from about 5 per cent only five years ago. This is causing profound anxiety to ordinary people. The second is to note that we are now moving from a period in which unavoidable imported inflation was the overwhelming influence on prices to one in which domestic causes within our own control are assuming greater significance.
It is now estimated that the balance of payments deficit this year will be about £300 million or about 10 per cent of GNP which seems to be a record for any OECD country. The prospect for next year is one of hope for a relatively small improvement.
I have referred to the international causes of these phenomena but I do not want to be taken as arguing that there is little we can do domestically to ease or solve our problems. The contrary is true. The difficulty is that in present conditions the Government alone cannot, without taking powers of a nature and a scope which most people would find repugnant, be fully effective in keeping the economy on the right course. The Government spend about 40 per cent or so of gross national product, through their current budget and capital programmes. This gives any Government considerable leverage. They can, by emphasising their capital programmes, encourage investment and so induce self-sustaining employment. They can by their taxation system and philosophy, as a minimum, ensure that investment and employment are not discouraged. And they can— as they have—through their welfare codes, look after the weaker sections of society and ensure they are protected from the ravages of the worst inflation and the most widespread recession that has hit the western world in this generation.
All this, as I have said, affects about 40 per cent or so of what we as a community produce. The other 60 per cent where decisions are taken are private decisions, whether of companies, of unions, or of farm organisations; and this part of the community's decision-making process can in our society dominate the sort of growth and the sort of economy we make for ourselves in the years ahead. We can go for high incomes— I want to stress this—and see unemployment queues grow because the products the men should be making are too dear or are too badly designed or because the equipment they are asked to use is too antiquated for their products to sell against the competition of other countries, who pay themselves less and spend more in improving their machinery and in infrastructure and the design of their goods.
Or we can in the period ahead accept income restraint—and perhaps even invest more—and so maintain the level of employment at as high a figure as is possible in the bitterly competitive world about us. The choice is as stark as that. It is higher money incomes eroded, by higher prices and high unemployment or a reasonable level—I emphasise this—of income and employment maintained at as high a figure as conditions permit.
If people try to take too much out of the economy, they can only imperil their own jobs or those of others. Good wage agreements are of no value if the firm goes out of business. Some powerful and sheltered groups might be able to obtain their demands, for a while, at the price of the jobs of others: but in the end in the economic environment in which we are now living, even they, who think themselves secure, could suffer.
This is not a question of the Government asking the people to forego the fruits of economic growth. It is rather a matter of moderating expectations that in the short-term simply cannot be realised. It is a question of stabilising the economy and ensuring the basis for a resumption of growth in living standards as conditions permit.
Deputies will be aware that the Government have called for a national partnership to meet and overcome the economic crisis. It has been increasingly realised in all countries that Governments alone cannot ensure the prosperity and stability of complex modern economies. In Britain and in America we have recently seen the moves to promote a wide-ranging process of consultation as the basis for what has been termed the social contract in Britain. In Germany, co-partnership has for long been a key factor in that country's economic success. This Administration came to office committed to Government by consultation and we have acted in accordance with this commitment.
A month ago I and other members of the Government met the major economic groups in the Community to give them our appreciation of the economic situation and of the need for a united national response to it and to get their views on how best we should solve our difficulties. Tomorrow, the Minister for Finance will be consulting the National Economic and Social Council whom he has asked to submit an early report on the approach to the economic situation. We are also conscious of the need to reach beyond the economic leaders and spokesmen and put the facts and implications before the people as a whole. To this end, we intend to publish a paper on the situation next week and we are considering other methods of informing them fully.
As I told the national economic organisations, we have been considering how all facets of our ongoing economic and social policies together with any new measures that are needed and can be taken may best be fitted into an overall strategy for 1975 and the years beyond. This strategy will be implemented through all the instruments at our command, including the next budget which, of course, is greatly advanced because of the change in the financial year.
The aims of this strategy will be first, as I said earlier, as our top priority, to maintain employment as far as lies within our power and to achieve this by moderating the rate of price increase and the rise of our external deficit; secondly, to ensure that the burdens imposed on us by external difficulties are equitably shared and that, in particular, the real purchasing power of the poor and disadvantaged is protected; and, finally, to provide a sound basis for renewed growth over the medium-term.
I have stated, on a number of occasions recently, the principles that would govern our strategy. I repeat that the Government are resolved to avoid resort to contractionary policies which would increase unemployment. I said, that if we failed to get the national partnership which we sought, we might be compelled, in the interests of national solvency, to take drastic restrictive action—but that this need not happen and was not what the Government wanted.
If we did fail to get a response from the people, such action would surely have to come sooner or later. As a Government we have to look beyond the short-term, to ensure the basis for future growth. In the short-term it is certainly desirable to offset the contractionary influence on the economy of the rise in the prices of imported commodities and this is our intention. But had we to bear the increase in the cost of public sector pay which could face us if we do not get moderation, on top of the increases in other expenditure needed to stimulate the economy, public finances would be stretched to beyond breaking point. Our foreign borrowing is already high. A continuing rapid increase in this borrowing requirement is not prudent and, indeed, may not even be possible. To push dependence on it too far is to risk a collapse of our capital programme at the whim of foreign bankers. The alternative, if we were faced with an immoderate rise in public spending, could only be penal taxation which would inevitably cause a severe set-back to our prospects for future development.
Similarly, it is right and proper that we should use the leeway afforded by capital inflows and our external reserves to avoid shock treatment to eliminate or even to reduce very substantially the balance of payments deficit. But we could not face with equanimity the prospects of deficits equal to 10 per cent of GNP for an indefinite period. At some stage, the burden of servicing the necessary borrowings, whatever form they took, could become crushing and again we would be exposed to the danger that suppliers might eventually refuse to provide us with the imports vital for our economic life. In the long-term we will have to shift resources into exports to pay for our higher-priced imports and this again means getting down our rate of inflation. This will be a gradual process but a start must be made. To suggest that we are faced with a choice between stimulation of the economy and control of inflation, seen as opposed alternatives, shows a basic misunderstanding of the position. The position is rather that the more inflation can be moderated, the greater the stimulus the Government will be able to give to the economy.
If we get real moderation in income demands, perhaps combined with protection against erosion of real incomes by rising prices, we can progressively reduce inflation and safeguard employment.
We face a testing challenge as a nation. I have no doubt, and we got this message clearly from the groups we met representing trade unions, industry and agriculture, that we have the capacity, the will, the skill and the ability, and the Government will provide the leadership, to get us out of these difficulties.