It is perfectly correct. In am not going to engage in an exercise, which I declined to engage in yesterday, which would involve repetition of statements which I previously made. There is no point in assuming that we can overcome all our problems by foreign borrowing. Foreign borrowing, no matter for what purpose it is made, even if it is made in order to carry us over the temporary difficulties of the oil crisis, is nonetheless incurring a debt at a high price, because interest rates are currently high and for a short term, because at present money is only being lent on short term. Therefore we have to be prudent about the size of the foreign borrowing which we make. From all sectors, not merely from the Opposition benches here, has been incessant demands for more and more money from the Government. The simple truth must be faced that at the moment, when we are operating in a deficit budget situation, we are not as a community paying our way. We are instead borrowing abroad in order to cover current expenditure.
That happens to coincide not only with our own correct assessment of the short term needs of the situation but also with every worthwhile opinion of every reputable economist at home and abroad. It coincides, too, with the recommendations of all the international organisations with which we are associated, including the International Monetary Fund, the World Bank, the European Economic Community, the Organisation for Economic Co-operation and Development and so forth, the recommendation that we should endeavour to borrow without regard to the burden of repayment.
In extending our foreign borrowing this year, as we propose to do, to £225 million we are satisfied that this is as much as we can prudently stretch our foreign borrowing demands at this time To stretch our foreign borrowing requirements any further would be imprudent at present because we would then have a debt obligation which could be beyond our capacity to pay. We must keep our capacity to repay in mind at all times. Loan repayments will influence our standards and quality of life later since we will have to set aside a proportion of our resources to repay the debt and interest. Our credit standing is also something which will determine the willingness of other countries to lend money to us. To maintain our credit standing we must live within our resources. The Government may not succumb to all the pleas that are made for additional revenue. We must limit our expenditures to what we can prudently expect to get on the domestic and international money market.
It is well also to remember the cost of servicing the national debt. It makes a serious inroad on current spending. It limits the ability of the Government to hand out in any year all the money that comes in because a significant proportion must be retained in order to repay capital sums and interest. The cost of servicing the national debt in 1975 is estimated to be £224 million and that, by any standard, is a very considerable sum. Quite clearly we must be careful not to add imprudently to the very heavy cost of servicing the national debt. Taken with the borrowings which were made in 1974, this year's borrowings will give a total in excess of the total amount borrowed since the foundation of the State.
This is not any sign of improvidence or recklessness. It is a consequence of the unusual economic circumstances in which this country and many others find themselves at present. Of course borrowings of this nature would not be feasible at all if the oil-producing countries were not building up massive surpluses of up to £35 billion a year, surpluses which they themselves are unable to consume within their own economies. On that account they are in some position to lend money. To our great disappointment, the recycling of surplus petrol dollars has not yet developed with the efficiency and speed one would have wished, but there are signs in the early months of 1975 that there will be an improvement and that the International Monetary Fund will have double the amount it had last year for recycling purposes. There will also be the OECD recycling facilities for member countries and the private banking system is adapting itself to the changes necessary to recycle surplus money from OPEC. These countries themselves are engaged in direct lending, particularly to the developing countries. They gave to Ireland for the first time last year a £27½ million loan. This was a unique development, directly related to the oil situation and one which gives us courage these days that we will be able to get sufficient resources by borrowing them.
The fact that money is available to us does not mean we must be reckless and take more money than we can properly use and properly repay in a comparatively short period. There are, quite clearly, many uncertainties in the present economic situation both at home and abroad and it is difficult to predict what the trends will be in 1975. On Monday of this week I was present at a meeting of the Finance Ministers of the EEC where we had a review of the economic situation affecting the Community and the world in 1975. It would be wrong to say the meeting was pessimistic and it would be equally wrong to say it was an optimistic meeting. The general assessment was that no country in the western oil-consuming world would have a growth rate exceeding 2 per cent, and it was anticipated that a number of countries might not have any growth or have a negative growth rate.
This is not a very encouraging prospect and the most that can be hoped for is that the slide towards recession will be slowed down in the coming months and that the end of the year might see the commencement of an upturn in the economies of our trading partners and ourselves. Therefore, though at present we can say there is a flicker of light at the end of a dark economic tunnel, we cannot be certain even at this stage that the light could not be quenched by some undesirable economic movement over the year. However if the wisdom that now seems to be descending on the economic and financial world is maintained, we can hope for an improvement towards the end of 1975 and throughout 1976.
Assuming that the reflationary measures taken in a number of key industrial countries are effective—in Germany, the Netherlands and the US— and that as a result the world economy arrests the slide towards depression, the external environment should become more favourable as the year progresses. However our prosperity, our capacity to improve our situation, will depend as much if not more on our domestic behaviour as on external factors. Domestically, a vital factor will be the trend of incomes.
If income increases are in line with the Government's recommendations in the White Paper—increases no more than necessary to compensate for the cost of living—the growth rate should increase by about 2 per cent. But if there is any departure from these essential guidelines on income, then we will put our growth rate in jeopardy and we will certainly increase the danger of further unemployment.
This is not an Irish jaundice virus. This is the view that was recited by each member of the Council of Ministers in respect of his own national economy at the recent economic and finance meeting of the nine EEC Ministers. All countries intend to stick by this formula. If several other countries have consumer price increases less than ours, because they are not as vulnerable as we are to international trends, and if those countries link their income increases to more than their domestic consumer price index, it means that their rates of income increases will be considerably less than ours. This in turn means that if we are prudent enough to limit our increases to no more than consumer price increases, we will still be put at risk from a competitive point of view in external markets.
There are already signs that in some markets the economic situation is forcing down prices. We therefore face a double challenge, that as our own costs may tend to rise, we may find it difficult to sell in markets where domestic costs are declining, which means we could widen the cost gap and increase the amount of competitiveness facing us.
An examination of likely trends of expenditure and gross national product shows that the greatest stimulus to our economy will come from exports and consumption. Looking back on 1974 now, we know that the volume of consumer expenditure probably fell by 1 per cent. In 1975 this trend should be reversed and moderate volume increases could be recorded. This is partly due to the high level of salary, wage and income increases anticipated. These increases will come even if there is no new increase in income levels this year, because the carry-over effect of the 1974 National Pay Agreement will mean an increase of 25 per cent in non-agricultural incomes this year without any further arrangements being entered into. That with much improved agricultural incomes is a very significant stimulus to the economy.
On the external front merchandise exports should also continue to rise, but it would be unlikely that they would rise at the same fast rate as they did in 1974 particularly as in the early part of 1974. But industrial exports should pick up significantly in the latter half of the year because of reflationary action being taken in a number of other big industrial countries. Agricultural exports should see a very remarkable and most welcome improvement throughout 1975. It is not unreasonable to expect also that tourist receipts and numbers should have an upswing in 1975. A large proportion of our tourist increase in recent years has come from continental traffic, and the indications are that this great and very welcome growth of tourists from continental countries will show a significant increase in 1975, and what we hope will last, the more peaceful situation in the North of Ireland, could have a really dramatic impact on growth in our tourist traffic. Other earnings abroad are also expected to increase at approximately the same rate as in the last two years.
Therefore my advice today to industry in general is to prepare now for the inevitable growth which is going to take place in world economics in the latter half of 1975, in 1976 and onwards. We have come to a point where the factors which were bringing the world into the depression have been recognised and corrective action is being taken. Some of these depressionary forces have been so strong that, although corrective action has now been taken and the brakes applied, the momentum towards depression is likely to carry some of the world economies a little further down before they reach bottom and start on the upswing. At last the mistakes of 1974 have been recognised in those countries which were primarily responsible for generating global depression. As corrective action is now being taken, 1975 should be a year in which we will see steps to end our present difficulties and a significant improvement as a result.
I cannot overemphasise that it will take some little time before the significant improvement reaches us here. Usually it takes Ireland from four to six months to respond to significant economic swings, up or down in other parts of the world. When depression is descending on the world elsewhere, it is of benefit to us to be behind others, but unfortunately when the upswing comes it may take us a little longer to absorb the benefit of that upswing. However, we have both the opportunity and the capacity now to move in the right direction. The best profits are made by people who refuse to follow the herd instinct by those who are one jump ahead of those who are still in a state of despondency, and by those who, when things are in a state of boom, have the wisdom to realise that booms do not last forever.
The proper recipe for Ireland today is to anticipate the growth which will take place towards the end of 1975, to prepare for that now, to make sure that our capacity will be sufficient to meet the growth which should be quite significant towards the end of 1975 and throughout 1976. If we have the wisdom to do that, we can overcome the delay in improvement which has been our normal experience but which is unnecessary. That is one of the reasons why, notwithstanding the constraints on resources this year, we have given an addition of 43 per cent for industrial expansion, maintenance, development and improvement and for new industries this year. We regard this year as one to prepare for the inevitable growth which is ahead of us. The great opportunities which we foresaw for this country on entry to the EEC are still there. Distressing and all as our experience has been throughout 1974, it would have been immeasureably worse and indeed devastating, if we had not the opportunities and advantages of the EEC open to us. The EEC economy is still basically sound and has within it great capacity for further growth. A number of the EEC countries are, notwithstanding the oil crisis, notwithstanding the fact that they are importers of oil, in a position of surplus and others are in a balanced position, so that, once the upswing comes, these countries will be ready to absorb a very substantial amount of our industrial and agricultural exports.
On the import side of the account there are signs of a considerable deceleration in import prices. In view of this, the increase in the total import bill should be well below what we experienced in 1974. When allowance is made for increased international transfers from the EEC and other sources, the deficit on current account of the balance of payments is likely to be between £240 million and £250 million. This would be a very significant improvement in difficult times, a reduction of £25 million to £35 million in the record deficit which we had of approximately £275 million in 1974. The anticipated reduction in the deficit is, of course, in line with the strategy which we outlined in the White Paper of seeking to reduce the deficit to acceptable proportions over a period of years. This is necessary in order to ensure a gradual repayment of our debts and in order to show conviction to other countries that we are tackling this problem with which every country will have to deal.
One of the main determining factors in deciding to introduce what was a carefully expansionary current budget was the Government's commitment to maintain employment. We have given in the budget a boost to domestic demand by the significant tax reliefs of just £28 million and by the social welfare improvements. Initially this should result in an end to shorttime working which has been a major factor in pushing up the numbers on the live register over the past few months. The numbers on short time have varied for some weeks around 10 per cent of the total live register. This situation, with the tax reliefs which we have given and with the gradual improvement in the world economic climate, should begin to correct itself before too long.
In addition to aid for existing industry the public capital programme is designed to give a further boost to employment prospects. Particular emphasis has been placed on grants for industrial development with a view to increasing in 1975 and in subsequent years both industrial potential which we regard as vitally important and job opportunities. To this end the Exchequer contribution to industrial development, through the IDA, was raised for this year from £19.5 million to £42.5 million. These measures indicate the central role which the maintenance of employment has in the Government's economic strategy for this year.
We are in no way complacent about the unemployment situation. It constantly concerns us, but it is worthwhile pointing out that we have had one of the smallest growths in unemployment in Europe in 1974. Other economies have had increases in their unemployment rates of as much as 150 and 200 per cent while ours has been between 30 and 40 per cent. That is much more than we would wish for but the fact that other economies, including ones which have no balance of payments deficits and which are not obliged to borrow abroad, have had bigger cutbacks and a greater growth in unemployment, is an indication that the Government and our economy are maintaining the maximum amount of employment in difficult circumstances.
In addition to job creation we are maintaining our objective of increasing industrial development in the deprived regions. The IDA have established 23,000 jobs as the target for industrial job creation in 1975. They are confident of achieving this target. An achievement such as this at a time of serious world depression can be considered marvellous.
I should like to deal with some specific points that have been raised. Deputy Lynch appeared to suggest that external factors were in no way the cause of unemployment in Irish industry. He said that the fact that industrial exports had increased by 40 per cent was proof of that. If the world economic climate had not deteriorated and if the economy in Britain—which is one of our largest markets—were not in the mess in which it is, our industrial exports for 1974 would have been much greater than they were. If we had been able to maintain throughout 1974 the momentum we had at the beginning of the year we would have had a dramatic improvement in the number of people employed in industry. Towards the end of the year there were employed in industry here the same number of people as were employed in that sector at the beginning of the year. That, too, was a unique experience in the European and, indeed, in the world environment.
The world recession has affected adversely foreign demand as well as domestic demand. Despite the expansion of industrial exports last year, consumer demand at home fell and this led to an increase in overall unemployment. There were two other reasons for rising unemployment, first, firms producing for the home market may have lost part of that market because of intense foreign competition and, secondly, the increase in industrial exports may have been generated to a large extent by newer exporting firms with assured markets while older export firms may have been affected by the depressed level of external demand.
A number of Deputies, including Deputy O'Connor and Deputy Dr. Hugh Gibbons and speakers on the Government side, emphasised that the buying of Irish goods is completely within our own control. There is no restraint on us either by reason of EEC, GATT or any other obligations, from buying Irish goods. All that prevents us from buying home-produced goods is our indifference or our own disinclination to support Irish industry. That tendency has never been justifiable. It is unforgivable that people would not give due preference to Irish goods at a time when Irish industry is so dependent on the home-market. It is now more important than ever to buy Irish when so many of foreign markets that were available to us have shrunk because of economic difficulties in those countries.
I should hope that out of the current debate regarding the problems of Irish industry, people will recognise an obligation to persist in their support of Irish industry and to be proud, as they should be, of the high quality of our goods, a quality that many people may have doubted for a long time but the fact that Irish industry has shown the greatest growth in industrial exports of any European country in recent years, is proof that what Ireland can produce, Ireland can sell in any part of the world. The Government have warned, as has every prudent economist, that while the quality of our products is good and will always be accepted as such, we must keep the price right. Whether we do that will depend on our own willingness to moderate our expectations of income improvements. A number of Deputies opposite endeavoured to belittle the effect which imported inflation had on prices.
Notice taken that 20 Members were not present; House counted and 20 Members being present.
