I was dealing with the incorrect charge of Deputy Colley that industrial exports would, perhaps, be static. I want to point out that the OECD have forecast a decline of 2½ per cent in the volume of exports this year. It must be borne in mind that many major economies are passing through a very difficult stage because of the down-turn in world economic activity and demand. As a small open economy, we cannot escape being hit by current international recession. The fact remains that our performance is better than the performance of any comparable country.
This year our balance of payments deficit is expected to be between £150 million and £200 million, which represents a very substantial improvement on a balance of payments deficit of £300 million last year. It is our intention that this deficit be brought down gradually, and deliberately gradually, because to do it immediately would plunge our people into a greater economic recession than is at present imposed on us because of outside circumstances.
Deputy Colley suggested that the balance of payments be held in check because of a down-turn in economic activity at home, but, of course, that is only half the picture. A large part of the improvement is due to more favourable terms of trade resulting mainly from an easing of import prices. The down-turn in our economy is a result of world-wide effects. We would be experiencing a higher growth rate and our imports would be higher if the decline was not at present so insidious. However, what Deputy Colley does not mention is that our exports would also have been higher if our customers abroad were not suffering from the same recession as is inflicted upon this country. Our agricultural exports this year have been growing at a very rapid rate. For instance, in the first five months of this year in value terms they are 40 per cent higher than last year. This is making a very major increase to our balance of payments position.
Most of the allegations made in the course of this debate by the Opposition were wrong. Yet another of the incorrect ones made was that the current budget deficit, as enunciated by me on 26th June, did not include the costs of social welfare improvements next October. I do not know what the Opposition are doing. The performance of this Chamber does not encourage one to have much confidence in them. The media are saying that—it is not a partisan assessment of a Government Minister. They are not even doing their homework. If they had looked at the budget statement of last January they would have seen where we provided for the October increases in social welfare. We provided more than enough because the result of the Government reduction in the consumer price index by 4 per cent, as a result of the supplementary budget which we are now discussing, will mean that we have provided more than sufficient to meet the October increases in social welfare.
I referred in my financial statement to two types of saving schemes designed to counteract in some way the effects of inflation. One of these was an index link scheme of limited applications directed to help our older citizens to provide a small nestegg for contingencies. I am glad to say that the working out of this scheme is almost completed and subject to the usual requirements of printing and publicity it should be in operation very shortly.
I also said I was considering a limited scheme of indexation related to the national instalment savings scheme confined to those prepared to set their savings aside for a minimum fixed period of time. The formulation of this scheme is somewhat more complicated in that it has to be associated with and synchronised with the existing national instalment saving scheme. I am nevertheless hopeful that this will be announced and in operation in the very near future.
I was interested, Sir, that in contrast with many recent debates, including the debate on the January budget, the Opposition were a little more careful on this occasion not to demand further and further public expenditure. I pointed out in January last that having criticised the size of the deficit and having criticised the amount of the taxation and having criticised every financial rule the Government were following, the Opposition were urging additional expenditure of £120 million. It is probably due to laziness on their part or indifference or, as I identified earlier, their general lack of zest in this debate, that they did not get down to any particular items in the course of this budget debate. So I have not been able to put a cost upon their Santa Claus generosity. They were demanding an increase in the limits of SDA loans both as to the amount of loan advanced and the amount of income to qualify for a loan. The interesting thing is that having chastised us for the size of the present borrowing requirement, to increase these limits would have increased the borrowing requirement by about another £20 million. So, as they seek to be generous enough to show how wonderful they are, they are raising once again the problem of the size of the deficit and the amount of borrowing that has to be made. I would suggest that before we next come to discuss the financial affairs of this country the Opposition would get together and try to achieve some uniform approach to the economic and social problems of our time.
They also commented upon the lack of infrastructural development, which is one of these wonderful words that mean something to those who are looking for something but do not allow one to measure the cost. Of course, people who failed and failed miserably to provide the infrastructural development are not in a position to criticise this Government. We have quadrupled in two years the amount of money we spent on water supplies, sewerage, roads and services of that kind which are essential to the provision of houses for our people and to industrial development. As they did not quantify what they were demanding, I am not in a position to put a price on it. All I can say is that we have stretched resources very considerably in order to provide the immediate needs of our people in the social sector and also to provide employment.
I was interested to see that one commentator has said that the Government's disposition to pump yet more money into housing was the last resort of an uninspired Minister for Finance. Of course, I can envy the luxury of being a commentator and I am sure they do not resent my sense of envy. When every other commentator in our community was advising us to pump money into housing I find it difficult to accept the veracity of that accusation. What is the simple truth? The quickest and best way of promoting employment in order to ensure the least effective increase of imports, the most effective way of promoting employment without generating inflation, is to build houses. Ireland has amongst the member states of the EEC and many other European countries the best record for the provision of homes for people. We are the only country in Europe that over the last two years has not alone maintained its housing output but has increased it. This Government with that record behind them have pumped yet more money into the housing sector. There are a number of reasons, first of all because we have such an abominable lag to overtake and secondly, because it happens to be one of the most immediate ways in which we can relieve existing unemployment. I know there are other ways in which public money could be spent to generate wealth in the future. I would like to be spending more money in those sectors but in our economy—and our economy is working about 20 per cent below its existing capacity—obviously no immediate return could be obtained from investing in sectors which at present are operating below capacity. The important thing to do is to provide a stimulus, therefore, in the building industry in such a way as will ensure immediate employment and also relief of very serious social distress. We have provided a very powerful stimulus in the private sector of the building industry which, in this country, is being maintained at a level which, as I said earlier, is not being maintained elsewhere. Additional finance of over £50 million was announced for private house building, partly from Exchequer resources and partly from the resources of the banking system.
It is significant that under this Government the banking system which was regarded as being conservative and not interested in social investment and as being unready to provide money for housing has come forward with £40 million for house building. That is very significant and something that should be remembered by people who are strong critics of both the Government and the banking system.
There has not been any neglect on the part of this Government of local authority housing. Early in the year, since our budget in January last, we injected another £7 million into local authority housing. At present local authorities are stretched to the limit of their physical and administrative capacity. There is no lack of finance holding up local authority housing. We have had to build up a service which was inadequately provided with staff, skills and planning, and we have built up the output of local authority housing for our needy citizens in a most dramatic way during the period of the greatest economic recession ever experienced by the world.
Deputy Lynch suggested that there was no information as to the cost of the subsidies and reduction in VAT. This distressed me because one wonders if the members of the Opposition ever bother to listen when they are in the House. Deputy Lynch was in the House since I was speaking on the budget. Then you wonder whether or not they bother to do their homework outside the House.
In my financial statement—page 26 of the stencilled version—I gave the cost of the subsidies in 1975 at £18.5 million and the VAT reductions at £8.2 million. It is indicative of the Opposition in Ireland today that the Leader of the Opposition could come into the House and make such a reckless and unfounded accusation, that the Minister for Finance in the name of the Government, had not put a price on the subsidies and the removal of VAT, when he had counted it down to decimal points. It is no wonder people are disillusioned with the Opposition when such could occur.
Deputy Colley said on television that since the Government took up office there had been a run on National Loan sinking funds and saving certificate rescue funds. He suggested that this was unprecedented and undesirable. The first time sinking funds were used for Exchequer financing was in the Fianna Fáil year of 1959-60. Prior to that it had been the practice to keep sinking fund balances on deposit with Government bankers, who were then the Bank of Ireland, pending use for the purchase of stock on the open market for cancellation. The market, however, became stagnant. Comparatively large balances accumulated on deposit at a time when the Exchequer was borrowing from inter alia the Bank of Ireland for Exchequer purposes at rates much higher than the deposit rates. In effect, Ireland was borrowing her own money and paying a high interest rate on it. I am not prepared to pay a high interest rate for the borrowing of money at home and abroad when there is in the Exchequer coffers money lying idle upon which the Exchequer is receiving less than it would have to pay if it borrowed the money elsewhere.
I should like any person who criticises the policy of the Government to justify any operation in which the Government of Ireland would fail to use the money they have immediately available, instead of money which they would otherwise have to borrow at excessive rates of interest. The rates of interest being charged on money lent today are unprecedently high. It is clear that the sensible thing to do is to use the resources which are immediately available without having to pay extortionate rates of interest.
Deputy Colley referred to the delay in renegotiating the export credit scheme. All I can say is that he obviously does not know the facts. Work on the revision of the export credit scheme commenced in my Department and in the Department of Industry and Commerce in 1974. Detailed discussions were necessary with individual exporters of capital goods in order to assess their credit requirements.
In my budget statement last January I announced that details of a revised scheme would be announced shortly. The negotiations with the Central Bank and the other banks were, for reasons beyond the control of the Minister for Finance, very protracted. They involved not merely the particular discussions with individual exporters, but also settlement of the monetary policy for the year. Our banking system is composed of independent units. Their agreement is required for any advance which they are asked to make. Care has also to be taken to observe EEC requirements. We have to make certain that where the Exchequer is involved in the subsidy it is properly administered and that the very best arrangement is made from the point of view of the national economy.
In fact, for the first time, there will be an Exchequer subsidy for the export credit scheme and it will cost money, like so many other services which people so glibly demand but later are less willing to pay for. The arrangements came into operation on 1st May. Only one complaint has been received, and that came from a firm which complained on three occasions when Deputy Colley was Minister for Finance. I think Deputy Colley formed the view that they were too ready to make complaints and less ready to look after their own affairs. However, as I say, the one complaint has come from a firm which has previously complained and it is not significant. Deputy Colley suggested, if I recall his remark correctly, that there was something sinister in the fact that a complaint had been made. He must be consoled to know that it came from the same quarter as was obviously causing some embarrassment to him.
