Financial Resolutions, 1976. - Financial Resolution No. 11: General (Resumed). – Dáil Éireann (20th Dáil) – Thursday, 29 Jan 1976

Financial Resolutions, 1976. - Financial Resolution No. 11: General (Resumed).

Debate resumed on the following motion:

That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.

—(The Taoiseach.)

Mr. J. Lynch

As instruments for reducing inflation and increasing employment, the last three budgets of the Minister for Finance were absolute failures, and it gives me no joy to predict that this budget will be the worst of all four.

There are a number of ways in which one can approach examination of any budget. I propose to concertrate my remarks on two aspects: one, the role of the budget as a record of the Government's housekeeping; and two, the role which the Government play in regulating and managing the economy as a whole and the consequences of that management, whether it improves or depresses the standard of living, whether it relieves the tensions of inflation and unemployment.

Yesterday was in some respects the moment of truth for the Minister for Finance and the Government. For exactly three years they have asked the people of the country to wait further for delivery of their promises, for the turn in our economic affairs that would bring these promises to fruition. They created the illusion that they had some kind of magic formula which made normal economic analyses no longer relevant. The magic formula was an illusion, and the promises can now be said to have been broken, even without a promise of hope to sustain our people who have been so bitterly misled in the past three years.

I referred to the role of the budget as a record of the Government's housekeeping. On this issue, the problem overhanging the Government's management, or mismanagement, has been the disastrous increase of reliance on borrowing. In the past three years we have seen the reckless spending spree leading to the position where the deficit in the current budget has risen from a negligible figure of £5 million in 1972-73, our last year in office, to £92 million in 1974, £259 million in 1975 and £327 million for 1976, the current financial year.

At the beginning of last year, as we all know to our cost, the Minister budgeted for a £120 million deficit. He was no less than 100 per cent out in that forecast. Let us hope the £327 million now expected to be the deficit in 1976 will not be exceeded again by 100 per cent. The enormous level of borrowing to pay for, or more accurately to postpone paying for, day to day expenses is quite unprecedented in the history of this State and totally unjustified on any financial or economic grounds. From time to time the Coalition have made half-hearted attempts to justify their dependence on borrowing by pleading that borrowing was a necessary exercise because of the problems created by the oil crisis of 1973, but there are a number of factors which give the lie to this argument.

The first and most obvious is that Ireland was not the only country to suffer from higher oil prices and the subsequent economic recession, but Ireland is the only country in the EEC and indeed in the western world generally which has borrowed at this colossal figure. Last year total public borrowing by the Government and other official agencies, such as local authorities and State companies, was more than £700 million, equivalent to 20 per cent of our GNP. We know now that the borrowing this year will be more than £900 million, equivalent to more than 22 per cent of our GNP.

Let us contrast these figures with the borrowings of other European countries, borrowings which lie in the range of 4 per cent to 6 per cent of GNP and which, even in the cases of the heaviest borrowers, such as Britain and Italy, do not exceed 10 per cent of GNP. As manager of the nation's purse the Minister for Finance is pursuing a disastrous spendthrift course, borrowing more and more at higher and higher interest rates, reaching the ultimate in this classic "skid row" behaviour. He is now borrowing to service borrowing. The stark figures of the national debt establish that not only has there been an increase in the absolute amount but that the rate of progress has accelerated at a frightening pace. I will just give a few figures. On March 31st, 1973, the national debt was £1,298 million. On March 31st, 1974, it was £1,464 million. Then our financial year changed and on December 31st, 1974, it was £1,766 million. On December 31st, 1975, it was £2,376 million and at the end of this year on 31st December, 1976, it is estimated that the national debt will be £3,200 million. In three years the Minister for Finance has been able to create a national debt one-and-a-half times greater than what it stood at after 50 years of the coming into being of this State.

If these borrowings were, as claimed, intended to maintain employment and output then we have to ask ourselves: Where is the evidence that they have succeeded? The answer is, of course, that there is no such evidence. We know only too well that unemployment has risen as rapidly, indeed more rapidly, in Ireland than in other EEC countries and output in industry has fallen as heavily here as elsewhere. The one unwelcome result we appear to have obtained from this debt finance spending has been the dangerously high level of inflation. Two days ago the Irish Independent in its second leader under the heading “What Policy?” had this to say:

We are now in a far more serious position than most other countries.

That, I suggest, is almost an understatement.

Inflation, unemployment and borrowing are out of line here by international standards. It will no longer suffice for the Government to look simply for an upturn in the world economy to push us out of our difficulties. We have got to move as a matter of urgency to put our own house in order, to recognise that the world does not owe us a living and that the imbalances which we have referred to must be eradicated.

This budget is a very poor effort indeed, to eradicate these imbalances. Certainly it gives no indication that the urgency pressed upon the Minister by the Irish Independent has been realised by him.

The failure of the Coalition's spending spree does not, of course, surprise us. Since they came into office we have consistently warned that they were embarking on a budgetary policy totally devoid of any financial justification and totally divorced from the economic needs of our country, based as it was on solely short-term and narrow political considerations. This is the second pointer which gives the lie to the argument that the steps taken were designed to create employment and to reduce inflation. I might remark here that they embarked on that policy of deficit budgeting even before the oil crisis. In their very first budget in May, 1973, they had committed themselves to the prodigal son's approach.

The third argument working against the Coalition's approach in the past three years is that they are now, perhaps grudgingly, proposing to abandon it. We have had enough speeches from the Taoiseach, the Minister for Finance and other Government spokesmen in recent months warning us that public spending could not rise indefinitely and that sooner or later there must be a halt to the rapid growth in spending in recent years, and so indeed there must. But the depressing thing is that, while yesterday's budget may in some sense be regarded as a step back towards realism and the beginning of the end of the Cloud-Cuckoo-Land approach, it still has done virtually nothing to halt the growth in public spending.

There has been much emphasis by Government speakers on the way in which the economic recession had raised Government spending and depressed tax revenue, thus causing some, but not by any means all, of the deficit. When we look at the figures, however, there is very little evidence that tax revenues are down, but there is a great deal of evidence that spending has rocketed. Let us look at the suggestion that tax revenue has decreased. In 1972-73 total tax receipts and other revenue amounted to about 33 per cent of gross national product. In 1975 they accounted for about 35 per cent, so that, despite the recession, the Government had managed to acquire a larger share of the national cake. Even prior to yesterday's changes the pre-budget estimates for 1976 were that receipts were likely to remain at about 35 per cent of gross national product. That establishes that it is not any major shortfall on the tax side which has caused the financial headache for the Government.

The real problems arise on the spending side. Let us look now at both current and capital spending. In 1972-73 the Government's total spending on current and capital account amounted to just over 42 per cent of gross national product. By 1975 this figure had risen to over 54 per cent and, even prior to yesterday's budget, the estimated 1976 figure was over 58 per cent. It is this fantastically rapid and quite inconsistent rate of growth in spending which is at the heart of the Government's budgetary problem. The changes announced yesterday suggest that there is still no commitment or policy on the Government's part towards curbing this spending spiral. In so far as any attempt was made to close the gap between income and spending it took the form of further tax increases to sustain the higher level of public spending, and this despite the Taoiseach's publicly proclaimed view that it is the spending growth which must be halted.

If spending were to go on rising at the same rate as in the past three years, then in little more than ten years of Coalition Government, the public sector would absorb 100 per cent of gross national product and all debate about the future of private enterprise in agriculture, industry or commerce would be futile since all would have been devoured by the public spending monster.

There must be some welcome for the reluctant acceptance by the Coalition that they must pay for their day to day spending by taxation. There can be no support or acceptance from this side of the House for any policy of persistent increases in the Government's share of total spending and total national resources. This, I suggest, is a drift towards extreme socialism which is causing grave apprehension among the public generally, among traditional Fine Gael supporters and, I might add, some non-doctrinaire supporters of the Labour Party. I used the words "drift towards socialism" because there is no visible evidence of any conscious plan or policy on the part of the Minister to go in that direction. The more likely explanation is that the Minister is being forced to go on this course of accepting creeping socialism because of the confused policies he has adopted or has been forced to adopt. There may very well be some elements in this Coalition which would welcome this trend, which could, perhaps, explain why there is so little effort being made to choke off this rapid growth in public expenditure.

We on this side of the House are not opposed to temporary increases in deficits whether by way of higher spending or lower taxation, if this borrowed money is being effectively used to overcome the effects of an economic recession and to boost employment. We are opposed to persistent increases in the Government's share of the national cake which has never been justified as any part of an overall policy. Despite the Coalition's attempts to obscure this issue, much of this borrowing is not the result of temporary factors and will not disappear with the ending of the recession. It is instead the consequence of the Coalition attempting to have their cake and eat it because, on the one hand, they introduced new spending on social welfare, on their disastrous policy to deal with local rates in other areas, but they did not introduce the extra taxation to pay for these spending plans. That is the issue from which they have run away over the past three years and which they are only now beginning to face.

I would like to refer to the budget of June last—six months ago. This was an additional emergency budget introduced to deal with what we regarded as a serious emergency situation. People were prepared then to face up to the realities and to a definite policy, hard though it might have been in some respects. Once again the Minister and the Government took fright and ran away from the policies they should have introduced, not only just then, but at least six months earlier. As a result the Minister's problem is now all the graver and all the more difficult of solution. Let us be clear yesterday's raid on the taxpayers' purse is only a tiny fraction of what is needed to restore balance in the current account. Despite the £107 million extra taxation the Minister forecast, their current deficit still rose from last year's level of £259 million to £327 million, a rise of about 26 per cent, which is still away above the inflation increase. Their borrowing to pay for the day to day running of the Government is still rising. Even yet they have not succeeded in halting the rising tide, much less in even attempting to reverse that trend. This means that we still do not know what policy the Government are going to adopt to cope with this deficit.

The Minister talked of removing that deficit in three years. That means he must raise his tax receipts by that amount, an incredible 8 per cent of GNP on to the existing level of 34 or 35 per cent, or he must cut spending. May the explanation be that the Minister has rejected the ultimate cure so far in advance that he anticipates, I might even say hopes, that an incoming Fianna Fáil Government will have to take up the problem again and do his work for him?

This postponing of the evil day is a gloomy and depressing prospect, enough perhaps to explain why yesterday's budget should have been obsessed with the pressing financial problems of the Exchequer rather than with the real economic problems and difficulties which face our country. The Minister and the Coalition have nobody but themselves to blame for the financial monster they have created. For three years they ignored our warnings and attempts to put them on the right economic road. For three years they persisted in their foolish belief that they could spend their way out of any economic problem and that adding to the fuel of inflation would help in some way to maintain employment. When they finally started coming to their senses and listening to sensible advice both from this side of the House and from outside, they still could not bring themselves to operate that advice properly and efficiently. Here again I refer to the debacle of last June's budget.

Having ignored our earlier suggestions for food subsidies, for example, as a first step towards breaking the inflation spiral, they eventually accepted a similar proposal when it came from the National Economic and Social Council, an independent advisory body which they had already established, and whose views therefore they could hardly ignore. The one interesting, though little publicised feature, of the NESC report on our economic prospects for 1976 was the comparison they made between the effects of their proposals for last June and the actual measures introduced at that time. They indicated that their proposals were not accepted by the Minister because he was afraid to face up to the issue. The most revealing statistics from that comparison is this: the estimate of the NESC was that there would be 8,000 fewer people unemployed this coming summer had their advice been followed.

In June the Minister was claiming that the dominant consideration in framing his budget was to protect employment and curb inflation. We know how little success he had with employment, while his only success in lowering prices was the application of the Fianna Fáil proposal, that is for food subsidies, which he had originally spurned. Yesterday he seemed to have abandoned all pretence of being interested in the economy as a whole. Certainly, that is the only way in which this budget can be understood. Despite the fact that unemployment is at an all-time record level and that inflation is still dangerously high, the Minister brought in a budget which will not relieve, not arrest, but will aggravate both of these problems, the problems of unemployment and inflation. I propose to demonstrate this to some extent.

The tax increases which he introduced must have the effect of raising prices by up to 5 per cent. That figure seems to have been generally accepted by all independent commentators since the budget was introduced. As a result of that 5 per cent, the Minister's pre-budget estimate of a much lower inflation rate this year is now in need of drastic revision. Taking the projection of perhaps an 11 per cent to 12 per cent rate of inflation this year, the effect of this added 5 per cent will be to bring up the rate of inflation, allowing for some possible decreases as a result of factors for which the Minister would not be responsible and could not claim credit.

It would now seem that in 1976 prices will rise by at least 15 per cent. This is hardly the sort of performance which will inspire confidence either in our own businessmen and workers or in any prospective overseas investors. I sincerely hope for and support the pay pause the Government are seeking but adding to inflation in the way I have described must also raise serious question marks about the Government's ability to secure a pay pause. With prices rising at this rate, the real spending power of workers and consumers will be significantly reduced. Unfortunately, this is bound to intensify the pressure for higher pay rises.

The Minister appears to have recognised the problem which he created himself in this way with his proposal to introduce a price index which would include tax increases. That has received very adverse comment in at least one leading article in today's newspapers. While there might be some case to be made for incomes not to rise in line with tax induced price increases in a period of economic difficulty, it would be totally unacceptable to allow any Government the apparent freedom to increase their share of the national cake in this way. Such a power would mean that there would virtually be no limit on the extent to which the Government could increase their income, while reducing the amount of money remaining in the hands of the public. If the Minister and the Government want to secure a pay pause, they will have to do something other than engage in this form of statistical playacting. I believe no trade union could be expected to agree to give the Government the power they seem to seek by this device.

The Government must produce some clear indication of the way in which the fruits of any restraint and sacrifice of living standards will be used to get the unemployed back to work. This was the purpose of this budget, the stated purpose in advance. This is one crucial area in which this budget has failed more than any other. The only way in which dole queues can be expected to change on the basis of yesterday's budget is that they will grow longer rather than shorter. Some estimates suggest that the overall deflation resulting from the budget could add up to—I heard this in an economic comment on the radio this morning—20,000 more people in the ranks of the unemployed. I hope this is an upper figure which will not materialise. Even if the increase were to be half that amount, it would still mean a terrible addition to the misery and depression created in our society during the past two years.

There was and still is an overwhelming duty on the Government to take action which will help the unemployment position. Even modest amounts of public money, if used selectively, would have the effect of guaranteeing work for thousands. The Confederation of Irish Industry, and my colleague, Deputy Colley, in his pre-budget article in The Irish Times, suggested one way, that is, a limited relief of social insurance contributions by employers. Far from giving any limited relief in this way, the Minister seems to have added to the burdens of our home-based industries.

One could list many other means, in limited ways, of boosting employment at home. One could list the ways in which the Government have neglected that opportunity: for example, the shameful lack of progress in constructing a smelter, or the shameful way in which orders for ships and furniture and Government printing have been allowed to provide jobs in other parts of the world, and not at home here where they are so desperately needed. There are other ways in which efforts could be made to create jobs. There is the case of housing. Sooner or later the bluff of the Minister for Local Government will and must be called in this respect.

Deputies

Hear, hear.

Mr. J. Lynch

In a brash way he has been defending figures of housing output over the past three years of which, I repeat, he can claim little if any credit. I want to refer back to my speech on the adjournment debate last December which he misquoted in reference to this problem. I said that in the late 1960s we had introduced an ordered housing construction programme which would produce 25,000 houses by 1973. The Minister and his Coalition colleagues, in advance of the formation of the Coalition, said a crash programme would be needed to reach that target. There was no such thing as a crash programme and, in fact, the output of 25,000 houses was reached as we had predicted it would.

Unfortunately it went in the wrong direction. Home ownership was depressed and the emphasis switched to local authority houses. I commented on that at the time and said it was an undesirable trend. I do not want to repeat what I said here yesterday. I still believe it is an undesirable trend and that there is an inherent desire, an inherent ambition, an inherent aspiration in our people to own their own homes which this Government are deliberately depressing, and creating monster landlords in the form of local authorities. It is not enough to say that the Minister has introduced a better system of house purchase by local authority tenants, welcome though it is. Young married people who have the opportunity and the capacity for home ownership are being denied that prospect deliberately by the policy of the Minister for Local Government.

May I revert again to the claim in regard to an output of 25,000 houses and repeat what I said? If it takes a minimum of three years from the time the finances are arranged, the sites acquired, and the planning and other preliminaries completed, before the house is ultimately ready for occupation, last year the Minister for Local Government could claim no credit whatever for the 25,000 houses built in that year.

If they have abandoned the idea of raising the grants to a realistic level, there are perhaps other ways in which they could give young people, first-time owners or seekers of houses, the opportunity or doing so. There is a compelling case for giving grants to first-time buyers of houses, because they are typically young married couples who have the greatest difficulty in raising the huge cash deposits which are now needed. However, these grants should be accompanied by an easier system of loan repayment. If these grants were accompanied, say, by a scheme of inflation-linked mortgages which would have the effect of keeping down the size of cash repayments in earlier years, the overall result would be to enable many thousands of people who cannot afford to buy homes at present to do so. This would mean a very substantial boost to the construction industry which has been so depressed for the last couple of years, and especially in the past year, and in which so many people are at work.

One other area in which the total absence of any action is both depressing and irresponsible is that of unemployed school leavers. The Minister referred to the need for providing 30,000 new jobs between now and 1980. But apart from increasing somewhat the amount of money available to the Industrial Development Authority, he has made no single tangible, immediate effort that would even put a dint in that huge total of 30,000 people annually looking for jobs.

There are surely many forms of community service and many projects for community improvements in which young people could be engaged productively. Even a modest sum of £5 million would be sufficient to put some thousands of young people at work and would hold out some prospect that they could make a useful contribution to society. As a practical illustration of what I have in mind, all over the country there is a crying need for community services, for community halls. Many people are prepared to give their services voluntarily. If young people were supplied with the materials and paid a modest weekly sum in providing these halls, not only would encouragement be given to young people, not only would the confidence be given to them that they were contributing to the community, but they would, on the way, provide a very essential need for which so many people are calling out. Above all, such action would demonstrate that the rest of the community were concerned for the young people's welfare and were willing to do something about it.

While referring to young people, it may perhaps be relevant at this point to note one of the disappointing omissions from yesterday's budget. No increase whatever was made in the level of university grants. Therefore students from lower income families already faced with difficulty in finding employment now find it still more difficult to gain entry to universities.

There is also a disappointing and, I might say, frightening lack of concern in this budget for the future development of industry. Investment in industry has been falling over the past two years, and the pre-budget forecasts were for a further fall this year. This is a dangerous downward trend that must be reversed if the growth of the economy is not to be imperilled. At present there is little incentive to invest in additional capacity since most firms are suffering from the problem of spare capacity.

Tourism is one of our most important export industries and is yet another area which is bound to be hit by this budget. The combination of higher petrol, tobacco and alcohol prices will make the task of attracting more visitors, particularly from Britatin and the Continent, that much more difficult. It could pay the touring visitor to go to the North first and stock up with the items he might need for the rest of his holiday which he might be disposed to spend in the South. Here again positive proposals were put forward from this side of the House in this respect, perhaps not novel but at least put forward as a genuine effort and a genuine contribution to help this vital area in our economy.

If the Minister was really serious in his claim to boost exports, then he could take action by boosting invisible exports through tourism. It would be relatively simple, for example, to introduce some form of duty-free sales on cross-Channel sea and air services. Another method of encouraging the car tourist would be to give coupons for a tax rebate, say, up to 50 gallons for every foreign registered car arriving at our ports. Such a scheme, I suggest, would cost the Exchequer little if anything. In fact, it would be quite possible for the total tax yield from tourists to increase, because in the absence of attractions such as I have mentioned, the total number of visitors could unfortunately fall off substantially.

The list could be added to, but the examples I have given and many others which my colleague, Deputy Colley, gave, and which have been given from time to time from this side of the House, are more than enough to demonstrate the total absence of any thought or planning to deal with the twin problems of inflation and unemployment. In the Minister's budget last year, under the heading "Medium-term outlook" at column 1968, Volume 282, of the Official Report of 26th June, 1975, he said:

In particular, we do not regard the taxation, subsidisation or employment premium measures as being needed—or, indeed, sustainable—for more than a very limited period of time. There is the danger, however, that the solution they produce could be short-lived unless supported by policies over the medium term ahead aimed at maintaining the confidence restored, the stability regained and the renewed growth in the economy.

Six months have elapsed. What has become of the medium-term policy? What has become of the "renewed growth, the confidence restored, and the stability regained"? Indeed, I might ask him specifically what has become of or what are the results of the employment premium which was announced with such a flourish here by the Minister and followed up by his colleague, the Minister for Labour? There was not one reference to it in yesterday's budget. Has it been a failure? We supported and welcomed it. We thought it was imaginative, but obviously the depression that has been created by the Government has offset whatever advantages this scheme otherwise might have had. The only contribution to these hopes and promises was the sorry contribution we had yesterday, the total abdication of the Government when the Minister referred to the long-term economic plan.

This has had a long history, even in the short life of this Government. The programmes introduced by Fianna Fáil in the late fifties and during the sixties were decried by the Opposition as being not imaginative or radical enough. They were indeed modest, but they worked by and large, and these plans could be said to have laid the foundation for the extraordinary and, I might say by reference to the past, spectacular economic growth that was maintained through the sixties and early seventies. We pressed on the Minister, almost since he came to office, the need for another economic programme. He scorned our suggestions and persistently said that in the climate then obtaining, which incidentally was much more positive and identifiable in its ingredients than those that now obtains, it was impossible to put forward any realistic plan.

By last autumn he had a change of mind and announced the introduction of a programme before the end of the year, that was before 31st December, 1975. We are now told that a Green Paper, a discussion paper, is to be published some time in the future. This is another way of telling us that yet again this Coalition either does not know or cannot agree on the policies which ought to be pursued in the years ahead. Therefore, instead of a Government plan you have to have a discussion paper, a paper of options which will, perhaps, invite open competition between trade unions, employers' organisations, farming bodies and others, to put forward plans, come to the Government's rescue by declaring a sound programme, and providing some policy for this bankrupt Coalition, bankrupt not only in the narrow financial sense, but also bankrupt of any ideas, or to a limited extent, ideals. At the rate this Government are drifting towards the kind of socialism to which I referred, there may be hidden somewhere in the background some kind of ideals in that direction.

There are some commendable things about this budget, but commendable perhaps only because the Minister was driven to adopt them. At least some attempt was made to pay the bills, to meet, to a very infinitesimal degree, current expenditure. Little attempt was made to pursue this magnificent social programme, which of course would be implemented by the Coalition. No attempt was made to in some way save face in the light of débácle over equal pay. On the contary, with the limited reliefs given by way of taxation, no tax relief whatever was given for married women.

Some attempt was made to regularise unemployment assistance to some people who could afford to do without it. That is commendable. However, these are short-term, hit and miss, little efforts being made by this Government, but again there will be no overall plan, no overall hope, nothing to restore the confidence of our people and our country in our economy. With all this evidence of their total inability to provide the leadership which is needed, the only sensible course open to them is to resign before they are run out of office——

Deputies

Hear, hear.

Mr. J. Lynch

——by the just wrath of an unjustly treated people.

I had intended dealing with other points in the budget, the failure to increase certain social welfare benefits, the maintenance allowance, the huge impost on car owners which will have so many repercussions not only on the owners themselves but on the motor industry as a whole. These matters I believe will be adequately dealt with by subsequent speakers from our side of the House. Overall, this budget, like its three predecessors, has been an abject failure and is something that this Government should be totally ashamed of and something which this country will not forgive them for a long long time.

Deputies

Hear, hear.

The Taoiseach

It is not necessary for me to go again into the same range of detail covered yesterday by the Minister for Finance in his comprehensive review in introducing the budget. However, I should like to deal with a few of the salient features.

The budget deals with Government expenditure of over £2,100 million on current and capital account. Even this figure, massive as it is, does not reflect the full extent of public expenditure in its widest definition since it excludes expenditure financed by local authorities and the expenditure from the social insurance fund and from other sources. However, it is the figure with which we are primarily concerned in this budget.

In 1976 the gross national product is estimated by the ESRI at approximately £2,100 million before the changes which the budget proposes are taken into account. Even, therefore, taking the budget figures as they are, the size of the influence it must exercise on the economy will be apparent. It can swing the direction from growth to decline, or vice versa. The Government have tried in what they have done to ensure that the effect of the budget will be to change the growth rate from the 1 per cent which it would have been without the budget changes to 2 per cent in 1976. This of itself seems a modest aim. On the other hand, when account is taken of the fact that the gross national product declined last year by 3 per cent in line with world conditions this swing would represent a significant turnabout in our fortunes.

In considering, therefore, the effect which the budget will have on the economy there are, of course, many uncertainties largely indeed uncertainties similar to those which this country and most other countries experienced last year. It depends on the speed and the strength of the upturn in the world economy which now at last seems to be under way, certainly in a number of countries, the evolution and pattern of incomes and the degree to which people will feel sufficiently confident to spend rather than to save. In assessing, therefore, the impact it is necessary to look at the total picture —the total amount of expenditure, current and capital, and its composition, and the way in which the total is financed through different forms of borrowing and through taxation. It is not enough simply to focus attention on the tax and expenditure changes as some commentators have done. The Minister has given an estimate of the likely growth rate following the budget and subject to all the uncertainties that I have mentioned which, of course, last year proved completely incapable of precise or predictable assessment. I think, however, we can be more confident this year than last year that the tentative rate will be attained.

The Opposition have been loud in their criticism of the level of borrowing over the last two years. They have suggested that employment and output would be maintained if we had much lower levels of borrowing. I want to put this straight to the House and to the country: there is no way in which employment could have been maintained at its existing level if the Government had not borrowed or had not provided the money from borrowing or from taxation. It is accepted that we could not have taxed more heavily without adverse results, and it is recognised that we had gone as far as was reasonably possible in the extent to which we borrowed. It is therefore not possible for the Opposition to have it both ways. Indeed, I think they have overlooked the effect of the deflationary impact of external influences and the greatly increased cost of our imports and the international recession in demand. On this subject, the OECD Survey of Ireland issued last November states, and I quote:

It is clear that measures to expand domestic demand could not completely offset the powerful external recessionary influences.

If this be true—and this is a survey by an outside organisation—what would have been the situation if we had failed to take the action we did, if we had opted for the unemployment-creating policy advocated by the Opposition? The Opposition have repeatedly stated, again in this House yesterday and again by the Leader of the Opposition in the House today, that we should not borrow, but immediately after these sentences are used they suggest spending more on a variety of projects. I will come to those in a few minutes.

There are only certain resources from which money can be got by the Exchequer. It can be raised by taxation and it can be raised by borrowing, whether the borrowing is on the domestic market or on the foreign market. The only other alternative which Fianna Fáil did not say but which is implied by their criticism, is that the Government should print the money. We reject that policy. We reject any attempt to water down the value of our currency. Our policy has been to avoid imposing hardships which might well be unnecessary. Regrettably, the expectations of an international recovery which we shared with so many distinguished authorities, because we accepted the experts in these international organisations who commented on the economies of different countries last year, proved premature. At the same time the pattern of wages and salaries was not in accordance with the requirements of the national interest.

We recognise that an international recovery will go far to eliminate the need for so substantial a fiscal stimulus while also helping, in itself, to restore a more normal and acceptable pattern of public finance. Incomes restraint would also, of course, help to this end both directly and by helping to restore the confidence of consumers, the weakness of which depressed revenue receipts last year. This sluggishness in consumer demand also contributed to the shortfall from the economic growth target of last year's budget.

The Opposition yesterday and for some considerable time have endeavoured to have it both ways. They have criticised borrowing and at the same time have advocated additional expenditure. They have also opposed the increases in taxation which were proposed yesterday by the Minister for Finance and which were designed specifically to keep the borrowing requirement from reaching an unacceptable level. It is interesting that yesterday in a pre-budget comment in an article in a newspaper Deputy Colley referred to the reduction in the opening current deficit and suggested in that article that the range of reduction which would be acceptable was within that on which the budget was finally framed. although yesterday in the afternoon he changed his approach to this, and this morning the Leader of the Opposition critised borrowing but in the course of his speech—and this is typical of the Opposition—month after month, week after week, day after day, on Dáil questions and in debates, on motions put down by the Opposition—suggested extra money for everything. The Opposition lead the demands which so many other sections of the community express, that the Government should spend more on this, more on that and provide more money for different projects, some of them ill thought out, some of them worthy projects, but at the same time the Government are neither to borrow more nor to raise the money by taxation. They cannot have it both ways.

This morning here the Leader of the Opposition suggested—I have taken a short note of them—a sum of £5 million for employment for school leavers, an undefined sum for housing grants and a loan scheme, an undefined sum for university grants, an unspecified sum for the relief of industry from social welfare payments, and an unspecified sum for industrial incentives. These are all in addition to the expenditure already enshrined in the budget. It cannot be done. The Opposition must recognise that the only source the Government has—and this is what the Government have tried to get across—is to raise the money either by taxation or by borrowing. If we are criticised on one hand for the level of borrowing and opposed on the other hand when we try to raise the money by taxation, how is the money to be got? That applies to the Opposition's queries and it also applies to the demands from different groups throughout the country. It is not possible in our circumstances at the present time to meet the demands, however laudable many of them are, however desirable from every point of view some of them may be. The proposals made here this morning by the Opposition, if accepted, would mean that our taxation would have to be three or four times the level proposed in yesterday's budget.

The policy which the Government are operating is one designed to deal with the important problems affecting the country. Our programme is designed to generate maximum public expenditure in order to help in particular the unemployment problem.

We have approached the unemployment problem from two angles. We have increased public expenditure to produce the type of expansion of demand in our economy which would help the unemployed, and for those unfortunate enough to lose their work we have increased unemployment payments to a degree which shelters the individual from the worst monetary effects of his misfortune. The present budget continues that policy and develops that strategy. The reality, however, is that in a period of world recession such as we now have what any one country can do to ameliorate unemployment is limited. With this country it is more limited than with many others. In normal times our imports and exports are equivalent in value to more than 90 per cent of all we produce. This means that we are more vulnerable to external influences than any economy in western Europe. If export markets are bad because of a general recession, our ability to export —affecting almost 40 per cent of gross national product—comes into question. If the recession is bad, other countries keeping costs down can sell their goods here at prices which, without unfair practices, complete strongly with what we produce at home for our own markets. Both of these factors must bear strongly on what any Government —or indeed the community as a whole here—can do about unemployment.

However, despite these disabilities and acknowledging the heavy and regrettable toll that unemployment is exacting, I think it would be useful to put on record, for comparison purposes, some account of what is happening elsewhere. I should like to give some comparisons to the House regarding conditions in other countries, the extent to which unemployment has risen in other countries, and the effect that rise has had on the economies of the western world, and far beyond it. Between December, 1973, and December, 1975, unemployment in France rose by 71 per cent; in Germany, the strongest single economy in the western world, it rose by 181 per cent; in the United Kingdom it went up by 134 per cent while in Denmark it rose by 457 per cent. Here the corresponding figure was an increase of 64 per cent.

There are many qualifications to be made in comparing figures like this. The method of counting unemployment, and the method by which figures are compiled, are different in all countries. The composition of the labour force is different, the structure of the economies is different. In particular, the coverage of the figures is different. We started from a high base —in that the percentage of our labour force unemployed in 1973 was already comparatively high by international standards. But this was a problem which the Government inherited: we did not make it. The figures I have quoted make the point, and make it forcibly, that bad and all as our unemployment is—and I make no effort to extenuate it or to suggest that it is not serious—it is by no means an isolated phenomenon. Compared with countries with much greater resources and stronger economies than ours, such as France and Germany, we have fared better.

We can get our unemployment down if we invest in methods, machinery and infrastructure that make our goods competitive. We are doing this on a massive scale. It is part of the basic strategy of the budget to shift resources into areas which can create self-sustaining employment. I will come later to the money we have put into the construction industry. In the budget we have provided a substantial increase for industrial training through AnCO. It will be increased from £6 million in 1975 to over £10 million in the current year.

Provision is also made for an investment in the development of our mineral resources which will yield, it is hoped, a handsome return over the years and help to ensure the exploitation of these resources in the best interests of the country. The allocation for industry in the public capital programme has been increased by 71 per cent and this year accounts for almost 26 per cent of the total programme, as compared with about 19 per cent last year. The capital provision for industrial promotion by the IDA, SFADCo and Gaeltarra Éireann is being increased by one-third. A substantial provision of £37 million is being made towards the building of NET's fertiliser plant in Cork Harbour which will ensure self-sufficiency in our nitrogen requirements until well into the eighties and will make a significant contribution towards reducing our adverse balance of payments. This plant will, as Deputies know, use natural gas from the Kinsale Head field as feedstock. In this way, processing of our natural resources will give rise to considerable employment and other economic benefits.

Despite the difficulties of the past few years, the number of new industrial jobs inherent in grant approvals of the Industrial Development Authority has been of the order of 20,000 or more annually. In 1975 alone, the IDA activity resulted in projects with a job potential of about 17,000, with planned investment in new industrial projects both from private and public sources of the order of £300 million.

Deputy Colley suggested yesterday that there was some doubt about the continuance of the tax-free concession on exports. I do not know how he embarked on that but it is appropriate to deal with it now. It is possible that his reason for the comment was because the Minister for Finance referred to it in his budget speech. I should like to make it absolutely clear that there is no intention of withdrawing export tax reliefs or interfering with them in any way. The legislation to provide the export tax relief was originally introduced by a Government of which I was a member. At the time it was described by a Government of which I was a member. At the time it was described by an independent commentator, Professor Carter, the Jevons Professor of political economy at Queen's University, as the biggest single factor in getting this country into the export market. The fact that it was introduced by a Government of which I was a member 20 years ago confirms us in our belief that it was a step in the right direction.

In that connection I should like to add that the other major contributing factor to industrial expansion was the establishment, by a Government with which I was also associated, of the Industrial Development Authority. These two statutory measures, the establishment of the IDA and the tax-free concessions on exports, have, between them, provided, with other assistance, the major incentives and contributions towards industrial expansion.

We live in a world in which population is rising rapidly. Food production is failing to keep pace. While many of those living in developing countries currently lack the means to buy food in the market, the future is likely to be bright for countries which are able to produce and market high quality food at competitive prices. In this country, we enjoy many climatic and other advantages for agricultural production. We now have the benefits of assured markets and remunerative prices under the common agricultural policy, properly managed. If we are to raise our growth rate, we will have to make the best of these assets and exploit the potential for development that lies in our agriculture. The potential returns on investment by efficient farmers are high and it is primarily a matter for farmers themselves to seize the opportunities open to them.

The Government will continue to give them every encouragement. Our commitment in this regard is shown by the substantial increases in the provisions for agriculture in this budget which show increases of 20 per cent on the current side and 25 per cent on the capital programme. We have, of course, taken certain steps which will affect the incomes received by some farmers as supplements to their incomes from farming. These steps, we believe, should not affect production.

I should like to say in that regard that for many years there was criticism of the manner in which this assistance or these payments were made—criticism, but no action taken to deal with it. Deputies will recall that some years ago when Deputy Brennan was Minister for Social Welfare he introduced a proposal to deal with it and there was a mini-revolt in Fianna Fáil. One member left the party and another made a speech in which he made it plain that he would not vote for the change. It was abandoned. Yesterday for the first time we took steps to deal with what, in some respects, is an unjustified extension of the scheme as originally contemplated. There were a few comments across the floor to the effect that we had not said this in the recent West-Mayo by-election. Fianna Fáil are always selective in what they say to their audiences, selective in the comments they make. When they are talking to business people or shopkeepers, of course they criticise these benefits, but when they were in Ballycroy, Achill, Belmullet or Bangor Erris, they were all for them.

What we have done does not interfere with the legitimate entitlement of people in Ballycroy or Achill or Erris or any other part of the country: we have stopped the abuse Fianna Fáil had not the courage to deal with. These changes are in line with the Government's policy of ensuring that money is spent in the right direction to supplement and assist and to provide the incentive to farmers who wish to increase production.

This scheme will assist farm investment by helping to promote and assist farmers who live on uneconomic holdings and who need a supplement to expand investment. As a result of the measures we have taken we are reinforcing the increase in farm investment during 1976 which should be still further stimulated by the sharp recovery in farm incomes and the current and prospective prices for farm produce.

It is true to say that a number of the problems facing us are more difficult than at any period in our history. In addition to the worldwide recession through which we are going and the troubled and continuously disturbed state of Northern Ireland, there are demographic factors built into our society which make our present stage of transition from an agricultural community to one based largely on industry and services a period of unparalleled difficulty. I do not want to imply by what I have said that these developments in industry and agriculture are sufficient to get us over these difficulties.

Both industry and agriculture and indeed development generally need much more than the mere payment of grants and loans from the State. It hardly needs emphasis that of the £300 million of new industrial investment which I mentioned just now, the State will be providing only some £65 million in grants. The remainder must be raised, by the promoters, from various sources, including company funds, private investors and State or bank loan finance. These other sources of finance—indeed the very will to expand investment—can exist only if conditions for investment are right: by this I mean only if there is a full appreciation in the community of the necessity for investment and the environment in which it can flourish if employment is to be sustained and the prosperity we all seek attained.

This means different things at different times, but obviously now it means that above everything else the demand for the goods and services to be produced as a result of investment must be there. In times such as the present when recession is deep and world-wide, consumers are highly selective as to the price and design of articles they are being pressed to buy: and countries or companies or traders which do not complete on these criteria simply go out of business.

How have we fared in the past year in our selling efforts abroad? In 1975, the markets in which we sell are estimated to have declined by just under 8 per cent in volume. This is a significant fall, and if it had been translated into our exports they too would have fallen by a like amount. But though they did drop in volume the fall was a great deal smaller than the decline in the markets in which we were selling. In other words despite what was one of the most difficult years ever faced by workers and manufacturers in this country we more than maintained our relative position. Part of this is due of course to the very substantial increase in agricultural exports, but even if we isolate industrial goods they too show up comparatively favourably.

If this is so it may well be asked why the Government are seeking a pause in the rise in incomes, as part of their strategy of which this budget is part. The answer is twofold.

First, we have up to now been protected from the full effects of the growth in incomes here by the depreciation in the value of sterling to which our pound is linked, and by a rise in costs in the United Kingdom which has been of the same order of magnitude as the rise here. We can no longer rely on these ephemeral and extraneous forms of protection.

Second, over the past year in particular, pay has risen here by a great deal more than in most of the countries with which we trade. This is a significant and most important aspect of our whole approach to our request for a pay pause to the social parties. Hourly earnings in manufacturing in 1975 are estimated to have gone up by more than three times the percentages by which they rose in Germany and the United States. At the same time, industrial output is estimated to have fallen by 7 per cent. There could hardly be two sets of statistics more indicative of a need to get output more into line with earnings. If we take these two statistics together, there could hardly be any more convincing evidence of the need to get output in line with earnings.

That is why, basically, the budget introduced by the Minister aims at a strategy of increasing growth from the 1 per cent which it would have been if no change had been made, to the 2 per cent it will be if the strategy is successful. The budget has a large distributive element— in that it attempts to protect from the worst effects of inflation those most in need of protection. It has also, as I have tried to emphasise in what I have been saying, a heavy concentration on forms of investment in industry and agriculture, which can only be of benefit to the future growth of our economy. However, the budget itself is part only of the strategy necessary for us to pull out of our present difficulties. The rest must come from the community itself.

Let me say now that if those in receipt of incomes try to compensate themselves for changes in taxation made in the budget, our efforts to achieve our objectives of growth and redistribution will be frustrated. But over and above this consideration, which is serious enough, there is the overriding consideration that, as surely as the sun rises, persons now at work will lose their jobs and the already intolerable level of unemployment in our country will increase even further. I do not think that any individual would wish this consequence on himself. I think it would be even more short-sighted for any organisation devoted to the interests of the workers to take on itself responsibility for decisions which can only have the consequences I mentioned.

There is evidence—I think it is accepted by all who look at the thing calmly—that the benefits of moderation are clearly recognised by the people. Recently there was a public opinion survey carried out, after I and my colleagues met the Congress of Trade Unions and the other groups in the social partners, and that survey showed that six out of ten persons interviewed favoured the Government's proposal that those in jobs should not press for any further increase in pay until the end of this year, apart from the payment of the final instalment of the current national wage agreement, and those with non-pay incomes should accept a similar restraint. From the same survey it was found that two out of every three full-time employees interviewed were willing to accept a pay pause provided all those concerned accept a similar pause. That, of course, is what we have proposed.

It is true that this will involve a small reduction for a relatively short period in the incomes of those who receive increases under the national pay agreement. It is no harm to point out that those who received these increases have fared well from the point of view of their living standards. This is shown by the average earnings of those working in mining and manufacturing which includes and is biassed downwards, to some extent, by those workers whose employers were unable to pay the various instalments under the terms of the national pay agreement. If we look at the purchasing power of these earnings, that is the amount earnings rose above the CPI we see that between March, 1973, and June, 1975, purchasing power rose in that period by 16 per cent. A pause now, therefore, will help their fellow workers who are either unemployed or who did not get these increases, and such a pause will leave room for these to get the standard increases.

There is no doubt the proposals we have included in the budget are designed to stimulate production. A number of comments have been made here criticising certain aspects of public expenditure. I want to make it clear that we have framed our expenditure in what are considered the most advantageous areas from the point of view of providing employment. There was implied this morning in the speech by the Leader of the Opposition a suggestion that we should not have built as many houses as we have built and that the money should have been invested elsewhere.

Mr. J. Lynch

Sir, may I ask the Taoiseach to give way? I did not say that. I said there should not be so much emphasis on local authority houses and that more help should be given to people who want to build their own homes.

The Taoiseach

Local authority houses are provided for those who are less well able to provide for themselves.

Mr. J. Lynch

That means everybody now.

Mr. Coughlan

What about the tenant purchase scheme?

The Taoiseach

I was about to say that. There is now a tenant purchase scheme so that people can own their own homes. I do not think there is any conflict on the desirability of providing houses. I believe everyone is in favour of home ownership, but it is quite obvious that a great many people who go to building societies or other financial institutions are outside the range of those who are catered for by local authorities. Let me give now some facts about our achievement in respect of houses because this is, I believe, one of the areas in which the policy of the Government has been particularly successful.

In addition to the private housing funds flowing to the building societies, insurance companies and banks, and invested by them in the housing programme, we have for the past three years in succession maintained conditions in which the output of houses could continue at a high level. The final figures for last year are not yet available, but all the indications are that the figure will be over 25,000 houses. In other words, for the three-year period ending 31st December last we will have seen more houses built than in any corresponding period since the foundation of the State, representing in that short period more than 75 per cent of the total number of houses built in the ten years between 1960 and 1970.

This programme, as I said, represents a massive investment in the basic social infrastructure in providing homes and accommodation for our people. The point was made—it was mentioned a short time ago—that we should somehow adapt the provisions of the house purchase scheme operated by local authorities. This is an area in which the State can play a role in furthering investment. The public capital programme exists because it is needed not to supplant but to support private investment in certain areas. The housing drive has been going at an unprecedented rate and has been assisted by an unprecedented flow of funds into those organisations making loans available for house purchase. In 1974 the building societies had a net increase in the amount deposited with them in shares and so on of a sum just short of £30 million, and most of this money was available to them for issue in house purchase loans. In 1975 the corresponding figure at approximately £70 million is more than twice as high. It is obvious that where there is a flow of capital like this there is not the same pressure on the State, which is already hard-pressed to provide capital to invest in other projects, to supplement the market—individuals themselves through their own resources, whether through the banks, the building societies or insurance companies, are providing a massive increase in resources for private housing investment without actual State intervention.

It is essential in considering a budget that we should look at the inescapable obligations on the State which were referred to yesterday by the Minister for Finance. One such obligation is in the area of security. The total State expenditure on security for the Department of Defence and the Department of Justice in this current year is over £158 million. The Minister for Finance referred yesterday to the waste, and indeed worse, resulting from the violence in Northern Ireland and to the necessity here to counter the efforts of violent men in the campaign for which they are responsible. The strain this is imposing on our society can be gauged to some extent from the fact that the combined total of the Defence and Justice Votes in 1976 is greater than the proposed State investment both on current and capital account in housing. It is true, I think, that patriotism has long since ceased to have any meaning when those professing it can produce distortions like this.

I should emphasise that the story does not end there. The consequential effect of violence in purely economic terms, in loss of life and damage to person and property, in loss of tourism, investment and business, is even more serious than the figures I have quoted. I have quoted these figures merely to indicate to the House the extent of voted expenditure on security to show the Government's determination to pursue relentlessly and campaign against those guilty of political violence in our society wherever they come from or whatever their motives.

The amount of money they may spend on this or that Department is not necessarily a criterion of the extent to which the Government attaches a particular importance to a certain sphere. The very substantial increase in the provision for a particular purpose is naturally a good thing in itself, but the extra finances add to the total pool of public expenditure. As I said, some of this expenditure might possibly be encouraged by a Department in other directions rather than by direct State or Exchequer subvention. From a national point of view the money may be better left in private hands than spent by the State. While this is expressed as a general view by columnists and commentators, the fact is that when we take each group in the community and put them all together, each section is demanding more and more from the State. These are the people who are very often strongest in their condemnation of Government borrowing or the level of taxation.

I have made it clear in the course of this debate that neither the Opposition nor any group in the community can have it both ways. The amount of money needed can only be raised in a very limited area, by either borrowing or taxation, if increased demands are to be made for this or that service. As the Minister for Finance said yesterday, there is no free service available; somebody must pay. It is important to get our priorities right. One aspect of this which has been welcomed and which has been supported in different parts of the House is the extra money being provided for education—about one-quarter. Much of this will go on public service pay. Education is, above all, a labour intensive service. It is obvious from the demands being made from many quarters, including the Leader of the Opposition, that the large increase of £1 million extra per week is not regarded as sufficient.

The same comment could be made for many other services. Allocations of public money are governed now more than ever by the limit of the resources available to us. This is the point I have been emphasising. The State cannot, without grave damage to the economy, continue to absorb more of its total resources through borrowings, charges for services or taxation. In a year in which the consumer price index is estimated to rise by a considerably smaller proportion, an increase of approximately 25 per cent in the provision for education represents a significant increase in resources devoted to this most essential service.

Since 1972-1973, the total provision for the health and social welfare votes and payments from the social insurance fund, taking into account the further improvements now proposed, will have increased by almost 280 per cent. Individual rates of benefit for old age pensions, unemployment and disability payments again taking into account the improvements proposed in the budget, will have increased by various amounts, generally in the range of 95 to 100 per cent, although there are percentage increases above and below these limits.

During the same period the increase in the cost of living has been approximately 60 per cent. Some of the extra expenditure is due, of course, to the assumption by the Exchequer of certain health charges from local authorities. It is well to emphasise this. The House will recall that in December, 1972, the then Government published a White Paper on rates and said that after an assessment had been made of this, and as far as the Government could see ahead, rates would continue to be a major source of revenue for local authorities. Subsequently there was a belated promise in the course of the general election in February, 1973, that there had been a change of mind. One has to assess the carefully prepared and documented White Paper and compare it with a promise made in the heat of the election. As a result of the decisions taken by this Government in the last three years, rates are now £4.50 in the £less than if we had not transferred the health and housing charges from the rates to the Exchequer.

Part of the increase in respect of social welfare and health charges is due to certain anomalies and abuses to which the Minister for Finance referred yesterday. In that connection, we announced that action would be taken to deal with the fact that some payments combined with redundancy, pay-related and social welfare payments gave certain recipients more than they would have if they were employed. In the course of his remarks on this, Deputy Colley referred to the application of the proposed 85 per cent limit on unemployment benefit and to the fact that 100 per cent of these payments would be counted by local authorities in assessing differential rents. He seemed to consider that this would discriminate against lower paid workers. I find it hard to follow the logic of this because there are already built into the schemes many provisions designed to help those in need. Taking those provisions into account, there is no reason either in logic or in equity why income derived in one form as against another should not be counted in the same way. It is obvious that £1 received in pay-related benefit will buy precisely the same amount of goods as £1 received in pay.

Criticism has been expressed on the extent of the tax increases in petrol and cars. The first and most obvious reason for this is the need for balancing the Exchequer income and expenditure, and the second lies with the need to encourage economy in the use of petrol and petroleum products. It is significant to note that petroleum improts have increased from £67 million in 1973 to about £200 million in 1975, despite the depressed state of the economy. So far as the car tax is concerned, Deputies will notice that the increase in the consumer price index since the tax was last increased has been more than 50 per cent, in other words, the tax because the rate was fixed was falling in real terms. This is not necessarily a reason for increasing the burden in any particular case, but the present conditions leave the Government with little option so far as this tax is concerned.

As I have said, we have framed this budget on the basis that it is designed to meet our present needs. No really creditable alternative has been proposed against it. I mentioned earlier the fact that not merely the Opposition but also many sections of the community demand more for this or that purpose. Indeed, suggestions were made again this morning by the Leader of the Opposition, without specifying how much money they would cost or where the money was to come from. The proposals amounted to this: "Spend more, but do not borrow, do not tax, print the money." We reject that philosophy. Our aim is to enable this country to face up to the problems which effect it in this year, a very critical time on our history.

We have been faced with a recession of unparalleled severity and magnitude. We have individually, for reasons which I need not go into, been slow to adapt ourselves psychologically to the effect of this recession, but the effects are there for everyone to see. Our unemployment has risen. Many firms have gone out of business. The entire country has suffered a deeper and more prolonged onslaught from economic and, indeed, quasi-political forces, than at any time in our generation. But we have kept the rate of investment in industrial and other forms of infrastructure reasonably high and we have a good base of modern well-equipped industry. Our agriculture is relatively buoyant. In a world where population growth is increasing pressure on resources of food, we, as a major food producer, must prosper. We have begun to see some of the fruits of the development of our minerals and natural gas.

These are the prospects for our future, but in the one vital area of industrial and service costs, we can do ourselves grievous harm by seeking to continue to pay ourselves too much for what we produce. The choice is ours.

As the Minister said yesterday, no one will provide us with a living. No one else will make the choice for us. We must make it ourselves. We can go ahead, as we have been doing, paying ourselves too much in income increases unrelated to reality, and see unemployment increase to an even more critical level. Or we can, for a reasonable period, exercise moderation in income increases both as individuals and as a nation.

The Government will see that sacrifices are equitably shared as between the different sections of the community and conditions in which investment and employment can increase will be encouraged. This is what the budget is about. This is what it is designed to do. I do not think any reasonable individual, faced with the choices I have mentioned, would hesitate to adopt and support the course we have adopted. The budget is based on the assumption that the course of restraint will be chosen and that the perception and good sense of the Irish people will lead them to accept a temporary moderation in the present standards in the interests of future prosperity.

There is no alternative to these proposals. No sound alternative has been proposed. Of course there has been criticism. Every section which is affected inevitably will criticise. The criticism has been fanned and led and induced in every way possible by the Opposition. There is no alternative of any kind that can get the country out of the situation in which it is. Nobody has any confidence in the Opposition, but there is ample evidence that there is massive confidence in the capacity, the determination and the leadership of the Government to bring this country out of its present problems.

Dáil Éireann debate - Thursday, 29 Jan 1976