(Dublin Central): Before lunch I was discussing the present situation of the economy. I said that a lot of the crisis arose when the present Government came into office. They failed to realise at that time the serious economic situation the world was moving into. They came to office making commitments on a 14-point plan without properly researching how they were to be financed. We know the dangers of over-commitment, whether in business or our private lives. The present Government made these commitments on a 14-point plan, some of them extravagant commitments, especially in the economy in which we find ourselves. They failed to look at the whole economic structure of the world and of this country at that time. They failed dismally to consider what the full consequences of the oil crisis would be. Instead they looked at their commitments and said “We are going to keep our commitments”.
That is something that might be justifiable in a strong economic unit, but it has been proved now that the decisions which they took, first as regards deficit budgeting and, secondly, certain types of policy which they adopted were wrong. Our economic base was steadily expanding, and had been during the 1960s and into 1970. We were expanding our economic base, and that is what matters if we are to create employment. What was urgently needed at that time, and indeed when Fianna Fáil was in office, was a continuation of foreign investment into industry, an encouragement of finance, irrespective of whether it was generated within our own economy or had to be borrowed from abroad. I have never during my time in the Dáil criticised the borrowing that went into commercial or capital development. Capital development is essential. This country as regards its development, whether it be our roads, telephones, ports, is in urgent need of an injection of capital. The climate was set at that time, and it took a considerable length of time to get that climate established. It started under Seán Lemass and Ken Whitaker, the man who left the Central Bank yesterday. That proper climate was established in the 1960s and continued into the 1970s until we left office.
The present Government failed first to look at the underlying problems, or some of the problems that were prevalent in Europe at that time. Secondly, trying to pursue a socialistic policy in an open economy such as ours was fatal. They introduced Bills of a capital taxation nature, their second bad mistake. These Bills, especially the Wealth Tax Bill, which we opposed, were not conducive to encouraging capital into this country. In the future if our economy is properly built up and our economic base properly strengthened with necessary finance, I would say there would be some justification for these capital taxations. However, shortly after coming into office they set their minds as to how they could introduce this capital taxation package. The amount of revenue accruing to the Exchequer from this entire package is infinitesimal in comparison with the total budget.
But it is not the small amount of money coming into the Exchequer that is the big loss. It is that it has undermined confidence, first in the private sector and has undermined confidence abroad as regards the inflow of capital. In effect, that capital taxation brought very little revenue into the Exchequer this coming year. I have not got figures from the Minister for Finance, but I am sure the wealth tax will not account for £3 million to £4 million of the total current budget. It inhibited the inflow of capital which was urgently needed to expand our economic base. It encouraged the outflow of capital. This has been denied by the Minister, but I am convinced that it encouraged the outflow of capital which could be utilised today.
Furthermore, it created a climate amongst business people that was alien and repugnant to their advancement. We see today that all confidence has been undermined in the private sector, and it is that sector that has suffered over the past three years. We must concentrate our attention in the future on the private sector, for it is in this sector that we are going to get economic expansion. The public sector plays an important part as regards employment and very necessary it is, but if we want to get this country out of its present economic situation we will have to pay far more attention to the private sector. Over the past three years the private sector has been a target for undue taxation and we are reaping the results now. How could we possibly hope to continue especially with our huge current deficit. In 1972-73 there was a deficit on the current budget of £5 million. In the present year, to the end of 1976 on the Minister's figures our current deficit will be in the region of £327 million. We know that will not be a real figure by 31st December next. Even if there is a pay pause—and I hope there will be—we know the underlying expenses which will arise on fuel, telephones and various other factors such as expenses underlying the last wage agreements which I believe have not been taken fully into consideration. All these underlying costs must show up before the end of this year and therefore the Minister's figure of £327 million is not realistic. It could easily be £450 million when all the expenses that will have to be met are taken into account. This kind of current deficit is one of our chief problems.
The Government should never have allowed the finances of the country to reach this appalling state. We have a huge national debt; our tax base is diminishing while our expenditure is increasing. Obviously, this trend cannot continue. It could not continue in any business and much less where the Government are concerned and the day of reckoning must arrive. To a great extent the day of reckoning has arrived when we see restrictions being placed by EEC countries on borrowing, spelling out what they will expect in the future. Obviously, guidelines and restrictions will be laid down in regard to foreign borrowing in future and we will find that money spent in the past four years to the tune of about £650 million to finance current deficits—a large part of which should have gone into productive assets to generate wealth and create employment—has been misspent because of bad budgetary methods.
When the upturn which has already taken place in some European countries and in America and Japan comes we will find ourselves in the position where opportunities will exist but we shall have no finances to avail of them. We have expanded our credit. If we had built up a proper credit base abroad, when the economic upswing comes we could go to the European Bank or the World Bank and ask for £400 million or £500 million to invest in industry or to develop our ports or our mineral wealth. Unfortunately, if the occasion should arise this year or next year we will be unable to get that kind of capital; we have increased our borrowing too much; that is the whole trouble.
In 1973 our national debt was £1,298 million; by 31st December, 1976 the estimated national debt will have reached £3,200 million. These are startling figures. I would not mind if on the other side of the sheet we had investment to show for this money— that is what matters. I do not say that all this expenditure has gone on current budgeting but a large part of it has and there is very little in the way of tangible assets for the astronomic rise from £1,298 million to £3,200 million. Where are the tangible assets within the economy? There is a downturn in our industrial output which happened last year and there is every indication that it will continue this year for various reasons. We have a continuing unemployment problem. That is the situation we have reached after indulging in huge excessive borrowing.
This is a situation about which we should all be concerned. I am not concerned about the Government but about every human being in the country and about his or her standard of living in the next two or three years. The Government failed to take unpopular decisions; they took wrong decisions. They made commitments which, to put it bluntly, the country could not afford. For years past we have been comparing standards with those of advanced European countries. We are looking at the golden triangle where they have had wealth for the past 200 years, looking at the advanced economies of Germany and other countries and telling ourselves that we must have the same standards here. But we must cut our cloth according to the measure. We are living in Ireland and we can only get the standard of living that the wealth of this country can give.
The Government failed to realise that sound budgetary policies would automatically dictate this. They have failed to run the country exactly as a business should be run. I could make some concession for a slight deficit in the current budget over the last six years but I could make no excuse for the Government having spent £678 million in the current budget over the past three years. This is money which was not generated within the economy. This is bound to have a detrimental effect on the private sector and on economic expansion.
We had a capital taxation packet, which took almost 12 months to process through this House. This was completely unnecessary at this time. No matter how socially undesirable it was the Government should have looked at the realities of the situation to see what the consequences would be of a capital taxation packet such as that introduced by the Minister for Finance. It did nothing for the economy. I would say it was justified if it had helped the Exchequer by £50 million to £60 million. It will help the Exchequer very little. It has completely demoralised confidence in the private sector. Therefore, we will see the futility of the crazy taxation package of the Minister for Finance.
The Minister for Finance and the Cabinet failed to grasp what the significance of the oil crisis would be. It was quite obvious that there was a certain movement of wealth from the west to the east. We know the eastern countries are expanding their economies, building their whole infrastructure and naturally doing it at the expense of the west. Where else would the money come from? The Minister for Finance, as well as many people in the country, failed to grasp the significance of that. I doubt if the west will ever be as wealthy again. The Government did not seem to take that factor into consideration.
The Government did not try to find out where they could cut down expenditure. They went in the opposite direction and increased expenditure, most of which came from the private sector. There has been a downward trend, as we have seen, over the past three years. Until we regain the competitiveness which we enjoyed we have no hope of expanding our economic base. If our unit costs do not get into line we have lost the attractiveness for our manufactured goods which we enjoyed over the past ten years.
During the past few years inflation has been running at between 20 to 25 per cent. It was quite obvious during that time that we were losing our attractiveness in relation to our exports. The Government will have to consider doing something about that. I believe England are ahead of us. During the past 12 months England, to a certain degree, has controlled its expenditure by voluntary means. When the British people accepted a semi pay pause of around £6 that was the first step Britain took towards getting out of the economic chaos the country was in. Britain has now enjoyed almost 12 months of this package, the £6 wages increase across the board. That was a remarkable reduction from what the country experienced in the previous three years. This low wage increase is bound to show up to their advantage during the next two years. It is bound to put their manufactured goods on a competitive basis again in relation to their exports to Europe and the world.
We have not reached that stage yet. Our unit costs are still rising. Unless we take some positive steps towards bringing this into a realistic line I believe there will be no attractiveness here for our products. The majority of manufacturers are operating on a very low margin. Any man with £500,000 would be very foolish if he invested it in a manufacturing industry. I am not saying this in order to frighten away capital from manufacturers but to impress on the Minister that unless something is done about increasing the profitability of the manufacturer and that it is recognised that profits are necessary if we want to expand our industrial base we cannot succeed.
Unit costs have gone completely out of hand over the last three years. The price of electricity has gone out of all proportion in ratio to the cost. All these factors have had a detrimental effect on manufactured goods. The Minister said he gave a concession to manufacturers in relation to the retention of stocks. I believe it amounted to £7 million but I dispute that the Minister gave anything to manufacturers and business people generally as regards a help to taxation. On paper it looks like it but the Minister is deceptive.
I asked the Parliamentary Secretary to the Minister for Social Welfare on several occasions about the pay-related benefit scheme. I believe the Minister is getting £10 million too much a year from this scheme. This fund has carried a surplus over the past two years. The employers' contribution is 2 per cent which is a very substantial amount if a manufacturer is employing 200 or 300 people. If the Minister was concerned this year to try to help manufacturers he should have looked at the pay-related benefit scheme and if it was in excess of the requirements he should have reviewed it immediately. I believe if he did there would be a downward trend in contributions.
The Minister could also have taken a look at the contributions. We should all be concerned with the industrial arm, whether that be products from agriculture, our own mineral resources or raw materials which are imported. Our whole future lies in the manufacturing base to try to generate more employment. There was nothing in the budget to help this sector of the economy. In fact there was nothing in the budget to rectify the economic situation at all. It was an exercise in bookkeeping, as to how you could balance income against outgoings. It contained nothing else apart from that. Reading through the budget speech there is nothing tangible to show there will be an upturn in the economy.
I wonder is the Minister aware of the circumstances of those people. He knows the experience they had last year. He is aware of the huge number of redundancies in this sector. These redundancies took place for a reason. The units in which they were working were no longer viable and could not operate. We will have to direct our attention towards this. Last week I was in Edenderry and I saw advance factories lying idle. Some time previously I saw advance factories lying idle in Ballinrobe. I am not sure how many advance factories are closed throughout the country. Money was either borrowed and given to the IDA, or generated at home. This is capital which must be serviced. Unless we succeed in getting people to occupy these advance factories, there is no hope of reducing the present unemployment level.
Why are there no takers for these factories? Last year the Industrial Credit Corporation had £4 million which they could not lend. That is most unusual and very significant. There is no shortage of money in the Associated Banks today. If proper proposals are put forward, the Associated Banks are quite willing to help the industrial sector. Why is no one looking for this money? There must be a reason. I know there is a world recession, but there must be other reasons.
