I move:
That the Dáil on its rising this week do adjourn until Wednesday, 13th October, 1976.
As the House is aware, this debate is generally used as a vehicle for a review of the economy and other relevant matters. I propose to follow this precedent.
First, I should like to deal with the economy. Many views have been expressed on this, but I think it will be more satisfactory for us to stick as far as possible to the facts.
We all know that in 1975 national output declined. We know that the world recession was in part responsible for that situation. What has not been so obvious is the extent to which we in this country did better than most of the countries with which we trade. Last year, the decline in our gross national product, which had been estimated earlier to have been about 3 per cent, is now put by the Central Statistics Office at no more than 1 per cent. This is a very creditable performance for our uniquely open economy in the particularly adverse circumstances which prevailed internationally. In 1975, I would like this House and the public generally to know that the decline we suffered came close to being the smallest of any of the member countries of the European Community. I propose to use OECD figures — and the estimated decreases in GNP elsewhere last year will show that in Germany it was down 3.4 per cent, France down 2.4 per cent, Italy down 3.7 per cent, the United Kingdom down 1.6 per cent, Belgium down 1.4 per cent, the Netherlands down 1.3 per cent, Denmark down 0.8 per cent and the United States down 2 per cent.
Our industrial exports did fall in volume terms by about 4 per cent, the first decrease for many years. While this was in itself disappointing, the decline was comparable with those suffered by other industrialised countries and represented a less adverse result than experienced by some of these countries. Germany, for example, suffered a decline of 10 per cent in volume terms in its exports, nearly all of which are industrial in nature.
The figures I have given demonstrate clearly the extent of the recession which hit the western world. There is no point in trying to hide or ignore its effects. Neither is there point in trying to conceal the beneficial results of the budgetary and other policies adopted by the Government. We did indeed suffer a decline in output in that year but, because of the actions of the Government and for other reasons, this decline was a great deal less here than it would otherwise have been — and was much less than in many other countries.
I am happy to say that the signs of recovery which I noted in opening the previous adjournment debate last December have been confirmed. It is now clear that the upturn was maintained through the last four months of 1975.
The decline in industrial production levelled off in the third quarter and there was an increase in output in the final quarter of the year. Available indicators, in particular the external trade returns, suggest that in the current year the upturn has continued. The revival of imports has increased in tempo, reflecting increased output but also increased consumer demand. Exports have also shown a significant increase. There were particularly noteworthy rises in sales to countries other than Britain and Northern Ireland. Those to all EEC countries other than the United Kingdom in the period up to the end of last month were up 35 per cent in value on the corresponding period of 1975 while those to the United States rose by 66 per cent and those to Japan actually doubled. Total industrial exports showed an increase of 30 per cent in value in this period, equivalent to about 10 per cent in volume terms. These are not signs of a faltering economy — or of industry unstable or afraid to use its opportunities.
The international outlook is encouraging. Indeed in the major economies, recent developments have been somewhat more favourable than previously forecast. The latest estimates suggest that world trade could expand by up to 8 per cent this year where earlier estimates had been of an increase of 6 per cent. The US economy is leading the recovery. In continental Europe, both Germany and France now expect growth rates to be of the order of 5-6 per cent. In Britain, national output grew at an annual rate of about 4 per cent in the first quarter. However, this represented a mainly export-led expansion phase and, because of the impact there of the counter-inflation policy, prospects for our goods there are not so promising int he immediate future. Some improvement in domestic demand there is likely in the second half of the year, but this may not help us, particularly if we do not achieve the gains in productivity necessary to negative the difference between our two countries in the size of wage and salary increases being contemplated. As is well known and has often been emphasised, Britain is our single biggest export market. We must compete there. In fact, the disparity in expectations on incomes in the two countries and the effect this could have on our competitiveness both here and in the United Kingdom is probably the single most worrying problem on our horizon.
This is so because on the way we deal with the problem will depend our ability to keep at work those who now have jobs and to create more jobs for those at present unemployed and for those coming into the labour force. Moderation in income demands will contribute to raising our living standards in the long run. Lack of such moderation will put thousands more out of work — and lower living standards for all.
In my speech on the adjournment debate before the Christmas recess I indicated that it was the Government's view that those who were fortunate enough to have jobs should agree not to press for any further pay increases at least until the end of 1976. The Minister for Finance in his budget speech reiterated the Government view that a pay pause from the termination of the 1975 national wage agreement until the end of 1976 was most desirable for the good of the economy as a whole.
Given our commitment to upholding the processes of voluntary agreements wherever possible, the Government, as the single largest employer in the country, took part in the discussions aimed at negotiating a new national wage agreement. Regrettably the calls for a pay pause to the end of 1976 produced little concrete result in the negotiations. We do not consider the terms of the draft 1976 national wage agreement to be the best solution to our problems. We do however consider them to be the best solution which can be got on a voluntary basis at the present time.
A rejection of the terms of the draft 1976 national wage agreement would indicate a most disturbing unwillingness on the part of the parties concerned to face up to the problems confronting us at present. It should be clear that there can be no question of increasing the payments which would be made under the draft national wage agreement. That should be known and understood. Much of the objection to the draft proposals seems to be caused by the restrictions the proposals would impose on special increases over and above the standard amounts. I would ask those who take this line to consider carefully the social stresses that would be created if strong limits were not put to such extra increases at a time when many workers have not got even the standard increases under the last agreement and have no hope of obtaining the full increases under the proposed agreement.
The pursuit of a "free-for-all" would simply lead to a situation where those who think they are in a strong bargaining position would try to enrich themselves at the expense of those in weaker positions. Those not in strong positions, obviously, have less to bargain with and their position would consequently be much worse due to their weaker situation. The pursuit of such a policy might bring short term gains to a minority of our citizens but would do nothing for the community as a whole. Those who would pursue such a course of action would bear a heavy responsibility, for the pursuit of narrow sectional interests at this time could tear our society apart. As has been repeatedly said, and it is no harm to mention it again at the present time in the period between now and the decisions in respect of the national draft agreement, nobody owes us a living.
A call for restraint in income demands does not have any attractions when made after the announcement of a 6.2 per cent rise in the cost of living in the previous quarter, but this increase is in large measure attributable to previous excessive pay increases, and sooner rather than later this fact will have to be acknowledged and short term sacrifices made if we are not to fall disastrously behind in the fight against inflation. A particularly heavy responsibility, therefore, rests just now on those in a position of leadership or influence to help in getting this message across to the community at large.
We expect that the second half of the year will see a more generalised recovery here than has so far occurred and that the growth rate for the year as a whole will be in the range of 2-2½ per cent. I should emphasise that this estimate was made before the outcome of the current situation on incomes is known, and is based on certain assumptions as to pay levels and competitiveness. It is now obviously a matter for conjecture whether these assumptions are right. I might also indicate that the figures I quoted from the OECD are also borne out by Agence Europe Nationale which gives the estimate for this year and which are largely in line with the other figures given. I mentioned that because there is no fundamental agreement on the assessment by different expert bodies in this regard.
I now want to review briefly the position in the principal sectors of the economy. We have recently debated the Estimate for Agriculture and, if I do not speak at any length about developments in farming, it is not to be taken as indicating any lack of appreciation of the vital importance of agriculture. This was underlined by events in 1975. Of the increase of £305 million in the value of exports over £200 million was contributed by agriculture.
For farmers, 1975 was a good year. Output rose by no less than 10 per cent, by volume. The cattle industry recovered from the relatively depressed conditions of 1974 and creamery milk production increased appreciably. The increase in farmers' incomes is estimated to have been about 50 per cent, which more than fully made up the setback experienced in 1974 when they suffered a fall of 12 per cent. This has brought back confidence to the industry about its future growth. There is plenty of evidence of this renewed confidence. Market prices for cattle have never been better. The decline in the acreage of tillage has now been reversed. Fertiliser usage is showing a welcome and very necessary increase following the cutback over the past two years which, unfortunately, has recently led to a loss of jobs in the fertiliser industry.
This resurgence of confidence is soundly based. Within a relatively short period further advantages will accrue when the transitional arrangements of EEC membership come to an end. I would encourage farmers to build up their herds and to develop the great potential of this basic national industry. I also want to urge farmers in the dairying sector not to over-react to the current proposals of the EEC Commission. I want to assure them that the Minister and the Government will ensure that any adjustments in the Common Agricultural Policy will maintain the scope for expansion here based on our unrivalled natural assets and ability to produce milk at low cost. We can and must remain one of the world's leading producers of cattle and cattle products in an expanding and highly industrialised market of 260 million people.
I have already referred to the encouraging performance of industrial exports and to the stabilisation of production revealed by official figures. These figures do not extend beyond the end of last year. However, the April survey of manufacturing industry conducted by the Confederation of Irish Industry and the Economic and Social Research Institute indicated that the recovery in activity in manufacturing has, in the main, continued. Taking manufacturing as a whole, the firms surveyed expected that production and exports will continue to increase in the next few months. Home sales, however, were not expected to show any change.
The assessment also varied considerably from one sector to the other, as indeed has performance in recent years. The survey suggests that the increase in activity is mainly concentrated on intermediate goods and that there have been steep declines in the output of consumer products. This ties in with the disquieting import trends. Imports of a wide range of some manufactured consumer goods rose by about 30 per cent in volume terms in the last six months. Imports from Britain were particularly buoyant. This increase owes something to the dismantling of tariff protection which has been almost completed, so far as British goods are concerned, since this time last year. The intensification of competition, which is usual in a period of recession, probably played a part. But there can be no doubt that the main reason for the increasing share of the home market being taken by imports is the loss of competitiveness, principally as a result of the higher pay increases we have awarded ourselves in this country.
In the four-year period to the end of 1975, average hourly earnings of male workers in industry increased by 18 per cent more in Ireland than in Britain. More rapid productivity growth here cut the gap between the respective rises in average unit wage costs to 7 per cent. This result is, of course, an average of widely differing performances between industrial sectors. In some branches of industry a high rate of investment or the advent of new capital-intensive firms helped to push up output per person employed and to offset increases in pay. In other branches — the more traditional sectors such as clothing, traditional textiles, paper and printing, wood and furniture and food — the greater increases in pay here were fully reflected in unit costs. Most of the 57,000 jobs which were lost in industry between 1973 and 1975 were in these sectors. This bears out again what I and other Ministers have been saying about the link between increases in unit costs and unemployment.
A recent issue of the Newsletter of the Confederation of Irish Industry gave an interesting illustration of this relationship by comparing the relative performance of the textile and clothing industries. During the four-year period from 1971 to 1975, unit wage costs in the Irish textile industry rose 17 per cent more slowly than those in Britain, and Irish textile output increased 19 per cent more rapidly than British output. At the same time, unit wage costs in the Irish clothing and footwear sector grew 12 per cent faster than those in Britain: output in the Irish clothing and footwear sector declined 17 per cent more rapidly than output in these sectors in Britain. There could hardly be clearer evidence of the connection between costs and employment. Within limits, the more we pay ourselves the less we can employ in this country. It is no argument to say that higher wages here stimulate demand and so create markets for more goods. They do: but the markets are for goods made where costs are lower, and home industry whose prices are out of line gets no benefit. These are the iron and indisputable laws of trade and they cannot be amended by restrictions which invite retaliation against the 40 per cent or so of our trade which depends on exports of goods and services.
I have related the preceding comments to Britain since in many ways the two countries now constitute a single market in which impediments of any kind to the free circulation of goods are few. Increases in unit wage costs in our other principal trading partners, with the exception of Italy, have been less, in some cases very much less, than in Britain or here and it is only the depreciation of the £ which has prevented our goods becoming completely uncompetitive with goods from the US, Japan and most continental EEC countries. We cannot continue to rely indefinitely on this extraneous influence to protect us from the effects of asking too much and giving too little.
There is plenty of hope in our future. If we can draw on the lessons of the last few years, we can turn the results of adversity to advantage, for during these recent years we have had a complete transformation of our industrial base. Many firms have closed. Industries have been extensively rationalised. There has been massive investment in new plant and technology, greater, I may say, than anything we have ever experienced in our history before. Despite the adverse international climate for investment, the Industrial Development Authority have maintained a high level of success in bringing new industries here. Last year, their promotion work resulted in grant aid being approved for projects with a job potential of 16,500. The authority have set a target of 17,000 for this year.
When I was in America at the kind invitation of President Ford in connection with the celebration of the bi-centennial of the independence of that great country, I took the opportunity of stressing the advantage which this country possesses for American firms thinking of locating plants in the European Community. There is indeed ample evidence of the attractions of the country in the extent to which American firms have already decided to invest here. As Deputies know, their total investment as at a recent date come to some £329 million. During my visit there, I announced, with the Minister for Industry and Commerce, the decision of six more firms to set up factories here, involving a total further investment of some £53 million. Since then, first-time inquiries have been received by the Industrial Development Authority from a significant number of other American companies; and the authority themselves have mounted almost 100 industrial presentations in America. Their efforts, if they bear fruit, will be in the interests both of this country and America in that they will preserve for investing firms markets which they might otherwise have lost, and by promoting industrial and economic activity generally will create new and better markets generally here, in America and in the Community for the products both of industry, services and agriculture.
At home, the Government have stepped up very significantly our support for industrial development. We have allocated almost £54 million to the IDA for capital purposes this year. The total allocation for industry in the public capital programme was increased by 71 per cent. Counting both current and capital expenditure, direct State aid to industry this year is just short of £120 million. And this does not include tax revenue foregone as a result of the scheme of tax relief for export profits and accelerated depreciation allowances. We will continue to make available as much money for industrial development as resources allow.
Given the magnitude of State assistance to industry and changing circumstances, there is an obvious need to review the various ways in which aid is provided and to consider whether they give the best possible incentives to industry to invest and to increase output and sales. Such a review is in hands in the context of the preparations for issue of a national economic and social plan. There is no shortage of ideas on new measures of help for industry, and the Government welcome any worthwhile suggestions or proposals. It is noteworthy, however, that we receive no suggestions on schemes that could be terminated or abridged. However, in current budgetary circumstances, there is a responsibility to ensure that even aid to industry — or to agriculture or other sectors of the economy — taking account, of course, of the benefits to the revenue of more buoyant activity in the economy, does not further widen the public sector deficit.
The same is true in relation to public spending affecting the building and construction industry where calls for increased spending have also been heard. There has been a substantial increase in unemployment in this sector and this is something the Government regret. Of its nature, the industry must depend on what happens in the rest of the economy to generate demand for its products: and in this sense it is less a master of its own destiny than many other industries. While appreciating this, I wonder how much of the blame for high unemployment in the industry must be shouldered by the industry itself, both workers and employers. Does it push up the price of its products so much that demand inevitably slackens? Does the operation of price variation clause facilitate this process? For the sector's customers, be they in the public sector or in the private sector, can only secure so much funds to spend on building work. If these buy a smaller quantity of work as a result of cost and price inflation, the result is unemployment.
Again, here, the connection between the level of wages and employment is crucial; and the figures are simple. If £325 million is available for building and construction generally — from the public capital programme or otherwise — and 40 per cent of this goes directly on wages, then some 50,000 men can be employed. If the average wage goes up by say 20 per cent while the total amount of money flowing to the industry remains the same, then unemployment in the industry, as a matter of simple mathematical calculation, must fall. Perhaps 9,000 more men must lose their jobs. This is the sort of roulette being played and these are the stakes in current wage negotiations. Here as in every other industry and walk of life, jobs and wages are interdependent and there is no way in which the link can be broken. The more out of line with productivity that incomes go the fewer jobs there will be in this country — both for those who now have them and for school leavers and others who are seeking them.
Certainly, the Government have not been sparing in allocating funds for building. Our housing record is the best example of this. The increase in local authority housing construction since we took office culminated in a record 8,700 houses being built last year. This increase and the other measures in our housing programme have maintained an annual rate of more than 25,000 dwellings in output.
But to get the full measure of the work supported by public expenditure, one needs to go far beyond housing, further even than the items shown under the heading "building and construction" in the sectoral breakdown of the public capital programme. Spending under many other headings also provides work for construction firms and workers. Examples are harbour works, work at airports, spending by Bord Fáilte and factory-building partly financed by IDA grants. The total provision affecting the industry in this year's programme is in fact, the £325 million I mentioned. This represents a remarkable effort in the budgetary circumstances that prevail.
I do not wish to comment on the discussions relating to pay in the industry except to ask all concerned to consider the points I made a few moments ago; and the reality that there can be no further allocation of public funds for building work this year. Further, there will be very strict constraints on what will be possible next year. Many people hold that we have reached the limit of taxable capacity — and in the interests of economic development, we must reduce the level of public borrowing.
While detailed statistics on developments in the services sector in 1975 are not yet available, the level of activity in the sector as a whole was lower than in the previous year. However, tourism improved by about 3 per cent in real terms and there was growth in certain other areas. Figures released by Bord Fáilte show a rise in tourism numbers in the first four months of the current year. The North American market was particularly buoyant with an increase of 13 per cent. For the year as a whole the board forecast a rise of nearly 7 per cent in overseas visitors.
The past six months have been noteworthy for the progress made towards the full exploration and development of our natural resources, on the basis of the Government's policy that their exploitation should confer the maximum possible advantages on the nation as a whole. The work at Navan for the development of the lead/zinc ore body is going ahead and more than 1,000 workers are employed there at present. Following the announcement of our intention to promote the establishment of a zinc smelter to process zinc concentrate supplies from the Navan mines, we authorised the IDA to pursue the matter and they have been doing so actively.
In the offshore sector, substantial progress has been made in the last year. Deputies are aware of the position about natural gas from Kinsale from the debate on the Gas Bill, currently before the Oireachtas. During this session, exclusive offshore exploration licences were concluded covering areas in the South-West, West, North-East and East. The licensee work obligations are such as to ensure that a wide-ranging drilling programme will continue over the next three or four years. This programme has already started. I think we can look forward with realistic optimism to results in this area.
Deputies will be aware of the discussions on a new Law of the Sea Convention which are being conducted in a global framework, and of the discussions within the European Community on a new Community regime for fishing. Both these sets of discussions are of great importance for the future development of our fishing industry. I emphasised this at the Luxembourg meeting of the European Council when I said that conservation was vital to the future of the industry and that the Community's new policy must give maximum attention to this question. We are not happy with the Commission's proposals on exclusive coastal zones. These have had to have regard to the short-term national interests of a number of our partners which are opposed to ours in this matter. I would hope, however, that they will see the importance of adequate coastal zones to the conservation of fish stocks which, ultimately, benefits all interests concerned. At any rate, the Government are determined, in the discussions which are continuing in the Council of Ministers, to safeguard the interests of our fishing industry and to allow scope to realise its potential for further development
I have referred to the Luxembourg meeting of the European Council of Heads of Government and Foreign Ministers of the member states of the European Community which I attended at the beginning of last April. In the statement I made in the House on my return, I referred to the general situation within the Community. I suggested that although the outcome of the meeting in Luxembourg was disappointing it might be best to suspend judgement until the end of this year. This, I think, remains valid as developments in the interval do not provide a clear indication of the health of the Community or of the direction in which it is going.
On the credit side, it is worth noting that, except in a small number of cases mainly relating to Italy, where Commission approval for derogations was granted, protective measures affecting other member states have been avoided. Agreement was reached in the annual price review under the Common Agricultural Policy on a package which was satisfactory for this country, given the overall economic situation and the diverse interests which had to be accommodated. We had further evidence of Community solidarity in the loan of 1.3 billion dollars raised by the Community for this country and Italy. Our share was more than £150 million. Further progress has been made in developing the external relations of the Community acting as a single unit.
These are some of the Community's achievements of which we should not lose sight. Some of them consist more of avoiding dangers than of making positive progress, but they are no less welcome for that. However, there is no point in concealing the fact that there have also been many disappointments. These include the continuing failure to agree on a Community energy policy, the lack of progress towards convergence of the levels of development of the member states' economies, the failure to agree at Luxembourg on the size and composition of a directly elected European Parliament, the patent failure to coordinate Community policy, as such, in economic summits like that at Rambouillet last year and now at Puerto Rico.
There is to be a further meeting of the European Council on 12-13th July. I would hope that with improving economic prospects it might be possible to make a start there on breathing new life into the Community. In relation to direct elections to the European Parliament, the number of proposals under consideration has been narrowed down to a small number within which I would hope we could find the basis for a solution which would be satisfactory for Europe and for this country.
The report on European Union, prepared by M. Tindemans, the Prime Minister of Belgium, and the discussions on the issues it raises also have an important role to play in advancing integration. The report has been under examination by the Foreign Ministers and is to be discussed further at the forthcoming meeting of the European Council but we will not know the final outcome before the end of the year.
The benefits of such activity are in marked contrast to the continuing tragedy of Northern Ireland. I have stated Government policy on the North on many occasions. As recently as March I had the privilege of giving a full account of its main aspects before a joint meeting of the House of Representatives and the Senate of the United States of America. That account received wide publicity and, I think and hope, wide acceptance.
It is hardly necessary for me here to go into the detail of what I said there. I would like, however, to place again on record my appreciation of the actions of President Ford in joining with me in an appeal to American and Irish people to refrain from supporting Northern violence with financial or other aid, and for the practical measures taken to give effect to that intention.
Unfortunately, it is not by words alone that progress can be made in Northern Ireland—though badly chosen or ill-intentioned statements can cause considerable damage. And it is not by the length of speeches that the value of policies is to be judged. The Government have shown more than once that their will to combat violence is not merely verbal; and that they will uphold, with the considerable forces now at their command, the law of this land. We do not want men of violence here; and we will not permit this country to become a haven for those who destroy the lives and property of our fellow countrymen in Northern Ireland, here or elsewhere. Our record on violence speaks for itself but British Ministers have joined with us in expressing satisfaction at the excellent results that have been achieved in the field of North/South co-operation on security matters.
At present there is evidence of a will in Northern Ireland to discuss the way forward for the different sections of the community, most of whom wish for an environment of stability and law, in which the real problems of the area can be tackled. By the real problems I mean the problems of unemployment and social justice and the creation of good living conditions for all its people. The discussions now going on are a hopeful sign for the future. We here wish them well. Our attitude will be one of readiness to help in any way we can—and to accept and support fully any institutions of Government freely arrived at which command the respect of the people of Northern Ireland as a whole. Indeed, when I met the former British Prime Minister, now Sir Harold Wilson, in London last March, we confirmed that both Governments were agreed that only on this basis could an acceptable form of a government be established.
From what I have said it will be easy to deduce the main emphasis in Government policy over the past few years. We have sought to protect the weak from the effects of the worst recession since the 1930s and to develop our economy so as to ensure that, as far as possible, people could remain in employment. The numbers out of work are high but they would have been a great deal higher without the measures taken by the Government— on a scale, let me emphasise, never matched in this or in any other generation. Indeed, as Deputies will be aware, percentage increases in unemployment in other countries, brought about by the recession from which we have all suffered, were higher— often far higher—than here. This is no comfort to those who have lost their jobs or who are seeking work, but it does bring home the size of the Government's effort to maintain employment and the comparative success of that effort.
The cost has been great. The capital and current expenditure of Government and local authorities and the capital expenditure of semi-State bodies has risen over the past three years from just under £1 out of every £2 of gross national product to about £2 out of every £3. No matter what ideas one may hold about the influence of public expenditure on gross national product or on economic growth, it is clear that a continuance or increase in expenditure at this level is not compatible with a thriving and self-reliant industry or agriculture. If the State and public authorities generally monopolise too many of the decisions on the allocation of resources, then other initiatives by indigenous industry just cannot take place. The absorption or reallocation by the State and by public authorities of an increasing proportion of national wealth—no matter how worthy the motive—can only weaken enterprise and the sense of drive in domestic industry and agriculture on which the growth of the economy depends.
Public expenditure is financed largely by taxation and borrowing. Our levels of taxation expressed as a percentage of total resources are not high by international standards but this statement, taken by itself, gives an incomplete picture. First, the relative poverty of our country means that the level of taxation expressed as a percentage of GNP which would be light in a richer country could bear with great severity here. And the structure and incidence of taxation may often be such that it weighs heavily on particular sections and may well inhibit development.
The borrowing we have had to do to maintain our capital and other programmes is not sustainable at its current level in the longer term, or in conditions such as those emerging where the major industrial nations are pulling out of recession and industry may well be starting to seek investment capital to finance its activities. Indeed at its present level borrowing is imposing a heavy burden on taxable capacity. Deputies will have noted that in the current year the cost of extra debt services is almost equivalent to the entire buoyancy of taxation. In other words, when the increase in the cost of debt service is met there is little or nothing for other policy options like the reduction in taxation or improvement in services. This is the factual position which should be pondered by the many who propose further increases in public expenditure and borrowing.
What then are the priorities for the Government? The first and absolute priority is the maintenance and creation of employment. This means many things. It means that we must reduce our rate of inflation because at its current level it is making it increasingly difficult for us to compete in markets here and abroad where we must sell. So far we have been reasonably successful in this area. The danger is not in what we have done but in what we may do— not in the past but in the future. It could well lie ahead in the consequences of wage and income increases which are too high for the economy to bear, and well above what is contemplated abroad. Economically, we do not live on an island. We live in the midst of a large and busy market where goods sell on price and quality, irrespective of origin. Exporting a high proportion of what we produce, we benefit from this market, but importing also the best that it can produce, we must observe its disciplines, or suffer the consequences. It is the plainest of common sense that if our goods are uncompetitive in price or design, then employment must inevitably suffer.
It is no good coming along when the markets are lost and factories and workshops are about to close, and urging that something be done to keep the plant alive and jobs in being. Fire brigade actions achieve little. We will survive and prosper only by the use of good management practice and the application in time to incomes generally of the principles of realism and common sense.
This does not apply only to those working in what are generally known as the productive sectors, like agriculture and industry. It applies throughout the economy. There is no such thing now in our country as a sector, service or industry, isolated from the rest. Each depends on the other. All who live and work in this country are part of the same community and depend on it for their livelihood. It is for this reason that the Government introduced the recent legislation on the banks. The community pays the tens of millions of pounds for bank salaries, in one way or another, just as it pays the costs of other goods and services it buys. And the community has a real and continuing interest in what it gets for this money. Bank costs are part of industry's prices; and their actions become examples for others to follow.
Our basic aim of improving prospects for employment requires a great deal more than moderation in the rate of inflation and in the growth of incomes. It requires a new attitude on public expenditure and a critical examination of many projects and programmes. There are many questions to be asked in this examination. To what degree is public expenditure and the taxation necessary to finance it adding to our inflation, and thus in effect diminishing our prospect of creating more jobs? Are there within Government programmes which are contradictory in effect, perhaps at the one time involving subsidies and taxation? Is what we are spending really achieving a return for the community as a whole, as distinct from some sectional group within it? Are our policies on welfare and taxation logical, or even compatible with each other? Many questions like these are being considered and will be answered in the Government's continuing examination of public expenditure and its place within our social and economic plan. Indeed it is only in this way that we can free the resources necessary to release and sustain the enterprise and investment on which the growth of the economy and all employment depend. Again, is the emphasis within the total of public expenditure, at whatever level it is set, right, if we want to achieve our objective of ensuring that our opportunities for employment improve? Obviously the direction of changes made in the last budget must be maintained. There must be the greatest possible emphasis on spending which creates self-sustaining employment and does not at the same time add substantially to the tax burden, either directly or through debt service charges. Perhaps nowhere more than in relation to public expenditure is the Government's priority of creating and maintaining employment more relevant.
In what I have said about inflation, incomes and public expenditure, I am not implying that the Government alone can achieve the atmosphere of confidence—the desire and initiative to progress—on which our prosperity depends. The Government can and will provide the environment for progress. That is what the work on the forthcoming economic and social plan is all about. But neither any plan nor the Government can, in themselves, ensure that progress takes place. That depends on many things like the will to succeed, the readiness to accept and benefit by change, and not least the willingness to refrain from unjustified criticism which can fuel the despondency which so many now seem to enjoy. I have said that an absolute priority is the maintenance and creation of self-sustaining employment. It is an aim to which all sections of the community can subscribe; and it is an aim to which all can give substance in their lives and actions particularly in their attitude to incomes. The Government will continue to encourage and lead to its achievement. It is the basis on which our policy is framed and the objective of our efforts and undertakings.
