I am not quite sure at which stage I should ask this but at the bottom of the very first page of the Bill there are two Acts referred to. They do not form part of the Schedule. Could the Minister tell us in what way they are referred to since they are not, I think, part of the Schedule? It is a somewhat unusual form of reference.
Bretton Woods Agreements (Amendment) Bill, 1977: Committee and Final Stages.
The Deputy is right. It is not part of the Schedule; it is not part of the Bill, as such, but is a reference note to assist.
I am sure everybody concerned is grateful for the assistance. So as not to be confused by the assistance could the Minister tell me whether he has ever seen this kind of thing before? Offhand I cannot recall having seen it. If one is not familiar with what is involved it may be more confusing than helpful.
It is a recent innovation but I do not know the date on which it was brought in. Perhaps a note could be taken by our good officers of this. Perhaps if a line were drawn between "Schedule" and "Acts Referred To" it would indicate that it was not part of the Schedule.
Sections 1 to 9, inclusive, agreed to.
SCHEDULE
Question proposed: "That the Schedule be the Schedule to the Bill."
I take it that the terms of the Schedule although, as the Minister said, they do not oblige us to break the link with sterling, may permit us to do so.
Yes, after fulfilling our responsibilities for consultation and so forth. The Deputy knows the manner in which such responsibilities are respected by all the members.
In view of the fact that the Schedule would permit us to do so, may I be permitted to say a few words on the topic? I am afraid Deputy Halligan has left us, so I will be brief in dealing with what he has said. Deputy Halligan spoke somewhat emotionally about freedom and sovereignty. I want to remind the House that in recent years the French and the Danes, who were members of the European Snake, were obliged to withdraw from it because the economic and political circumstances were unacceptable to them. Therefore, it can be quite misleading to talk about freedom and sovereignty in this respect.
There was also reference by Deputy Halligan to the relationship between the Irish and British currencies in the last 50 years. He seemed to ignore the fact that it has been only in recent years that our trade with the UK has come down to approximately 50 per cent of our total foreign trade. It has been also only in recent years that there has been a huge drop in the value of sterling. These are new developments which must make us look anew at our link with sterling.
My view is that it is inevitable and that we should make up our minds towards breaking the link with sterling. I have no doubts that that is the way in which we are heading and we should try to prepare for it as soon as we can. It is true that the long term effect of that relationship is that our inflation rate will converage in the long term with the British inflation rate, but as Keynes, whom Deputy Halligan was quoting, said, "In the long-term we are all dead".
In the meantime, the fact is that if our inflation rate is higher than the British inflation rate, then we converge with the British rate because the higher cost of our goods and higher unemployment automatically bring us down to the British inflation rate. If on the other hand we are below the British inflation rate we will only converge with the British rate when effectively we achieve full employment, a situation we would all like to see. We have not been fortunate enough to reach that position in recent years and the consequences are quite clear, that the high unemployment and the high cost of Irish goods are making us converge with the British rate. However, it would be quite wrong and misleading to suggest that one should not talk of domestic inflation, as Deputy Halligan appeared to have been saying, because of our link with sterling.
There has been a very clear example in recent times of what can happen in regard to the two inflation rates because of domestic circumstances. I refer to the 1976 budget, as a consequence of which 5 percentage points of the 20 percentage points that represented our inflation rate in 1976 came straight from the 1976 budget. Deputy Halligan pointed out that this year our inflation rate appears to be going a little lower than the British inflation rate. That may not be unconnected with this year's budget here, and indeed, the British budget. In this country, the Minister finally, I hope, learned a lesson about the consequences of what can be done by the Government alone, and I am not saying that the Government alone are responsible for the divergence: there are other factors. What I am saying is that it is wrong and misleading to suggest that because of the link with sterling there is not anything we can do about inflation here, particularly in the medium term. We have a great deal of control over domestic inflation and if we do not exercise it we will never be in a position to break the link with sterling.
That is not a bad comment on the Schedule.
I laid the foundation for it, as the Minister will have seen.
I will not presume to follow the Deputy down many of the laneways he took because they are not all relevant, but I should like to put the matter right. It was not Denmark which left the European Snake. It was wealthier and stronger countries, in some respects, France and Italy——
I think Denmark had gone in and had left earlier.
Great pressure came on the Danish kroner and perhaps not unrelated to that there was a widening of the margins of deviation which were allowed and which had to be widened in order to keep the Snake from bursting itself asunder. That is a fair indication that it is the markets of the world which determine the value at which currencies stand. That, of course, was not always determined in an emotional way, although sometimes that can be the cause, because some of the most unstable people are those who can dictate the prices of things in the market place. It is determined mainly by the domestic behaviour of an individual economy, and I agree with Deputy Colley on that. There can be no getting away from the fact that people will determine the value they will put on your currency by their assessment of the way in which a particular society is behaving itself and managing its own affairs.
That is a factor that is not sufficiently recognised by many of the advocates for an instant severance of the relationship between the Irish £ and the £ sterling. If this country ever takes that step, that action will have to be associated with a wider acceptance of discipline for a number of years than this country has ever practised in the past.
Hear, hear.
It is the kind of discipline that we had to some extent, when we had no option open to us between 1939 and 1945. I do not mean there would be deprivation or want or scarcity of commodities or anything of the kind that was forced on us by external circumstances at that time, but there would have to be disciplines in relation to incomes. I do not want to get into an argument but when Deputy Halligan, who is not here, was speaking he painted a rather dull and worrying picture of the industrial relations position in Britain. There are those who are not quite as pessimistic as other commentators but we are not entirely on easy street here either, as anybody would know from reading the daily newspapers. While we have a national agreement we need to have widespread adherence to that agreement and less attempts by any individual groups to break away from the spirit or the letter of it. If some persons set a pattern of behaviour through irresponsible conduct in the use of muscle power against the community which gets for them a short term advantage it will simply lead to the kind of chaos here which Deputy Halligan is pessimistic about developing in Britain. Let us not assume that we have no cause for anxiety. We have and we have as great a need for discipline this year as last year. We have a greater need for discipline if we want to achieve that degree of greater economic independence which would be available to us if we were free from such a close association with the £ sterling.
It would also be idle to assume that even if we were to sever the present linkage with the £ sterling we could ignore the future value of it. We could not because Britain still remains our principal trading partner both in relation to the purchase of our own goods and services from us and what we purchase from the rest of the world. The £ sterling will have for the foreseeable future—I do not think there is anybody alive who would see a future which would not contain considerable weighting for the £ sterling —considerable weighting in any arrangement with what is called the basket of currencies with which we would have to be associated if there was a severance of the present linkage. The important thing is that we are free to do it if we want to. We have been in that situation for many years. Our membership of the IMF does not limit the right which we have to do that. It is a right which we would exercise subject to the responsibilities which, as members of the IMF, we freely accepted, to consult with people who have an interest with us in the value which we put on our currency. The IMF involves obligations for all members. We willingly accept them because as a small country we have more to gain out of an acceptance by the larger powerful economic forces of the disciplines of the IMF than we have to lose. It is a question of our surrendering a little theoretical economic sovereignty for the greater real benefits which flow to us by the disciplines of the IMF. The IMF has done a great deal of good since it was established. It has an even more important future ahead because of the many uncertainties and instabilities which exist in economic affairs. They will always exist but they have increased in number and effect over recent years and it is unlikely that the impact of this uncertain period is going to diminish for some time to come.
Question put and agreed to.
Title agreed to.
Bill reported without amendment and passed.