I want to start very briefly by saying that there are some things in this budget which are to be welcomed but this will not be the tenor of my speech. It will not take me long to say what they are but it is right that we should say that there are certain things in the budget which I believe all sides of the House will welcome. There is the increase in public service widows' pensions, which will bring them up to the position which they should have and which I believe all sides of the House are committed to their having. There is the easing of the means test for War of Independence veterans, something which we all will welcome. There is the extra aid to the Arts and the £250 for one-parent families, although one may regret that the amount is so small given the scale of the sums which are being thrown around in this budget but at least something is being done and the Government deserve credit for that. Finally, a small technical point, the revised provision for taxing radios and record players to limit trade diversion because of cross Border traffic. This is a technical change but one which will assist in maintaining a more normal pattern of trade in Border areas than has been the case hitherto.
Those are small things which add up to £3,500,000 out of a total of £2,776 million, that is .15 per cent of the budget. I have to criticise the remaining 99.85 per cent of the budget. We could discuss this budget at the level of the fantasy world the Government are living in, a world in which the economic growth generated by the National Coalition, which attained 5¾ per cent in 1977, was maintained throughout last year and allegedly will continue this year without any special boost or help in Government action. We could remain in a fantasy world of 5 per cent inflation rates, 6½ per cent to 7 per cent growth rates, with investment rising at 15 per cent, figures which have been given to us by the Government in recent times. That is where the Government have remained in what one has to describe—I trust you will not regard me as disrespectful in doing so—as the Martin-George cloud cuckoo land. One might almost be convinced by the budget speech that they believe their own figures. I say almost because there are give away, tell-tale figures in this speech which show they do not in fact believe their own figures but have not yet had the courage to admit as much.
We in this House cannot deal in fantasies; we have to deal in realities. The real world we face today is a less cosy one. It is one in which the Central Bank tells us that growth has been declining since the middle of last year and that in fact the short-lived consumption boom which Fianna Fáil imposed on top of the solidly based growth achieved by the National Coalition—and they achieved this inflation when they were bringing down the level of borrowing—came to a sudden sharp end within a year of their coming into office. The economy is sliding down a slippery slope of declining growth. I quote from the Central Bank bulletin:
There is some evidence that the economy reached a plateau at mid-1978; In other words, there may have been a pause in growth in the second half of 1978.
We know what the words "some evidence that" and "may have been" mean in a Central Bank report published immediately before the budget. Such statements cannot be made quite as bluntly as at other times. While the Central Bank pursues its duty by drawing attention to important phenomena in the hope that the Government would pay some attention to the facts it does so using soft words to cloud the harshness of the facts but not to obscure them. The Central Bank continues:
The main component of domestic demand, private consumer expenditure, appears to have reached a peak in the second quarter and to have fallen from that level in the subsequent quarter. Investment in building and construction, another major component of domestic demand, also seems to have slowed after the second quarter and ... may have actually declined in the fourth quarter. Foreign demand, as reflected in industrial exports, was not very buoyant throughout the year and industrial exports failed to increase in value terms in the third quarter.
I will return later to this question of imports and exports and to the sudden turn around that occurred in our trading pattern in the middle of last year and to which too little attention has been given by commentators:
Industrial output expanded rapidly in the first half of 1978 but declined in the third quarter. Growth in imports ... tapered off in the fourth quarter.
The Central Bank goes on to say that the marked slowing of growth in the second half of 1978 has implications for 1979, implications which we did not hear anything about here yesterday, and with regard to which this budget takes no relevant action. The Central Bank goes on to say that there seems little reason to expect growth to recommence, at least at the rapid rate experienced in the first half of 1978. It says on the domestic side there is no scope for general demand expansion and sums up with the words:
On the whole, the outlook for 1979 does not seem to be quite as bright as the actual performance in 1978.
The Central Bank has a tradition, according to my analyses of past reports, of giving forecasts on the future trend of the economy in quantitative terms except immediately before the budget when it does not put it into figures because it does not want any contradiction to arise between itself and the Government at that time. In no year has this self-restraint on the part of the Central Bank been as significant as this year because, frankly, normally the Government entering into a budget are making an assessment of the economic situation and are trying to react globally to it as best they can for the sake of the country. Unfortunately this Government, their hands tied by the ham-handed way in which they entered into Government with a manifesto committing them to a course of action bound to produce illusory short term results, have lost the freedom of action in managing this economy in the way it needs to be managed and have therefore lost the capability of ensuring continued growth and, in these circumstances, the Central Bank's comments are highly significant in the absence of any particular forecast for the year ahead. They are particularly significant, more so, perhaps, than in an ordinary year when the difference in the projections might not be great.
The real world is also one in which the OECD tells us that because of this decline since mid-1978 the growth in our economy in 1979 will be only 4 per cent. It is only in the most unusual circumstances that the OECD flatly contradicts what its member governments say. Usually it shades its comments so as not to be too critical. We all know the talks that go on between finance officials in the OECD to try to bridge disagreements, to soften any asperities and to ensure that whatever comes out in the OECD report is not going to conflict too flagrantly with the government of the day and the officials of the OECD, within the limits of what they can honestly do, to endeavour to avoid embarrassing unduly individual governments. I know of no case so far as this country is concerned, though I have seen it happen in the case of other countries, where the OECD has so flatly, flagrantly and totally contradicted the projections of a member government at the crucial point of the year when the government is bringing in a budget as on this occasion and I have been following these reports now for over 20 years. I have followed the careful use of language and one often has to read a long way between the lines to find out what they are saying in criticism of a government. I have never known a case where the divergence between OECD figures and the figures that were put forward by a government have been as great as in this instance.
We find also that the Economic and Social Research Institute, the independent agency whose job it is to give impartial forecasts of economic developments here, likewise tells us that growth in 1979 will be 4 per cent, a figure incidentally which has built into it the £70 million of the EMS money which is not at the moment built into this budget.
But the Ministers for Finance and Economic Planning and Development —and they have said this several times in the last few days—say that they have been more right than these other bodies last year and that so they shall be this year. I was following a radio interview of the Minister for Economic Planning and Development last evening when I, unfortunately, was interrupted by the division bells, and he was taking this line that others have been mistaken previously; they had been right and, of course, this year again they would be right and others would be wrong. Let us look at the facts because that is a legend that I would not want to have perpetuated because it simply is not true.
It is a fact that for the year 1978 the Government and these bodies, the OECD and the ESRI and the Central Bank, did not differ that much about the outcome. The Government said that GNP would be 7 per cent; these three bodies said it would be 5½ to 6 per cent. We now know that, despite Government attempts to cover up the facts, the growth last year was nearer to what these bodies said, between 5¾ and 6¼ per cent it now appears, than to the Government's 7 per cent but in so far as there was a difference between them last year—and the difference was not great—it was these bodies who were right and the Government who were wrong, contrary to the statements of the Ministers for Finance and Economic Planning and Development. We know also that whereas the Government forecast 7 per cent inflation to the end of 1978 all of these bodies forecast 8 per cent and we know that the figure—and all are agreed on this because it is now on the record—was 8 per cent. The figure for the 12 months ended November was 7.9 per cent. In a reply in this House the other day the forecast was given from the Government benches of a 2¼ per cent rise in the quarter to February and when one tacks that on and turns it into a figure for the 12 months ended February one gets about 8.7 per cent. So the end of December figure is going to lie somewhere between 7.9 per cent and 8.7 per cent, I would say, about 8¼ per cent as against the Government's forecast of 7 per cent. Here again these other bodies were accurate in their forecasts of inflation and the Government were wrong, not by a large margin but in so far as anybody was right, it was the independent bodies and in so far as there was an error, it was a Government error. I am not making much of this because the differences were stretched but it is simply false for the Government to claim they have been more accurate than these three independent bodies when they were, by a certain margin, less accurate. They are, therefore, not convincing when they say this year that they are going to be right with figures that are totally different from the figures offered by the other three bodies in question.
These differences between the Government and these other bodies do not relate only to growth rates. There are also wide differences in inflation forecasts. The Government are still claiming, though their own budget figures make a nonsense of this, that inflation up to the end of 1979 will be 5 per cent, given they were starting with over 8 per cent and given the figure I suppose the year as a whole, year on year of about 6½ per cent, to use economists' jargon. The OECD tells us that inflation this year will rise to 9 per cent and the ESRI says it will increase to 10 per cent whereas the Government say it is going to fall to 5 per cent, though their own budget contradicts this flatly because the Government have been forced, by the arithmetic of budget making, to expose their own inflation figures as fraudulent.
In this instance the Government have been forced by the arithmetic of budget-making and because of their own commitments to indicate that they were reducing borrowing to 10½ per cent of GNP. They were forced to tell us what their GNP figure is for next year when they told us that their borrowing of £779 million would be 10½ per cent of GNP and one does not need to be a great arithmetician to arrive at their forecast for GNP next year at £7,400 million. That is a 17 per cent increase on the 1978 GNP of £6,300 million. In this budget, therefore, the Government are forecasting a GNP increase of 17 per cent.
How much of that is going to economic growth? The OECD and the ESRI say 4 per cent. Let us leave that aside for the moment. For the purpose of this calculation, let us take the Government's figures at their face value. Let us say the Government are right about a 6½ per cent volume of growth. Where does the rest of the 17 per cent come from? It is, of course, straight inflation. The Government's forecast of GNP for 1979 is £7,400 million, and directly implicit in their statement is that £779 million in borrowing is 10½ per cent of GNP. That statement implies an inflation rate of 10 per cent next year—the figures cannot be interpreted in any other way. This is by a Government claiming to be thinking of bringing inflation down to 5 per cent, implying an average of 6½ per cent over the year as a whole.
So the Government's figures make nonsense of their claim to be bringing down inflation. Deputies may recall that inflation for the 12 months which ended in May last was just over 6 per cent. It had come down to that figure 12 months after the change of Government because of the policies which had been pursued by the National Coalition and because of the extra boost given by this Government in regard to motor car taxation which, I think, amounted to 0.4 per cent, if I remember correctly—in other words, if this Government had not acted, inflation would have been 6½ per cent in the 12 months ended last May.
What is inflation now? I mentioned already that the Government have admitted a figure in the current quarter of 2¼ per cent. That is before a budget which will add the best part of that figure to inflation, never mind the recurring increases in prices day by day. By the Government's own admission, in the 12 months ending in February of this year it will be about 8.7 per cent, and immediately after this budget it will be about 9 per cent. Therefore, in nine months the inflation rate will have been pushed up from about 6 per cent to something around 9 per cent—I think just above that figure, the Government say just below it.
I could go on with these contradictions. There is also the Government's claim that investment rose by 15 per cent last year. That is a nonsensical figure. The OECD, the Central Bank and ESRI all contradict it, giving figures of 11 to 12 per cent. The Government are living in a fantasy world 18 months after the Fianna Fáil wedding party is over.
Here for the first time in the history of the State Ministers are presenting to the Dáil figures which are not just shaded up or down by a margin of optimism or pessimism in the direction of the Government's wishful thinking. All Governments have tended to put their own gloss, to a small margin, on figures. They have all gone through the process of arguing with the civil service to try to convince them that figures could be a little bit higher, or a little bit lower, in regard to inflation, and consequently the figures that come out are marginally different from what the experts, left to themselves, would have given. But the margin by which politicians in the presentation of figures for budgets and other economic purposes, have distorted the data given to them by experts has been minimal, has never gone beyond, in my experience either in Government or Opposition, a margin of legitimate doubt that must arise in making these assessments.
But here for the first time we have figures, the true figures, the figures with which the Government were presented by their advisers, grossly distorted and falsified to the point of absurdity and self-contradiction on a scale which makes me ashamed to be part of our political system. I must say that in Government one of the things I took some pride in was the kind of working relationship between Ministers and civil servants. I joined in discussions on domestic economic matters with civil servants, and when we were trying to make estimates of what the future of unemployment would be, what future growth would be, we had arguments and discussions, and if I could put forward a valid case for saying why the unemployment figure would fall by a certain number, and if by intellectual argument I could convince them that was something they had overlooked, they were ready to modify their figures. But if I could not out-argue them, I loyally accepted their figures. That also was the attitude of my colleague, Deputy Richie Ryan, and of all our Ministers—we accepted that the figures to be put to the nation must be ones that the experts stood over and that they must not be distortions of the true figures. We accepted that basically the country must be told the truth.
This is the first time in my recollection that we have departed from that. Government documents bearing the Government's imprint have turned out to be no better than party political papers, ones that have no credibility. That reflects on our credibility at home and internationally. Let us remember that other countries, too, go through the same process, whose governments want to put a favourable gloss on things: they, too, have similar practices of not distorting figures, not giving them more than a small gloss of optimism or pessimism and in regard to which the experts can say at the end: "There is a margin of doubt here and you could be right about it."
Here we are producing figures which will go out to the international forum and which everybody who gets them, OECD, EEC, IMS, knows are false. Our international credibility is affected by that sort of performance. They are figures from what are derisively described occasionally—why the fruit in question should be so discredited I do not know—as banana republics. No one expects that kind of behaviour or that kind of non-credibility to arise in relation to a country of our standing. All sorts of domestic or international credibility have been thrown to the winds, and regardless of the consequences the Government are throwing fantasy figures around like confetti. This is highly dangerous to our economic future because by refusing to face the fact that growth is falling by more than one-third, from 6 per cent to 4 per cent, that inflation is rising from the 6.1 per cent of the year ended last May to 10 per cent in 1979, and that investment is falling, not increasing—it had never reached the growth rate of 15 per cent that the Government dreamt up—the Government have created a budget that bears no relation to our economic needs.
It is a budget for emigration, nothing less. In that connection, could we have an end to the data on which emigration is produced? In this House some months ago we were given figures by the Taoiseach for the estimate of emigration in the year ended February 1978. He rightly said that the figures were estimates of net emigration. They were based on the net outbound passenger movements by sea and air, a technique which I developed in the fifties and which has been widely used since. The Taoiseach said quite rightly then these net outbound passenger movements had been shown to exaggerate slightly the ultimate net emigration figures. The net emigration is usually about two-thirds of the net outgoing passenger figures. We cannot be sure of the figures accurately until the next census figures are issued, but that it a fair relationship.
For the periods ending January-February, June usually, and October-November, where there are not distortions of tourist traffic affecting the net flows, it has been shown—and I have followed these figures month by month since the fifties—that the net outbound passenger figures give a good indication of the trend of emigration. The sum of yearly figures in a five-year inter-censal period usually add up to what the net emigration has been.