Dáil Éireann debate -
Wednesday, 18 Jul 1979

Vol. 315 No. 17

Adjournment of Dáil: Motion (Resumed).

Debate resumed on the following motion:

That Dáil Éireann, at its rising on Wednesday the 18th July, 1979, do adjourn for the Summer Recess.

(The Taoiseach.)

The Tánaiste

I listened with interest to Deputy B. Desmond winding up this debate on behalf of the Labour Party.

He was painting a picture of an economy which I found difficult to recognise. Suddenly I recognised the economy that he was describing. It was the economy of this country when the Coalition Government were in power. Deputy FitzGerald pursued a line somewhat similar when he talked about a short-term cyclical crisis which he said Government policies and brought about in advance of the energy crisis. The energy crisis—if that is the proper word—began with the Iranian revolution some months back. If Government policies resulted in a crisis here it is remarkable that months later it is difficult to find evidence of this crisis.

Of course, there is no such crisis. Economic growth is continuing, the numbers employed are rising and investment is growing. These are not the characteristics of an economy in crisis. If they are, what word should we use to describe the situation that existed when Deputy FitzGerald was in Government? There is no dispute among commentators about the continuance of economic growth. Of course, there are differences of view about the rate of economic growth and these will continue after 1979 is dead and gone. Given the difficulties of measuring the growth of the economy referred to this morning by the Minister for Economic Planning and Development, but particularly this year when the availability of statistics has been reduced by the postal dispute, I am prepared to wager that when the more definitive figures for 1979 come out in two years' time, growth will be shown to have been nearer our estimate of about 5 per cent than to the lower figures being produced by certain commentators.

It is accepted universally that employment is rising. The postal dispute held up production of the live register returns, but figures for the end of April show a year on year decline of about 11,300 before allowing for the change in conditions of eligibility for unemployment assistance for women. Allowing for this change, the fall in the live register unemployment between April 1978 and April 1979 was 12.5 per cent, which is a very substantial cut.

The data also show that investment so far in 1979 is buoyant. For the first six months of the year cement sales were up 14 per cent on the corresponding period in 1978, despite the wretched weather that we had earlier this year. Imports of capital goods are also continuing to grow very quickly. Deputy FitzGerald referred to trade developments and in particular he pointed to the increase of £270 million in the trade gap over the first five months of this year. It is necessary to look at the factors increasing the trade gap. Over 70 per cent of the increase in imports in the first five months of 1979 was attributable to increased imports of producer capital goods and of materials for further production. Imports of producer capital goods were by far the most buoyant category, rising as they did by almost 45 per cent in value terms. These imports go to increasing the exporting capacity of the economy. The growth in industrial exports in the first five months of the year was strong. The performance of agricultural exports, however, was weak largely because of supply constraints following the high level of cattle disposals in earlier years and because of delayed marketing of cattle as a result of the late spring.

These data help to put trade developments for this year so far into perspective. Because of the unexpectedly large rise in oil prices the balance of payments deficit will be higher than we had originally expected. On the basis of current trends, it could be around £500 million or approximately 6 per cent of GNP this year. This is far less than following the 1973 oil crisis when in 1974 the balance of payments deficit reached almost 10 per cent of GNP. An increase in the balance of payments deficit was expected to follow the implementation of the Government's programme for growth. In the White Paper National Development 1977-80 we stated that the deficit was expected to rise to over £500 million or 6¼ per cent of GNP in 1980. A deficit of about the size anticipated in 1980 is now in prospect this year mainly because our oil import bill will be about £100 million more as a result of the recent OPEC decisions.

We accepted the likelihood of a higher deficit because we believed, and continue to believe, that growth and its benefits, particularly on the employment front, are worth running some risks for, but the risks must not be allowed to become too big. The same White Paper said that continuous monitoring of the external situation would be necessary so that corrective action could be taken if developments proved more adverse than anticipated. The position is being monitored.

We have then an economic situation showing many positive features and some that will need careful watching. This could by no stretch of the imagination be described as a crisis and it should not be described as a crisis because of the damage that this could cause. The initial impact of an adverse economic development can be compounded if consumer, and perhaps more important, investor confidence is impaired. Investment is, as I have said, growing fast this year. A blight should not be thrown on this growth by talk about a crisis that does not exist. Deputy FitzGerald's irresponsibility in this matter is to be deplored in my opinion. The Government's planned approach to the economy has come in——

Dr. FitzGerald

The figures speak for themselves.

An Ceann Comhairle

Order.

The Tánaiste

This morning, according to the count of the Minister for the Gaeltacht, when the Minister for Economic Planning and Development was speaking, the leader of the Fine Gael Party interrupted him 36 times and the leader of the Labour Party about half that number of times. The concluding speakers for Labour and Fine Gael were not interrupted. May I request the same courtesy, please.

(Interruptions.)

An Ceann Comhairle

Order. If the Deputy does not restrain himself from interrupting on this occasion the Chair will have to take action.

The Tánaiste

The Government's planned approach to the economy has come in for criticism in this debate. Our targets for this year or any other year were never, of course, an assessment of what was likely to happen if events were allowed to follow their normal course. On the contrary, they were, as I made it clear in my budget speech, a statement of what could be achieved if external circumstances were favourable and if the full support of the social partners was given. It is, of course, self-evident nonsense to suggest, because these conditions were not fully met and targets have to be adjusted, that the policies designed to achieve these targets were and are wrong. The targets were in a sense set as a challenge to our people, to use their efforts and talents to the full to improve their lot and the prospects for their children. That challenge has not been fully met. Even before the external environment took a turn for the worst it was becoming clear that the wholehearted response we sought to our policies was not forthcoming.

Despite the measures taken in the budget to advance growth in output, employment and living standards demands for special treatment by many categories of workers continued and the industrial relations climate deteriorated markedly. Already, as the Taoiseach has pointed out, the number of man-days lost through industrial disputes is well over one million, which will in this respect make 1979 the worst year since the war. The postal strike alone caused considerable damage to the economy. The industrial relations climate is still unsettled with evidence of continued willingness to cut off essential supplies and services regardless of its economic or social impact. If our society is not to disintegrate into a collection of warring interest groups squabbling bitterly and ruthlessly over what will inevitably be steadily reducing spoils, we must arrive at an ordered way of dealing with industrial disputes and wage determination.

The Government have worked long and hard to create such a way in the proposals for a national understanding. It is a completely new departure, it is a comprehensive social contract designed to meet the aspirations of those at work for higher incomes, to protect the underprivileged, to improve employment prospects for those out of work, to move towards a more equitable sharing of the tax burden and to fortify the growth prospects of the economy. It has profound significance. It has been the first attempt in this country to develop a system in which Government, employers and unions will work in harmony together as partners to promote the wellbeing of all. The Government were unusually open, both in the talks with the social partners leading up to the national understanding proposals, and in being prepared to enter into conditional commitments on a range of matters.

Unfortunately, the terms of the original national understanding were not endorsed by the trade union movement. In view of this, and because of potential dangers inherent in the situation that was developing, the Government had no option but to act as they did and announce a norm for pay in keeping with the requirements of the economy. Since that announcement was made the social partners arrived at revised proposals on pay increases for 15 months from the expiry of the 1978 national agreement. The Government have indicated that they will implement the provisions of the national understanding, pay and non-pay, if the pay proposals are ratified by ICTU and by the employer organisations.

I would like to make my position clear in relation to those revised pay terms. It would be less than frank of me if I were not to voice unease about them. In fact, they must be considered as being too generous, having regard to the situation now facing the economy. The negotiations on the national understanding and the events surrounding the pay issue took time and during this time the world economic outlook took a distinct turn for the worse. Nevertheless, the Government are prepared to abide by the revised pay terms and to implement the other provisions of the national understanding in the belief that an agreed, concerted and committed approach by Government and social partners to the problems confronting us is better than any alternative.

It is my hope not only that the revised national understanding will receive the endorsement which the original undertaking failed to get, but that the period of industrial peace which we so badly need will follow. We need industrial peace not simply to repair the revages of the past few months. We need it because any other course in the situation before us could be economically suicidal for many enterprises. The world economy is going into a down-turn and international competition will inevitably become much tougher. We can be certain that any weakness on our part on home or export markets will be ruthlessly exploited.

The Government's economic policy from the day we took office aimed at inducing a note of confidence into the economy and getting things moving again. I remain confident in the strength of our economy and in its ability to grow, but I am equally confident that attempts to abuse that strength, to pile demand on demand, obstruction on obstruction, will in the much tougher world economic climate emerging now, rebound to the cost of those involved and of our people in general.

In historical perspective 1979 will be seen as a notable year because of the Government's decision to participate in the EMS and because of the break in the link with sterling. Securing for this country the degree of economic dependence appropriate to our political independence has been a long and difficult task and no steps in this process have been more important than the decisions to which I have just referred, decisions that reflect the Government's faith in the maturity of the economy and in its ability to participate on an equal footing with our Community partners in this new European system.

The EMS is only a few months old but we can draw satisfaction from the performance to date of our currency in that system. The recent appreciation of sterling against our £ and against the currencies of most other countries, including some regarded as being among the strongest economies in the world, has been seen in the wrong light so far as much comment has been concerned. Sterling has appreciated because of factors peculiar to the British economy, notably the possession of large oil reserves. These factors are irrelevant so far as Ireland is concerned and it would not have been sensible to allow our £ to appreciate in line with sterling even if the EMS had never existed. Such a course would have resulted in an over-valued Irish £ with a consequent loss of competitiveness for our producers on both home and export markets. If our currency had appreciated in line with sterling we would have heard much during this debate about the jobs that were threatened as a result.

Deputy FitzGerald asked about the likely movement this year in external reserves and said that the external payment situation, in conjunction with Government-induced inflation, is now threatening to undermine the Irish £ in relation to EMS currency. The reserves at the end of 1978 stood at £1,250 million, representing about 4.1 month's imports. At the end of June the reserves were £994 million, a fall of £255 million. The widening of the trade gap is the main reason for the decline. In addition, the reserves at the end of 1978 were almost certainly inflated by inflows of a speculative nature which have been reversed since. Given the pattern of external trade, a seasonal decline in the first half of the year is normal. In 1978 the reserves fell also in the first six months and were £960 million at the end of June 1978. A recovery can be expected in the second half of the year. The reserves are still high by international standards and will remain so.

The outlook between now and the end of the year does not give any cause for concern in that regard. To date the Irish £ has withstood the test of the EMS and it can continue to do so provided there is an appreciation of economic reality by all sections. But almost as important is the need to ensure balanced comment on the exchange rate and to avoid the type of misreporting—to use Deputy FitzGerald's word—that has occurred in recent weeks.

The unfortunate tendency of Irish people at times to denigrate themselves and their achievements ought to stop short of readiness, wittingly or otherwise, to undermine the confidence in our currency. Britain continues to be our largest single export market. Because of the movement of our respective currencies, Irish goods must be more competitive now on the British market. Our exporters must exploit that situation to the full. It is a situation that could not come at a better time since it offers a way of offsetting the negative impact on world trade arising from the oil price increase. We should not overlook the fact that this divergence in the currency also improves the competitiveness of Irish manufactures on the home market in competition with British imports and on third markets in competition with British imports.

As the House will be aware, while our entitlement to the £225 million in loans and £45 million by way of capitalised subsidies each year for five years was never in doubt, its implementation was blocked by British insistence on access to the interest subsidies in the event of their full partipation in the EMS. This position was not acceptable to the other members. Last Monday I managed to find a solution covering the British position with which my colleagues on the Council of Ministers would agree and which protects the Irish and Italian positions. The way is clear now for a rapid formal adoption of the enabling regulations which will assure the receipt of £45 million by way of capitalised subsidies this year.

Mr. L'Estrange

It is needed badly.

An Ceann Comhairle

Order.

The Tánaiste

In June 1977 the Government were returned to power with a massive vote of confidence in our strategy for economic and social reconstruction as set out in our election manifesto. That manifesto contained a set of coherent proposals designed to deal with the nation's economic ills. These proposals were elaborated on further in a series of planning documents published in the past two years.

We will not be deflected from our planning strategy, the fruits of which are already apparent in the achievements of 1978. The restoration of the planned approach towards regulating the economy is central to the Government's overall strategy. In 1978 our plan involved a temporary rise in the borrowing requirement in order to boost growth, to increase employment and to reduce inflation. In all of these areas we met with success. It is ludicrous to suggest, as Deputy FitzGerald did, that we gave away almost £250 million a year in the 1978 Budget. The tax concessions given, which would serve to reduce the consumer price index, and the increased expenditure in the area of the job creation were all part of a carefully worked out plan, the success of which can be seen in our achievements in 1978. I wonder is Deputy FitzGerald suggesting that the tax concessions we gave should now be undone.

The democratic system of Government at times such as these imposes farreaching obligations on every individual adult citizen. These individual obligations are every bit as important as the individual rights which democracy confers. Unless these obligations are recognised the democratic system itself and the individual freedom of choice which it enshrines is put at risk. The democratic responsibility of the citizen today does not end with casting a vote this way or that in an election. Free societies cannot function today without a broad range of agreement on fundamentals. These responsibilities are as pertinent—sometimes even more pertinent—in the work place as they are in the polling booth.

Those who put forward outlandish wage claims must face the plain fact that by their actions they are, as surely as night follows day, going to deprive other people of their livelihoods. People in the public service who advance exorbitant claims must face up to the fact that they are asking the taxpayer to pay more taxes. The ultimate absurdity, of course, is when public sector groups who are themselves pursuing excessive claims become vocal in the next breath demanding tax cuts. The Government are tackling the whole problem of income tax. I defy anyone on the Opposition benches to deny that our two budgets have given greater tax concessions than anything done by the Coalition. Indeed, the Coalition through their tax policies played havoc with enterprise and the whole work ethic in this country.

As I have indicated, we are working in a determined way to improve the tax system—to ensure that the burden of income tax is more equitably shared. To achieve this requires throughout the community that deep sense of responsibility I have already mentioned. Particular sections of the community who have come off lightly in the past do themselves and the community a disservice when they over-react to tax proposals which are moderate and reasonable.

Mr. L'Estrange

It is a pity the Minister did not think of that in 1977.

The Tánaiste

Some of those prominent leaders in the farming community who raise the roof at the mere mention of any effective taxation—that is taxation which will actually yield real revenue—are misleading their followers in a most irresponsible way. Whether they realise it or not, they are trying to lead the farming community on a truly dangerous road.

A situation in which farmers are not paying their fair share of the tax burden must inevitably generate ugly tensions between the rural and urban communities. Such tensions and divisions could in the long run have tragic consequences and could imperil the system of family farm ownership itself. I would, therefore, address a special appeal to those who lead our farming organisations to address themselves honestly to this problem, fully conscious of their responsibility not only to the farmers of today but to the next generation of farmers.

Mr. L'Estrange

Will the Minister tell us what he promised the farmer before the election in June 1977? What did he promise the IFA before the June election? Did he not tell them they would have no tax to pay if Fianna Fáil were returned to office? The canvassers said that throughout the length and breadth of the country.

An Ceann Comhairle

Order. I must ask Deputy L'Estrange to behave himself or else to leave the House.

Mr. L'Estrange

He misled the people in 1977. He told the IFA Fianna Fáil would reduce farming taxation.

The Tánaiste

The Deputy will get much more to shout about in a few minutes. He should wait for it. The terms of the proposed national understanding extend the range of democratic participation beyond anything achieved to date. If the proposals are agreed and adhered to we will have created the climate necessary for a united approach to the difficult problems facing our people. I would like to see that concept extended to include the farming community and I would hope that when next the Government and the social partners sit down to chart a united course the farm representatives will be at the table ready to play a constructive role.

One of the most frequent criticisms levelled at this Government has been that we have raised people's expectations too much, that our plans have been too ambitious. Much of this criticism has come from Fine Gael and it has also come from the parliamentary Labour Party. A couple of days ago the leader of the Labour Party, Deputy Cluskey, told us to abandon our plans. I suppose I really ought not to be surprised. During the last Coalition that is precisely how Fine Gael and Labour reacted to the oil crisis of a few years ago. They threw up their hands in horror, furled their sails, battened down the hatches, and drifted wherever the storm carried them. In the memorable words of the former Minister for Finance, Deputy Ryan, they thought of this nation as being a helpless cork upon the waves. That is an approach that we in this party will never accept. Of course, there are circumstances over which we have no control but the philosophy of Fianna Fáil now, as in the past, is that the more difficult the external situation becomes the greater is our responsibility as a people to exercise control over our internal problems.

We have been told by Fine Gael that the manifesto was too generous. There have been snide references to the "goodies" in the manifesto. These were part of a package designed to boost growth and get our economy on the move. They succeeded and let it go on the record that they meant thousands of jobs for our young people. I repeat again that we have since coming into office put more people to work and created more new jobs than any other Government in the history of the State.

Let us be a bit more specific about the goodies which Fine Gael and Labour profess to despise so much. Would Deputy FitzGerald, if he were now in charge, re-impose domestic rates? We are entitled to a straight answer to that question and I will yield to the Deputy for a yes or no answer.

Dr. FitzGerald

We had a manifesto before the election saying what we would do about rates.

The Tánaiste

Yes or no?

Dr. FitzGerald

The people decided against us and we accepted their verdict. They are sorry now.

The Tánaiste

I wonder would Deputy FitzGerald or Deputy Cluskey reduce the income tax allowances to the level they were at when they were in office. They are saying that what we did was wrong. Are they going to correct the situation if they ever get back into Government? The people are entitled to know what they would do about the situation.

(Interruptions.)

An Ceann Comhairle

Order.

The Tánaiste

We know that Deputy FitzGerald prevaricated on the subject of wealth tax. Let him tell us now whether, in return for Deputy Cluskey's support, he would re-impose wealth tax if he were now in charge. It is well known that Deputy FitzGerald, from his ivory tower over in Iveagh House, was able to impose the wealth tax on his more prudent Fine Gael colleagues. Others carried the can on that occasion. Now that he is Leader of the Fine Gael Party, it is strange that Deputy FitzGerald is less enthusiastic.

These points in the manifesto are ancillary matters. I will come to the central point in the manifesto: Fianna Fáil's commitment to jobs and to full employment for our young people. That is the target which Fine Gael and Labour want to see abandoned. Make no mistake about it, there is a brutal equation which could work out temporarily in somewhat easier times for those who have good jobs and who are in a strong position. If resources are not earmarked for job creation and industrial development they cannot be diverted to other purposes. One could, for a while, allow those in a strong bargaining position to win higher incomes. One could buy one's way out of unpopular decisions, out of difficult strikes. One could even do popular things on the tax front. However, the price would be paid by our young people who, in their thousands, would have to make their futures in other lands. This country would lose their energies, their talents and their youthful initiative.

I should like to put it on the record that we in Fianna Fáil will keep faith with the young people. "Jobs in Ireland for our people" remains our priority. In spite of current difficulties, it is our aim to put the future of our youth before all other considerations. We are not going to buy temporary popularity by selling our young people short. That is precisely what Deputy Cluskey is advocating when he tells us to abandon our programme. He is saying, "Let us do it the easy way and scatter our youth to the winds of the world.". At least he is being consistent.

(Interruptions.)

An Ceann Comhairle

Order.

The Tánaiste

In advocating that we abandon our plans he is being consistent. Every single Member of the Coalition Government, whatever his official title, including Deputies FitzGerald, Barry and Corish, was a minister for unemployment. In asking this Government to abandon their plans and programme they are being consistent. That is what they did when they were faced with problems of oil and so on. I want to assure the House and the people, particularly the young people, that this Government will not abandon them. All those who make irresponsible Disneyland wage claims are saying the same thing, too. That is also the message from those who are unwilling to accept a fair share of the tax burden. It is the message of those who foment unofficial, irresponsible industrial action. Let me say on behalf of this party and on behalf of this Government that we would prefer to go into defeat honourably than to retain popularity by selling our young people down the river.

Mr. L'Estrange

Talk about the conversion of St. Paul.

The Tánaiste

We are now about midterm in the life of the Government.

An Ceann Comhairle

If Deputy L'Estrange cannot restrain himself he will be asked to leave the House. Deputy L'Estrange should be a responsible member of the Opposition.

The Tánaiste

Over the next few months it will become clearer that in the run-up to the European elections we suffered a temporary loss of popularity because we defended the public interest. The Deputies over there may fool the people for a short while, but they cannot succeed in doing so for very long. In a while the people will be able to recognise those who jump on bandwagons for what they are. The most valid criticism of this Government is that we have not succeeded in getting our message, our achievements and some of our problems across to the people. But our opponents need not take too much confidence from this because we intend to do something about it and to find our own means of communication through which to keep our people fully informed. In times of difficulty in the past, when our people fully understand the problems which they faced as a nation they responded manfully. Unfortunately for Deputy L'Estrange and his colleagues, they will do so again.

Question put.

The Dáil divided: Tá, 62; Níl, 46.

Tá

• Ahern, Kit.
• Allen, Lorcan.
• Andrews, David.
• Andrews, Niall.
• Aylward, Liam.
• Brady, Gerard.
• Brady, Vincent.
• Briscoe, Ben.
• Browne, Seán.
• Callanan, John.
• Calleary, Seán.
• Cogan, Barry.
• Colley, George.
• Collins, Gerard.
• Conaghan, Hugh.
• Connolly, Gerard.
• Cowen, Bernard.
• Daly, Brendan.
• de Valera, Vivion.
• Doherty, Seán.
• Fahey, Jackie.
• Farrell, Joe.
• Faulkner, Pádraig.
• Fitzgerald, Gene.
• Fitzsimons, James N.
• Fox, Christopher J.
• French, Seán.
• Gallagher, Dennis.
• Haughey, Charles J.
• Herbert, Michael.
• Hussey, Thomas.
• Keegan, Seán.
• Killeen, Tim.
• Lawlor, Liam.
• Lemass, Eileen.
• Lenihan, Brian.
• Leonard, Jimmy.
• Leonard, Tom.
• Leyden, Terry.
• McCreevy, Charlie.
• McEllistrim, Thomas.
• MacSharry, Ray.
• Meaney, Tom.
• Molloy, Robert.
• Moore, Seán.
• Morley, P.J.
• Murphy, Ciarán P.
• Nolan, Tom.
• Noonan, Michael.
• O'Connor, Timothy C.
• O'Donoghue, Martin.
• O'Hanlon, Rory.
• O'Leary, John.
• O'Malley, Desmond.
• Power, Paddy.
• Reynolds, Albert.
• Smith, Michael.
• Walsh, Joe.
• Walsh, Séan.
• Wilson, John P.
• Woods, Michael J.
• Wyse, Pearse.

Tellers: Tá, Deputies Woods and Briscoe; Níl, Deputies L'Estrange and B. Desmond.

Question declared carried.

Ní

Barry, Peter.Barry, Richard.Begley, Michael.Belton, Luke.Bermingham, Joseph.Bruton, John.Burke, Joan.Byrne, Hugh.Cluskey, Frank.Conlan, John F.Corish, Brendan.Cosgrave, Liam.Cosgrave, Michael J.Creed, Donal.Crotty, Kieran.Deasy, Martin A.Desmond, Barry.Donnellan, John F.Enright, Thomas W.FitzGerald, Garrett.Fitzpatrick, Tom. (Cavan-Monaghan).Gilhawley, Eugene.Griffin, Brendan.

Harte, Patrick D.Hegarty, Paddy.Horgan, John.Keating, Michael.Kenny, Enda.L'Estrange, Gerry.Lipper, Mick.McMahon, Larry.Mannion, John M.Mitchell, Jim.Murphy, Michael P.O'Brien, Fergus.O'Brien, William.O'Keeffe, Jim.O'Toole, Paddy.Pattison, Séamus.Quinn, Ruairí.Ryan, John J.Taylor, Frank.Timmins, Godfrey.Treacy, Seán.Tully, James.White, James.

The Dáil adjourned at 4.40 p.m. until 2.30 p.m. on Wednesday, 17 October 1979.