I move:
That a sum not exceeding £3,638,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December, 1980, for the salaries and expenses of the Department of the Taoiseach, and for payment of certain grants-in-aid.
As we approach the summer recess it is opportune to look back over our work here in the Oireachtas during the first six months of the year, to assess what we have achieved, and to look forward to what needs to be done for the rest of the year and beyond.
In parliamentary terms we have done well. A considerable amount of legislation has been enacted. We have scrutinised the financial estimates much more thoroughly, and in greater detail, than has been the practice for some years now and we have also succeeded in providing more time for special debates and for discussing relevant current matters.
Perhaps the most important debate in the last session was that on Northern Ireland at the end of last month. Because it took place so recently, I shall not now go over the same ground as I covered in opening that debate. I do wish, however, to reiterate my view that the situation in Northern Ireland is the major issue in our country today. Our aim is the unity of all the people of Ireland in peace and harmony and the achievement of that aim is our first political priority.
The publication of a new document by the British Government on Northern Ireland is expected shortly. While it would be injudicious to comment in advance on any particular proposal it may contain, I believe it is important that I should state, again, our view that a proposal which is not acceptable to all the community in Northern Ireland and which does not recognise the reality of the physical, political, social and economic relationship between Northern Ireland and the rest of the country will not succeed and it is only in the context of new and closer political co-operation between the Irish and British Governments that a permanent and lasting solution will be found.
In reporting to the Dáil on the Venice Summit, I referred briefly to the present state of the European Community and to the main problems facing the Community and the implications which these problems of the Community and the Community approach to them will have for Ireland. In the course of that debate, reference was made to the extra contribution this country will make to the budget of the Community as a result of the settlement of the British budgetary difficulties.
The first aspect of this situation to be taken into account is the fact that we are net recipients from the Community and net recipients this year to the extent of £360 million. That money flows to this country from the budget because that is the way in which Community policies are designed under the treaties. We are benefiting or losing from these policies in precisely the same way as other member states are benefiting or losing.
While this is true, it must be remembered that this long, difficult and intense debate was about the extent to which member states were either net contributors or net recipients. Attention was specifically focused on these very specific sums of money, plus or minus, which were involved for the different member states. Our place in the plus table was a clearly evident one.
It was also equally evident that we stood to gain to a substantial extent immediately this year through the additional funds which would flow to us from the set of proposals which were blocked by the failure to resolve the British budgetary problem.
The amount of these additional funds is estimated at about £75 million in the current year. In strictly budgetary and financial terms, therefore, in contrasting the additional inflow of about £75 million against the additional contribution of £8 million, there was no doubt as to where our best interests lay. But there was, of course, a great deal more involved than that. It was clearly in the best interest of every member state, and none more so than ourselves, to get away from the dissension which was impeding the work of the Community and its development.
The settlement furthermore cleared the way for the whole agricultural package which in addition to the increase in prices for products contained a number of other very significant benefits for us. These included the inauguration of a new policy for sheep, progress in regard to fisheries policy, agricultural development proposals for the west of Ireland and, of very considerable importance for us, the abandonment of the supplementary milk levy and the proposal to suspend the system of beef intervention for part of the year. Against this background of progress and benefits in so many areas, the additional contribution called for from us could not, on any basis of logic or reason, have justified us standing in the way of the solution to the British budgetary problem arrived at so painfully and after so much dissension.
The Community, in common with the rest of the industrialised western world, is going through a period of high inflation, rising unemployment, low growth and growing balance of payments deficits. The main cause of the current economic problems of the Community is the fact that oil, on which the Community is so heavily dependent for its energy, has increased two-and-a-half times in price in the past 18 months.
A Community approach to this international problem is progressively emerging. Its essentials are, to reduce dependence on imported oil by developing alternative sources and by greater economy in the use of oil. At Venice, also, the need for a dialogue with the oil-producing nations was stressed and it was agreed that such a dialogue should be undertaken.
The Community has committed itself internally to changes in its structures which could well be of very great importance to us. This commitment arises out of the recent solution to the British budgetary contribution problem, and from the imminent approach of Community expenditures to the upper limit of its own resources. These are serious issues with far-reaching implications. It is clear that we are in for a protracted period of debate and negotiation on the future policies and mechanisms of the Community. In the aftermath of the settlement of the British budgetary problem, an outlook has been developing in Community circles which has important implications for the future development of the Community.
As I indicated when reporting to the Dáil on the Venice Summit, an entirely new emphasis is now being given to the status of the budget, to the possible detriment of the ideals and principles of the Treaties and we shall have to draw attention to the longer-term repercussions of this approach. I would like to reiterate that while the budget is an important instrument of Community policy, it is only one of a complex of policies and mechanisms which go to make up the Community as a whole. This new mood is nowhere more clearly illustrated than in the attacks which are now being made on the common agricultural policy. It is our policy to steadfastly and consistently resist these attacks because we believe that the common agricultural policy represents one of the major, political, economic and social achievements of the Community and that without it the Community would be a greatly diminished Community and a much less coherent political entity.
We intend to point out also that the major industrial partners have done well out of the Community and that the Community has not been a one-sided affair. We recognise that reforms are needed in the common agricultural policy and that the problem of surpluses in some areas must be dealt with but we shall press to have the real origins of these surpluses clearly identified so that the remedies proposed are directed towards the root of the problem which will be found, in many cases, to be imports of substantial quantities of the products concerned from third countries.
The Commission, taking into account the general international economic situation, is of the opinion and this opinion, indeed, is shared by most of the member Governments of the Community that, for the present, priority must be awarded to reducing the rate of inflation and the balance of payments and budgetary deficits and that, for this reason, a regime of physical and monetary restraint should be continued. This view was again reiterated at the Western Economic Summit which has just concluded in Venice where classical orthodoxy seems to have prevailed completely. We cannot therefore expect any initiatives at Community level to deal with unemployment or to endeavour to generate economic activity at Community level. So far as our economic problems are concerned, it is clear that while our membership of the Community provides us with a very strong economic base and an essential support system, we cannot expect that Community economic policies in the short term will contribute to a solution. We shall have to rely on our own efforts to deal with them. Our own actions and behaviour and the measures we take will determine our success in overcoming our difficulties. Like the other members of the Community we must continue consistently with our efforts to restore order to our public finances but in our case we must, at the same time, ensure that by good economic management the measures we take to get our finances under control do not deflate the economy to any harmful extent.
We will not deflate because deflation is not appropriate in our circumstances. Our economy is still a developing economy and the sort of deflationary policies which might be embarked upon by countries where economic development is at a much higher level than ours would not, at this stage, be suitable for us. In our efforts to deal with our budget deficit, our balance of payments deficit, excessive borrowing and high inflation, we must be careful not to depress economic activity to a level from which it would be very difficult for it to recover within a reasonable period of time.
The budget introduced this year was entirely appropriate to the economic situation. It had to secure a balance between a number of conflicting demands and is succeeding in doing this. It is on course and the strategy on which it was based must be maintained. Government expenditure and borrowing must continue to be kept within sustainable levels. The task facing the Government, therefore, at present must be, within these constraints, to maintain economic activity at the highest level and to ensure that the financial policies which we are forced to adopt will not inhibit unduly our efforts to secure the highest possible levels of employment. That is clearly a difficult and complex management objective but we are determined to undertake it.
The primary objective of Government economic and social policy is the attainment of full employment based on an expanding economy and sound public finances, with a special emphasis on the consistent improvement in the standard of living of the poorer and weaker sections of the Community. We intend to pursue that objective notwithstanding the many economic difficulties which we are encountering at present.
I would now like to look in some greater detail at the different aspects of our economic situation. Because of its significance to our gross national product, external trade is an area of major importance. Export performance, the level of imports, the terms of trade and the balance of trade are of crucial importance to our rate of growth.
The present international economic scene is, to say the least of it, discouraging with many countries adopting a restrictive approach to economic policy and with very low or negative growth forecast for some of the key areas to which we will be exporting. In the European Community as a whole, for instance, growth is expected to be a mere 1½ per cent and in the OECD area as a whole, it is expected to be only 1¼ per cent. This reduction in growth is common to all countries and, in particular, the United States and the United Kingdom are expected to have negative rates of growth.
The European Community as a whole, had a current account deficit for the first quarter of 1980 of 10 billion dollars, compared with a small surplus in the first quarter of 1979. Some of the strongest European economies are having balance of payments deficits for the first time for many years. It is against this type of international financial situation that we must decide our own course of action.
The balance of payments is for us the basic economic indicator in this area. It has always been recognised that as a developing economy, moderate balance of payments deficits are acceptable in our case.
Since we broke the link with sterling and joined the EMS, the balance of payments has assumed greater importance both as a measuring rod of economic performance and as an element in monetary policy. But our basic position is still the same in regard to the acceptability of moderate deficits. We cannot permit any undue preoccupation with the balance of payments to interfere with our primary economic objectives.
While we must continue to watch the balance of payments and to assess the different measures we consider taking for their likely effects on it, there are nonetheless a number of encouraging signs. Because of the sound management of our public finances, domestic and international confidence has ensured that the Irish pound is remarkably stable in the European Monteary System. Recently also despite the fact that the terms of trade have moved heavily against us, particularly in regard to oil prices, there is evidence that the balance of payments deficit is being stabilised.
Our objectives in this area are clearly defined. We must promote industrial and agricultural exports by every means available to us and develop our earnings from tourism to the greatest extent we can in the face of current difficulties in this area. We must seek out those areas in our existing export markets where there is still growth and search for new markets which recent experience shows can be found and developed. Córas Tráchtála are engaged in an active review of these possibilities. They have a number of special measures under consideration and they do not by any means take a pessimistic view of our prospects. Bord Bainne and CBF are undertaking similar activities.
An active campaign of import substitution is required and the public sector are fully committed to such a programme. Because oil imports represent such a serious imposition on our balance of payments situation we have a very real interest in efforts being made to recycle petro-dollars. We have expressed the view that the Community should endeavour to ensure that member states are enabled to finance their oil imports on the most favourable possible terms and will press for action on these lines.
Unemployment in the European Community has risen to six million and there is the prospect of a further increase this year and next. This is due both to low economic growth and to the fact that there will be some four million new entrants a year in the labour market in the early eighties. At present it must be recognised that the Community, as such, has no proposal to undertake any action in regard to unemployment despite being pressed to do so by the trade union movement throughout Europe. Our figures in this country reflect the overall European scene.
The Government see unemployment as the major social problem. In particular we are concerned about the high number of school leavers seeking their first employment this year. Our approach to the problem is both comprehensive and detailed. The public capital programme has been directed primarily towards the maintenance and creation of employment. Capital for infrastructure, telecommunications, energy and the industrial promotion agencies has been significantly increased in real terms.
The State-sponsored bodies concerned with economic and commercial development have been requested to explore every possibility open to them for economic development and job creation. In particular they have been asked to maintain their recruitment of apprentices and trainees at the highest possible level. It is to industrial development of course that we must look, principally, for the jobs we need. This is now a two-fold task. We must not alone, as we have been doing so successfully, create new jobs, but we must also seek to minimise the haemorrhage of job losses, which are reaching unacceptable levels.
The prospects for industry this year, bearing in mind the international growth climate, are good. Output growth in manufacturing at 5 per cent is expected to be the highest in the European Community. At least 25,000 new manufacturing jobs will be created this year and job approvals under the IDA are expected to be about 30,000. In fact, job approvals negotiated in the first five months of this year at 13,800 represent the best ever January-May performance by the IDA.
The Government development priorities, set out in the 1980 Public Capital Programme, have been particularly directed to the achievement of industrial growth. The funds for infrastructure, telecommunications and the ESB will significantly assist industrial development also. There has been no slackening, therefore, in spite of our economic difficulties and constraints, in the drive to expand our manufacturing capacity. This new manufacturing capacity consists in the main of technologically-advanced, high-productivity industry with great growth potential in employment and exports. The Government will continue to make funds available to the greatest extent possible for infrastructural and industrial development. Small home-based industries will be assisted by the provision of technological advice and assistance.
The new National Enterprise Agency will identify new opportunities for industrial and service employment. It will, in particular, seek a domestic response to the new employment possibilities identified.
The National Economic and Social Council, which as Deputies know is representative of the main economic and social interests in our society, has been asked to review overall industrial policy and to make early recommendations to Government on it.
The possibility of increasing employment in the agricultural industry is also being actively pursued.
Job creation is unfortunately however only one side of the equation. It is job losses which are pulling down our overall employment situation. The considerable success of our job creation programme is being heavily eroded by job losses in industries unable to compete in present market conditions. Two major factors contributing to this situation are unrealistic pay settlements and intransigent attitudes to restrictive practices and productivity.
The cost of credit for working capital is adding greatly to the difficulties of a number of firms and is frequently the cause of job losses.
The Ministers for Finance and for Industry, Commerce and Tourism have had this problem of working capital for industry under active examination for some time and will shortly be bringing forward a scheme to assist in this area. Furthermore, the Government look forward to a reduction in interest rates generally as soon as conditions make this possible.
High inflation rates are now an international problem. Most countries have put control on inflation by rigid monetary and fiscal policies as their major economic objective. The increase in inflation rates over 1979 is about 50 per cent in most Community countries. On average the rate for the Community is expected to be 12.3 per cent in 1980 as compared with 9 per cent in 1979 and 7.1 per cent in 1978.
Basically the acceleration in inflation rates is due to the high increase in oil prices in 1979 and 1980. As already indicated, crude oil prices in the Community are now nearly two and a half times what they were at the beginning of 1979. Since Ireland is the most open economy in the Community, with imports running at over 65 per cent of GNP, we import external price increases to a greater extent than any of our trading partners.
The present high rate of inflation has two major consequences for policy: first that we should not add to it by domestic income increases we cannot afford; and, second, that the weaker sections of society be protected from its effects.
This latter objective was a major Government priority in the 1980 Budget. It involved increases ranging from 20 to 25 per cent to social welfare beneficiaries, and income tax concessions for the lower paid.
Our inflation rate, which was just over 20 per cent at mid-May, should now have reached its peak unless there are further sharp increases in oil prices or unless there are excessive increases in incomes.
There is some prospect that the staggering increases in oil prices of the last 18 months may not be repeated. The Government are also determined to make every effort to secure moderation in incomes. I believe that responsible people now realise that we must live within our means and that we cannot continue to award ourselves income increases which, because they are not justified by increased output, must be met by borrowing. I want to repeat that the strongest economies in Europe have already settled for very moderate income increases this year and we have no alternative but to follow suit.
Overcoming our present economic difficulties will require the full support and the co-operation of the social partners and, equally important, will require a widespread understanding by the general public of the realities of our situation. A major contribution to success can be made by the achievement of a new national understanding which will be directly related to the needs of the economic situation. Discussions on such an understanding are now under way and the Minister for Labour, on behalf of the Government, will make every effort to bring them to a successful conclusion. The difficulties are very great with the conflicting pressures on the participating parties. I want to underline that we attach great importance to these negotiations because a successful outcome would contribute enormously to our efforts to overcome the intense economic difficulties with which we are confronted.
A new national understanding related to the economic situation would give us something much more than an economic base from which to move forward. It would give us a major psychological shot in the arm and would give workers, in particular, a sense of security and stability in which a peaceful industrial relations climate can evolve. Nothing could demonstrate more clearly a national awareness of the economic dangers which confront us and our determination to overcome them than the securing of an agreement on an appropriate understanding.
I would like to use this occasion to urge the social partners to make every effort to reach an early agreement and to keep constantly in mind the current international scene which has emerged and in which our economy will have to operate in the times immediately ahead of us. In economic terms, we are not an island. We are, more than most, a country which is subject to international and European conditions and we must act accordingly.
The single most important economic decision facing the community today is the level of incomes we agree to accept over the next 12 months or so. This decision is central to our whole economic and financial future. We cannot carry income increases which are out of line with those which have been accepted in Europe generally.
An unrealistic settlement would increase inflation further and lead directly to a substantial increase in job losses. We are already suffering heavy job losses at present and these, unfortunately, will accelerate if our pay settlements do not give us the breathing space we need. The Government, in order to underline the seriousness of securing a moderation in incomes and in the context of the national understanding discussions, have postponed the implementation of the second phase of the Devlin award in so far as Ministers and Ministers of State are concerned and we will discuss with other categories in the public service a similar postponement in their case also.
The level of income increases emerging from the national understanding will also have crucial implications for the budgetary situation. The overall budget deficit must be reduced, and the budget made a significant start in this direction. Any major addition to the bill for public service pay would set us back very considerably.
Our ability to expand the economy and to increase employment is also heavily dependent on good industrial relations. Strikes not only reduce national output and earnings but they also inhibit foreign investment. The vast majority of our employers and employees are fully conscious of this and they do succeed, through patient negotiation conducted with skill and goodwill, in settling whatever differences may arise. They anticipate problems and eliminate possible differences by good personnel policies and procedures. My appeal earlier this year for improved industrial relations has had a positive response. In the first quarter of this year we had fewer stoppages than in any recent year. The situation has disimproved in the second quarter, but it is still markedly better than the same quarter of last year.
It is still bitterly disappointing to find groups in key employment who are prepared, very often by unofficial action, to cause serious disruption in pursuit of increases or benefits which cannot on economic or social grounds justify the damage they cause. The answer to these situations can only be found through the creation of a general community climate and opinion which will favour conciliation rather than confrontation and which condemns irresponsible and unjustifiable actions in this area.
The crucial question of industrial relations must also form part of the negotiations of a new national understanding. In the national interest ways and means of improving industrial relations must be found. I know it is not easy to find general procedures which can always be successfully applied in particular cases, but we must make it a matter of national pride and self-esteem that we are mature enough so to organise ourselves that costly and destructive stoppages of work can be avoided. Workers and management in other countries can succeed in doing so and we must constantly ask ourselves where the cause of failure lies in our case.
The Government are, in the context of the discussions on the national understanding, ready to accept any procedures or actions which the social partners can demonstrate to be useful in improving industrial relations and will give careful consideration to the recommendations expected shortly from the Commission on Industrial Relations. If we are to continue with the great programme of industrialisation needed to meet our objective of full employment, there is no alternative to securing a continuing climate of industrial relations comparable with the best obtaining anywhere in the world.
Our economic strategy, both domestically and internationally, also has as a top priority the development of the agricultural sector, which is of course, still our greatest industry. While there has been great progress in recent years, there is scope still for greater progress, as our full potential is far from being realised.
Due to a combination of factors, last year was not a good year in general for our farmers and some of them incurred fairly serious losses. The situation with regard to farmer taxation has been uncertain, while the prices farmers receive for their produce have not kept pace with increases in the cost of credit and farm inputs.
Arising out of these developments and to strengthen farmer confidence in their industry and in the long-term interest of our agriculture, I now wish, on behalf of the Government, to give a number of specific assurances to our farmers.
Firstly, they can be assured that we will not accept any departure from the principles of the Common Agricultural Policy of the European Community which has been of such enormous benefit to our farmers in providing guaranteed markets at remunerative prices for their produce. Secondly, when the resource tax ceases to apply at the end of this year, there will from then on be only one system of taxation on farm profits. Thirdly, agricultural policy will be administered in the closest possible consultation and co-operation with farming organisations.
A number of very useful and constructive meetings have been held between the Government and the farmers' representatives to identify problems and suggest solutions. These meetings will continue. The Minister for Agriculture will, during the course of this debate, outline our policy for agriculture in greater detail.
Despite the difficulties there is much to encourage us in the present economic situation and outlook. We are maintaining economic growth at a higher level than many stronger economies. We are maintaining a high level of new job creation in viable employment. Our investment programmes, essential for future growth, are at a high level. We have succeeded in having a good agricultural package adopted by the Community for this year. Exports went up by nearly 23 per cent in the first 5 months of this year. We have greatly improved the state of our public finances and the external reserves position is being safeguarded. The exchange value of our currency within the EMS has remained stable.
Greater productivity, improved cost-competitiveness, innovation, enterprise and hard work are the key to success in the present harsh international economic climate. Our economy is so small that even a small development can have an enormous effect on our economic and social progress. We must seek out every opportunity for growth, no matter how small.
As I mentioned earlier, I have been meeting the main State-sponsored bodies concerned in economic and commercial activities and I have been discussing with them how best their enormous potential to contribute to growth and enterprise can be more fully realised. I am confident that a great deal can be achieved in this area.
There is a tough period ahead but we are determined to overcome the difficulties facing us. That is our assurance to the nation. The real challenge is whether we will get over these difficulties sooner rather than later; whether we will recover quickly or take a longer time to get back to higher standards and better times.
In either event I give a guarantee that this Government will see to it that the poorer and weaker sections of the community will be protected from the adverse effects of the situation confronting us.
Anyone who might feel dispirited by the state of the world around us or by our internal problems should understand that in fact we have a number of advantages on our side that makes us better placed than most of our partners in Europe to make substantial progress.
Our prospects in the field of oil exploration are reasonably good. Industry and agriculture have enormous potential for growth. Our most important asset of all, however, is our young population. Anyone who goes to a community or sporting event, as I often do and sees the great preponderance there on such occasions of bright, eager young people, full of energy and enthusiasm and a zest for life, cannot but have complete confidence in them and in our country's future and be convinced that whatever the temporary difficulties may be, time is on our side.
In steering the country through these difficult times, the Government have the most important role, but the trade unions have their part to play and the employers have theirs. What will really decide the issue, however, is the attitude adopted by individual members of the community and the seriousness and realism with which each person approaches his or her own situation and what decisions they take.
The reality to which we all must adjust is that the entire western industrialised world has undergone a major piece of economic surgery.
What the increase in oil prices of the last 18 months really means is that, over and above the normal economic exchanges a major share of the output of goods and services of the western countries, including ourselves, has been transferred to the oil-producing states. That is the true position and it cannot be circumvented. There is no point either in blaming the Government, employees, trade unions or employers for the consequences of that straightforward transfer. We must accept the economic implication which is that until such time as we make up for that transfer by increasing our output of goods and services we have to adjust our situation to cope with it.
If, however, sufficient individuals, seeing clearly what is at stake, decide to genuinely conserve energy and use only what they have to; take a positive stand against strike action until everything else has been tried; resist pressure to demand more in income than they know the traffic will bear; act fairly and considerately if they are employers and responsibly and reasonably if they are workers then we cannot be beaten and we will emerge out of these difficulties safe and sound.
Severe though the impact of present economic difficulties is, restricted though we are because of the financial constraints now imposed upon us, the path of progress is still open to us and opportunities for further expansion and development in many areas are there to be taken.
We must, as a nation, see our present difficulties and constraints simply as obstacles along the way to be removed by our own efforts. Motivated by a spirit of national endeavour, we can, not only make further progress in the years immediately ahead, but we will be ready, when conditions improve, to undertake a major national advance on every front.
