I confess to being somewhat puzzled by the contribution of the former Taoiseach, now Leader of the Opposition. What is this debate about? It is the analysis of the former Taoiseach that the measures we decided to undertake were not necessary or were premature. It is his view that the economy was on the mend and recovery was in sight. Is it credible that a Government such as this with a very small majority would embark on unpopular measures if we did not believe in their necessity? We are politicians who rely on the popular mandate. We are not motivated by malice but, having looked at the situation, we felt that these were the minimum measures necessary. The former Taoiseach says they were not necessary, that the timing was all wrong, that the economy was on the mend. If we are to believe his account, there was wise and sagacious leadership over the past four years, certainly over the past 18 months, which meant that we were in sight, if not of the promised land, certainly of the turn about in the Irish economy.
If the rescue was in sight and recovery on the way, why did the former Taoiseach leave these benches? Why did he leave the mandate given to him? It was not the strength of Opposition rhetoric. It was not the case put here day after day that some measures were necessary. He had a majority almost larger than the Labour Party at its present strength. Why then did he leave a full 12 months before the expiration of his term of office, when all the encouraging signs he now sees were before his eyes? That is the mystery and the real credibility gap in this debate. There is no answer to it. On the evidence of his contribution there was no need for him to scuttle to the country. I hope that mystery will be cleared up during the course of this debate. To paraphrase a colleague of Deputy Haughey, there was no problem, the economy was on the mend, it was a good Government with a secure majority and there would not be an election until June of next year.
The reasons for the Government's decision to take action have already been explained. We found public finances in a shambles and it was clear that if we did not take corrective action external agents would act for us. There is a determination on the part of the Government to take the necessary decisions to put our affairs in order and to create a framework for all our citizens—workers, farmers and taxpayers—to make their contribution to getting the economy underway again. This supposedly erratic Government have been criticised with an air of authority by the former Taoiseach. But, despite such criticism, it is a clear indication of the determination of the Government that within three weeks of taking office we have reached a wide range of decisions on essential expenditure cuts, on tax changes and policy modifications. These decisions had been avoided and postponed by the previous Government. If such measures had been taken in good time and if that Government had acted with the full strength which their mandate allowed, the economy would not now be in such a precarious situation.
It is normal for any Government to have expectations of putting their own programme into effect at the first opportunity. When we took stock of our position, however, it became clear that fundamental and effective actions were immediately called for to bring public finances under control, to halt the catastrophic decline in our balance of payments and restore public confidence in the Government's ability to govern. Outside the ranks of the Opposition, nobody seriously doubts that our economy is in serious difficulties. No one seriously questions the fact that corrective action must be taken in relation to our public finances. The incontestable figures published last week support this view. The former Taoiseach unworthily impugned the accuracy of those figures yesterday, suggesting that they were perhaps less than neutral in the calculations they were based on. I give an undertaking that during the lifetime of this Government there will be no fiddling with official reports and when a White Paper is issued it will be an impartial assessment of the situation. There will be no doctoring of the books. Both the Opposition and the Government could begin to realise that this will be the state of affairs from now on.
The conclusions drawn by the Government are reflected in the budget proposals. The difficulties facing the economy did not arise overnight. Ever since the rapid build-up of oil prices in 1979 triggered off a world-wide recession, it was evident that our economy, being particularly open to international trends, would be seriously affected and measures would have to be taken to mitigate the blow.
The signs of trouble have been there for some time. Unemployment has increased sharply, the rate of inflation has remained persistently high, the level of Government financial deficits and the balance of payments has worsened at a rate which would quickly bring about a total loss of confidence in the economic future of the country. Remedial action to deal with these problems either was not taken, was too timid to achieve positive results or was offset by other decisions aimed at softening the impact of worsening economic circumstances on particular sectors. This was the situation we inherited.
While it is necessary to avoid measures with a harsh deflationary effect which would sharply reduce living standards and economic activity and bring about short-term job losses, it is extremely risky to defer action or not to take any action at all until the point was reached where the fundamental soundness of the economy was called into question. This would be a catastrophic situation where unemployment, inflation and exchange values would get totally out of control and in the longer term the damage to the economy, to employment and living standards would be far worse than anything we have experienced so far.
These measures were undertaken in the belief that it was better for this Government to take remedial action than that foreigners or lending institutions outside of our country should take much rougher action at a time not of our choosing. While there are some indications of a modest recovery in international economies taking place in the near future, it is not possible to see any sustainable improvement in Ireland's economic performance until we have brought about a significant improvement in the balance of payments, in the current budget deficit and public sector borrowing requirements and in the international competitiveness of Irish products. Our measures are aimed primarily at rectifying the imbalances in public finances and external payments and paving the way for improved performance in the industrial sector of the economy which is the key to our future prospects in terms of creating and maintaining jobs and earning exports at a level that will sustain our currency value and maintain and improve our standard of living.
It has been said before, and no one acted on it, that if we are to survive as stable society we have to end our excessive dependence on borrowing for meeting everyday expenditure. We have to become more competitive and we have to be able to exploit market opportunities for goods and services abroad in an expanding international economy and to withstand competition from imports on our own markets. We cannot achieve this on the basis of an imbalance in our public finances and external payments, with borrowing being misapplied for longterm productive investment projects. It will not be possible to achieve a balance in our payments overnight but a start has to be made in this budget. The longer term steps necessary are spelled out in the Government's programme and will form the basis of future policy and action. No new Government would have chosen these steps as the first decisive steps in dealing with the economy but the choice is not ours and these remedial steps are necessary.
The need for this budget stems directly from the lack of action by the last Government to control our public finances. These criteria determined the kind of action we took. In our examination of the decisions on public expenditure our essential objective at all times was to reduce day-to-day expenditure and capital spending on non-productive purposes so that it would be possible to achieve the maximum sustainable increase in the funds available for investment in the preservation of existing jobs and the creation of new jobs.
Our first priority then is action which will mean more jobs, especially for young people. This clearly means making more funds available for productive investment. It also means achieving improved levels of competitiveness and new arrangements especially those associated with the Youth Employment Agency necessary to ensure that new jobs go to young people. When I talk about improved competitiveness it is not simply in terms of pay increases although they are a part of it. Many other factors are generally ignored by people who talk of the necessity of keeping our competitiveness to a standard so that our goods can be sold on export markets. They concentrate solely on the pay element. They ignore such factors as general management, marketing strategy, financial control and industrial relations within firms so as to avoid industrial disputes which benefit no one. These factors are germane to the question of preserving our competitiveness in products on which future job opportunities depend.
The Government's joint programme makes clear our belief in planning in a longer term context. As the programme states, the main objective of planning must be the achievement of such economic expansion as will ensure our employment needs. Central to that planning process will be positive help from the Government to improve our general managerial capacity, to ensure that we have the marketing ability to seek out the new sales opportunities that will enable Irish firms to return to operating at their full potential, to streamline private financial structures so that their funds are channelled into new investment and to bring about an industrial relations system where employers and workers know clearly and accept current economic reality and avoid wasteful and costly industrial disputes that serve nobody's best interests. These so-called non-pay aspects of overall competitiveness are, on the basis of recent studies, just as important as the pay aspects. Improvements in this area must go hand in hand if we are to protect existing jobs and create new jobs for the numbers of young people looking for these jobs.
The Government are especially conscious of the need to ensure that public as well as private enterprises play their full role in creating jobs. My party, by policy and otherwise, are committed to expanding the State sector. We made no secret of our belief that there must be creative use of the State sector in developing the economy, because we believe that that system is the best from the point of view of the community and also because a properly running State sector is a bulwark against growing foreign intervention and control of the Irish economy. But in this Government we say also that there must be a full role for private enterprise in developing the economy. We see a partnership between private and State enterprise, all devoted to the primary national economic objective of providing the maximum number of jobs for our young people in the future.
The Government's joint programme provides for the setting up of a National Development Corporation to hold the State's shares in existing commercial public enterprises and to engage in new projects to provide productive employment. That National Development Corporation will aim at stimulating and mobilising enterprise in the public sector, at eliminating inefficiency where it exists and at restructuring where justified public firms, all in the interests of providing more jobs.
The basic purpose of the corporation will be to stimulate and mobilise entrepreneurial capacity in State enterprises, to eliminate inefficiencies, to re-structure commercial enterprises where justified and to provide access to funds on a basis that ensures fair and equal competition with the private sector; to hold the State's shares in existing public enterprises which have commercial objectives; to engage in new projects with the objective of productive employment creation particularly in potential growth sectors of the economy either on its own or in joint ventures with other public, private or co-operative enterprises. The corporation will act as the commercial vehicle, where appropriate, for projects involving productive employment originating inside the public sector.
It is envisaged that the initial equity capital for restructuring and new projects will amount to £200 million to be taken up over a period of years and that a borrowing limitation of £500 million will apply. The wide range of functions envisaged for this National Development Corporation and the level of Exchequer finance proposed mean that the most appropriate way to provide for its establishment will be through legislation. It is my intention to have the necessary preparatory work completed as soon as possible to be ready for the Dáil to pass the necessary legislation on resumption later this year.
This Government are especially conscious of the need to supplement existing jobs and they propose new general job creation measures with a special programme aimed specifically at the acute problem of youth unemployment. The Youth Employment Agency we promised will therefore be established immediately to integrate existing schemes and radically extend them to provide up to 20,000 young people who have been without employment for at least six months with employment in environmental improvement schemes, in community youth work or in voluntary social or community organisational work. I do not pretend, nor do the Government, that the best efforts of the Youth Employment Agency will be adequate to meet the size of the challenge before us in providing our young people with jobs. The surest way of providing a sufficiency of jobs in the future is to bring our public finances into order, ensuring that we protect our currency against the danger of deflation —and that danger would have been there had we not taken action — and generally to put our economic house in order so that a climate of enterprise, a partnership between the State and private areas, can be created, with the entire community united in making that national economic objective of maximising employment opportunity. It is a large challenge, a very difficult one to meet. It will not be overcome in the next year or the year after but we must make the necessary start.
It was timely that the Central Statistics Office published recently the first of a new series of analyses of the live register which showed that in mid-April of last year the total numbers on the register for a continuous period of over six months, aged up to 24, was almost 7,000, when we remember that many young unemployed people do not register, that the total number on the register increased by over 31,000 between end April 1980 and end June 1981 and when we remember also the number of young people who leave school.
In this budget we have had to increase taxes. To fund the Youth Employment Agency a levy of 1 per cent on incomes will be necessary. I believe that all will accept that as a national priority we owe it to our young, growing population to provide the funds necessary to finance job creation and training for them.
In the budget a range of indirect taxes was necessary. The joint programme of the Government made it clear that the increases in these taxes and charges would be introduced. The fact that the position of our public finances was undermining the stability of the economy at an alarming rate meant that taxes had to be increased now to avoid enforced deflation of the economy at a later stage. I believe that the vast majority of our people will understand that firm and timely action now is far preferable to an uncontrolled drift into a situation in which Ireland's future as an independent economy would be threatened. That reality must be underlined, that there was such a threat, that that action has not been taken by our predecessors, though they had ample political muscle to take that action. That is in stark contrast with their recognition now, from the convenience of the Opposition benches, that economic recovery was under way. As announced here this morning by the former Taoiseach, there was no problem, the economy was on the mend, within months complete recovery would have taken place, the action being taken by us was over hasty; I think "premature" was the label the former Taoiseach put on it yesterday evening. He does not believe the overturn on our public finances would have been as large as the people on the dismal side, the economists, had predicted. For all these reasons we hope in the course of this debate to hear why the former Taoiseach and Government deserted these benches a full 12 months before their term of office had expired. If all those encouraging signs were there and evident to them this week presumably the same signs were evident to them in May when they decided to go to the country seeking a renewal of their mandate. Why they did that when the political situation in this House did not so require them to do so, when those encouraging economic signs were there, we hope to learn in this debate.
We do not deny that the measures we have taken will have an adverse effect on the price index — in the short-term that will be the case — but I believe the real courage of this Government will be justified by the restoration of the overall economic strength of this country, by the return to production at near or normal levels of capacity, that improved competitiveness will come about, that jobs will be saved, that the economy being put on a sounder footing gives us a better platform from which to advance into the future.
We have also taken measures to ensure that the welfare sections in our community will be protected against any indirect tax charges that have occurred. The former Taoiseach made great play of the fact that these are very small increases but they are October increases. We are committed as a Government to proceeding on a real improvement over the years ahead for all in the welfare category in our community, for the less privileged, for the poor in our society who unfortunately are with us in very large numbers. One of the actions of this Government will be — the previous Government had decided to abandon them — to reinstall the poverty committees, to admit, and there is no shame in admitting, that Irish society has not solved the problem of poverty, admit that it is another challenge that must be faced. We will have restored this autumn the twice yearly treatment of the welfare problem in our community. It was abandoned by the previous Government and restored by us this year. In the January budget of next year we will continue on the real improvement of the welfare groups in our community.
In our joint programme we are committed to returning to the path we followed between 1973 and 1977. We are committed to reducing the old age pension qualifying age in our period in office. We have had a lot of lip service paid to the question of the less privileged in our community by the people opposite this morning and probably will have throughout this debate. But this Government, in which the Labour Party are sharing with Fine Gael, are committed to continuing the advance, interrupted in recent years, in removing the sore of poverty from our society.
It will not be accomplished overnight, but at least it is a good beginning that as a Government we are not ashamed to admit there is poverty in Irish society, not ashamed to admit that it will need conscious political treatment to rule out the inequalities responsible for that poverty in Irish society and to realise that it will not be settled on the basis of yearly handouts, with politicians expecting praise simply because they have done the right thing, based on the consumer price index, for a particular needy group at a particular point of the year. We must tackle this matter scientifically. We must go to the root causes of poverty in Irish society. That will be the programme that the Labour Party in Government will be committed to in our period in office. It is in the joint programme and both parties are determined that we will do all we can to eliminate poverty in the years ahead. We do not adhere to the philosophy that the elimination of poverty must await the achievement of economic prosperity. We do not go for that kind of pacing in Irish society. As far as we are concerned, hand in hand, with an improvement in our material prospects, month by month, year by year, there must be a parallel advance in the elimination of poverty from Irish society.
It is not easy for any Government, least of all a Government with a majority as slender as this one and so short a period in office, to impose the kind of measures we felt were necessary. I hope our example will be noted and that even our opponents in their heart of hearts — Deputy McCreevy already has done so publicly and perhaps others also—will agree with us. I am prepared to think there are many responsible Deputies in the Opposition party who were in the last Government, who know the facts, who may play at rhetoric in this debate and say this measure was not necessary, but who in fact agree that it is necessary. We know that you spent many long months looking at the mess in our public finances. We do not know the reason you did not take any action. We do not know if there is an association between your calling an early election and some political problems in your own party. We do not know the reason for this, but we know you spent many months looking at this problem.
You did not take any action but you certainly examined the problem. We know that many of you opposite who have experience of Government who know the facts——