I move:
That Dáil Éireann at its rising on 18th December, do adjourn for the Christmas Recess.
Adjournment of Dáil: Motion.
At the start of this adjournment debate it is necessary to outline the economic situation that the Government faced when taking office. This is not primarily in order to blame the previous administration, although their role in bringing the economy into crisis is clear. It is necessary to spell out the economic facts as a background to this current debate. The mess the economy was in is now well known but it is worthwhile spelling out some of the prominent characteristics of the economy when we took office as compared with the situation three or four years ago.
In 1977 the current budget deficit amounted to only 4.4 per cent of GNP or £194 million. On a thorough examination of the books this Government found that the current deficit if unchecked would turn out to be £947 million for 1981 or 9.5 per cent of GNP. Exchequer borrowing was at a manageable 10.2 per cent (£454 million) of GNP in 1977 but would have reached 20 per cent of GNP this year without the July budget which trimmed back the borrowing requirement by £336 million to £1,637 million or 16½ per cent of GNP.
For the first time in the history of the State the national debt will equal if not exceed national income this year. Foreign borrowing which was negligible until 1978 has now become the major source for funding the Government and the semi-State sector's borrowing requirements. The net foreign liability of the public sector which comprises the Government's foreign debt plus that of the semi-State sector, less the total official external reserves, has risen from a deficit of £92 million in 1975 to over £3,000 million this year.
Half of the Exchequer borrowing requirement is required to cover the gap between Government expenditure and revenue on day-to-day spending. As the proportion of Exchequer borrowing financed from foreign sources has risen from 17 per cent in 1977 to 47 per cent in 1980, it is patently obvious that such borrowing represents a burden on both the Government and the Irish people who will have to pay sooner or later for this mismanagement. Our foreign debt grew from a modest £90 million in March 1971 to over £3,000 million this year. While economists are right to have pointed out the enormous strain this has placed on the balance of payments it has even more serious implications than is implied by the servicing of this debt. The main point here is that in a period when there was a need to adjust expectations to the deteriorating world economic situation, the previous administration temporarily increased living standards with disastrous long-term effects. In the period when we were suffering a deterioration in our terms of trade due to the rising value of foreign currencies etc., the Fianna Fáil Government decided to ignore the fact that, unless expectations were in accord with the economic realities, the forthcoming economic crisis was inevitable.
As well as effectively conning the public that they were creating wealth while in effect they were placing us in further debt, the previous Government pumped money into the economy, with a childlike hope that all would be well. As was obvious from the start the increase in demand generated by this policy largely leaked out of the economy. In a small open economy there is no way that it could have been otherwise, and we can see from the import statistics where a lot of the publicly dispensed largesse went. It went abroad to maintain and create jobs in other countries. Imports of capital goods and raw materials we need. But a repeat of the growth in the value of consumer imports of 100 per cent as occured between 1977 and 1980 in the next four years would be disastrous. It is simply self-defeating for the Government to pump money into general demand as most of it will disappear in imports, many of which are non-essential.
In response to the crisis which the Government inherited, they decided that there was no alternative but to admit that the level of overspending which had taken place since 1977 just could not be sustained. It was for this reason that the Government made a start in tackling the financial difficulties in the July budget.
The budget took measures which in good times would be unpalatable but I am confident that the public are aware of the necessity of getting our economy in order. Essentially, the budget aimed to raise revenue in order to pay for some of the lavish expenditure programmes which had been implemented. The necessity of raising revenue was vindicated — if this was necessary — by the stream of Supplementary Estimates in all areas which have been before the House in recent days. Charges of monetarism and Thatcherism from the Opposition cannot be sustained in the face of the need to raise extra revenue as exemplified by the stream of Supplementary Estimates. The choice before the House and the country was whether essential services could be maintained. It is evident, as it was when we were in Opposition that from January, when the budget was unveiled by the previous administration, expenditure and revenue proposals there were not intended for a full year but were for a Government which only intended to spend six months in office. They brought the Estimates coming before the House to a new low in terms of accuracy. These charges, made so loosely from the Opposition benches that those of us who are in Government at this difficult time are wedded to monetarist principles come ill from an administration which planned a deliberate cutback in the Estimates for Public Services this year, which necessitated the measures we took in the July budget to maintain essential services.
Programmes were approved without adequate revenue being raised and as expenditure on many areas was committed the Government had to raise money in the budget. The only other choice would have been to increase foreign borrowing and by this stage we all know that our choice in relation to borrowing was severely limited. Given that by mid-1981 official foreign debt was about £4,000 million and with the interest on debt at around £30 million per month, the irresponsibility and indeed the impracticability of endless borrowing is obvious. Another feature of the budget was the halt in the suicidal courses of borrowing to finance the current budget deficit. Such deficit spending would have contributed both directly and indirectly to our balance of payments deficit which was highlighted as unsustainable even in 1979.
The decision by the Government to reduce foreign borrowing and phase out the current budget deficit is surely one which should be welcomed by all who have even the briefest acquaintence with economic realities.
I know economists are held in ill favour by members of the Opposition and Deputy Haughey said that the advice of economists generally should be ignored. He ignored it when he was in office and we have all seen the results. I am certain that the action taken in regard to this area has been seen by the international financial community as the only sensible option for the economy and in this regard it is perhaps worth noting that our external reserves have increased from £1,165 million in November last year to over £1,473 at the same period this year.
In raising taxation in the July budget the Government realised that increasing indirect taxation is regressive but the Government are committed to reducing the combined burden of indirect and direct taxation on the lower income groups. It is also committed to introducing higher capital taxes both on equity grounds and for the purpose of reducing the current budget deficit.
I believe that equity in the taxation system is of vital importance if we are to convince the Irish taxpayer, and particularly the PAYE sector that we must cut down our reliance on our foreign borrowing to finance day-to-day spending and share the burden of adjusting the public finances according to people's ability to carry it.
In tackling the current budget deficit by increasing taxation last July, the Government realised that the scale of the problem was such that expenditure cuts would also have to be dealt with. Wasteful areas of expenditure are being eliminated and projects which do not represent an adequate return in national terms are not being undertaken. To do otherwise would be irresponsible. While the Government are determined to phase out the current budget deficit I would like to make it clear that this will not be at the expense of the lower income groups or at the expense of productive employment.
From what I have said it is clear that the Government are serious about bringing the finances of the nation back into order. Reducing foreign borrowing, phasing out the budget deficit are of necessity a critical part of the Government's response to the financial mess it inherited.
But let me make this point quite clear, the Government's objective is to preserve the productive capacity of the economy to the maximum possible extent in order when the time comes to take advantage of the upswing in the international business cycle.
Basically, what we have been attempting to do by bringing our public finances into order and ending the disarray in that area is to enable us once more to obtain some control over our economic affairs. That control had been slipping out of our hands because of the irresponsibility of our predecessors. That control had been falling more and more into the hands of foreign bankers. That had to be reversed. That is the underlying logic of our entire approach to public finances. The so-called nominal republicans in the economic area were selling out what remained of the country's economic sovereignty. It was time for us to end that process. As republicans in the economic as well as in the political sphere, we are proud to acknowledge that we corrected that anti-national process initiated in the last two years of the previous Government, a Government which claimed above all others to be the custodians of all the republican virtues. That Government, in effect, under forms of republican rhetoric, were selling out totally the economic sovereignty of the State.
Narcissus.
This is not a serious contribution.
That is the underlying logic of it and we have attempted to rectify it. That is why the Labour Party are a willing participant in this Government.
Willing?
We are attempting to win back some control over our economic affairs. However difficult that task will be, and it will be difficult——
Get at inflation.
There are people around the Leader of the Opposition, potential leaders, waiting in the wings, people who wish to lead that party on a more serious path, people who do not agree with him——
What about your good self?
He had better watch Michael D.
They do not agree with the kind of Opposition he is giving to the country at present. He is trying to give them more of the same policy he gave when he was on these benches — more borrowing. That is the recipe of the Leader of the Opposition. I do not criticise the entire Opposition Party under that heading. There are men and women in that party who follow wiser counsels, who understand the need for some of the measures we had to take and who will regret that their official policy as announced through their Leader is opportunist and not in the national interest. We are glad to note that there are such men and women in the ranks of the Opposition Party willing to stand up and be counted.
What about the administrative panel of the Labour Party?
I know the Deputy has been in correspondence with us. I hope he will send us more letters in the next few months. We are always glad to have any letters he may send. The Leader of the Opposition must indeed be an extremist when he writes to those with whom he has nothing politically in common. I do not know how many letters he has sent to members of his own party in recent months. He certainly has been busy writing to us and I invite him to send us more letters in the next month——
Tell us what you will do in the future and stop the blather.
The whole point of the Adjournment Debate is to give us an opportunity to exchange views. What the Government have been trying to do is to retain some economic control over our own situation. Our public finances were left in an extreme state of disarray by our predecessors. We have now been in an economic recession for two years and the impact on manufacturing industry has been severe. Industry is coping with what can only be described as a hostile trading environment. The number of firms in severe difficulties include some of our largest established companies as well as the smaller industrial units. Depression in export markets and severe competition from imports on the home market are the characteristic of trading conditions. I maintain close contact with the IDA and I am confident that the target of 36,000 job approvals in 1981 will be achieved.
Despite the difficulties on the jobs' front I want to assure the House that the State agencies concerned with job creation will continue to make every effort to create more jobs in the difficult period ahead. It is satisfactory to note that job creation in 1981 will equal that of 1980 when international trade and investment conditions were more buoyant despite the recession.
I have said that existing State agencies concerned with job creation will maintain their job creation record attained in recession-free years and as an illustration of the kind of positive response forthcoming I would instance developments in the services sector area.
The international service sector has, I believe, great potential for future employment growth in this country and in September I signed an order which enabled grants to be applied to this area.
This service area will be an important new aspect of Irish industrial development. The special employment grants which apply for the employment of persons in service industries will contribute significantly to regional and national development. As the service sector is not capital-intensive, a special employment grant which relates to jobs and not to the acquisition of capital is an essential instrument in tapping the full potential of this sector for Ireland.
We introduced that.
An attractive taxation structure is part of this incentive package which supports the new service. For example, the 10 per cent rate of corporation tax is available to service industries which have been deemed by the Revenue Commissioners to be manufacturing, e.g. certain data-processing activities. The 10 per cent tax is also available to design and planning services provided the projects are executed outside the EEC. The other elements of the incentive package include capital grants and a rent subsidy.
I believe that by building on what has already been achieved in relation to foreign investment and encouragement of indigenous manufacturers we can push our economic development a stage further by concentrating our efforts on encouraging the establishment of fully integrated facilities in all sectors. My desire is to see a balanced development of manufacturing and service industries in this country and I believe that this new drive to further encourage the services sector will assist in the achievement of such a balance. It will also foster an environment in which a high degree of technology transfer can be achieved.
In pushing ahead with this intensified programme, Irish effort will be stimulated to the greatest possible extent, as well as seeking to attract major growth companies in this area from overseas.
While I am confident that exploiting the potential for the increasing worldwide demand for international services will play an important role in providing employment for our ever-growing labour force, in the current economic conditions there is, as I said earlier this week, a need to encourage all viable forms of commercial enterprises. I would like to see a new partnership between the private and state sectors. Both public and private enterprises must become aware of the potential that co-operation offers. I intend to take steps which will break down any obstacle which may hinder such joint ventures.
New developments in the service sector and an increased awareness of the need for more joint ventures offers significant potential for the future. Looking at the situation in regard to industrial development this year, I have already outlined some of the problems that exist. It must be pointed out, however, that the Government are committed to increasing productive employment. The Government's objective of mending the disarray in our public finance will enable our economy to cope more effectively with the effects of the recession by freeing resources for productive investment. It is totally irresponsible to suggest that this effort on our part to end the public finances mess is monetarist. It is inspired by the need to ensure more productive investment.
It is heartening to note that manufacturing investment will amount to £750 million in 1981, which represents a 20 per cent increase on the 1980 outturn of £625 million. Despite the continuing weakness in the world economy, the IDA and SFADCo by the end of the year will have reached the impressive job creation target of nearly 40,000 We must all be encouraged by the indications that Irish industry is more aggressively marketing its products on the Irish market which will continue to hold an important place for most firms where most of their output is still sold.
What can be achieved is shown by the Irish Fashion Group where domestic sales were up 38 per cent on last year. I was very impressed when I visited the Irish Fashion Group recently at their exhibition where so much of their sales were planned for next season by aggressive marketing and good design on their part. The Irish Goods Council have shown in many such product areas that increased marketing can result in new orders and, therefore, jobs. In addition their industrial division this year will have exceeded their target of £30 million for industrial import substitution by £3 million.
Manufacturing output in 1981 is forecast to grow by about 2½ per cent as compared with 1980 and manufactured exports by over 3 per cent despite a 15 per cent fall in the food exports. Complacent attitudes have no place in the harsh competitive world of today. The present difficult economic and trading conditions need not be a cause for despondency. Resourcefulness and initiative by management and workers are powerful weapons in the fight for survival and long-term prosperity. In many of the instances in which I have been involved the efforts to retain jobs in firms threatened by increased foreign competition, I have been heartened by the change of attitude on the part of unions and employees. I have been very much engaged in discussions at that level over recent months. Turning away from the challenge, or simply allowing the gateway to opportunity to be closed off cannot and must not be the response of industry. I do not believe it will be.
As we are so dependent on imported capital and raw materials for many of our activities, we must ensure that our productivity and efficiency are among the best. Productivity is not solely about the organisation of production but also about marketing investment and relations between management and unions.
In the market place all available opportunities must be relentlessly pursued and exploited. This requires aggressive and comprehensive sales and marketing policies, the incorporation in our products of design and quality of the highest international standards, the strict adherence to sales and delivery dates, the identification of import substitution opportunities. It is not just by accident that some firms have healthy order books while others are simply wondering whether their next order will fall from the sky. Efficiency means more than just the installation of new machinery and equipment or the adoption of new techniques. It also requires changes in attitudes and more flexible work practices. Efficiency on the factory floor can best be achieved by replacing the doctrine of "who does what" by a fair-minded and responsible approach. As a nation we perform best under difficulty.
One of the greatest challenges our industry faces is adapting to new technologies. Participation in the technological race is not enough. We must be among the winners. Emphasis on securing new jobs or new projects can only be part of our strategy to build a sound and competitive Irish industrial base. The task now is to uplift the level of technology in the products and processes of Irish industry. This is particularly important for home industries if they are to compete in supplying the needs of our multinational industry. Irish companies will continue to be encouraged to take account of this factor and to undertake a greater level of investment on research and development. With regard to this Irish companies are planning to spend £13 million on almost 400 research and development projects.
I do not like to interrupt the Tánaiste but the arrangement was that he was to finish at 11.15 a.m. I know we started late. Perhaps he could manage to keep to his brief and we might get on to the track again.
On a point of order, I do not think——
The slots will not work out unless we do something about it. Admittedly the Tánaiste did not start until 10.45 a.m., but we should try to fit back into the slots.
There were to be 45 minutes for the opening speakers. That is the Order of the House.
I appreciate the Ceann Comhairle's difficulty. He and I faced difficulties together in the past.
It shows how unrealistic the time given for this debate is.
It is much the same as last year.
The Tánaiste, without interruption.
The past four years were not four glorious years but four wasted years. We will not speak of the past two years.
Inflation at 23 per cent.
That is what we inherited from the previous Government.
Unemployment 133,000.
By mid-summer of this year, when the former Government were preparing to bolt from office with no pressure on them but the fear of taking responsibility, the figure was 130,000 out of work.
I seem to have started all this.
I will attempt to bring my remarks within a new order of time.
A major challenge is facing the Government if we are to provide adequate employment opportunities in either manufacturing or services. It is for this reason that the Government decided to establish a National Development Corporation. When established it will constitute a major new initiative of significant long term importance in the task of increasing productive employment. In our brief period in office we set up the Youth Employment Agency to deal with youth unemployment and to provide 20,000 jobs for our young people. We do not pretend this will meet the entire demand.
This is all flim-flam.
We consider it is a more realistic approach to the problems of Irish youth than the supply of T-shirts or false promises at election time which we saw from the Opposition. It bears very respectable international comparison with what has been done in France and other countries where they have to deal with this very serious problem of the unemployment of young people. I would be the first to admit that we will have to take further steps to make inroads on this area. This is an important and significant element of Government policy. It is objective proof of the Government's seriousness in dealing with the large economic problems facing the country.
One of the main aims of the National Development Corporation will be to ensure that viable commercial opportunities in either the private or public sector will not be constrained due to undercapitalisation. It is envisaged that much of the corporation's investment will be directed to new growth sectors where progress in the past has been inhibited for this reason. The NDC will in its investment decisions therefore take account of the need to stimulate such strategic new industries. Profitable investments in the more mature industries will also be considered. It will have a strong developmental role and will have power to identify and initiate commercial investment opportunities either on its own or in joint ventures with existing State companies or with the private sector. Investment by the National Development Corporation wil be required to yield an adequate return and in this way will improve the quality as well as the rate of investment. The National Development Corporation will hold shares in existing public enterprises with commercial objectives and their work will constitute an important impetus to increasing economic efficiency in the State sector. I would hope they will utilise untapped resources in these enterprises and will take steps to stop any losses due to inefficiency. The objective of the corporation will be to develop a professional, vigorous and successful State sector and to improve the contribution of this sector to the development of the economy.
Another area of my responsibility to which I might refer for a minute is that I believe top priority must be given to the rapid exploitation of domestic energy resources. We have here a gas reserve, the Kinsale Head, that has been upgraded by approximately one-third, a major national asset. We are now proceeding, in agreement with the Northern Ireland Authorities. Hopefully, early in the New Year, we will reach agreement at ministerial level there to extend the pipeline to Belfast. We are very anxious that we should share this national resources with all the people of the island. That is the objective of this Government, a Government which, in relation to the Northern question, in the political and economic spheres, are anxious to record real progress as distinct from phoney rhetoric. I would hope on the energy front in relation to Northern Ireland to have very rapid progress made in the new year. The results of this year's offshore drilling operations leave me optimistic that in the very near future we will have confirmation of commercial finds.
I might refer very briefly to the social welfare area to which this Government have a special commitment. This is illustrated by the measures which have been taken in this area since the Government took office and those which are in course of preparation. The most fundamental aspect of the Government's approach relates to the maintenance and value of social welfare payments so that the burden of measures which must be taken to deal with our economic problems does not fall on social welfare recipients. As a Government we are committed to providing real increases in the incomes of social welfare recipients and are determined that significant, real increases will be achieved over this Government's term of office. We are anxious to bring back more control into our economy but this must not be at the expense of the underprivileged — they must not be harmed — and it will not be the intention of this Government that they should suffer unduly. Instead our resolve is that their standard should be preserved, and that will be our intention during the lifetime of this Government. Annual increases in social welfare payments are normally provided in the January budget but an earnest of the Government's commitment in this area was given in the increase which came into effect in October and in the provision of a double weekly payment of all long-term payments in this present month. The October increase cost an estimated £39 million in a full year while the double payment in December cost £12.5 million. I should also like to mention the increase from October in the weekly fuel voucher, not that we are happy with the situation — we will not be happy and satisfied until all of the elderly are provided with comprehensive heating allowances during the winter months.
The measures to which I have referred are essentially short-term in nature. The longer term aim is to bring about a comprehensive system of income support which will cater efficiently and adequately for all areas of need. The Government's programme envisages a number of major developments in this area, which I do not have time to go into. I might refer however to the area of pensions. That is under examination with a view to the establishment of a national earnings-related pension scheme. The work begun by the publication of the Pensions Green Paper in 1976 will be brought to fruition in the Government's term of office. The Minister for Social Welfare has already made considerable progress in finalising her proposals in this area.
The Tánaiste has three minutes remaining.
There are also a number of other proposals relating to the reform of social assistance schemes which I do not have time to go into here. We have re-established the Combat Poverty Organisation under a new agency. I think the House will welcome that as another instalment of the Government's concern in this area. We are aware also of the inadequacy of income support for families at present — another area of Government concern. Proposals for a new child benefit scheme, outlined in the Government's programme, which involve the abolition of child tax allowances and their replacement by an augmented child benefit, will bring about a very significant improvement on existing levels of childrens allowances and a greater concentration of support for children in areas of greatest need.
I might say it is a source of regret to the Government that the earlier negotiations on a national pay agreement finally broke down. The Government attached a great deal of importance to the conclusion of an agreement; but this had to be on terms that were appropriate, in the Government's view, to the state of the Exchequer in the first instance and to the economy as a whole. I am satisfied that the parties to the negotiations can be acquitted of any lack of endeavour to bring about an agreement. Unfortunately the viewpoints of both sides finally proved to be irreconcilable. The final position of ICTU, which they indicated was non-negotiable, had elements which made it impossible for the employers and Government to accept.
One key issue from the Government's point of view was a moratorium on special pay claims, because the economy could not afford in 1982 anything like the level of expenditure on special increases which had occurred in recent years. The Government had to have an assurance — any responsible Government at this time of great economic difficulty would had to have a similar assurance — of a very large reduction in such expenditure. This would not have been possible if the situation in regard to special claims had continued unchanged. I do not have time in my last minute to enter into a discussion on the merits or demerits of the national agreement provisions under which in the past special claims have been processed. What was abundantly clear was that in recent times under those provisions the Government of the day were faced with very heavy expenditure. The immediate budgetary situation is such that we in Government could not afford to have such expenditure on the Exchequer front in 1982. Despite the fact that the national pay agreement did not prove attainable I am confident that there is a realisation on the part of trade unions and employers that the general economic situation imposes constraints which cannot be ignored.
Finally, the Government have a small majority——
Indeed.
——but the Government have a mandate, a mandate which we propose to carry out, from which we will not bolt, to bring the Irish economy once more under control, susceptible to the decisions of a Government here in Dublin — that is our objective — and to set up the institutional measures to improve employment to end irresponsibility. This Government will continue its full term.
It is good to know what are the Government's objectives because they have become a little obscure recently. I think the way we are now proceeding is a bit pathetic and shows once again how foolish this Government were to truncate this Adjournment Debate in the way they have done. We are not going to have a reasonable debate here today. We are not going to be able to come to terms with any of the serious, outstanding economic and social issues which confront us. I hope that that lesson has got across to the Government and that we will not have this sort of situation arising in the future.
The two basic indicators in our national economy — the rate of inflation and the level of employment, both at record levels, 23 per cent in the one case and 133,000 in the other — demonstrate the total failure of this Government's economic and fiscal policies. The Government's pay policy is in ruins, their taxation policy is fluctuating between unrealism and uncertainty, their budgetary and fiscal policy is unclear, their election promises dishonoured and their political credibility destroyed.
It seems to me that the Members of the Government parties have become hypnotised by their own propaganda about public borrowing. For party political purposes they engaged in a major propaganda campaign which has since taken on its own momentum. It has seriously distorted their thinking on economic and social issues and led them into some very irrational and indefensible positions and attitudes.
It is against this sort of background I must emphasise as strongly as possible the need in our circumstances to give absolute priority to job creation and to the infrastructural investment which will create and support that job creation. Of course that thesis raises the question of resources and their adequacy and the extent to which it may be legitimate and prudent to increase those resources by borrowing. On that issue I want to quote from a European Commission Report entitled European Economy of July 1981:
Among the new member states Ireland is regularly faced with sizeable deficits, a situation that is only natural when one considers the development gap that separates it from the other member states. In Ireland hitherto fiscal policy has been conditioned by the need for rapid industrialisation which has been encouraged by public investment and Government investment aids.
Those remarks put this current debate about borrowing and budget deficit in context.
It is also to this whole argument to understand that Ireland is in a unique position in the European Community because of our stage of development and our young population. There has, of course, been a major expansion in economic and social development during the sixties and seventies, particularly during the past four years. A major programme of industrial development has been successfully undertaken; our agriculture has been modernised to a considerable extent and housing, schools, hospitals and other welfare facilities have been provided in increasing measure. Despite these advances the reality of our situation is that if we are to develop and if our young people are to have the opportunities and standards to which they aspire, major investment programmes financed by borrowing will be an essential part of our economic management for some considerable time to come.
Before dealing with investment and our basic philosophy in that regard, I should like to deal with a particular aspect of the current budget deficit which is not very often adverted to. The extent of the current budget deficit is directly related to current economic circumstances. The present Taoiseach, referring to the recession in the mid-seventies in an interview in the Sunday Independent on 29 March 1981, said that at that time we were borrowing 16.5 per cent of GNP because of the effects of the oil crisis. Why, we must ask, was it all right to borrow at that level in 1975 because of the effect of the oil crisis and apparently irresponsible to try to cushion the effects of the second oil crisis by a similar level of borrowing in 1980-81?
It is necessary for the facts in this regard to be clearly spelled out. The great jump in foreign borrowing occurred under the previous Coalition Government when it increased ninefold. Borrowing was, in fact, kept below that level up to 1981 when we were faced as a result of the second oil crisis with a situation similar to that which obtained in 1975. No one disagrees that the level of borrowing must, as soon as economic conditions permit, be stabilised at a level well below 1975 and the current level of 16 per cent, but a sharp reduction in present circumstances could have disastrous economic and social consequences.
The Commission's review for 1981-82 stated:
The resort to public sector external borrowing is part of the recognition of the fact that adjustment to the oil price increases cannot be immediate and that balance of payments deficits have to be financed for a number of years.
Assuming the out-turn expected when we left office has not been significantly affected by the July budget the budget deficit will have risen to about 0.6 of 1 per cent of GNP during the current recession. That rise must be looked at against the background of the rise in unemployment brought about by the recession and the corresponding burden which was placed on the Exchequer by the greatly increased cost of social welfare. Right across the Community there has been a rise in deficit of at least 1 per cent this year but Government commentators and spokesmen here have for their own political reasons concentrated attention solely on our situation.
One thing about which this House should be very clear is that deflationary monetarist policies contribute nothing to an improvement of the budgetary situation or to the state of the country's finances. The experience of Britain and now the United States shows that the rise in unemployment and interest rates which are a consequence of monetarist policies rapidly negative any beneficial effects which conscious cuts in Government expenditure may produce. They must by now have learned that there is a great difference between the real world of prices, family budgets, living standards, employment and the harsh, uncompromising economic theories to which they are apparently dedicated.
The reality of where this Government's policies are leading us has been stated by the Tánaiste, not today but in a recent press interview. He made it clear that these policies are leading to a high level of unemployment with consequent effects on public sector borrowing and current budget deficits.
It is of interest to inquire at this stage where are all those economists and commentators who were so stridently vociferous about the economy, public finances and public sector borrowing prior to and during the general election campaign on television and radio and in the press. Have they all now taken a sabbatical year when it has become clear that this Government's policies are running into the ground and are not going to give us a sound economy or even sound public finances? It is not yet clear to anyone, perhaps not even clear to the Government themselves, what particular part of the Fine Gael election manifesto will be discarded but we can calculate that if the whole package is to be implemented the current budget deficit is likely next year to become considerably greater, not less, and a level of 9.5 per cent of GNP is a distinct possibility. Even with the major cuts which are being spoken about, there will be no real improvement in that budget deficit and that is why monetarist policies are so completely disheartening. Even in terms of their own objectives they will fail but in the meantime they will cause serious economic and social disruption.
The essential difference between Fianna Fáil and this Coalition is that our approach is positive and theirs is negative. We are development-investment — minded and they are committed to monetarism and deflation. It is our positive approach that enabled us to create an average of 20,000 new jobs each year from 1970 to 1980. The first prerequisite in the achievement of economic and social objectives is political commitment to those objectives. The knowledge among the general public and business and trade union circles that there is this commitment to economic and social progress creates a climate of confidence, a framework within which investment can be encouraged. With Fianna Fáil the investor knew where he or she stood and that there would be no sudden switches in economic and fiscal policy. Particularly the social partners knew that as a Government we were determined to provide the infrastructure and the framework of support services which modern industry needs.
Under our stewardship Ireland became one of the most favourable countries in the world for investment and the success of our industrial promotion activities was the envy of many other countries. The performance of our new industry has been, perhaps, the major redeeming feature of the current recession.
The political campaign undertaken by the Coalition parties in their effort to damage Fianna Fáil has had a very negative and destructive influence in the investment area. Coalition spokesmen, incredibly, have sought to cast doubt on our creditworthiness, although the simple facts are that our credit rating in the international markets has never been as high as it is today. For their own political motives, Coalition spokesmen tried to cast doubt on the soundness of our economy and on the achievements which up till then had been universally admired.
Economic growth brought its own problems. There was a tremendous surge of growth in 1977-78, following which a number of serious impediments to further growth and development began to emerge. Many of these were infrastructural in nature — a deficient energy supply, a deficient telecommunications system, a deficient transport system. There was also a deficiency in skilled personnel with the result that the IDA had to advertise abroad for such persons. Fianna Fáil decided that an essential priority directly related to prospects for job creation was to eliminate these bottlenecks. That strategy also served in time of recession to provide some continuing momentum in the economy deriving from productive investment.
Our investment programme of £1.7 billion adopted in January 1981 dominated the development of the economy this year. All commentators are agreed that it was responsible for providing the 2 per cent growth in GNP that was expected, at least up to the July budget. It was directly responsible for halting and even slightly reversing the rise in unemployment in the first half of the year.
If Deputies study the index of manufacturing production they will see definite evidence of an upturn starting in April this year and continuing to September, the latest month for which figures are available. Comparative graphs of industrial production in the EEC countries — and I refer Deputies to European Economy No. 11, Supplement A of November 1981 — demonstrate that Ireland was the one country to show marked and definite signs of upturn this year. Employment in the construction industry increased by over 5,000 in the first seven months of the year, again as a consequence of the Fianna Fáil investment programme. Concern is now being expressed at the halting of projects and the likelihood of a loss of jobs in the construction industry. The high level of capital investment initiated by us in 1981 is now apparently under attack and there is talk and very positive documentary evidence of substantial cuts. With the number of projects already axed we must all be aware of the economic consequences of cuts in public investment at a time of recession. It means that the chief stimulus to economic activity this year will be removed and the consequential economic and social disruption will be cumulative in effect.
The Government have been fond of appealing to external authorities in support of their economic strategy. A reduction in the level of investment would be in direct contradiction of the economic advice we are being given. The European Commission in its annual economic report of 15 October 1981 spoke of `the present priority need to induce a massive new build up of investment', and argued that `the level of financial incentive towards capital formation and innovation should be maintained in real terms if not increased'. The Community's loan instruments, of which we freely availed with their full encouragement, were designed to promote infrastructural investment.
Within this area absolute priority has been given by the Commission to energy investment. We devoted no less than £290 million this year to three major projects, the coal-fired station at Money-point, the natural gas pipeline, and the peat development programme, in addition to a number of smaller projects involving indigenous or renewable sources of energy. Our dependence on imported oil was nearly 80 per cent only three years ago. Dependence on imported oil for electricity generation had been reduced to 56 per cent in the year ending 31 March 1981.
We deplore the attitude of the present Minister for Finance to our Government's programme of reducing our vulnerability and our excessive dependence on imported oil. The Minister talked in this House on 1 December of excessive electricity-generating capacity, in justification of the decision to shelve the proposals for a second power station at Arigna to use native coal for the peat briquette factory at Ballyfornan. Both these projects were purposely designed to reduce oil imports which represent a huge burden on the balance of payments and the Government's decision is indefensible by any standards. The Commission stated on 2 October in its document entitled "The development of an Energy Strategy for the Community":
Investment in energy saving and in substitution for oil must be encouraged both as a means of reducing the share of oil in total energy consumption and because of its favourable effects on the level of economic activity and employment.
Energy investment is a vital strategic area, capable of generating new jobs. The Government are cutting back instead of investing further in that area.
Another State sector, where cuts are being imposed, is the telecommunications development programme. All authorities were agreed that telecommunications was the single biggest area in need of improvement, if Ireland was to remain attractive to industry. Fianna Fáil embarked on a massive improvement programme, costing £22 million this year, which again would create about 6,000 jobs this year. We are now hearing from all over the country of buildings postponed, personnel not being recruited, and orders for stores being down by as much as 40 per cent.
We are all aware of the deficiencies in the transport infrastructure of this country. Fianna Fáil policy was to tackle this problem on a number of points — the road development plan for the 1980s, investment in new buses and rolling stock for the railways, and a network of local airports around the country. The recent NESC report on "The Importance of Infrastructure to Industrial Development in Ireland" pinpointed the problem of personal mobility. Although its review was confined to roads, it could scarcely have put up a more effective case for the regional airport in Connacht, recently abandoned by this Government. It found that executives of firms in the west spent an inordinate amount of time travelling to and from Dublin, and that many were discouraged from locating in the west in the first place. The study asked: "It must be an issue how far in present circumstances the West region is the right location for other firms unless there are very strong compensatory advantages in other directions". This is a very important principle. This was the conclusion of independent transport consultants from outside this country, and it is the core of the argument for the Connacht regional airport.
The fourth example I mentioned was availability of trained and skilled personnel. We have 40,000 students approximately in third-level education at the moment. Our White Paper on Education envisaged expansion of 45,000 in 1985, and to 51,000 in 1981. It now appears that the Government intend to make no further efforts to increase the number of places available over the next five years, and that they anticipate difficulties in maintaining the existing level of service provided by third-level institutions. We have all seen the beneficial effects of the development of the NIHE in Limerick and the regional technical colleges in the 1970s, and it is clear that further expansion is needed.
Deputies will have seen a suggestion in the Sunday newspapers that the NBST science budget is to be cut by 30 per cent in real terms, and that the Marine Research Laboratory at Carna, which is vital to the development of fish farming and shellfish farming, is to be virtually closed down. I must confess to a very special personal interest in that particular project and I deplore that decision.
Ireland has one of the lowest rates of public spending on research and development in the OECD. Research and development are vital for long-term permanent industrial development. We are in a fairly exposed position in this regard at present with much of our industry relying on imported research and development work. The Taoiseach is responsible for science and technology, and he must personally see to it that this vital sector is protected from budget cuts, whatever about any other areas.
Capital investment must of course be concentrated on priorities and we need to ensure that we obtain value for money. This is not an argument for cutting the capital budget, but for ensuring that the amounts we are able to make available are used to maximum benefit. Local authorities and semi-State bodies should be encouraged to give priority to projects with the maximum impact on employment for the minimum cost.
Our priority throughout our period in office was jobs, especially for our young people. All the statistics indicated that a major job creation programme was needed to secure viable employment for our young people. We set about creating those jobs. An increase of 80,000 was achieved between 1977 and 1980. Even in 1980 the momentum was being maintained with job approvals running to 39,000. Our commitment to the provision of employment was and is total. We made available to the IDA and other job-creation agencies all the funds they needed and could possibly absorb.
This is one area where the Fianna Fáil approach differs markedly from the present Government. This Government, if they are to be believed, have made taxation reform and elimination of the budget deficit their priorities. There are voices within the Government who, while they may not have gone fully back to the old Fine Gael doctrine that it is not the Government's responsibility to provide jobs at all, have certainly hinted at such a concept. The Tánaiste has already admitted defeat on this front, when he said that unemployment is unlikely to fall below 125,000 on the basis of the Government's policies over the next five years, and that it could rise to 145,000 in the next three or four months. These are his figures, not mine.
The debate on the Youth Employment Agency showed up the weakness of the Government's position on youth employment. They are clearly relying on training and work experience programmes. Training, apprenticeships and work experience programmes under Fianna Fáil were designed to fit young people for permanent jobs that would be made available. They were not just a device to cloak the real unemployment figures by providing short-term occupation. Our policies were successful. In October 1979, the last year for which comparative figures are available, the percentage of young people unemployed in Ireland was 22.5 per cent, the lowest figure in the EEC and compared with an EEC average of 41.5 per cent. This was despite the fact that we have the highest proportion of that age group in the labour force of any country in the Community.
In 1980-81 our primary objective was to try to contain the growth in unemployment during a very difficult recession. This year we succeeded in halting the rise in unemployment at the January figure of 125,000. At the end of June in fact the number out of work had dropped slightly to 123,500. The rise in unemployment this autumn over the previous twelve months is down to 20 per cent, compared with an EEC average of 33 per cent, and levels of 50 per cent in Germany, the Netherlands and the UK.
It is accepted that we are going to need somewhere in the region of 20,000 extra jobs a year in order to provide work for all our young people. This is the challenge, on which we on this side of the House are focusing, and to which all other considerations are secondary. Now let us examine in turn the Government's approach to this problem and Fianna Fáil's.
Let me say first of all that the Government have been seeking to divert attention as much as possible from the problem and to condition the public to accepting high levels of unemployment, by pretending that the state of the public finances is an even more pressing problem. In so far as they have any employment policy at all, the Government parties have three policy prescriptions for unemployment. The Fine Gael election document, which was particularly weak on the whole area of employment, suggested that greater incentives through tax reform would produce more jobs. The fact, however, is that the Irish industrialist has the best incentives in the world, with generous grants, a favourable tax regime and a fairly low level of social security contributions.
The Labour Party had two proposals, which were subsequently incorporated into the Gaiety Theatre programme, the Youth Employment Agency and the National Development Corporation. Youth employment schemes, while useful, tend to be palliatives, especially in the absence of increased funding. The 1 per cent levy in 1982 will produce very little more than the budgeting amount in 1981. We have already dealt with the Youth Employment Agency and I think that whatever the intentions were the Department of Finance will make sure that that 1 per cent levy will be doubled and diverted simply into funding the existing schemes and very little more than that.
The National Development Corporation, it can be safely predicted in advance, will simply assume responsibility for co-ordinating existing or possibly reduced public sector investment. Indeed, the Taoiseach recently said at the annual dinner of the Insurance Institute that the purpose of the National Development Corporation was to prevent the misallocation of resources.
That is not a correct quotation.
As we understand it, the original Labour Party concept was to create the employment which the private sector alone could not provide. Thus there will be no additional factor capable of creating jobs. Much time need not be wasted on any of these proposals, as the Tánaiste has already admitted that they are going to make little or no difference.
Mention must also be made of the anti-employment effect of Government policies, cuts in public investment, the freeze on public service jobs, and the general effects on demand of deflationary policies. Unemployment has risen by 10,000 since the Government took office, a figure about which they refuse to comment. Questions in this House have elicited that half this figure can be attributed to their decision not to fill vacancies in the public service. A further 3,000 more jobs lost in the construction industry. Like the rise in CPI the rise in unemployment since June is directly attributable to the policies of this Government.
I am in a bit of a dilemma because I have so many grounds on which I would like to criticise the Government that I have to be selective. The Government have provided me with an embarrassment of riches for criticism of their policies. Unfortunately they have not provided me with enough time to deal with them.
We are very concerned about the abandonment of regional policy by this Government. We have highlighted, as a party, the economic withdrawal from the west — the closure of the Tuam factory, the abandonment of the regional airport and particularly the abandonment of the decentralisation programme which we had embarked upon. Withdrawal from the regions is bad enough. What is more alarming still is that the Government are apparently withdrawing from the economy as a whole. We have seen the withdrawal from the west, withdrawal from industrial disputes, withdrawal from national pay talks, withdrawal from agriculture and now from housing through this new agency. It is clear that in the budget there will be further withdrawals — from education and from public investment. The philosophy of this Government was, I believe, truly expressed by the Minister for Trade, Commerce and Tourism when he advocated that the State should have no function in providing jobs, housing or other services and should confine its activities to giving us law and order. It is truly extraordinary in view of the direction in which this Government are heading that the Labour Party should be collaborating in a programme which will reduce State intervention both in the economy and in the social areas.
I do not know what little tout put that speech together but I never said any such thing.
The withdrawal from the economy means that the Government will not be in any position to provide solutions to our social problems. The whole tendency of Government action is to increase unemployment, reduce living standards and cut services. In addition, their taxation policies are likely to hit the less well-off. All this is bound to aggravate the existing poverty problem and, even supposing particular programmes to deal with individual aspects of it are devised, they will have very little impact in comparison with the general effects of Government action. The £100,000 allocated to poverty in the July budget was an insult. We are proud of the fact that in our term of office the relative position of the lower paid was significantly improved. Social welfare payments increased by 30 per cent in real terms during our period in office.
Much attention has been focused in the last few months on the problem of deprived urban areas and the danger of social explosion. While considerable social progress has been made over the last few years none will deny that there are still real social problems. One of the deficiencies pinpointed in the examination of such areas is the lack of recreational facilities. We made a major concerted effort to provide such facilities where they were needed. We did not regard them as a luxury or an optional extra but as a social necessity. It is deplorable that one of the first actions of this Government was to suspend a whole series of decisions to provide community, sporting and recreational facilities. That was an extremely short-sighted decision.
The Government must now face the fact that the entire economic strategy is in ruins. Nothing is working, nothing is being achieved. The country, after only a few short months of the Coalition Government, finds itself in a state of real depression without being offered any hope of improvement. The original formula of blaming the previous Government for everything has worn thin and is no longer available to this Government.
I thought there was nothing to blame them for.
Fianna Fáil cannot be blamed for this Government's failure to fulfil their taxation election pledges. We all recall how severely the Tánaiste was reprimanded in September for suggesting that the tax package should be phased in and how he was made to agree that it would go ahead as planned. We are now being asked in December to believe that the Taoiseach and his Ministers did not realise in September how bad things were in July when they took office. It is also being suggested, as an alternative explanation by the Minister that the electorate voted the Coalition into office because they were not really interested in the promised reduction of income tax by 10 per cent but in the £9.60 which was being taken from the husband and given to the housewife.
I see the Deputy is skipping a bit of his speech.
No I am not. Now that the Minister mentions it I will go into it. I want to concentrate his mind for a moment on his appearance on television recently.
I did not tell any lies.
I was very sorry for the Minister.
The Minister will get an opportunity of making his contribution.
What he tried to infer was that the electorate had not really voted for the reduction from 35 to 25 per cent in income tax but that they were intrigued by the £9.60. He said that now Fianna Fáil were confusing the housewives and that that was why they were not applying for the £9.60.
Great numbers did not apply. Are the Government aware of that?
It was rather extraordinary to find a Minister of the Government on television saying to the Irish people that there was a question mark over whether the taxation package would be implemented. We are barely a month away from the budget and he purports not to know whether the taxation package will be implemented in full.
I did not tell any lies.
It was rather a peculiar performance for a Minister who prides himself on his straightforward honesty to have to go on television and say there was a question mark over it. He could not say yes and he could not say no. A funny sort of straightforward honesty.
The Deputy himself has a question mark over his head.
I think the Minister for Trade, Commerce and Tourism should have Industry.
Much of the alarm in Government circles over the state of our economy was caused by their dawning realisation that they could only carry out their election promises at the risk of severe damage to this economy, if at all. We want to see this Government concentrate instead on protecting existing jobs, creating new ones, developing essential infrastructure and taking good care of the less well off, and stop codding around with the taxation system.
The Minister for Finance has now admitted that Fine Gael miscalculated badly by £150 million in putting forward their tax package. That miscalculation is all the more reprehensible because the Fine Gael Leader insisted vehemently at the time that the proposals were carefully costed and challenged us to disprove the figures.
The staggering increase in the CPI announced yesterday showed they miscalculated equally disastrously the effects of imposing indirect taxation in the July budget. The excuse of not knowing how bad things were is no longer relevant. The advice we were given on leaving office was that the best estimate of the budget deficit for this year was £790 million. My belief is that the Government fed in unrealistic assumptions for political purposes and cooked up a figure of £2,000 million which can now clearly be seen to have been widely exaggerated.
I believe the country at large now realise that the whole performance surrounding the July budget was a great political propaganda exercise. That July budget disturbed the rhythm of the economy which at that time was beginning to recover. As the Minister for Finance since admitted, the Government were constrained by their election promises to raising money by indirect taxation in a way that bears inequitably on lower income families. It is now accepted that the purpose of the July budget was to raise money for 1982 and not 1981. Government spokesmen are admitting that the July measures could be regarded as a financing component of the direct tax cuts in 1982 and accordingly we can claim, with complete justification, that they could have been avoided but for Fine Gael's election promises.
What is required for 1982 is prudent management of the economy which will support a recovery in economic activity. We agree with the phasing out of the budget deficit but not at a rate which will cause serious disruption. At this year-end the problems we face have been greatly magnified by the policies and actions of this Government. Coherent and consistent policies which those who put them forward actually believe in are now needed. On top of the difficult problems with which we in Fianna Fáil were grappling in office, and with a considerable degree of success, there is now added a politically induced crisis, negative policies based on the premise that everything we have been striving to do should not have been attempted at all, because they will only serve to undermine the confidence and self-respect of the Irish people. Demoralisation is no spur to achievement.
I have tried to outline on this and other occasions the constructive approach which underlay our programme for the eighties. We want to see national progress and development. We reject national retreat and defeatism. This Government are the worst disaster to hit the Irish people for over 30 years and they will be annihilated at any election or by-election they dare to face. Let them admit they have nothing to offer the Irish people except failure, recrimination, cut backs and deflation. The time for experiment is over. Let us return to sound and prudent policies that will see the country safely out of the present recession. That I believe would be the ardent new year wish of the vast majority of our citizens were they given the opportunity to express it.
On a point of order, this morning I was seeking information from the Tánaiste. Would he be so good as to tell the House the position with regard to heating oil?
The Deputy will appreciate that is not a point of order.
Deputy Leyden has been given very bad example by his colleagues, so I would not be too hard on him. I did not know the sequence of the Opposition speakers but I was a bit puzzled about Deputy Haughey's references to our having "disturbed the rhythm of the economy." I presume the rhythm he is talking about is the rhythm of which the main component was the vast development programme on which his Government had embarked? Anybody who disturbs a vast and sensible development programme is certainly very much to be blamed. I would like to know this from Deputy Haughey: why did he not see through this development programme? Why did he prepare to run away from it after three years and seven months? He was not embarrassed in this Dáil, because he had many greatful caddies behind him, laughing dutifully at his witicisms, and dozens of other Deputies who outnumbered those on our side of the House by about 20. He had no bother, whatever his Deputies might have felt privately, going around privately bragging that they felt differently from him, that they did not support him and that they would not go along with him; but when it came to the crunch they all trooped obediently through the lobies. What drove him to the country, to "disturb the rhythm of the economy?" How can he answer to the Irish people for having done the very thing he is rejecting, namely retreat and defeatism? What else was it but defeatism when he had an overwhelming Dáil majority and ran away after three years and ten months? If the programme he was boasting about was so obviously showing results, if there was nothing for an incoming Government to recriminate about because there was nothing wrong with the economy, why did he not see it through? Surely those results would have been coming through thick and fast, more visible and more conspicuous with every passing month? Surely he would have been invincible after four-and-a-half years in office? Surely it would have been open to him to stay at least until this autumn or until early spring 1982 before going to the country? He did not do that; he ran. He ran because he know the game was up. He knew the bogus Estimates of 1981 and the phony budget based on them could not be sustained as credible, genuine or truthful for more than a few weeks longer.
In regard to the priorities he mentioned to which the Government should attend, I do not dissent from them. Of course employment is a priority, but employment depends in the industrial manufacturing sector on competitiveness, and competitiveness is something a Government cannot command. They can do things, by their fiscal behaviour, which can contribute to the levels of wage demand on the private side and which will impair competitiveness. It is very important therefore for a Government, or for a succession of Governments, not to leave themselves in a situation where the iron constraints of the budgetary situation drive them to do that, with no other option; otherwise they cannot pay their bills.
The real importance of getting order into the finances of the State is to save a Government from having to conduct themselves fiscally in such a way as will inhibit the ordinary operations of industry which produce the jobs, and having no alternative but to do things which may not be helpful towards securing reasonable private sector wage increase patterns, thus implying a reasonable harmony and degree of equality between the rates at which our wage costs rise and those of our competitors with whom we have to fight for markets, not just abroad but at home too. It is because of the extent to which the State is constricted and hemmed in, and its freedom of movement pre-empted, by mad budgetary behaviour that it is possible to blame the State, whatever Government are in charge, for insufficient progress on the industrial and production sides.
There is a perfectly clear connection between inflation—whether it is contributed to by wage costs, by the level of import costs or fiscal policy—and the kind of settlement we are going to get from people whose settlement levels will determine our competitiveness. That is undoubtedly true. There is no use trying to palliate the inflation figure released yesterday. A year on year inflation rate of 23.3 per cent is very serious, but only one-quarter of that year falls within the period of office of this Government.
The ingredients of an inflation rate in so far as the Government have any direct control over it, are laid not only months but up to 18 months or perhaps two years before the emergence of the figures for any quarter. The simplest example of this, and I have the authority of Deputy O'Donoghue for it, is the level to which inflation fell and was continuing to fall steadily at the latter end of the years 1977 and 1978 when the rate was well down into single figures due to very moderate wage settlements achieved by Deputy O'Leary as Minister for Labour and by Deputy Ryan as Minister for Finance in 1976/77. I am not recriminating about the situation. It is much too serious for that. We are confronted with an inflation rate of which the proportion contributed to by the August-November quarter is exactly 25 per cent — since 5.8 per cent is almost one quarter of 23.3 per cent. When one allows for the fact that of that 5.8 per cent, some proportion — we calculate 2.3 per cent — was provided by our July budget, which was inescapable, faced as we were with the fiscal mess which the gentlemen across the floor who are now so wise and so full of ideas had left behind, when we subtract that figure we are left with a non-tax inflation rate of 3.5 per cent and that is far lower than any of the preceeding three quarters. We do not take credit for that. It could not be otherwise, because import prices were stable, or had fallen in some cases, plus the fact that the effects of the 1981 wage agreement were beginning to work themselves through to the end.
What we must ensure is that this time next year we do not have to worry about an inflation rate of any more than about half that. In saying that, I do not wish to be registered as having put a figure on the inflation rate for next year. I cannot predict what the figure will be, but the Government will be fighting to reduce inflation and in order to do so it is necessary to provide the incentives for industry so as to relieve that sector of burdens. In order to avoid having to provide in our fiscal policies taxation elements which well tend to drive up wage demands we will be fighting relentlessly to drive the rate down. If we succeed, the figure may be reduced by half or more than half within 12 months. This will depend very largely on the wage settlements that the private sector can negotiate, but it depends also on import prices, and if they remain as stable as they have been in the past while, the outlook is good.
Recently on television on the "Today Tonight" programme I heard a trade union leader say that there is no point in talking about belt-tightening to people who are paid a weekly wage that is very modest. I agree totally with that. There is no point in lecturing such people unless it is obvious that moderation is being practised by everyone. I think everybody knows my views on wealth tax. Perhaps in regard to that question I am in a minority in my party. I do not advocate the reintroduction of wealth tax in a form that would be in any way like that which was operated before, and which became discredited. However, while I have no jealousy of wealth, if the better-off will co-operate in a recasting of the taxation system, those people to whom we are lecturing about moderation will see that the better-off are enduring the same constraints and bearing the same burden relative to their capacity to bear them. That has not been the case.
One of the first moves by the last Government was to abolish wealth tax and they also threw away 80 per cent of capital gains tax. I am open to the argument that wealth tax in its former form was too crude and that it inhibited investment, but it is crazy to throw away those elements which at least had the psychological effect, if nothing else, of showing the people to whom we are talking about moderation that those who were in a state of economic comfort, to which those on modest incomes could never aspire, were feeling the pinch.
I should be delighted if we could all live in a land of sugar candy but the facts of life are different. It is insane for a Government of a State whose prosperity depends on competitiveness in selling goods to operate a taxation system which visibly allows a lot of people to get away relatively easily — though not perhaps rich by the standards of France, Germany or America but well-off by Irish standards — by comparison with the people who are at the receiving end of the lecturing. Though I have often had fault to find with people who tend to be vocal on the trade union side, I agree totally with the trade union leader on this matter.
The question of the burdens that are placed on the Government is very near this topic. Any Government in a State like this are under political pressures of one kind or another, but we have resisted those pressures and will go on resisting them with a hard-nosedness that may even surprise our friends. To take a recent example, let us consider the position of the Connacht regional airport project or, as it has become known, the Knock Airport project. I have no doubt but that the Connacht region needs an airport and that it will get one, but not at this time. We must wait until we can afford such expenditure.
I should like to give the House an idea of the atmosphere of demand in which Governments in these days have to exist. The chairman of the committee in charge of the campaign for that airport threatened us with immediate and terrible war if we failed to complete the airport. That was the kind of talk that was being put to us. This gentleman said that the completion of the airport would cost "only £5,500,000" and that this could be saved by economising on paper clips and by stopping civil servants from making personal telephone calls. I have been a Minister in this Government since July last and I know the sweat that goes into trying to economise, not for a fraction of £5 million but for a fraction of £5,000. People might be surprised if they knew how closely even a load of paper clips is considered at Department level. That is the position anyway in my Department and I expect it is the same in all other Departments, too.
How can somebody speak so airily about the expenditure of £5,500,000, and be so contemptuous of the reality of the needs of other people, and so ignorant of the realities of the revenue, to suggest that these trivial economies ——
What about the recruitment of non-civil servants?
These demands are being amplified not only by the people in the area concerned, but also by people here who see in the demands cheap short-term political gain for themselves. We had these two rhinestone cowboys, Deputy Reynolds and Deputy Flynn, riding through the west a couple of weeks ago, along with associated minor cowpokes and cowpunchers like Deputy Killilea, the sort who get shot off their horses early on in a film ——
Could I ask the Minister to give us less of the wild West and more of the tranquil East.
If people like that aspire to be leaders of their communities they should be showing real leadership. That means in times like this — and it means from now until the end of the century — they should be trying to moderate demands and not amplify them just to embarrass political opponents. Deputy Killilea nearly burst a blood vessel here about a month ago ——
The Minister knows that Deputy Killilea is in hospital at present.
I did not know that. I beg your pardon and his. I am sorry to have referred like that to him.
I hear he is comfortable.
I am sorry to have made fun of him, but he was very vocal and extremely articulate in regard to the Tuam factory ——
I am sure Deputy Killilea has a sense of humour and your comments will help him to make a speedy recovery.
I wish him a very speedy recovery. I think Deputy Donnellan misses him. He will have the good wishes of all sides of the House for a quick recovery. He articulated very loudly on the subject of the Tuam factory. The difficulties of the Tuam factory arise from a variety of factors, but some of them are within the control of people in the neighbourhood. I am not going to go into details. Where leadership is needed from people on the ground is in trying to overcome these difficulties at local level, not waiting until they become insuperable and then throwing the whole mess into the lap of the State and hoping you will get through by shouting.
I am nearly always misrepresented when I open my mouth on this subject. I do not mind about that, but I want to put these things against the background of the Government's budgetary task, of the demands which were made on it, of the necessity to resist those demands and I have no doubt that they will be resisted.
Deputy O'Malley made a speech yesterday to the Kevin Barry Cumann of Fianna Fáil in UCD. I think he has misunderstood the public sector pay situation, but, allowing for that, I want to concentrate on a phrase he used. He described what I think he wrongly understood to be the level of the proposal as "disastrous;" and it is clear he means disastrously generous. He said the country is "paying very dearly for the Governments' loss of nerve." He said this Government is a very poor one because, "having steeped the country in gloom and doom for months, they are acting now as if they had an OPEC like economy"— in other words, we are acting extravagantly. I expect to have Deputy O'Malley very much on my side in a little over a month's time when we see the lines of the 1982 budget ——
We see them already.
Deputy Lenihan knows perfectly well that the taxation, expenditure and every other aspect of the budget are decided step by step. If they were all ready at present we could have the budget debate now. When the budget appears there will be measures in it that no one is going to describe as being associated with people who have suffered a loss of nerve. I would like to be able to sit back with a smile and receive plaudits for a generous, popular budget; but it is not going to be like that. I do not know what its particular shape will be, but there will be no sign of loss of nerve in it and no question of behaving like an OPEC country. I expect to have Deputy O'Malley, Deputy McCreevy and a few more who recognise the reality of economic and fiscal existence on our side. I expect them — not that I think they have lost their nerve — to sit back and approve, if only by their silence, what they will see being done.
Deputy Haughey purported to cite a speech of mine. Deputy Haughey is a man, I often think, who has not the same perception of what the truth means as most people have. I make him a fair offer now: if he can produce the text of the speech which I am supposed to have made, I will eat it. That will not worry him because he is a man who does not really mind — truth and falsehood are all one to him. He was interviewed on RTE radio on 8 December last and what he said must have a bearing on his credibility, either as a party leader or as a speaker here on an Adjournment Debate. The interviewer, who I thought dealt with him rather timidly, when interviewing him about his time in Government put to him, "But Government borrowing... the interviewer petered out into inaudibility or he was overtaken by Deputy Haughey's flow. Deputy Haughey said:
"No, no. By intervening from time to time and protecting employment, saving jobs and so on, yes we did have to borrow a certain amount and I would like to quote you there what the European Economic Commission says about borrowing, and they said in July 1981, last July, I quote "Among the Member States Ireland is regularly faced with sizeable deficits, a situation which is only natural when one considers the development gap that separates it from other Member States."
I want to stigmatise that here as a lie because, although those words do indeed appear in the European Economic Community document, they do not refer to the budget deficit but to the trade gap. Deputy Haughey is too old a fox not to know the difference between these two things. He was in charge of finance during his time in Government. He knows the difference between a trade gap and a budgetary gap. He was being clearly asked about the budgetary gap. He does not mind confusing what he hopes will be hundreds of thousands of simple people by purporting to quote an EEC document in defence of this budget deficit. It is not in defence of it. It refers to something completely different. They have repeatedly said the opposite about budget deficits, that the borrowing level here cannot be sustained at the Government level, that the fiscal deficit is intolerable, unendurable and beyond all reason——
The Minister will bear with the Chair if he appeals to his command of the English language to remove from his statement the word "lie", which is offensive to Standing Orders.
Very well. Let me say it is a mistake, the genuineness of which I suspect. It is not as though that point of view on the part of the European Community was so unorthodox and zany, because I have here a printed broadcast made by the very same Deputy on 9 January 1980 in which he said we "had been borrowing enormous amounts of money at a rate which just could not continue." He said that to meet various commitments in their capital programme, they "had to borrow over £1,000 million in 1979 and that amount was equal to one-seventh of our entire national output for the year. It was far too high a rate and could not possible continue." That is the kind of language Deputy Haughey was using; but here this morning he was asking why we were finding fault with the borrowing programme in 1980 and 1981 when we found no fault with what was done in 1975. He himself found fault with what was happening in 1979, which was nothing like as bad as last year or this year under what was budgeted for at the beginning of the year. When I hear that kind of talk over the radio or television I ask myself, is it a matter of indifference to the Opposition who leads them? Do they not care whether it is truth or falsehood which is given out in their name?
I want to say something about the media and commentators in general. I have commentators even among my own correspondents, people who write to me. There is a kind of impression around the place that we are generating "too much gloom and doom." That is the kind of reaction you get from children when you tell them it is time to go home from the party, or that it is time to go to bed or time to do their homework.
It is not a question of gloom and doom. We are determined, if we can, to fight this economy through to the end of 1986 and to hand it over to the next Government, whether we form it or the gentlemen on the far side, in better condition than it is now. There is no reason why we should not succeed in that intent, if indeed we do not do what Deputy O'Malley suggested, lose our nerve. I do not think there is any sign of that.
I want to reply to the commentators, private and in the media, who say they are getting "too much gloom and doom." We are trying to tell the truth for a change. A particularly fatuous example emerged in the editorial in The Irish Times on 16 December. I cannot help but draw a contrast between the continuous stream of economic comment which that paper's editorial columns now contain and the very bland or flippant complacency which they were showing 12 months ago. The 1981 budget, that phony scandal, drew from them the comment that “perhaps there was some sleight of hand in the figures.” That is the worst they could find to write about it, and it was their only editorial comment on the economy in a month. That was the only budget which was dishonest in that dimension that this State has had. That paper is now saying that “We do not want any more gloom and doom.”
They ask us to tell the people what to do. They ask: "Do we save more? Do we spend more in order to keep industry going? Do we throw ourselves more into voluntary organisations?" What they are asking is that the Government should give more leadership to ordinary citizens so that the individual will know how he can help the situation. I am delighted to find such questions being asked.
The forms of advice which these questions invite are not new. They have been said over and over again. Expensive publicity campaigns have been paid for by the State under all Governments to advance them. The answers are; yes, save more; spend more to keep Irish industry going in the sense that if we are spending money at all we should do so on Irish goods. Yes, we should throw ourselves into voluntary organisations, because voluntary organisations that are socially useful implicitly diminish the burden on the State.
I will add a couple of more answers, boring old subjects, now threadbare, no longer as trendy as they were six or seven years ago: conserve energy; do not burn up petrol or electricity uselessly or needlessly because every bit of it, unless generated from home resources, has to be imported and paid for bitterly out of the product of our industry. Finally, think of your neighbours, your neighbours collectively in the shape of the State; do not cheat the State, do not give the State short measure and do not place impossible burdens on it; do not amplify unreasonable demands, and do not vote for a party that makes business out of supporting them.
In summation, one can say validly in regard to the Government's performance in the past six months that they have been strong on cosmetics, weak on specifics. I hope to elaborate on that by going through a number of factual bases for that contention. First of all we have had cosmetic exercise in regard to the proposed amendment of Articles 2 and 3 of the Constitution. I noticed that during the weekend the Minister for Trade, Commerce and Tourism retreated on that question and is now advocating caution, advising that it would be wise not to proceed with the suggested amendments unless there is a prospect of success.
There we had a confetti exercise initiated by the Taoiseach but now withdrawing from it as displayed by the Minister for Trade, Commerce and Tourism — a lot of hot air, a lot of froth, no decision to bring in the legislation that would make it possible to hold a referendum. We have no indication of when that legislation will come. There you have it: strong on cosmetics, weak on specifics.
We come to the Fine Gael tax package. The Tánaiste led the retreat from that tax package when he cast doubts on the wisdom of proceeding with the package in the present economic climate. I think that that view is gathering momentum within the Government. The women of the country in a very practical way have demonstrated their lack of interest in it by the very poor response from the wives of the country when asked by the Department of Finance to submit applications for the £9.60 a week. That was a cosmetic exercise which could be a very costly administrative matter. It was wrong, both in principle and practice, as so ably expressed by Deputy Ryan, former Minister for Finance, in a radio programme some months ago. It was wrong in principle for the Revenue to interfere with the ordinary arrangements between man and wife. It was wrong in practice to intrude the whole administrative machine for revenue collection into a situation where one is engaged merely in transferring money from one pocket to another within the one household.
We have several other examples of the Government being strong in cosmetics and weak on specifics. Before the formation of the Government, the Tánaiste, at a meeting of the whole of the Labour Party, made it a keynote issue that a National Development Corporation would be formed. He referred to it here this morning. The public capital programme leaked in The Irish Times yesterday does not have any reference to a National Development Corporation. A figure of £400 million was bandied about as the sort of money the Tánaiste said would be provided to fund a National Development Corporation.
In his speech this morning the only specific matter the Tánaiste dealt with is the question of the gas find in Kinsale and its transmission into a network for Dublin and possible Northern Ireland, a direct inheritance from the Government of which I was glad to be a member, initiated by the then Tánaiste, Deputy Colley. As far as the National Development Corporation is concerned, it was just another piece of cosmetics without specific input.
What do we mean by joint venture operations between the State and private industry, or direct intervention by the State in public investment? We do not have to have a cosmetic exercise of labelling an institution under the name of the National Development Corporation when we have there already sufficient State companies to carry out precisely the sort of investment and capital formation that any decent socialist would like to see implemented.
I refer to Bord na Móna and the importance of their briquette expansion into the west at Ballyforan. They are a State-sponsored body giving substantial employment, a commercially successful body, apart from the social aspects of their work. We find their expansion is restricted by deliberate Government decision, by a positive Government decision. We have a similar situation in Arigna where the ESB, in conjunction with the private coal mining interests in the area, have pioneered development into new forms of utilisation of low grade coal. We find that capital formation and capital investment restricted, curtailed and stopped. We have the Sugar Company, a State body engaged in the processing of foodstuffs for a long number of years. Their expansion is restricted and curtailed as well.
Here is where the Government's bona fides comes into contention, the bona fides of a Government strong on cosmetics, strong with a label like the National Development Corporation, but weak on the actual, practical, specific undertakings to hand, the State companies which are the tools for the Government of public investment and public capital formation. We find the ESB curtailed. We find Bord na Móna curtailed. We find the Sugar Company curtailed.
Recently we had a classical example of where the Government could implement the cosmetic references by the Tánaiste in his speech to joint venture arrangements. He referred glowingly in his speech this morning to the need for joint venture activities between the State and private enterprise. Of course I agree with the sentiments expressed, but what happened when Clondalkin Paper Mills came forward recently with a practical proposition on behalf of the Clondalkin Group to ensure that their operations could be sustained by a partnership arrangement between the State and the company, with an input of 45 per cent each way, and a 10 per cent input on the part of the workers? That is a classical case of the type of joint venture glowingly referred to and approved of by the Tánaiste in his speech this morning.
When a practical specific proposition of that kind comes onto the Government table, there is prevarication, delay and no action, only indecision. This was a specific proposal involving an integrated type of industry with potential for the utilisation of Irish forest products, the only paper processing establishment now in the country and we find Government prevarication and delay about getting down to a practical joint venture proposal which would help to sustain and expand that industry. Again, strong on cosmetics, weak on specifics.
There is a similar type of mentality in the legislation we have seen from the Government over the past few weeks of this Dáil session. The Youth Employment Agency is another classic example of cosmetics without any practical effect. All the Youth Employment Agency means is that a new body with a new label is being established to subsume existing activities in the way of training facilities being conducted by AnCO at present.
In the Housing Finance Agency Bill passed this week, we have another nice label which seems to indicate that a great deal of work has been done by the Government in the provision of funds for housing. All it means, in effect, is that it is taking up funds which are available already through existing banking, lending and building society organisations. Instead of applying their minds to the practical endeavour of making the existing agencies work and function more effectively, the Government are establishing a new agency which will merely mop up funds already available through insurance companies, assurance companies, building societies and the banking institutions.
I should like to refer to the one outrageous decision which takes precedence over all other decisions reached by the Government in the brief six months they have been in office, that is, the raising of the school entry age. The enormity of that decision is only now being borne in on people to the extent we originally said it would. Initially parents were somehow reluctant to appreciate the enormity of that decision which has been linked with a totally dishonest proposal in order to ensure that some Independent support was gained by talking in vague cosmetic terms about pre-school arrangements to be incorporated into the educational system.
In practice, the existing primary schools structure and the existing curriculum in the primary schools at infant class level make ample provision for this sort of pre-school training and discipline which are required in our educational system. We do not have to go beyond the existing school system, the existing teachers and the existing curricula for primary schools and particularly infant classes. It is all there. There was no need to come in here with this exercise in order to secure Independent support and refer in vague terms to the establishment of pre-school arrangements within the educational system. The first decision was wrong because, over the years, we have developed a flexible curriculum system since the abolition of the primary certificate, and that flexible curriculum system makes allowance for pre-school as well as primary school training and education. Again strong on cosmetics, weak on specifics.
The most appalling figures of all emerged in this disgraceful leak we saw in The Irish Times yesterday. In good time this year we have the full Government public capital programme for 1982 revealed for our edification. We have it here for this debate. It shows that, in total, we have a reduction of 61 per cent in the State capital programme for 1982. This includes enormous cuts in the basic Departments of the Environment, Industry, Trade and Agriculture in particular.
We have substantial cuts amounting in toto to 61 per cent in the State capital programme as against the requirements of the various Government Departments. In the first column the requirements of the various Government Departments for capital purposes are set out. In the final column we have the total percentage cuts mainly in the productive areas I have mentioned, coming to an overall total of 61 per cent.
The whole prosperity of this country in the economic sense, and consequently in the social sense, depends on increasing capital formation. It depends on a rising level of investment, private and State investment. Here we have a conscious Government decision, apparently, to slash through the capital Estimates presented by various Government Departments to the extent of 61 per cent.
One Department should be singled out because it is the most important one from the point of view of priming the economic pump of the country, that is the Department of the Environment where, under the Exchequer heading, the cut is 87.3 per cent and, under the non-Exchequer heading, the cut amounts to 189.5 per cent. Despite all the filmflam about a Housing Finance Agency, despite the legislation guillotined through the House this week, in effect the housing programme of this country just cannot survive with that sort of cut. Of course the environment is one of the big investment areas. On the Exchequer, one is talking of a capital investment of £510 million and on the non-Exchequer, of approximately £27 million. In those two areas there are cuts, compared with the figures presented by the Department of the Environment, cuts proposed by the Government — on the basis that this is a Government document — of 68 per cent and 189 per cent. That basically is in the whole area of the provision of services. Deputy Tully, a former Minister for the Environment, is aware of this himself — that the capital formation under that Department is related entirely to the provision of water, sewerage, roads, the whole infrastructure which makes the building of houses possible for our people. That is the main cut in the whole range of services provided by the State in the way of capital inputs, in a whole range of services. The highest single cut proposed here, as against the submission of the relevant Department, is in the area of the Department of the Environment, hitting directly and strictly at the whole essence of the State housing programme. No amount of legislation in the world, whether on a Housing Finance Agency, or any other can deal with the basic fact that the funds simply are not being made available for the development of the infrastructure of this country which is the greatest single need in regard to State application of finance at present. It is in this very area of providing the communications, roads and the other basic services that go to make the basic sanitary services and that, in turn, go to make housing development possible.
I could go right through the whole list of cuts here. I do not see how it will be possible to provide more jobs if the capital aspects of the Department of Industry are to be cut as well because the capital aspects in relation to the Department of Industry and Energy relate directly to the provision of funds to the Industrial Development Authority. The whole grant-giving system of the IDA is the biggest single capital aspect of the Department of Industry's activities which has been cut, according to this leaked paper before us.
Certainly it is impossible to see how a Government can in any way implement a programme that will make any dent in our unemployment problem if this is to be the approach, if there are to be substantial cuts in State capital formation, in the State capital programme. In that event the unemployment figures would not come down and the employment figure, which requires to be increased by 20,000 new jobs each year if we are to absorb people in gainful employment, simply cannot be achieved.
There are cuts in education and in health as well but I have picked out the two key areas of the environment and industry to show the substantial cuts in the public capital programme made by the Government on the submissions made to them by the relevant Departments of the Environment and Industry and Energy. With an overall cut of 61 per cent on the original capital submissions made by the various Government Departments, this is not just a go slow or a standstill in regard to State capital formation or investment, it is a rapid retreat from the situation in which they find themselves.
If this is to be the pattern of State capital spending in the coming year we are faced with the prospect of the most almighty recession ever to be experienced in this country. I am warning the Government in good time because whatever emerges from the current budget figures — we must await the budget when we will see what is the picture in regard to the current Estimates and the taxation to meet those Estimates — I am more concerned, from the point of view of the future of our economy and society, with the figures revealed here in regard to the proposals for a public capital programme, because that is going into retreat. Make no mistake about it: we cannot have the houses if we do not have the infrastructural services. If we do not have the roads and sanitary services we will not have the houses and we will not have employment in the building sector. If we do not have sufficient grants given to the Industrial Development Authority under the heading "Ministry" we will not have the factories to provide the jobs. It is as elementary as that. That is what specifics are about. That is what having a political will to govern means, not passing legislation here that is meaningless, Bills such as the Youth Employment Agency Bill and the Housing Finance Agency Bill — and the woolly generalised type of talk about a National Development Corporation. That is all nonsense, all airy-fairy cosmetics. Specifics come down to this: are you providing sufficient money for the capital programme of this State? When one sees there the drastic cut of 61 per cent in the total provision for the capital programme equally one immediately sees the direction in which the Government are going.
The final indictment of the Government in the few short months they have been in office, in my view, relates to the absence of political will. Are they interested in governing? That is the question. Have they any other interest than that of staying there and hanging together? Unless there is a political will displayed by the present Government, then the hard, necessary, economic and social decisions will not be taken. There is no question about it — and I make no apology for it — that in our state of development we must borrow for productive purposes and in particular for infrastructural purposes. Our type of developing society does not have the developed infrastructure of a number of other Community countries. Therefore we must borrow for these purposes. That was our policy as a Government and will continue to be our policy when we are elected to Government once more, to raise the necessary funds and apply them to the necessary capital operations having regard to the developing state of our economy.
Deputy Haughey this morning mentioned a very important aspect of infrastructural provision which is concerned with oil substitution and energy saving. Our planning in regard to the utilisation of coal, peat and gas resources was directed towards a lessening of our dependence on imported oil. The target was to get down from an 80 per cent dependency to one in the region of 56 per cent. That has now been shattered by the Government's decision to curtail the ESB generating programme and, in general, to curtail the capital finance expansion of the Electricity Supply Board.
Could I seek the indulgence of Deputy Lenihan for a moment to say that the Chair is endeavouring to gain a minute or two. If I say to the Deputy that ordinarily he would have three minutes left but that he would oblige the Chair if he would take only two——
Certainly, every minute is important.
In conclusion, I want to say that the whole essence of this Government has been to indulge themselves in cosmetics at the expense of real government. Real government means doing specific things, making specific proposals, carrying them through and providing the necessary finance. On that fundamental basis this Government have failed during the past six months. After a succession of by-election victories, which will commence in Cavan-Monaghan, we will force this Government out of office and resume the national advance.
I have been listening to debates on the Adjournment for many years and they usually follow a pattern whereby the Opposition try to take the Government apart and the Government defend their position and what they have done. The main theme is centred round the previous year's budget and what the Government did or did not do.
I have to shake myself when I hear Opposition spokesmen because either they are suffering from a memory lapse or something has happened which I do not know about. This Government took office just over five months ago and attempted to run the country for the rest of the year on a budget prepared by their predecessors. Although before the general election most of us were aware that the state of Government finances was bad, in our wildest nightmares we could not have realised what the Government, including experienced men such as Deputy Haughey and Deputy Lenihan, could have done. At the beginning of the year they introduced what they saw as an election budget, the most outrageous document ever presented to this House. They knew they were running into extreme difficulty regarding foreign borrowing, having borrowed so much that everybody who was asked to lend money was beginning to ask what was happening in this country. They realised that if they waited, as they should, until the following year to hold a general election, matters would be so very much worse that they would not have a hope of being re-elected and they therefore decided to play a confidence trick on the people and on the Oireachtas. They introduced a budget which was so far short of what was needed that we have been continually preparing and presenting to the House Supplementary Estimates to provide for the ordinary day to day running of the country.
Deputy Gay Mitchell yesterday tabled a question to me for written reply regarding the shortfall in the money provided for my Department. I had to seek almost £29 million to run the ordinary services. Deputy Mitchell's question asked how much of this referred to the pay of Army personnel and the period covered. The amount was £10 million, representing payment for seven weeks. Fianna Fáil deliberately budgeted for £10 million less than was required for the payment of soldiers and they knew this was the situation. They also left other parts of the Department short of almost £18 million. This is the position in the Department of Defence, Could anything be more outrageous than this kind of action by a Government? The result is that money which has not been provided either in the January budget or in our supplementary budget in July must be met in next year's budget. We are being asked to carry the can for what Fianna Fáil did in an effort to get electoral support
I have said before on a number of occasions that I have a certain sympathy with spokesmen who give their opinion on certain things that happen in Government when they do not know the exact position. I have no such sympathy for ex-Ministers who know what has happened and are talking with tongue in cheek. Deputy Haughey and Deputy Lenihan know that they were not stating the facts as the books have proved them.
We have people in this House who are socially very nice and with whom one would have no hesitation in associating. We have had Ministers during the years some of whom were approachable and were prepared to do their share and others who felt that when they became Ministers they became little gods. Irrespective of whether Ministers are good or bad individually or whether they are approachable, there is the collective responsibility of a Government. This is where Fianna Fáil appear to have fallen down very badly, because it appears that individual Ministers took it upon themselves to take and carry out decisions for which money had not been provided by the Government. Is there anything more likely to run a Government or a country into trouble?
Coming up to the election it appeared to be a question of who ran first with the good news about the money which did not exist. Most unfortunate was the then Minister of State at the Department of Education, Deputy Tunney, who had responsibility for sport and was authorised by someone, not the Government, to notify people of expenditure for sports complexes throughout the country. The money for these projects did not exist. Many people started work on the basis of the promised grants and some of them are coming to this Government and asking if anything can be done to rescue them from their impossible position. I have great sympathy for these people and it is unfair that they should have been put in this position. When we realise that the previous Government were prepared to do such things, we understand why they decided to run to the country rather than wait for another year.
We hear all sorts of complaints from Fianna Fáil and we are told that when they were in office this or that could be done. Do they not realise that the country knows there was no provision made for so many things that they simply added up as debts? Deputy Lenihan referred to the fact that I should have known about certain things because I was Minister for Local Government, that I should have known about housing. I know a lot about it. I spent four years in that Department, in which my record will be there long after some of the people who are criticising me will be gone and forgotten. As far as housing is concerned the previous Government let down the building industry and those waiting for houses in a very bad way. Almost the first thing we had to do when we took office was to find an additional £30 million which was given to local authorities in an effort to bail them out of the situation in which Fianna Fáil had put them on the local authority housing front. Within a month or six weeks we had replies from all the local authorities saying: "Thanks very much for the money. In fact, this only paid for the houses we started last year and got no money for and for others we were building this year and got no money for. We cannot start a single local authority house because there is still no money available."
Surely Deputy Lenihan must have known before he started his speech here that that was the situation. Surely he must have known that the Fianna Fáil Party allowed the building of houses not alone for the local authorities but for private individuals to get into such a mess that we are now attempting to pick up the pieces. The new Bill which passed through the House the day before yesterday is an effort to get money to build houses. The houses must be built. Fianna Fáil are no help to us when they give the impression we could continue on the rake's progress they embarked on, when they borrowed money right, left and centre, anywhere they could get it and almost destroyed the good name of the country among international bankers.
We have heard very trenchant criticism here of the Youth Employment Agency Bill. I would like to try to straighten out one or two misunderstandings which appear to have found their way into the discussion on the Bill. First of all, I would like to make it clear that the Government proposal is that at least £40 million will be provided for this Bill when it becomes law in 1982. Last year the other programmes involved, which Deputy Lenihan and Deputy Haughey were talking about and which were supposed to be catering for the same type of people, the same number of people, only received approximately £20 million. This year £20 million was provided and in 1982 £40 million will be provided and in a full year there will be at least £90 million available. The number of people is not, as has been said here by a number of Fianna Fáil speakers, 20,000. It wil be at least 40,000 jobs, which is an addition of 20,000 jobs for young people. I am sure that was known to those who were speaking. I want to reiterate it so that it will be on the record and there will be no doubt at all about it.
Deputy Lenihan was waffling away about all the things the previous Government would have been able to carry on and do without any new legislation. I have two comments to make on that. The first is that, if all those things which would have reduced unemployment were available to Fianna Fáil when in office, why did they not do something about it? Why did they allow the situation to get so bad? Secondly, when Fianna Fáil speakers talk about youth employment, would they like to make, before the debate finishes, some comment on the Youth Employment Action Group. This was headed by well-known sportsmen who were supposed to set the country on fire: employment for youth was to be the greatest thing because the fellows in charge were the fellows who knew. I have no comment at all to make about them on the field of sport or in other activities. They were excellent and produced great results. But we know why they did not produce any results for the action group set up by the Government. It was because funds were not made available. There was absolutely no money at all for this group. Possibly they should have got Paul Goldin or a few of those fellows who would be able to mesmerise people and raise money that way. As it was, no money was made available.
Therefore the money was not there for the purpose of giving employment to young people and the thing fell flat on its face. It was introduced with a fanfare of trumpets and it sneaked out the back door. There was no comment when it was gone. The only people I was sorry for were the unfortunate people involved in the scheme who were codded into believing that the Government meant to do something important for the youth of the country. We now propose to do something important for them. We propose to do something which will give at least an additional 20,000 jobs in 1982. We propose to do this not alone for the purpose of helping youth but for the purpose of helping that unfortunate group of people who under the previous Government and, if we do not do something, under our Government will be in an impossible position — the over 40s. If they lose a job they cannot get another because the pressure from the younger people for jobs is too great. I believe we can do a lot to try to stabilise the economy.
I believe that the present negotiations with the representatives of the public service committee of the Irish Congress of Trade Unions and the Government will have a very good result. I listen to comments made by people about it being the wrong thing to do, that we should not have given so much, but those same people were roaring their heads off last week and the week before because we had not a national pay agreement. I regret that there has not been a national pay agreement, because I am in the unique position that I was a member of the Irish Congress of Trade Unions that negotiated the first national pay agreement and a number of the others. I took part in the discussions and subsequently took part in discussions on the other side of the fence as a member of the Government. I know the merit of having a national pay agreement. I also know the difficulties trade unions have when the so-called free-for-all arises. The biggest trouble about a free-for-all is that it usually ends up with the people who are the strongest — and, therefore, in most cases the better paid — getting more than those who are weaker, and therefore are lower paid. One of the things proposed for the public service agreement is that the lower paid will get substantially more than the higher paid. Nobody can find fault with that. I do not want to go too deeply into this except to say that it has gone a long way. I hope that the agreement will be completed and that it will be taken as an example by those outside as to what they should ask for and what should be paid. If it is not we will have the situation where the very strong firms, if they can afford it, will be offering rates of pay which will be completely out of line and other people will be offered practically nothing at all.
Let me say, in passing, that I feel, as a trade union official of 30 years' standing, that the trade unions will, of necessity, have to put their own house in order. I know there are a number of very responsible people running the trade unions and I know there are a number of the trade unions throughout the country who are very anxious not alone to look after themselves and their members but to take the national good into account. We are long past the day when people, having got what has been negotiated for them by their trade union, should be allowed to try to squeeze a lot more for themselves even if that means putting many hundreds of people or, indeed as sometimes occurs in the case of transport, many thousands of people on their feet for a long time. The trade unions would be well advised to see to it that their own slogan — each for all and all for each — is taken into account. When people are negotiating for increases they must take into account the position of those who are not as well off as they are.
The Government which took office in June have been left with an unbelievable task. A number of members of the previous Government must have realised the slippery slope on which the Government were and that the actions being taken were the wrong ones. I do not know why they did not make an effort — perhaps they did and did not get very far with it — to get things straightened out. The idea seems to have been that with an election taking place in 1981 short corners should be taken. I am not too sure that some of them wanted to get back into office but they must have known that if they got back they would be in a very serious financial difficulty. I believe that the people of Ireland would do things, even unpalatable things, if they were told it was in the common good. People are prepared to face up to difficulties if they are told about them. There were outrageous demands made by certain sections of the community for funds of all kinds from the Exchequer. That just does not work. There is no point in looking for blood from a turnip. Fianna Fáil certainly left a very wizened turnip behind them. There is very little hope of squeezing any more out of it.
It is surely permissible for a Government who have been a short time in office to condemn the position in which those who were a long time in office left them. We left office in 1977. The country was then on the way to recovery. Everything was going right for Fianna Fáil when they took over. They got an economy which was beginning to get well out of the difficulties in which it had been.
I would remind the Minister that he has five minutes.
After the first merry year Fianna Fáil put things back in the old situation in which they seem to revel, where the people of the country did not matter. What the Government were doing was what was important to them. They started to do something which is incomprehensible to anyone who is interested in attempting to run a country as it should be run. They started borrowing on a massive scale and using it for current expenditure. They now try to blame us and say we are responsible for the situation in which the country finds itself. If the Government did what Fianna Fáil were doing we would be a banana republic, like some South-American countries, before very long.
Fianna Fáil must have known before the election that they were heading down that road. This Government are standing together for the purpose of getting the country out of the economic mess. We will take the necessary steps to do that. We will protect the weaker section of the community and try to stop something which was encouraged by Fianna Fáil, that is that if you have enough money and you are high enough up the tree then you should not be taxed too highly, if you are taxed at all. We will see to it that those who can afford to pay tax will pay it and that those who cannot afford it will not be put in the position in which they are at present.
There is one group that Fianna Fáil ignored for a long time. They should not be ignored. Those are the people who employ substantial numbers of workers, deduct social welfare contributions and income tax from their wages and do not return this money to the State. Even when they have been caught at it they have been allowed to do it again and again. There are millions of pounds held by such people. Some of them would say they had to do it to ensure that their businesses were able to tick over. That may be an excuse but it is not a justification. In certain circumstances it might be accepted but it is far too widespread.
There must be stricter control of money paid out by the State by way of grant. It is ludicrous that people can get grants, big or small, and not use them for the purposes for which they were intended. While the IDA have done a fantastic job we have reached the stage where some of the things they have done have not been followed up and money has been lost to the State.
I would like to refer to the speech that was made by the Tánaiste this morning although it is difficult to know what part of the speech he made, I believe his script was only used in patches. Doing the best I can in the circumstances, I want to say that even in the elongated version of his script, not all of which was delivered, I find it remarkable that there was no reference to a number of fundamental matters relating to industry which one would expect a Minister responsible for industry to talk about in a debate like this at the end of the year.
Scarcely any figures are quoted and those that are are at least partially misleading. We should have been given some estimate of the outturn of industrial employment in 1981 This was not referred to at all. The only figure mentioned is that the IDA and SFADCo will, by the year end, have reached the impressive job creation target of nearly 40,000. The fact is that that is not a job creation target but a job approval target, which is a very different matter. Unhappily a great proportion of those jobs will never come about. What is vital for this House and the country to know is what will be the estimate for actual job creation, what is the amount of job losses estimated for 1981, and what is the net position.
Although this script is very long — it is not numbered but I estimate about 40 pages — those fundamental matters are not dealt with. Although I have raised the matter twice in this House on Supplementary Estimates, the Tánaiste has chosen to ignore completely the rather ominous and, I think, sinister cutback of £8 million in the IDA capital allocation for this year. This House was given no explanation of that sinister and worrying development and we are entitled to ask why. Having already asked why twice and not having got an answer, one is entitled to draw certain conclusions. There can be only one of two explanations, either the Government deliberately cut it back or, alternatively, firms lined up for grant payments and instalments of grant payments decided not to go ahead with various projects or decided not to continue them to finality. Either explanation is of great concern to the country and shows that the outlook for 1982 in this regard must be very bad.
One of the few positive things the Minister had to say was that a new service industry scheme was being introduced, that he had great hopes for it and that he had signed his name to an order last September. This was blandly announced in the House as if it were a new thing he had thought up in the last few months. I would like to remind the House that that scheme was set out in one of the two Industrial Development Acts passed here last April and May. The Minister had nothing whatever to do with the development, working out or implementation of that scheme. It is indicative of the paucity of things he feels he can safely talk about that he has to dwell at such length on something which was implemented in this House by legislation eight or nine months ago.
It is extraordinary that the Tánaiste is able to deliver himself of 40 pages of script without mentioning the rate of inflation once. It is now 23.3 per cent. As I said last night, we are back in the banana republic days because when we reach these levels we are in the South American league. The only time we were in that league before was again under a Coalition Government.
Inflation has an enormous effect on industry and commerce. It is impossible to consider any aspect of these matters without taking the inflationary position into account, but in 40 pages the Tánaiste was unable to touch on it. Not once are the numbers of people unemployed mentioned. We did not have a repeat — I do not know whether we should be glad or sorry about it — of his pessimistic forecasts for the future. He says with some confidence that we will have an unemployment figure of 145,000 shortly and that he cannot see, even if things go very well within the next five years, the figures coming below 125,000. That is institutional pessimism, is undermining the whole futue of this country and is driving young people in particular, and people of all ages, to a sort of fatalistic despair.
The speech by the Minister for Defence is a rehash of the whole thing. Everything is desperate and there is nothing we can do about it. Fear feeds upon fear and despair feeds upon despair. The kind of leadership sought here today is far distant from the speeches we have heard in particular from these two Labour Ministers this morning.
The impression given both by the Tánaiste's script and by his method of delivery is of somebody who has no personal commitment to the office he holds and to the national task before him. It is not just today in this House that that lack of personal commitment has come across. It comes across at virtually every function he attends. This is a source of wonder to the people who have to listen to his couldn't care less attitude, to his resignation to failure and despair.
There are certain examples of that lack of commitment it would be better not to use in this House, but there are some examples I can use. There is one in particular I want to refer to. There is a short reference in his speech to the Irish Goods Council and the good work they did in the past year in increasing the amount of engineering import substitution and increasing the sales of Irish made fashion goods. That is all that was said. The most important time of the year for the Irish Goods Council is the two months prior to Christmas. The terms of office of all the council members expired in the middle of October. No Irish Goods Council has yet been appointed. There has been no council for over two months. The executive are a very competent and dedicated group of officials and they are doing their best, but it is incredible that this important organisation should have no council because, as I said, every member went out of office in mid-October. The Tánaiste has not found it worth his while to reappoint some of them or to appoint new people. That lacuna existed during the most important two months of the year in terms of the promotion of Irish goods, because the greatest spending takes place at the end of that two-month period.
That lack of commitment is now unfortunately transferring itself to many of the bodies with whom the Tánaiste should work, if he is to do his job properly. It is an infectious and a dangerous sort of disease. Down through the years we have had Ministers in the Government of the day who were no good, but even if they were no good they tried hard. One could rarely if ever accuse a member of any Irish Government of not being committed personally. There may have been some who were not able for the job, but that was not for want of trying. The Tánaiste has no commitment to his job. The Irish Goods Council is the only example I am prepared to give in that respect, but there are others that might be given in other circumstances.
The only other industrial estimate for 1981 to which the Tánaiste referred was the estimate for manufacturing investment at £750 million, which he says represents a 20 per cent increase on the 1980 outturn of £625 million. In fact, there is no increase in real terms. Unhappily there might be a slight decline, because in the second half of the year the inflation rate has varied between 21 and 23 per cent. For the first time in a number of years, therefore, there appears to be a decline in manufacturing investment. This is a very serious situation and one that is rather ominous for the future.
I have gone through the lengthy script but perhaps one might find it more appropriate to talk about what is omitted from it rather than what it contains. It is a remarkable performance in complacency at a time such as this.
Another example of that kind of complacency that is liable to cause tremendous damage to the country is the position of Whitegate. I will not go into this matter in any detail since Deputy Colley will be referring to it during his contribution. The situation in regard to Whitegate is frightening in that it leaves us in such a strategically vulnerable position. This situation has been brought about by the refusal of the Government either to force the owners of the refinery to maintain it in production and in working order or to take it over through the INPC. It is not just a question of 150 of 160 jobs or of whatever money this refinery might generate in the Cork area or of whatever savings it might generate by our being able to buy crude oil and refine it here instead of importing the finished product. What is important is our strategic vulnerability in this island country.
We have the traditional excuse of the Government when they decide against something but do not want to announce their decision of saying that they are bringing in consultants. That is their gentle and gradual way of breaking the news. I do not know what is the need for consultants since we have a national petroleum corporation who have all the expertise needed in that respect. So far as the financial costings of production are concerned, a firm of accountants by looking at the books that have been kept down through the years could work out to the nearest penny the cost of refining oil at Whitegate. In so far as any outside advice is needed it could be obtained within three or four days. One is entitled to ask what has been happening in the last six months. Has nobody looked at Whitegate or at its operations in that time? The Government know that they are letting Whitegate go and this is leaving the country in a very vulnerable position.
We are talking in this context about a country and not about a company. A country needs certain things that a company might not need where their only motivation was profit. A country must survive and we need these strategic facilities, even if they are not as fully commercial as they might be in other parts of Europe. As part of our arrangement with Gulf Oil at Whiddy we hold 1,000,000 barrels of crude oil, but we might as well have 1,000,000 barrels of water because without a refining capacity crude is not of any value unless it can be shipped out of the country for refining and back again, and that would be an impossibility in terms of war or of strike or of some kind of embargo. Therefore, we can write off the 1,000,000 barrels of crude at Whiddy in so far as having a reserve for an emergency is concerned.
During the last four years of Fianna Fáil Government very substantial efforts were made to expand the industrial base of the Irish economy. Those efforts reached greater success in those four years than at any other time since the foundation of the State. It is fair to illustrate the shape of the Irish economy today by asking the House to visualise a pyramid upside down. The narrow end being the productive end has to support the entire weight of an ever-broadening edifice which towers above it. While the encouragment of new industries is vital to the broadening of the industrial base, the expansion of existing industries is just as important.
The severe increase in inflation between 1973 and 1977, when the Coalition were last in office, severely eroded the cash flow positions of manufacturing companies. The reduction in demand created by increased costs and erosion of competitive advantage, together with increasing cost of capital, led to a sharp stop to growth.
The increased revenue flowing to the economy from the impetus of our entry into the EEC, particularly through the agricultural sector, cloaked the emergence of a major problem which was to affect the structure of the Irish economy. As the combined effects of the inflationary spiral, the increasing cost of energy, and the increasing cost of the State sector percolated into the cost fabric of domestic production, the problem was ignored.
During that period of Coalition rule a number of policies were introduced which have been proved to have acted as a disincentive to employment. A number of measures introduced by the present leader of the Labour Party while he was Minister for Labour in the last Coalition resulted in many employers not daring to offer jobs to new employees because they could not understand what their liability might be if economic circumstances changed.
It is very heartening to be involved with the big newcomer who is going to set up a new factory to employ some hundreds of new employees, but it is also very necessary to create the psychological environment which encourages the individual craftsman to take an apprentice or an improver or for an office which has two or three doing clerical work to be expanded by taking in another one or two people.
The city of Birmingham in England was able to withstand the ups and downs of varying economic winds not just by having a few big employers but also by being a city of 1,000 trades. There is therefore a need to sort out the different pieces of the economy and get them into whatever shape is necessary to recreate a new outline. A very important step was taken in that respect when at the end of 1977 I instructed the State agencies to concentrate heavily on the development of small industry here. They had spectacular success because within three years the number of jobs created in small indigenous Irish industry had more than quadrupled.
The economic problems worldwide are too serious and confused for us to be going along like a cyclist with a perished tube on his wheel. Like him, we will end up depending on a multiplicity of patches to keep us going. We require to tackle these issues at their roots. We are past the stage where we can use assumptions, many of which are unreal, as a basis for an economic development policy. Assumptions which made sense in Britain in the thirties do not make sense today. Neither do the assumptions which are being applied in Britain today necessarily make sense when applied here.
It is, perhaps, unfortunate that students of the forties and fifties, brought up to expect certain propositions as if they were infallible, are now senior civil servants, trade union leaders, journalists and politicians, accepting propositions which are no longer applicable in the real world of today. Kenneth Galbraith says we are now becoming governed by secular priests. The religious priest intervenes between man and God; the secular priest intervenes between man and ignorance. They expound constantly, giving experience as their qualification for so doing. I do not think anyone in Ireland today can signpost the road ahead for us based on experience. There has been no experience of what we now have to cope with. What we need is innovative thinking based on reality. Patchwork rescue operations give us time to adjust, to formulate proper plans, but they are of short term benefit and we cannot go on patching each section of the economy.
Today it is the farmers who say they cannot pay the high interest charges on their borrowing, so the Government must come up with a rescue plan. What is to stop the shopkeeper or manufacturer doing the same thing tomorrow? Why should they pay high interest charges on borrowing when others, with apparent muscle, can get special treatment? The development of sectional interest has within it the seeds of our national destruction. The consequences of inflation since 1973 have meant that manufacturers having to cope with higher costs have a need for increasing capital to finance the same level of production. Markets are competitive, making it difficult, if not impossible, to generate profits which could be used to assist with financing needs. Capital has, therefore, to be borrowed to finance working capital on stocks. The cost of this borrowing, in turn, has to be absorbed into the products produced, thus reducing their competitiveness. Notwithstanding the higher interest rates which have to be repaid to the banks, we are told by the same banks that their accounts, when adjusted to allow for inflation, are actually in deficit. There is no doubt in my mind but that a substantial number of companies trading today devote most of their gross profit towards the payment of interest on money borrowed from banks which, when paid to the banks, does not meet the inflated costs of the banks themselves.
Is it any wonder that I advocate adopting new initiatives? The priorities are self-evident. They are, firstly, the creation of jobs in productive employment and a reduction in the cost of administering the country. Thinking out a new planned approach to our economic recovery is an exciting challenge. It will not be achieved by the Coalition Government, who spend their time bemoaning the problems, shouting at people and telling them they are going to be penalised for living so well under Fianna Fáil. They also believe that if they paint a bad enough picture they will condition people into accepting a miserable standard of living, with no hope but emigration for those who want to advance and grey depression for those who want to stay.
The interaction between exchange rates and interest rates for a reserve currency need not apply to our exchange and interest rates. There are no international dealings of a speculative nature possible with our currency because the Central Bank only permits the forward purchase or sale of Irish currency when it is in respect of a trade related transaction. Britain and the United States, whose currencies have a reserve function, use interest rates as a weapon to influence their exchange rates. We do not have a reserve currency and, since EMS, our currency has not been subjected to the same type of short-term speculative capital flows; and for as long as we have exchange control regulations our currency cannot be subject to speculative capital flows, either into or out of Irish pounds. There is a long lag between the time investment is made and the underlying product of this investment is exported and the value is reflected to our credit in our gross export figures. Statistics based on current trade patterns are not an indicator for the planning of this economy. Billions of pounds of investment have been made but the full benefit is not yet discernible. Many of the projects are just coming on stream. The factories are nearly built, the infrastructure is being created, the plant and machinery have been imported and all of these activities are reflected on the debit side of our balance of payments and State borrowing. It is, therefore, the height of nonsense to use the resultant statistical position as justification for heroic actions which are entirely politically motivated. Have the Government never heard of leads and lags?
It is very rare for any newly-created manufacturing company to achieve an accummulated net profit which is equal to the total cost of investment in buildings, plant and equipment inside ten years. Infrastructural investment, by its very nature, requires even longer to achieve capital recovery. These are the real facts of economic life. They are not published in any statistics but they are part of the nuts and bolts of commerce, far removed from theory but well known to those who have been in the front line of our industrial expansion, not sheltering in ivory towers of economic or statistical theory.
I notice national deficits being forecast for 1982 and 1983 and balance of payments deficits without any regard for the increasing potential of our exports produced from the investments borrowed up to today and, therefore, creating an imbalanced picture for statisticians. Statistics which show export and import values and the difference between them as a balance of payments are on their own meaningless as a barometer of the economic well-being of this country. Import and export statistics are not balance sheets; they do not show asset values or the value of opening and closing stocks. That is why I advocate an approach to economic planning which takes into account the particular ingredients of our economy. We started to build an industrial nation from the narrowest of bases and the Coalition are clearly telegraphing that this young economy is going to be strangled because it cannot run a four minute mile while it is still moving from crawling to walking.
We will not allow the Government to strangle our hard-won development because they do not understand the nuts and bolts of the game. It is often said that projects are ruined not by shortage of money but by shortage of time. Asset backing gives the security for time. Our primary asset is our youth, with its vigour and application. It is educated, flexible and, in general, disciplined. It is ethical and caring and capable of lifting this country out of generations of exploitation, but it needs support and encouragement. It deserves better of its politicians than the Coalition Government are apparently ready to give it.
I offered to speak because I did not want to embarrass the House and particularly the Government because they have no speaker here to put forward. In the interests of fair play — I would like to say this while the Minister for Defence is here and I have an obligation to put the record right — the Minister for Defence said that there was no money available for the youth recreational and sporting facilities under the scheme which was announced by our Government when his Government came into power. I will prove that is not so. If the Minister wishes at a later stage to debate the matter further, we can very easily find some mechanism to discuss the matter. There was a grant-in-aid of £10 million provided for in our budget. This was in the Estimate of the Minister for Finance and out of this grant-in-aid £4 million was earmarked for the National Plan, which was the name we gave to the scheme. As well as that £4 million there was an additional £1 million from the capital allocation grants of the Department of Education.
Deputy Keating came in as Minister of State and he took it on himself to mislead the general public, the media and the House by saying the money had not been provided for. I want to say categorically, and I say it by way of a challenge to the Minister of State, that the money was provided for. The money was there and all that was required was to go through a technicality. The money for this year's scheme was provided in exactly the same way as last year. The Minister of State took himself off on a campaign of propaganda to try to discredit his predecessor.
This debate gives us an opportunity to look at the performance of the Government after six months in office and to try to assess what progress they have made and where. We have to see what the exact situation is today. I give them credit for one thing. They have succeeded in spreading doom and gloom throughout the country. With one or two exceptions, Government members have been using every opportunity to preach doom and gloom. Day after day we hear it. However, we are not getting any suggestions about how the many serious problems will be overcome.
Last May when the election campaign was in progress, the main plank of attack on us as a Government was that inflation was out of control and that it must be brought down if we are to improve our competitiveness. Let us contrast the inflation rate currently with the inflation rate then. We are now up to 23.3 per cent. Last July we warned the Government that the result of their budget proposals would be a 5 per cent inflation increase. We also warned them that the wage settlement, which we genuinely thought they were trying to achieve, would be affected by the 5 per cent increase in inflation caused by the budget. The Taoiseach tried to sabotage any settlement early on, but later he did a U-turn.
If I had time I would go back over the statements of different Government members and examine them in detail. They gave us the "Three Wise Men", three great experts, who recommended that the best the Government could do was 6 per cent. At the end of the day the Government were offering 13 per cent. That does not align with the gloom and doom being preached by the Government. If a bonanza developed in the meantime we should all like to know where it is.
The great majority of our people are not interested in prophesies of gloom and doom. Unfortunately they are not very interested in what is going on here in our Parliament. There is a very strong air of unreality about the whole thing. I listened to the Tánaiste this morning running through his script at the rate of 50 knots, missing some of it and going back on it. He showed no regard whatsoever for the problems of the people. People are having difficulty in existing. Families, particularly, are seriously concerned. Every Deputy in the House each weekend has fathers and mothers coming to him looking for help for their children, trying to get them some sort of jobs anywhere, any sort of jobs. We all have queues of leaving certificate holders coming to us. We have people from the vocational schools coming, and lately we have a new trend: we have thousands of university graduates looking for any kind of jobs. I have queues of university graduates coming to me looking for labouring jobs down in Aughinish Island in the Shannon Estuary.
Things are in a bad way, particularly for young people. I heard recently that there were 4,000 applicants for 40 nursing jobs in the Western Health Board area. Four thousand young girls were interviewed and one of the senior staff in the Western Health Board said it would have been easier on them and on the girls and their parents if instead of having interviews they had drawn the names of the 40 from a hat, because all the girls were equally well qualified. Of those girls, 3,960 could not be placed.
The situation is going from bad to worse but nothing whatsoever is being done for our young people. On a Private Members' Motion a couple of weeks ago on law and order I said that unless the State agencies with responsibility for providing employment for young people come together, whether they are the IDA or SFADCo, to do something immediately about this great danger to our society, there is danger that our young people will be pushed aside, disregarded, nobody showing concern for them.
I suggest that the greatest crusade the Government could embark on at the moment would be to try to do something for our young people. Instead of wasting parliamentary debating time on artificial issues for which there is no public demand — I am thinking specifically of what I will call the hanging Bill — they should be trying to provide employment for our young people to keep them away from areas which might lead them to the end of a road where something like the Bill I have just mentioned will await them. Give them a chance to make a living. That is all they want.
We have Ministers going to Claremorris and Skibbereen talking about crusades. The greatest crusade of the lot concerns help for our young people. I do not know how familar the Minister for Agriculture is with the problem — perhaps it is not as big a problem in County Kildare as in other countries — but let me assure him it is there in a big way. I ask him to use his influence in the Government to convince them that this is a damnably serious problem. If we do not do something about it now it will become unmanageable in a couple of years.
What do youngsters and their parents feel when they hear about an embargo on recruitment in the civil service? Then they read about the 2,500 hours overtime a week in one section of one Department, Social Welfare. Why cannot that overtime be worked into a number of normal working days for young boys and girls? What do the public feel when they see that promotions in the service are not being filled, and at the same time read about the jobs for the boys? They are being brought in and given plum jobs, some of them at more than £30,000 a year. Some of them cannot keep confidential documents away from the newspapers. I do not blame them. I blame their bosses, who should never have been given these confidential documents. If what I have been told is true, the document came from the office of the Minister of State.
The cynicism spreading throughout the country as a result of public pronouncements by the Government and their Ministers is wrecking the credibility of the Government — that is their problem — and also wrecking the credibility of our institutions. They should do something more positive and more constructive in the near future. If we are to keep our young people from becoming cynical and sour, if we are to give them the healthy start in life to which they are entitled, surely there is a better way of doing that.
We have 130,000 people out of work. What are we doing to help them? It gave me all I could do not to interrupt the Tánaiste this morning when he talked about the success of the IDA with regard to jobs coming on stream at present. He knows as well as anyone in this House that the jobs he is talking about did not come on stream today or yesterday. These jobs were sought and probably got 12 months, 18 months or two years ago. I do not mind who takes the credit. I am not interested in the credit. If I were the Tánaiste I would be worried about the present-day success of the IDA in the creation of jobs which will come on-stream in a year's time or two years' time for the many thousands of young people we have to worry about.
I have a fair recollection of Governments from all sides of the House over the past 20 years or thereabouts. I hate to say that because it shows we are ageing a bit. It is a fact of life. Never have I seen such a decline in the credibility of any Government. We all know that Governments enjoy a certain amount of popularity at the beginning. I have never witnessed such a rapid growth of disillusionment as I am witnessing at present. I feel sorry for the Government. I believe they genuinely want to provide as good a Government as they possibly can. Would somebody, somewhere, sometime tell them what the priorities are? If I had more than three minutes left——
I wonder would the Deputy yield a minute or two to accommodate Deputy Sherlock?
I will divide whatever time I have with Deputy Sherlock.
Deputy O'Malley gave Deputy Collins three or four minutes.
I should love to have 15 or 20 minutes to tell the Minister for Agriculture what his priorities should be. I am sorry for him. He is being made the fall guy by his Government in the agricultural counties. I do not want to be personal when I say he enjoyed quite a reputation when he went into the Department, but I do not envy his reputation at present within the farming community. I saw many Ministers for Agriculture, going back to the late fifties, and I have never seen a Minister for Agriculture, with such a low rating with the farming community. I represent one of the most agricultural constituencies and I know what I am talking about. I meet farmers every weekend. If some hope is not held out for them, I do not know what will happen. The gloom of the Government and the Minister has spread throughout the farming community. They are at the lowest ebb.
The Government should stop bellyaching about what we are supposed to have done when we were in office. We did not ask them to take office. They took office against our wishes. We did not want them in Government. They have been in Government for the past six months and they should stop bellyaching and do the job of work that has to be done. That is what the people want. For six months they have hidden behind what we were supposed to have done. From Christmas on, with their new budget and with everything else, people will not be interested in their excuses. They will be demanding results. We will tell the people what they are doing.
Some people want to speak on and on. I never do that. The issues are so compelling that one feels one must speak. This morning the Tánaiste said the Government were committed to relieving the burden of direct and indirect taxation. He did not say how they proposed to do that. I will not have any confidence in the statement that that will be done until such time as we hear concrete proposals from the Government side.
Far from improving the economic situation the July budget made it seriously worse because of the inflationary policies on which it was based. There have been cutdowns in jobs as a result of the cutbacks in public expenditure. The slowing down in economic activities affects not only the public sector but the private sector as well, resulting in loss of employment.
It is disheartening to hear statements by Government Ministers and others on the size and the cost of the public sector without any regard for the essential nature of the services provided and the fact that salaries and wages in the public sector are arrived at by long-standing tradition through conciliation and arbitration.
The price increases resulting from the budget bear most heavily on the workers. Indirect tax increases amounted to £300 million at a time when we heard efforts were to be made, which transpired to be only a cosmetic exercise, to impose equity in the tax system. The trivial levy imposed on the banks is an insult to the PAYE sector. As I said, it was a cosmetic exercise instead of achieving equity in taxation.
The entire amount raised this year by VAT — it increased by £28 million — could be raised by a 3½ per cent levy on the banks' current account balances. I reject the excuse given by the Minister for Finance that it would not have been possible to have recourse to capital taxation at short notice. A few sections in a Finance Bill are all that would be necessary to effect changes in the existing capital taxes. There was no special impost on luxury spending, much of which goes on imported goods. The Minister did not seek to raise any extra revenue by way of direct taxation on the incomes and wealth of those who recently speculated over £40 million in a scramble to buy shares in an oil company. Indeed, this and other well-publicised and profitable speculative gains by the wealthy call into question the alleged shortage of domestic funds for investment.
I want to make this point with as much impact as possible. The Government must ensure that the system of taxation is changed and that the wealth of the country is taxed. They must get down seriously to the question of tax avoidance and tax evasion. The public are becoming very aware of this problem and are conscious of the failure of the Government to do anything about it.
One other example I must give is in relation to the Youth Employment Agency, in respect of which the Minister indicated that the funding would involve a levy of 1 per cent on incomes. Is there any evidence whatever that the 1 per cent levy will be imposed on any sector other than the PAYE, whether it be the farmers, self-employed, professionals or others? I would say "no", that at this time there is no evidence that that levy will be imposed, because the Minister did not spell out how he proposed to do so.
What this is all about is the state of the nation, the financing of the nation, the services being provided by the nation. I must say also that cuts in public expenditure have resulted in hospitals caring for the sick and aged being under-staffed, unemployed people finding it difficult to get their benefits and more and more people becoming unemployed — all this as a result of the policies being pursued. In addition, agriculture, which has such a tremendous input into our economy, has not shown any increase in output. This is a situation which must be rectified immediately.
One day — hopefully before it is too late — the only solution to the financial problems of this State, will be adopted. That is for the Government to bring the banks under public control because control of a country's finance means control of the State.
"Give me control of a country's finances," said Rothschild, "and I do not give a damn who makes the laws." That is exactly what it is all about. It is inevitable that the State will gain control of the country's finances by bringing the banks under State control.
I thank Deputy Sherlock for his brevity and consideration.
For some time there has been an effort to spread a certain myth about why this Government are concerned about the state of public finances. It has been even said in some quarters, that we are far more interested in playing with figures and balancing books than we are with people. It was said even this morning that we were far more interested in getting the sums right than in considering what all of that was going to do to the people who live and work in this country.
I want to make it very clear that this is not the case. This is the kind of tactic one expects from people who want to hide the effects of what they themselves failed to do over the four previous years. We are not concerned, any more than anybody else, with balancing the figures for the sake of making the books look right. We are worried about the budget deficit, we are concerned about foreign borrowing, we are worried about our balance of payments deficit, not because these things mean anything in themselves or because they have any life of their own but because they are all no more than a reflection of what is happening to our economy, to our country and to the people who live, work and, unfortunately, those who find themselves unemployed in this country. If we adopt policies that will improve the situation, that will improve our balance of payments, improve the situation in relation to the budget deficit, that will reduce our balance of payments deficit, that will not be because we are aiming at improvements in the figures; rather will it be that we are seeking to relieve the problems and indeed the distress felt by our people who now find themselves unemployed, who find themselves in difficulty making ends meet and worrying about the future of their children, wondering whether they will be able to get jobs.
What we want to do is to create the conditions for expanding employment, ensuring that Government revenue — and it is not just Government revenue; it is what is earned and provided by our people from their labour in this country — can be used to do the things I have been talking about: to provide the jobs and services needed by our people and which they can afford. We want to do that in a way which takes account of our view and, we believe, the people's view of social equity and of a proper concern for those people less fortunate than others in our society. This is crucial to our young people and our unemployed.
It was said just a few minutes ago by Deputy G. Collins that we are hiding behind excuses, that the time is coming when we will be unable to hide behind those excuses any more. Were we hiding behind an excuse it might indeed be something for us to worry about that the time during which we could make that excuse was running out. But it is not the case that we are hiding behind any excuse. What we are doing, what we have been doing since July last, and what we will be doing in the next budget, is aiming to correct the very serious deficiencies that have come about in our economic situation as a result of the very deficient, ill-advised economic policies followed for four years before that. That is a fact we must all recognise: that there has been a growing disorder in our public finances during the period of office of the last Government, a disorder that grew because many of those policies were pursued against the advice of all economic commentators, not only at home but abroad, indeed against the advice of some of the previous Government's own economic advisers whether or not they were on the Government benches at that time. They resulted from actions which were clearly at variance with statements of Government policy at the time. I would remind the House that the White Paper National Development 1977-1980 contained a number of commitments to restoring order to public finances. Equally, statements made by the present Leader of the Opposition when he became Taoiseach indicated that action would be taken, again, to restore order to the public finances.
Unfortunately this did not happen. That can be illustrated by reference to a few of the main indicators which, in spite of what has been said, we should examine. In 1977 our balance of payments deficit came to something less than 3 per cent of gross national product. Two years later it had grown to approximately 10 per cent. When we took office at the beginning of July of this year the prospect was that our balance of payments deficit for this year would amount to some 15 per cent of gross national product. In spite of the fact that we had an increasing balance of payments deficit, we have seen an increasing burden of debt. At the end of 1976 our national debt stood at £3.6 billion. At the end of 1980 it stood at £8 billion. Interest payments on the national debt this year will amount to something in the region of £930 million, whereas in 1977 it stood at less than £340 million. The proportion of our debt held abroad has increased also to the point where interest payments on foreign borrowing this year will amount to some £250 million.
These figures in themselves are sufficient to show what has been the growing disorder in our public finances. The last figure I mentioned — £250 million worth of interest payments of foreign borrowing — constitutes a small part of the problem only but illustrates very clearly the kind of difficulty with which we must deal. That is a figure of £250 million which must be provided from Government revenue, from taxpayers' pockets, from the fruits of labour in this country and which cannot be spent or used in this country to provide employment opportunities or the other services our people need. To the extent that we have over those four years built up an increasing amount of debt, both domestic and foreign. We have mortgaged our ability to provide jobs and services for our people here at home.
Over that period there is no doubt that there has been a growing level of investment, much of it financed by foreign borrowing, but if we look at the pattern over those years we see that employment in manufacturing industry in the four years 1977 to 1981 increased by only a very small amount, about 2.5 per cent, and unemployment increased from 120,000 in June 1977 to 130,000 in June of this year. That investment did not yield the kind of return in terms of jobs for our people which we would have expected.
We have had ill-judged borrowing decisions and equally ill-judged investment decisions and we are still paying the cost of those decisions. I emphasise that the cost we are paying for those decisions is seriously constraining our ability now to provide employment opportunities for our young people, to provide for increases in output in the productive sector — not the least of which is agriculture — and hindering us in doing the kind of things which Deputy Collins has strongly urged us to do. It is our intention to proceed with the policies on which we have set out so that we can pull back as much as possible from the difficulties we are in and do the kind of things our young people need us to do.
Unfortunately I have been able to listen only for the past few minutes to the Minister for Agriculture, but I found what I heard interesting. He referred to ill-judged investment decisions and I wish to speak about some of the ill-judged investment decisions made by the Government of which he is a member. In this connection I refer to a letter dated 30 September 1981 from the chief executive of the ESB to the chairman and joint managing director of Arigna Collieries Limited which states:
With reference to your letter dated 21st September, 1981, addressed to the Chairman, I appreciate that the postponement of the Arigna project will cause some problems for your company. When the project came before the Board one option open to us was to postpone the decision for another 2/3 years. We realised that this would leave your company in a very uncertain situation so instead we have given a firm date and sought Government agreement to inclusion of the Arigna project in the Development Programme. At the present time the bulk of our finance for capital development has to be borrowed abroad at high interest with substantial currency risks. We must curtail our borrowing to the minimum which is unavoidable. We would not be justified in going ahead with a project which is not needed to meet electricity demand and which has no cost/benefit advantage to the ESB. If there was no capital scarcity, indeed development of distribution and transmission systems would have a higher priority than Arigna.
I am sorry that circumstances are such that we cannot go ahead immediately. I hope that the fact that we have fixed a date will, assuming Government approval, allow you to make such advance plans as will minimise your Company's problems.
He goes on to say that he does not think a meeting would serve any purpose.
I referred to this matter last week when discussing the Supplementary Estimate but unfortunately the Minister of State at the Department of Industry and Energy did not have the opportunity to reply. I assumed that the Minister for Industry and Energy, Deputy O'Leary, would refer to this and other matters I raised when he opened this debate this morning, but he made no reference whatever to these points. One can only assume that by failing to refer to them he is acknowledging the legitimacy of the criticism we have made.
Whatever the view of the ESB may be — and they are operating within their own more limited terms of reference — from the point of view of the overall economy there can be no doubt whatever that an investment decision to go ahead with the construction of the 45 megawatt power station at Arigna is a sound investment. I cannot think of any more sound investment which would be open to the Government because it would utilise indigenous raw material and thereby, even though it is a small station, save imports of coal or oil. In addition it would provide many jobs in an area where they could not otherwise be provided. There are trained coal miners there whose jobs will disappear if this does not go ahead because the existing coal seam is running out. This project is based on a new technique developed to utilise the crow coal in that area which heretofore has been unusable and the timing was such as to ensure continuity of employment to the trained miners. In spite of this, it is clear from the letter I have read that if the ESB get their way the project will not go ahead as planned. If the Government allow this to happen it will be a prime example of the kind of unwise, ill-advised investment decision of which the Minister for Agriculture was complaining and he and his colleagues will be guilty of it.
I also referred, as did several other speakers, to the situation at the briquette factory at Ballyforan. The Minister for Industry and Energy had the opportunity to deal with it this morning but did not do so. I do not want to be too critical but even his most ardent admirer would have to admit that he did not utilise his time to the best advantage and had to omit a good deal of the script he had circulated. Deputies Kitt, Callanan and Leyden tabled a question to the Minister on this matter on 25 November last and he replied as follows:
It is expected that the number of persons to be employed in the Bord na Móna briquette factory at Ballyforan, Ballinasloe, County Galway, when in full production will be of the order of 200 and that the total number to be employed on the Derryfadda bog and in the factory will be of the order of 600.
The bog development programme of Bord na Móna is being re-examined by the board in the light of the board's projected capital needs in 1982, and accordingly, it is not possible to say until this examination is carried out when work on the factory is likely to commence.
These are two projects about which there should be no doubt and the Government should be pushing the State bodies concerned to get on with them as quickly as possible. In both cases we are talking about the utilisation of native fuel resources which will substitute for imported resources. There is no use in shedding crocodile tears about the balance of payments difficulties if we are not doing everything we can to utilise our own resources. When these projects provide substantial employment in remote areas which it would be almost impossible to provide otherwise, there is a very important bonus involved if one is committed to tackling the unemployment problem. I have grave doubts about the commitment of this Government to tackling that unemployment problem. These are investment projects which by any criterion, be it energy policy or economic policy, should have top priority; yet all the indications are that they are being substantially postponed without any justification whatever, in my view.
While I am on the energy area I might also mention another matter which I raised recently and to which I expected the Tánaiste would reply or, at least, that some statement would have been issued at some stage after I drew attention to this matter but there has been no word about it at all. At a meeting of Energy Ministers in the European Community last October certain guidelines were adopted, which provided that there would be no further oil refining capacity within the Community because of existing over-capacity. A reservation was, apparently, entered in the minutes of the meeting in regard to Whitegate but that is all. There seems to have been no reservation whatever in regard to the possibility of our having a refinery constructed in the Shannon Estuary. As the House will be aware, there are proposals for the construction of two refineries in the Shannon Estuary. Most of us would be prepared to settle for one there. It would be most unfortunate if the Government had agreed with the European Community to restrictions which would prohibit the construction of a refinery in the Shannon Estuary. That appears to be what has happened. As I said in the House last week there was a report to that effect in The Cork Examiner. It was not denied or referred to by the Tánaiste. I drew attention to it in the House and there has been absolute silence. I regard the continuing silence as quite ominous.
I would regard it as the gravest dereliction of duty if it is true that the Government have done this. Our position is totally different from that of the other members of the EEC in this regard. Firstly, because we are an island our position is not the same as that of those on the mainland of Europe and, secondly, because the only refining capacity we have is in Whitegate and it is way below our requirements. Most of the countries, and, certainly those who are pushing for the adoption of this guideline in the Community, are countries which have an over-capacity in refining and could afford to press for those restrictions. The continuing silence of the Minister for Energy on this matter is quite ominous.
Since I am on the topic of a refinery, I would again like to refer to the Whitegate situation. I cannot understand why the Government should have allowed doubt to creep in as regards the maintenance of the refinery in Whitegate. I had a Private Notice Question on this the other day. Anybody who was present will agree that I repeatedly pressed for a clear statement from the Government that they accepted a proposition that the country should not be left without refining capacity but I made it quite clear that the method by which this would be achieved and the negotiations which the Government might have to engage in were a different matter and I had no wish in any way to make life difficult for the Government in such negotiations. The repeated telling to us and the country that the Government were engaging consultants and would make a decision on the matter by the end of February is ominous. You do not need a consultant to tell you if you should accept a situation on having no refining capacity in the country. As far as I am concerned that is a proposition which is virtually self-evident.
I cannot understand why the Government would hesitate in that regard. It does not mean if the Government said, as I thought they had been saying in the past: "We insist we must have some refining capacity", that the Government are thereby committed to a huge investment. That is not so; that is a separate issue. The Government could continue to have the refinery operating as it is at present and there are different degrees of upgrading which would be possible and different levels of investment. They are separate issues on which the Government might well wish to get advice from consultants. I suggest there is no basis at all for the Government to consult anybody whether the country should leave itself without refining capacity. It is quite inadmissible and quite unacceptable that the Government should refuse to make that commitment.
These are matters which have been raised before and which the Minister for Energy pointedly failed to comment on today. The only area of the energy field on which he made any comment was in regard to the construction of the pipeline for natural gas, hopefully to Belfast. I wish that project every success. I am quite certain it will be a success and I feel reasonably certain that there will be a pipeline to Belfast and, hopefully, that will be the beginning of the construction of a national grid for the distribution of natural gas. It is almost certain, apart from the natural gas we already have and know about, that we will discover substantially greater quantities in due course, which would certainly justify the construction of a national grid.
The fact that we are likely to have a pipeline constructed to Belfast is something I would certainly support but I hope the Minister for Energy will not try to claim undue credit for that because I am sure he would acknowledge that the ground work and a great deal of the work done above the ground was done before he came into office.
I would like, on the economic front, to refer to the programme, although I do not know what its official title is, but the document which is more easily identified as the Gaiety Theatre document.
And Mansion House.
I am sure the Taoiseach will acknowledge that the reference to the Gaiety Theatre document helps to identify it more easily than the Mansion House. There are reasons for that which I am tempted to go into but I will resist the temptation for the moment because I have things to talk about that may be more important.
They are putting on a Christmas pantomime at present.
The Deputy is entitled to that view. There have been a good deal of grounds for it. I want to refer to the aspect of the document which is headed Anti-Inflation Programme and to read certain extracts from that. One sentence in it reads:
The task of getting Irish inflation down to EEC levels must be undertaken within the first half of a proposed four-year planning period.
I say that in the context of an announced inflation figure yesterday, which has shocked most people, possibly even the Government. I suspect they did not think that what they were doing in July would cause so much havoc to the consumer price index. The fact is that the annual inflation to mid-November is now recorded as over 23 per cent. There can be no doubt but that the substantial increase in the last quarter is due to a very great extent to direct Government action in the budget. I am trying to square that with the statement from the Gaiety document as follows:
The task of getting Irish inflation down to EEC levels must be undertaken within the first half of a proposed four-year planning period.
If the Government mean that, they are making the task of that two-year period a very difficult one for themselves. A further sentence is as follows:
The critical part of this process will be the central pay norms established between trade unions, employers, and the Government as an employer.
We know there have been statements about agreements negotiated between the Government and the public service unions and there have been statements denying the first statements and giving different figures. I am not sure what the reality is but it does appear that some kind of deal has been struck. That brings me on to a further part of this anti-inflation programme which is supposed to have been agreed in the Gaiety Theatre and, according to the Taoiseach, in the Mansion House. It deals with the situation of pay barganing and national pay agreements and then, in the event of a failure to reach that, it goes on:
If it does not prove possible, in any particular year, to reach agreement on central pay norms on this basis, pay will be determined in the private sector by normal free collective bargaining. Pay in the public sector will be determined later——
I want to stress the word "later"
—— by bargaining in the context of the Government's priorities for job creation, investment, social policy, and the planning of the economy.
Quite clearly what that is saying is that if there is no national pay agreement the Government will wait until a pattern emerges in the private sector and will then and only then negotiate some form of agreement in the public sector. Clearly what has happened is in breach of that. The Taoiseach might deign, when he is concluding the debate, to comment on that breach of the programme that was agreed to on the formation of this Government and explain why that has happened.
The whole economic stance of the Government is reminiscent of the previous Coalition. They never seem to learn. To talk about an anti-inflation programme at a time when one is imposing very heavy increases in taxation in the form of VAT and other such taxes, in other words indirect taxes, is simply to fool oneself or to try to fool the public. It is difficult to avoid the conclusion that the increases which were imposed by the Government in July and which are now reflected in these appalling figures that have come out for the inflation rate to mid-November, were imposed by the Government probably not realising the full extent of what they were doing but certainly being conscious of the general drift of what they were doing and being aware, but wanting to forget, that these kinds of excessive taxation increases reflected in the consumer price index are in due course, reflected in pay settlements and in social welfare payments. Therefore, if one were to do the sum on this, the cost to the Government probably, but certainly the cost to the economy, far exceeds the increased revenue which the Government take in and there is no real solution to any financial problem a Government may have in excessive and savage increases in indirect taxation. Even from an economic point of view, and I am not talking at all of the social consequences, the answer does not lie in that direction. That was proved under the last Coalition and it has been proved under this Coalition already in the first six months of its existence, particularly by the figures which came out yesterday for the consumer price index.
On top of what has been done we are being told all the time that in the budget in January we are going to have a much greater move in that direction and a switch from direct to indirect taxation which means of course that whatever changes might be made on the income tax side, there will be substantial increases in indirect taxes with consequent substantial increases in the consumer price index and all the other consequences that flow from that. I must confess I find it rather frightening that this kind of economic madness should prevail at the highest Government levels. There is no possible economic justification for that approach. It is no answer to say that the Government found the State finances in a mess, which the Tánaiste spend so long talking about today since he could not deal with the problems relating to his own Department. Even if that were to be accepted as true, the question is whether this approach is the right one. I am saying that the history of the previous Coalition and of the past six months demonstrates clearly that that is not the answer. It is simply aggravating it.
We hear a lot about the current budget deficit. Recently the Minister for Trade, Commerce and Tourism — the trade and commerce part seems to be tautology — speaking on a television programme talked about the currrent budget deficit and said that the first time we had such was in 1971. He said that we will have to get back to the situation prior to that. I want to dispute that proposition. The idea that a current budget deficit is something that is to be absolutely avoided, if it did not go out with Adam Smith, certainly could not be accepted in a modern view of the management of an economy. To say one should not allow it to get out of hand is quite another thing.
I was the Minister for Finance who first budgeted, deliberately, for a deficit. I expressed at the time grave reservations which I had because I felt that the time might come when a subsequent Minister for Finance under pressure would be tempted to utilise this method for avoiding his responsibilities. Unfortunately that happened.
Yes.
It happened when the present Taoiseach was Minister for Foreign Affairs but was exercising a good deal of influence on the Department of Finance. The whole problem blew up during the previous Coalition. It was justified, we were told, by the oil crisis. Whatever justification there might be for additional borrowing at a time like that, there was no justification for the wasteful use of the money that occurred at that time. The reality of the situation is that when the Fianna Fáil Government came back to office in 1977 they were faced with a huge and totally unprecedented level of current budget deficit and borrowing. The present Government now know you cannot overnight remedy a situation like that. We embarked on a programme to remedy it and at the same time to tackle the grave unemployment problems that existed. We had enormous success in tackling the unemployment situation. We had very considerable success in attacking the current budget deficit situation at the same time. That was obscured somewhat by the fact that we found ourselves involved in a long and difficult industrial dispute in the Department of Posts and Telegraphs. I do not want to go into the rights and wrongs of that but I will say that Members of the present Government know now the kind of problems that arise in regard to public sector pay and special claims in the public sector and that the battle that was being fought at that time was a very important one with grave implications for the future of our economy.
We, the Government at the time, paid a very high price politically for that battle, but we also paid a high price in terms of deferred revenue which was carried into the following year. Because it was carried into 1980 it appeared that our current budget deficit in 1979 was way out of line. The reality was that it was quite close to what had been planned, allowing for that deferment and for certain other things that were out of our control. What went wrong went wrong subsequent to that. When I say something went wrong subsequent to that I am talking about the development of the second oil crisis and the developments on the pay front in the public and private sector, especially the public sector, which upset the whole programme.
The point I am making is that that Government demonstrated that it was possible to tackle a problem of a huge current budget deficit, a growing balance of payments problem and all the associated problems, together with a very substantial unemployment problem. It was possible to tackle all those things not precipitously but successfully. The way the Taoiseach and his Government are tackling these problems at present makes it quite clear that, whatever else happens, they are not going to make any worthwhile impact on the unemployment problem, that they will not get our State finances into order and that we are going to get the worst of both worlds, as we did before under a Government of which he was a member.
I want to refer again to the pay situation in the public sector. I have already quoted from the Government's programme, from which it was quite clear what was intended to be done, that is, in the event of no national understanding to have the private sector set some kind of norm and then the Government would engage in discussions and reach an agreement. That process seems to be reversed.
I have no doubt of the validity of the view that moderation in pay claims is absolutely essential for the future well being of this country. It is also true that imported inflation is very much reduced and that pay increases within our control are a very big factor in inflation and can determine to a great extent how big or how small it will be. Having said that, I want to make it clear that the Government ought to exercise moderation also. To have the Government impose the kind of increases in indirect taxation which they did in July and to do the same, or worse, in January is not the Government exercising moderation; and to impose those kind of increases while calling for pay moderation can only be described as hypocritical. It is unreasonable for the Government to go overboard with these kind of increases and at the same time expect people to reduce their pay claims substantially.
The Government have a very important role to play, and they should play it. They should not make the same mistake the previous Coalition made in this regard. In my view this kind of pay moderation is very important. If the Government play their role, there is a possibility we can begin to get inflation under control. The path the Government are following at present, and are threatening to follow in the January budget, will put inflation out of control. We are all going to end up with pay increases in confetti money. This is a mathematical reality the Taoiseach is aware of, and the Government are contributing substantially to the creation of that problem.
In regard to the attack on unemployment based on the performance of the last Coalition Government and on the performance so far of this Government, I come to the conclusion that the Coalition do not have a real commitment to tackling unemployment. Of course the Government want to see unemployment reduced and to create jobs, but in order to do that successfully they have to be really committed, motivated and determined and they have to subjugate all sorts of policies to those overriding considerations. What could be done was demonstrated after the last Coalition left office. The way this Government are going on we are never going to see a real attack on unemployment.
Our youth unemployment problem is very serious and it is going to get very much more serious. To impose a levy for tackling youth unemployment and to devote most of those proceeds to funding existing schemes is not the kind of thing that inspires confidence in the Government's commitment to this problem. I remember in 1976 and early 1977 that problems in one's clinics, particularly of youth unemployment, grew to crisis proportions. That ceased to be the case around 1979 because of what was being done by the Government. This is happening again now in my clinic and, I believe, in other Deputies' clinics and already it has become a major and critical factor. Unless the Government are going to tackle this problem properly we are all going to be in for a very rough ride.
I heard the Tánaiste talk about the National Development Corporation and, if I may quote from his speech, he said the following:
The National Development Corporation will hold shares in existing public enterprises with commercial objectives and their work will constitute an important impetus to increasing economic efficiency in the State sector. I would hope they will utilise untapped resources in these enterprises and will take steps to stop any losses due to inefficiency.
I wish the Tánaiste had elaborated just a little on what he meant by that. If the Taoiseach gets a chance maybe he will explain, but I am not expecting him to do so because it is not his baby. He has to go along with it but I do not think he is really convinced. We would all like to know how the National Development Corporation are going to stop any losses due to inefficiency in State companies. If they can do that they will be well worth their keep; but I would like to know how it is proposed to be done.
I want to comment on another aspect of Government policy which might be termed the crusade which the Taoiseach is reputed to have launched. I know the Taoiseach used the word "crusade" originally in an ironic sense and I know what he was referring to.
That is right. I was referring to Deputy Lenihan.
The Taoiseach has been tagged with this crusade and I am afraid he has to live with it now.
I am glad the Deputy brought out that point.
In this context I hear some talk of all-party support being necessary for the success in making changes in the Constitution. That may well be so, but before any point is made in that regard concerning my party, the Taoiseach should establish to the public satisfaction that there is support in his own party for the kind of thing he is advocating. If he cannot lead them in that direction he should not be utilising the Fianna Fail Party as an excuse for his failure to convince his own party.
In the course of the interview on RTE in which the Taoiseach launched this crusade he made one statement which I found quite shocking and that was when he referred to the sectarian nature of institutions or society here. I believe he did not intend it in the way it came out, but coming from a Taoiseach it was a shocking statement. The substance of what he said was that if he were a Northern Protestant looking South at this stage he would not want to live here because of the sectarian nature of our society or our State. Whatever view one takes of that I believe it poses another one: if he were a Southern Protestant looking at Northern Ireland would he want to live in Northern Ireland? That is not saying that everything is rosy down here, but if one is to make a comparison between North and South that question must be put.
I did and I distinguished specifically between the situation here and the grossly sectarian situation in Northern Ireland, as the Deputy will recall.
I remember that, but that does not answer the impression given by the Taoiseach in what he said in that regard. There are references frequently to a theocratic State and a theocratic Constitution here. I remember Mr. Harold Wilson utilising that phrase. Whatever views one may have about the nature of our Constitution, I do not think we should take this kind of thing from British people who live under the most theocratic constitution one could imagine, a constitution which would be totally unacceptable here. It is a constitution under which one must be of a certain religion to be head of state or hold certain major offices of State. That is intolerable from our point of view and quite unacceptable. I do not think we should take any lectures from people like that about a theocratic state.
We have problems in this regard and we have to tackle them. I do not think very much is achieved by pretending that we have some kind of theocractic State here and that we should look to the enlightened liberals of Britain to find out how we should get rid of the theocratic State. By all means let us look at the shape there would be or the kind of Constitution there would be in a new Ireland which joins North and South in one form or another. There is a lot to be said for doing that, but not for trying to do that in the context of alleged negotiation when there is no negotiation taking place. In so far as changes should be made from the point of view of our own society, let us argue that out on the basis of the merits and demerits of the case and what the population here want, not on the basis of what would satisfy Northern Unionists. That is a different issue.
I should like to refer to the references by the Taoiseach from time to time to Articles 2 and 3 of the Constitution. I want to make it quite clear that my personal view on this is that the Taoiseach ought to think very carefully about what he is doing here or that at least he ought to make it quite clear to our people what is involved. Whatever about Article 3 — I have made it clear that I do not think this is the time when any changes will do any good if they were to be made — to change Article 2 in any substantial way means saying to the British, the only sovereign state involved in Northern Ireland — not the Unionists, because they are not a sovereign State — that we forego any claim of any kind, legal, moral or otherwise, in regard to the Six Counties. It would mean that we are saying that Britain is entitled to exercise all sovereignty over the Six Counties and that we have no claim whatever in that regard.
In my view that is what it means. I have not yet heard anybody argue the contrary, whether they agree that we should or should not have jurisdiction or that the British should or should not have jurisdiction. I have yet to hear anybody argue that that is a false interpretation of Article 2 and I would be interested if people were willing to do so. If it is not a false interpretation, I suggest, that the Taoiseach ought when talking about Article 2 and changing it should tell the people what his view is of the meaning of Article 2 or whether the view I have expressed is correct or not. If he did that it may help forward the kind of reconsideration that many people would like to see in regard to different aspects of life here, especially in the context of North-South relations.
This is early in the period of office of the Government. They are only six months in office, but on the basis of what they have achieved so far I am afraid that the hope for the future is not great. To continue to talk about their version of what they found when they took office has worn so threadbare that it will not do any longer. This about the last opportunity the Taoiseach will get to use that excuse.
To begin with I should like to join with those who have already spoken in this House and with the many thousands of our people who are deeply concerned at the present situation in Poland. We, the Irish, share a strong fellow feeling with the Poles who have themselves been referred to as the Irish of Central Europe. In these tense and tragic days we share their desperate anxieties and we fully support their fight to determine their own future without internal or external coercion. It is agonising to hear reports, even at this stage unconfirmed, of deaths and injuries and hotels being turned into hospitals in that country which has suffered so much through her history. The Irish delegation to the European Security Conference in Madrid will later today express on behalf of the Government, and, indeed our people, our concern about these very serious events. The Minister for Foreign Affairs has just made a full statement on the Irish position this afternoon in the Seanad. Through the EEC we have provided substantial food aid to Poland and we are prepared to facilitate in any way we can the efforts of voluntary organisations to channel humanitarian assistance to the Polish people.
The single greatest problem facing our country today remains the crisis in Northern Ireland, which overshadows everything, even the economic situation to which I shall have to devote a good deal of my speech. We took office at a time when the stability of society not alone in Northern Ireland but also in the Republic was threatened more dangerously than any time since the early seventies. What was clear to us, and many others then, has become abundantly clear to all since. The hunger strike deaths were deliberately instigated and continued by the leadership of the Provisional IRA, not in the interest of human rights, for which they care nothing, but as a process of political blackmail of chilling cruelty and calculation. Those whose humane sympathies were most directly abused — the Nationalist people North and South — will never forget the evil cynicism of that campaign. Our concern in the early months in Government was to save lives outside and inside the prisons and to ensure that the men of violence would be deprived of the propaganda value of the hunger strike which they were abusing. Eventually the tides of nihilism and subversion were turned and the efforts of many brave and good men and woman won through. The hunger strike episode left two results: (1) the overwhelming majority of Nationalists North and South as they now look back on the horror of that time and the subsequent IRA campaign of murder of Protestants reject the IRA more thoughly and clearly than at any time since this cycle of violence began. Secondly, on the other hand, the damaging effect of the hunger strike on the majority section of the community in Northern Ireland, reinforced by the subsequent sectarian assassinations, have, understandably, proved more enduring. Thus the only political impact of the Provisionals has been once again, as so often before, to divide more deeply the Irish people.
Some of our own people may at times become so horrified or so depressed at the continuing misery in the North, the attrition of horrific events and the repeated frustration of political endeavour that their recognition of our great responsibility in relation to Northern Ireland, the single greatest responsibility of our Government and our people, can become dulled. Such an attitude, were it to become prevalent, could be dangerous for the people of Northern Ireland and dangerous for our own people. It is this attitude I have in mind when I warn, as I have done many times, of the dangers of "partitionism".
We cannot build walls around Northern Ireland — neither physical walls, nor walls of rhetoric as too many have been prone to do, nor walls of indifference as the British did for 50 years — and then hope that these walls will somehow contain the problem. They will not. We have an inalienable responsibility in this matter which we can ignore only at our moral, political and physical peril. This conviction above all others, has motivated this Government in their policies and their actions.
Thus we continued and developed the Anglo-Irish institutional process begun by the previous Government. But in doing so, we have sought, as we said we would do, to remove fears by seeing to it that the full truth was told about this process, about its original aims, and about its content.
For, as I said recently, it was a tragedy that the original concept of establishing Anglo-Irish institutions designed to encourage Northern Unionists to feel secure in dialogue with us was lost, indeed almost perverted, in a welter of distortion and misconception North and South. That which was originally intended and designed to provide reassurance and encouragement had been presented in a manner that led the Northern majority to fear that a deal was going to be done behind their backs and at their expense.
It has proved difficult to undo the damage thus done to an imaginative and enlightened conception. Neither our Government nor the British Government will, however, be deterred from developing the process in a responsible way either by criticism from some in this State that we did not achieve objectives which were never intended by those who conceived the idea, nor by criticism from Mr. Paisley that we were secretly achieving those distorted objectives.
An Anglo-Irish Inter-governmental Council is currently being established and parliamentary and advisory tiers will in due course also be set up. Negotiations for the sharing of natural gas with Northern Ireland are now proceeding intensively and we aim to establish a number of additional areas of economic co-operation and exchange between North and South next year. The Irish and British Governments have together for the first time committed themselves to make efforts to reconcile the two major traditions in both parts of Ireland. The Anglo-Irish Joint Studies have been published at our insistence in the interest of removing both groundless fears and unrealistic expectations. We believe that this is a record of solid achievement and real progress in a short period of time.
The responsibility of our Government and people extends, however, beyond co-operation with Britain. It has been my intention since taking office to start the process of eradicating both increasing signs of partitionist isolationism and remaining elements of aggressive irredentism in this State — and to do this for our own sakes as well as for the sake of the people of Northern Ireland. These are major objectives of the debate on the Constitution which I have begun.
I have been enormously heartened by the people's response to my action. I have moreover been confirmed in my sense of the need both to have this debate and to take those actions which are necessary to improve understanding between North and South and within Northern Ireland, by the overwhelmingly positive reaction of both sections of the Community in Northern Ireland.
The debate now launched will provide every one of our citizens here with the opportunity to confront and exercise his or her personal responsibility towards what is the most difficult of all Irish problems. I have, as I have often said, full faith that our people have the good sense, the imagination and the generosity to take up and react positively to this great challenge.
Four years ago, almost to the day, the then incoming Taoiseach, Mr. Jack Lynch, then six months in office, drew up a balance sheet of the Irish economy in 1977. Today I offer the House a point-by-point comparison of the items in that balance sheet for 1977 and of the same items in that which has to be presented for the economy today. I contrast his inheritance with mine.
In 1977 the then Taoiseach, Mr. Jack Lynch told the Dáil that "the rate of economic growth was at about 5 per cent which puts us near the top of the league internationally". The estimate given to me by the same official source four years later is that the growth in output in the current year has dropped to 1 per cent. Furthermore even that growth has been wholly wiped out by the change in terms of trade.
The then Taoiseach told the Dáil that personal consumption had grown in 1977 by 4½ per cent. This year I have to tell you that there has been no net increase in consumption at all and a fall in living standards of over 1 per cent.
The then Taoiseach in 1977 told the Dáil that the value of our exports would show an increase of almost 35 per cent in value and 18 per cent in volume. This year I have to tell you that the value of exports will have risen by only 18 per cent and the volume of exports by 3 per cent.
The then Taoiseach, told the Dáil in 1977 that industrial output in the first half of that year, the closing period of the National Coalition Government, had risen by 8 per cent. This year I have to tell you that in the first half of this year, the closing period of the Fianna Fáil Government, industrial output is estimated to have fallen by 1 per cent.
The then Taoiseach in 1977 told the Dáil that the numbers at work would show an average rise of about 7,000. This year I have to tell the Dáil that in the last 12 months of Fianna Fáil Government, the period ended June last, industrial employment fell by 9,000.
The Taoiseach in 1977 told this House that there would be a volume increase of about 9 per cent in gross agricultural output. This year I have to tell the Dáil that gross agricultural output in the current year has fallen by about 2 per cent.
Summing up the situation that Fianna Fáil found when they came into office in 1977, the then Taoiseach said "this is a sort of foundation on which we can build if we manage our affairs properly". And on the following day, in closing the debate, the then Tánaiste, Deputy George Colley, told the House "that there is, therefore, as the Taoiseach indicated, a solid foundation on which to build a prosperous future for our people". These were the verdicts of the two leaders of that Government on their inheritance. I can give no such verdict on what we have inherited from that administration and that of its successor in office led by the present Leader of the Opposition. In four years the solid foundations of which they spoke have dissolved, and we have the task of laying them once again from scratch.
In 1977 Mr. Lynch did not mention the current budget position. In fact the current budget deficit of the year 1977 was £200 million. Had we not corrected by the July Budget that current——
The Taoiseach should be telling us about the situation his Government have created.
The Taoiseach, without interruption.
——deficit of 1977 would have been in this year 1981 almost five times greater. Had we not corrected it, we would have ended the fiscal year with a figure of £1,550 million, almost eight times the 1977 figure.
In 1977 the then Taoiseach did not mention Exchequer borrowing. In fact the 1977 figure for Exchequer borrowing was £545 million reduced from 16 per cent to 10 per cent of GNP over the two preceding years during which the National Coalition Government had brought the Irish economy successfully through the later stages of the first oil crisis. Were it not for the July Budget, the prospective figures for 1982 would have been £2,550 million or 22 per cent of GNP. The cost of servicing that has increased by the same ratio.
I regret having to take up the time of the House in reciting these figures but if we are to assess realistically the problems that now face us, we must do so on the basis of solid facts and figures free from exaggeration or distortion, reflecting realities that are harsh.
When we were preparing to take over the reins of Government this time six months ago, none of us was aware of just how disastrously our economy had been undermined by Government mismanagement in the immediately preceding period. We knew that our predecessors in Government had thrown off any sense of responsibility during the previous 18 months — from the mement that my predecessor in office, Deputy Haughey, backed away from the commitment that he gave the people in his television address early in 1980. We knew that in the early months of this year as the election approached new heights of irresponsibility had been attained by the Government under his leadership. But we did not envisage, nor could we reasonably be expected to have envisaged, that the recklessness of the previous Government was on such a scale as to put seriously at risk the economic and financial viability of this State. Not even the bitterest political opponent of the Fianna Fáil Government that lost power in June of this year believed that they could have committed this country to a path leading towards a current budget deficit of over £½ billion in 1982 and to borrowing in excess of £2½ billion.
Not alone is the scale of this extravagance beyond anyone's imagination; it has produced nothing in return. Normally high Government expenditure produces short-term economic growth, even if the medium-term consequences can be very damaging in terms of the need to jam on the economic brakes. The extravagance of Fianna Fáil in its closing 18 months in office was, however, so misconceived and misdirected that it was actually accompanied by a sharp reversal of the decline in unemployment that had been taking place, and by a rise of 40,000 or almost half, in the level of unemployment. This unprecedented extravagance was accompanied by stagnation in economic growth and a decline in living standards, accompanied by a virtual halt in the expansion of investment. It requires a perverse kind of genius to spend so much money and get from it a virtual negative return.
Nobody can doubt that clearing up this mess is a difficult task. No one should doubt this Government's determination to do so. It is a task which will not be achieved within six or seven months, a year, or even two years. Its process must be spread over a period of four years, as we proposed before coming into Government. In this first period of Government, however, we have to make a major initial impact on the problem in order to establish a basis from which further progress can be made, at a price that will be suitable, without undue prolonged hardship for our people. At the same time, given the level of the current budget deficit and of borrowing that would arise if we did not take action, it is clear we must go much further than a quarter of the way this year towards our objectives if we are to sustain confidence in the management of the economy amongst those from whom we borrow; and if we are to maintain confidence in our currency. Borrowing must be reduced by one-third from the threatened level of £2,550 million. The current deficit must be reduced by something like one half from the figure of £1,550 million which it would have reached if no action had been taken. The first important steps were taken towards this end last July, barely three weeks after we came into Government. In six weeks' time, the second phase of this stabilisation operation will be carried out in the January budget which will be designed to establish a firm basis for confidence in the economic management of this State and for future progress towards a more sustainable public finance situation.
This recital of facts and figures of the disastrous economic inheritance we face and of plans to place our economy on a sounder footing may be seen by many people as a stark recital of harsh economic realities. We are doing no more than the minimum necessary to preserve substantially the living standards of our people and to prevent the massive disruption of employment that would come about if we continued on the path of reckless spending without regard to whether the resources necessary to sustain this spending would continue to be available.
The economic decisions that we have to take, which carry with them no political bonus for us, are being taken only because they are objectively necessary to sustain employment, to prevent a massive drop in living standards and to save us from the long-term effects of a major disruption of our way of life. It is because the vital interests of our people are at stake that we are taking the minimum steps necessary to safeguard these interests, by doing what is necessary to safeguard the economic independence of this State. That means to keep in our hands the decisions as to how resources will be distributed amongst our people; to enable us to decide for ourselves how equity can be maintained and the disadvantage in our society be protected from further hardship and poverty. If, through any failure of will or nerve on our part, the State were to lose its freedom of action and decision in regard to these vital matters, and to be constrained to act in accordance with the dictates of international institutions, then we would have failed our people in the most serious way that one can imagine. We shall not do so. Indeed uppermost in our minds as we discuss how best to tackle the problems that we have inherited is a constant preoccupation with the interests of the less well-off in our society — whether they be long-term social welfare beneficiaries such as old age pensioners, or people forced into unemployment with a collapse of the firm in which they used to work, or young people seeking employment for the first time, or farmers whose incomes have been halved, or people on low incomes. Whatever steps may have to be taken to safeguard employment and living standards from the major risks we face, must be and will be so designed that the impact of these measures will be spread equitably through the community and I make no apology for saying that the effects must be graded according to income. No attempt to extract from a speech of mine a particular phrase out of context will prevent me repeating that. Those on the bottom must be safeguarded from the effects of declining living standards. Those in the middle will have to bear some share of the burden and those best off will have to bear the greatest share. In this connection the fundamental changes in the basis of income taxation which we are introducing will play a significant role. Allowances under our present income tax system are highly regressive — that is to say they favour people with higher incomes as against those with lower incomes. For any given tax allowance, people with higher incomes benefit to the tune of 60 per cent while those on lower incomes benefit only to the extent of 35 per cent — and those in the lowest category of income, whose means are insufficient to make them liable for income tax, do not benefit at all. We are replacing this inequitable system by one based on tax credits. Under this system everybody in the income tax net will be credited the same amount in the form of a tax credit — an amount which will, however, be much greater than the value of the present personal allowance of those in the lower tax band.
The effect of the switch from tax allowances to tax credits, together with the increased value of tax credits to those paying the lower rate of taxation, is to shift the income tax burden to the benefit of the less well off — especially when taken in conjunction with financing the cost of this change in large measure by the application to income bands over £8,500 of payments equivalent to PRSI contributions the health charge, and the new payroll tax supplementing this health charge. A further important element in the tax reform, a very novel one, is the provision for a family income supplement in the form of the direct payment of her share of the tax credit to the wife even in cases where the husband had no income tax liability at all because of his low income. It is very important that this first move towards a form of negatative income tax is not frustrated by the failure of tens of thousands of families in this category to secure the additional benefits now available to them from the State through the family income supplement as a result of failure by the wife to apply for it. An industrial dispute in the Revenue Commissioners has held up the process of publicising this scheme and making application forms accessible to housewives as they would have been for instance, through post offices. As soon as this dispute is settled every effort will be made to publicise this aspect of the scheme and to ensure its availability to those who will benefit significantly from it. With regard to the payment of the wife's tax credit directly to her, even where no family income supplement is involved, it will be a matter for the individuals concerned to decide whether to make application for the payment of the credit to them. They should be given the right to this tax credit. It is perfectly clear to me that the present situation in which a woman getting married gives up her job to look after the home and loses the right to her tax allowance which is absorbed into that of her husband, is one which many women must understandably resent. It is right that they should be given a choice of retaining this benefit in this new tax credit form when they are not at work outside the home, just as they would have retained it if they had kept on working. Incidentally, I am glad to see that, despite the virtual non-availability of application forms because of the dispute, since publicity was given to this matter when the deadline for applications was extended — Deputy Fennell was extremely helpful in putting the message across on radio — the number of applications has almost doubled. There are other aspects of the social policy of the Government to which I should like to draw attention. One of these arises from the pay proposals under negotiation with the Public Services Committee of the ICTU. Before referring to those negotiations and the social implications arising from them, I should like to pay tribute to the responsible attitude on the part of the negotiators which has contributed to the working out of these proposals which, if agreed, will represent a helpful contribution towards the resolution of our economic problems. I particularly commend the patience and resolve shown by the Minister for the Public Service Deputy Kavanagh, who has been steadfast in seeking to negotiate proposals, acceptance of which would avoid possible disruption of industrial peace in the public sector. The course of the pay negotiations this year has been a difficult one and, in the end, the Government decided it would be best to seek a settlement within the public service when agreement had not been reached at national level. If agreement could be reached with the public service it would involve a moratorium on special pay awards in 1982 and an increase within the limits of available resources.
The proposals now under discussion make a particular provision for lower paid workers in the public service by including, as part of the first phase, a minimum payment of £4 per week. It is a matter for the private sector to decide whether they wish to follow the precise pattern of this public sector wage agreement or, in negotiation with unions, to vary it in certain respects. The Government, exercising their responsibility to hold down inflation, will direct the National Prices Commission to take into account in future price applications, wage and salary increases and the overall impact of the public sector agreement. We are also directing the Commission to monitor price trends generally with a view to ensuring that the same principles apply throughout the private sector even where at present firms are not required to make applications for price increases.
A major step forward is being taken by the Government in relation to youth employment, with the establshment of an agency to deal with the problems in that area, financed by a 1 per cent levy on all incomes to be supplemented by EEC aid. At the same time we are pressing ahead with the programme for the building of sport and recreational facilities throughout the country.
At another level altogether we are making new provision for pre-school education for the disadvantaged, who are not in a position to avail of the many private pre-school facilities that exist, but who often have much greater need for such facilities because of the pressure on mothers in less well-off homes, who work in order to assist in providing for the financial needs of the home. The provisions we are making will include action to allow for proper registration of pre-school operations, training for staff in these operations, and a grant-in-aid to the Irish Pre-school Play Groups Association.
Another social problem which we are tackling vigorously is that of providing housing for the young people who cannot now afford to enter into mortgage arrangements through the normal channels. The Housing Finance Agency to be established by legislation passed in this House yesterday will give young people the option of securing a loan on terms related to their ability to pay — based on their earnings throughout the lifetime of the loan. This new scheme will not only help young people with low incomes to acquire a dwelling of their own, but it will also, by taking them off the housing lists of public authorities, make it possible for many other families on these housing lists, at present with little or no chance of being housed by public authorities.
Another important social policy decision of this Government has been to reverse the previous Government's decision in relation to the extension of the work of the former Combat Poverty Committee. We have decided to establish a national agency to combat poverty — something to which both parties in Government are strongly committed in their party programmes. This agency will enable us to confront some of the neglected and overlooked problems of poverty, which, I believe, as a people we have failed to face during 18 years of economic growth between 1960 and 1978.
In our approach to social problems, we will be taking serious heed of the advice of the National Economic and Social Council which in their recent report on Irish Social Policy, Priorities for Future Development, set out very clearly the choices which we as a community face in trying to deal with social problems.
As this report advocates, we must discriminate positively in the allocation of resources to cater for those whose needs are greatest. In this connection we will be looking closely at the whole area of means testing to ensure that limits are regularly updated and that complex means testing procedures are simplified.
This Government have a special concern to enhance the role of women in our society. We shall be pressing ahead to remove all the remaining vestiges of legal or administrative practices which diminish the rights of, or discriminate against women. We are at present reviewing arrangements within the Government for dealing effectively with womens' affairs so as to ensure the monitoring of progress towards the implementation of our programme for womens' rights.
We are also proposing an all-party oireachtas committee on womens' rights so as to ensure that legislation and administrative practices protecting the status of women will receive special attention in this House. We are also determined to ensure that the present minimal involvement of women on State boards will be significantly increased.
Some parts of our country suffer from long-standing social and economic problems and are seriously disadvantaged — namely the western and north-western counties. An attempt by the Opposition to suggest that this Government will neglect these regions is a blatant propaganda campaign, designed to advance the political interests of the party in the Opposition benches.
Our programmes and policies will ensure that the western and north-western regions are provided with essential infrastructure aided by the establishment of viable economic projects. Those in the opposite benches who seek political advantage by advocating the topping-up of non-viable projects in the west do less than justice to this region, whose long-term interests can be served only by ensuring that the economic activities in this area are self-sustaining.
There is no more important resource, not only in our western regions but in all regions, than our agriculture. We all know how over the past three years previously growing prosperity of our agriculture was reversed, with a calamitous halving of farm incomes. This has reduced sharply the living standards of farm families, has created great financial hardship and worry for farmers, faced with heavy debts because of their efforts to expand production, and has greatly reduced their capacity to invest in the future expansion of output.
We can have no more important economic and social objective then to restore prosperity to farming and to alleviate the present financial distress of farmers.
The Government by a series of national and Community measures have started to reverse the decline in farm incomes. Already this year the decline appears to have been halted. This can only be a start. We must set about restoring the purchasing power of farmers and in this way restore also their confidence in their industry.
This sector of the Irish economy has the capacity to double productivity over the time — if farmers see reason to have confidence in the future and have the means to invest in the expansion of output.
The Government are concerned to ensure that our partners in the European Community understand precisely why we attach such importance to the Common Agricultural Policy, which for this country above all others in the Community is a vital national interest. For over a century, from the 1840s to the 1970s, our farmers suffered from the effects of British cheap food policies. When we joined the Community we did so in the clear knowledge that membership, involving a free trade in industrial as well as agricultural products within the Community, would involve the risk of heavy losses in the industrial sector, but in the belief and conviction that these would be offset over the years through the gains for Irish agriculture deriving from getting out from under the yoke of economic dependence upon a country whose policies had for so long been directed towards securing food cheaply.
It has been clear always that our farmers would not recover from the effects of over a century of cheap food policies in just a few years and that the damage of over a hundred years would certainly require several decades to put right. The productivity of Irish agriculture today is well below that of agriculture in countries with comparable climatic and soil conditions. We wish to develop this potential under free and fair trade conditions, which is the fundamental right of any country who is a member of the Community.
I have been concerned to convey this message clearly to my fellow heads of government of the Community so that they would understand why we cannot accept any dilution of the principles of the Common Agricultural Policy or any steps that would be likely to lead to its being effectively dismantled. This was the theme upon which I concentrated at the European Council Meeting in London in November. It was also the main theme of my discussions earlier this week with President Mitterand in Paris. At other meetings the Minister for Foreign Affairs and the Minister for Agriculture had been ensuring that their opposite numbers in our partner countries also understand our position.
The necessity to present our case effectively should not be underestimated. Pressure is now being exerted through many quarters against the Common Agricultural Policy — pressures that present a dangerous threat to a vital Irish national interest. To avert this threat we must secure in the weeks and months ahead that our interest in the maintenance of the Common Agricultural Policy is widely understood throughout the Community, as well as the present situation of Irish farming, which alone among the farm sectors of Community countries has suffered a loss of income amounting to one-half in three short years.
In tackling the problem of farm incomes at home the Government will take into account two very important considerations. The first is that, in view of the extent to which the drop in farm incomes has been attributable to a high rate of inflation, priority must be given to reducing inflation in this country.
The second is that any action to be taken to support farm incomes must be of such a character that it does not undermine the principles of the Common Agricultural Policy, upon the preservation of which so much in the longer term depends for our farmers.
I want before concluding to return to the financial and economic difficulties which now face us in this country. Our primary aim has to be the preservation and expansion of employment. The decline in employment which has been a feature of the last year or two may be coming to a halt and the level of employment may now be stabilising again. If this be so, it would be an encouraging sign; but in no way does it mean that we have broken the back of the problem of unemployment.
In this country now and for many years past and, I believe, in the two decades to come, we face the challenge of an expanding population. Over the past 20 years the number of young people in their twenties has increased by no less than 60 per cent — a figure without precedent in any other industrialised country. To find employment for each successive cohort of this new generation will require not just a stabilisation of employment but quite rapid expansion of the number of people at work. Whatever success we may have achieved in stabilising employment we are nowhere near the point today of achieving the kind of expansion that would enable us to provide employment for the new generation and to reduce significantly the existing level of unemployment.
In order to achieve this we must first of all secure our base. We must ensure that the policies we follow are such that they preserve this country from a major economic crisis as a result of which we could lose our power to determine our own economic, and therefore social, destiny.
Having thus secured our base by taking all necessary measures, however difficult or temporarily unpopular they may be, we must then move beyond that, creating the conditions in this country for expansion of competitive economic activity. Towards this end we must wind down inflation and the excessive growth of incomes contributing to inflation. As we make our way towards this goal our goods will once again become competitive in our own market and in external markets, providing a basis — the only sure basis — for the expansion of exports, of output and of employment.
It is important that all our people understand that national policies must be directed single-mindedly towards the goal of overcoming the problem of unemployment and providing jobs for those now out of work and those who have yet to enter the labour market on completion of their education. If we can sufficiently arouse the social conscience of our people on this issue, if we can secure the willing support of the whole community towards achieving this goal, it will be within our grasp. The only thing that can defeat us would be a failure on the part of our people, or their leadership, to evoke the necessary generous response to this social imperative, by those already in employment who might be tempted to seek to retain in their own hands resources which must be shared with those who also need the opportunity of a job.
In the first stage this means a general acceptance of the need to accept a rate of growth in incomes that will leave a surplus available for employment creation. We are on the road towards that.
At a second stage it may require more positive efforts to share work, an approach as yet unfamiliar to our people. But we cannot exclude any method that may help us to resolve the unemployment problem. We will fail as politicians if we are unwilling to seek from our people the necessary commitment to solving this problem.
The task we face in the immediate future is by any standard an intimidating one. No previous Government since the early years of this State have ever had to tackle a financial crisis as grave as that now facing us, one which threatens the financial stability of the State. The Government will not be deterred from managing the problem and tackling it effectively, or from taking all necessary measures to secure our financial viability and our continuing economic independence.
A politician faced with the kind of problems which we confront is bound to be conscious of the inadequacy of speeches. The desire of our people is for action rather than words. Early last July we took preliminary action to protect our economy from the disastrous course on which it was then set. Since then we have taken action, as I described earlier, in a wide range of fields to deal with various social problems and to tackle also the problem of farm incomes. Most recently, we have taken action to negotiate in the public sector a pay settlement which is designed to help towards our economic and social objectives. May I draw attention here to distortions of what is involved in this pav settlement and incorrect accounts of it which have given rise to critical comment which are not founded on fact?
Could the Taoiseach give us the details now? It is a genuine question.
I am drawing attention to the fact that people should not be misled by misleading statements. I do not want to do anything to disturb the situation beyond making that point which needs to be made.
Has a settlement been made?
The actions that we have taken and will take should, I believe, speak louder than any words we may say in this House. It is on the basis of these actions that I hope and believe we will be judged in due course when we come to face the electorate and to seek their verdict on the manner in which we have handled their affairs. In the meantime, in the intervening years we should pursue a steady course and when the time comes for the people to give their verdict I hope and believe that we will be able to say, as the then Taoiseach, Jack Lynch said about us in this House four years ago, that we have built a sound foundation for the future development of our society.
On this achievement and on the manner in which we have been tackling the problem of Northern Ireland, we will be happy to be judged when the time comes. In the meantime, we seek the support of all people of goodwill — and there are very many — in tackling the many problems which beset us, problems which, however, we shall overcome.
In accordance with the resolution of the Dáil I am now putting the question that the Dáil at its rising on 18 December do adjourn for the Christmas Recess.
Question put.
The Dáil divided: Tá, 76; Níl, 72.
Tá
- Alderman Dublin Bay-Rockall
- Loftus, Seán D.
- Allen, Bernard.
- Barrett, Seán.
- Barry, Myra.
- Barry, Peter.
- Bermingham, Joseph.
- Birmingham, George.
- Boland, John.
- Browne, Noel.
- Bruton, John.
- Burke, Dick.
- Burke, Liam.
- Byrne, Hugh. (Dublin North-West).
- Collins, Edward.
- Conlon, John F.
- Connaughton, Paul.
- Connor, John.
- Corish, Brendan.
- Cosgrave, Liam T.
- Cosgrave, Michael J.
- Creed, Donal.
- Crowley, Frank.
- Deasy, Martin A.
- L'Estrange, Gerry.
- McCartin, John J.
- McMahon, Larry.
- Markey, Bernard.
- Mitchell, Gay.
- Mitchell, Jim.
- Molony, David.
- Moynihan, Michael.
- Nealon, Ted.
- Noonan, Michael.
- (Limerick East).
- O'Brien, Fergus.
- O'Brien, William.
- O'Donnell, Tom.
- O'Keeffe, Jim.
- O'Leary, Michael.
- Desmond, Barry.
- Desmond, Eileen.
- Donnellan, John F.
- Dukes, Alan M.
- Durkan, Bernard J.
- Enright, Thomas W.
- Farrelly, John V.
- Fennell, Nuala.
- FitzGerald, Garret.
- Fitzpatrick, Tom.
- (Cavan-Monaghan).
- Flaherty, Mary.
- Flanagan, Oliver J.
- Fleming, Brian.
- Glenn, Alice.
- Governey, Desmond.
- Griffin, Brendan.
- Harte, Patrick D.
- Hegarty, Paddy.
- Kavanagh, Liam.
- Keating, Michael.
- Kelly, John.
- Kemmy, Jim.
- Kenny, Enda.
- O'Sullivan, Toddy.
- O'Toole, Paddy.
- Owen, Nora.
- Pattison, Séamus.
- Ryan, John J.
- Ryan, Richie.
- Shatter, Alan.
- Sheehan, Patrick J.
- Taylor, Madeleine.
- Taylor, Mervyn.
- Timmins, Godfrey.
- Treacy, Seán.
- Tully, James.
- White, James.
- Yates, Ivan.
Níl
- Acheson, Carrie.
- Ahern, Bertie.
- Allen, Lorcan.
- Andrews, David.
- Andrews, Niall.
- Aylward, Liam.
- Barrett, Michael.
- Barrett, Sylvester.
- Blaney, Neil T.
- Brady, Gerard.
- Brady, Vincent.
- Brennan, Paudge.
- Brennan, Séamus.
- Briscoe, Ben.
- Burke, Raphael P.
- Byrne, Hugh.
- (Wexford).
- Callanan, John.
- Calleary, Seán.
- Colley, George.
- Collins, Gerard.
- Conaghan, Hugh.
- Connolly, Gerard.
- Coughlan, Clement.
- Crowley, Flor.
- Daly, Brendan.
- Doherty, Seán.
- Ellis, John.
- Fahey, Jackie.
- Faulkner, Pádraig.
- Filgate, Eddie.
- Fitzgerald, Gene.
- Fitzgerald, Liam.
- Fitzpatrick, Tom
- (Dublin South-Central).
- Fitzsimons, Jim.
- Flynn, Pádraig.
- French, Seán.
- Gallagher, Denis.
- Gallagher, Pat Cope.
- Geoghegan-Quinn, Máire.
- Harney, Mary.
- Haughey, Charles J.
- Hyland, Liam.
- Joyce, Carey.
- Keegan, Seán.
- Kenneally, William.
- Kitt, Michael P.
- Lemass, Eileen.
- Lenihan, Brian.
- Leyden, Terry.
- Loughnane, William.
- Lyons, Denis.
- McCarthy, Seán.
- McCreevy, Charlie.
- McEllistrim, Thomas.
- MacSharry, Ray.
- Meaney, Tom.
- Molloy, Robert.
- Moore, Seán.
- Morley, P.J.
- Nolan, Tom.
- Noonan, Michael J.
- (Limerick West).
- O'Donoghue, Martin.
- O'Hanlon, Rory.
- O'Malley, Desmond.
- Power, Paddy.
- Reynolds, Albert.
- Smith, Michael.
- Tunney, Jim.
- Walsh, Seán.
- Wilson, John P.
- Woods, Michael J.
- Wyse, Pearse.
Tellers: Tá, Deputies F. O'Brien and Mervyn Taylor; Níl, Deputies Moore and Briscoe.
Question declared carried.