The first business upon the Agenda for to-day is the Finance Bill, 1923, Second Stage, and the motion is: "That this Bill be read a second time."
FINANCE BILL, 1923. - SECOND STAGE.
AN CATHAOIRLEACH
Sir, at a recent sitting of the Seanad you gave us a ruling that speakers on the subject of the Finance Bill would be allowed, within due limitations, to deal on broad lines with the question of our national finances, and, if I may say so, I welcome that ruling, because it appears that the real function of this Seanad is to try to grasp the broad aspects of this important problem, and not to become unnecessarily absorbed in detailed criticism. I believe we do not get the opportunity to examine estimates Vote by Vote, and although we may thereby suffer certain disadvantages, we have the advantage of being able to acquire a broad sense of proportion towards this whole question, and not merely have our minds diverted by such important, no doubt, but minor matters like whether contracts are given in suitable quarters, or whether rates of pay in any one department are adequate to services, and so on. I submit, sir, to the Seanad that it is essential to arrive at some understanding on the aggregate of our expenditure before we approach any analysis of the components. We must be perfectly satisfied as to what are our financial resources and limitations, and until we have got these limits clearly traced and established it is beside the mark to examine the details of our expenditure. Now, to some finance is a most terrifying subject, and a great many people, I think, are disposed to take their stand on that apprehension and to say that it is highly technical, and that they do not pretend to try to understand it. On the other hand, there are others more courageous, perhaps, but without realising their limitations, who go gaily in on this subject, and perhaps very soon find themselves out of their depth on technical points, especially that of currency, on which the highest authorities in the land appear to disagree. The broad details of the subject are fairly simple. Only recently I met a friend in the country, who said: "Oh, the Government have got no money." I said: "How do you know that?" He said: "Why would they want to borrow if they had got any money?" Of course, that represents an attitude towards finance it is very hard to argue with, but there it is. On the other hand, another point of view I have heard suggested by an eminent Senator in this Seanad is that one should not have any qualms about borrowing; that it was, on the whole rather a thing to be encouraged. I suggest to the Seanad that the truth lies midway between these two extremes, and that a simple parallel is afforded by the parallel of one's own private life. In one's own private economy one is brought up against the question, especially in recent years, of ways and means. We realise in our respective spheres that we have got so much, and if we do not live within that amount we are in for trouble. Of course, in private life the trouble comes quickly through the machinery of the law, as we all understand. I do urge and emphasise that exactly those same principles, although the operation may be rather more remote, apply to our national life. We cannot live beyond our means, and if we try to live and continue to live beyond our means, disaster is certain; and it would take the same form in the case of a nation as in the case of an individual. It is national disaster, and it finally finds its expression in endless and untold suffering to all classes. The Budget is the expression and focal point of our national finances. It is important, I think, clearly to understand what we mean by a sound Budget, and I submit this is a fair definition of a sound Budget—a sound Budget is one which meets out of revenue all the cost of the recurrent services and also the service of the debt, both interest and sinking fund, and which only borrows for services of a non-recurrent and reproductive nature. I think we should keep that definition, or any other of the same kind—the wording is immaterial—clearly before us when we proceed to examine our actual finances as presented to us in the various Government Papers which we have all had.
Now, let us begin by examining the revenue. I will do my best to deal in broad totals, and with as few figures as possible, but we cannot dispense with figures altogether. The tax revenue is £20,000,000, and the non-tax revenue £5,000,000. The total revenue, or, I should more accurately say, the total receipts from taxes and non-taxes is £26,000,000. Non-tax revenue is Post Office and revenue of that kind. From that should be deducted any expenditure which is non-recurrent. If you look at the Estimates, or Paper which has been circulated, you will find there is an item of £3,000,000 which is being advanced by the British Government in liquidation of certain pre-Truce compensation claims. I submit that does not correctly fall into non-tax or tax revenue. Accordingly it should be deducted, leaving a true revenue of £23,000,000 in round figures. Proceeding to the other side, we have a total expenditure of £46,000,000, made up roughly of £43,000,000 on supply services and £3,000,000 on Central Fund. I do not think the Seanad need bother themselves between these two services. They are both expenditure. Now, to reconstruct our Budget on the lines of the definition I have laid down, you must deduct charges of a non-recurrent or capital nature, and the following are the charges as far as I have been able to disentangle them that should be deducted:—£691,000, housing subsidy; £1,700,000 payable to Great Britian on account of adjustment of revenue for the the past year; compensation, about £11,000,000; and the Army. I am deducting the Army for the time being. The Army represents roughly, £10,500,000, and deducting the capital services of £24,000,000 odd, leaves our true expenditure somewhere in the region of £22,000,000—that is, £22,000,000 of expenditure against £23,000,000 of revenue. That is, broadly speaking, a Budget that balances, and answers the tests laid down in the definition I have enunciated. But we must remember this, that the important item of the Army is included in the capital charges, and, as we all know, portion of the Army must be and should be attributable to recurrent expenditure. The Budget, therefore, fails to balance by such portion of the Army as is attributable to the permanent standing Army. I have no doubt this amount is still not determined. It is a question of policy. But, say, the Government in their policy laid down a figure of £3,000,000 or £4,000,000 for the standing Army, then the Budget fails to balance by that amount, and some means must be found for meeting that deficiency. I see £3,000,000 only is provided for the service of the debt out of which interest of Dáil Eireann Bonds and also interest on any borrowing this year must be met. Whether that £300,000 is enough is a matter, perhaps, that the Minister will deal with when he replies. Now, whatever the sum may be that your standing Army is going to cost, how are you going to find that sum? First of all, you examine the two sides of the account. You take first the revenue. I suppose every member of the Seanad will have his own opinion on that point of view. Personally, I do not see how the Government for some little time to come can look to any substantial increase of revenue from the present taxes. The main industry which carries the bulk of all business in the Free State—that is, the industry of agriculture—is abnormally depressed, and that must react right through on the whole of our financial and economic system. On the other hand, I personally am not at all satisfied that the Government will be able to find any satisfactory productive sources of fresh taxation. I do not think any Government would be wise to base a Budget on increased revenue from fresh taxes until it actually sees that money and has had the experience from the operation of these taxes. I am sure we all feel it would be perfectly hopeless and thoroughly wrong to increase any of the existing taxes. In fact, if we were in any way to alter the existing taxes, it should be in the downward direction, to set free more money for the legitimate purposes of industry.
Turning then from the Revenue side of the account we come to the examination of the expenditure, and here there appears to lie the fertile source for which this money required to balance our Budget can be found. Now that diagnosis, for what it may be worth, of the position, is borne out by an examination of the 1920-21 year, and a comparison as against the expenditure of this year. I have taken about twelve of the leading services, including Old Age Pensions and Education, and other costly services. amounting to about 12 millions, for the purposes of this comparison, and I find that for 1920-21, for the whole of the 32 counties, the cost of these services amounted to 12½ millions. For the year 1923-24 the cost of the similar services for 26 counties amounted to 11¾ millions, so that there has been a saving on these services of not quite one million, although I think that the Revenue, owing to the partition of the country, lost to the extent of somewhere about 3 millions on these services. In fact, if these services had conformed to the loss of Revenue, then, instead of standing to-day at the figure of 11¾ millions, they should stand somewhere in the region of 8¾ millions. We all can comment upon that, and without my saying very much it is quite obvious that the effect of partition upon national finances has been very damaging, and that sympathy must be extended to the Government in their difficult position, because they find themselves in the position of having a business that is committed to overhead charges and physical equipment for 32 counties, from which the commercial energies and turnover of 6 counties has been taken away and lost. We all realise that there is nothing harder, in these circumstances, than to reduce overhead charges proportionately to loss of business. But, hard as it is, the fact remains that Finance is inscrutable and implacable and concedes nothing to sentiment. Assuming this is the only method by which the Budget can be balanced, that is by reducing expenditure, I would like to examine more in detail the methods by which I think that end could be reached.
I turn to the constructive side of the problem with less anxiety, perhaps because one possesses no responsibility onself. It appears to be rather easier to examine. The first thing I bring before the attention of the Seanad is the necessity for lucidity in accounts. Anyone who has an opportunity of examining these accounts would meet, I suggest a very confusing quantity of figures. There are a great deal of figures and very little information, and from the point of view of expenditure and revenue there is no distinction made—it may be only a matter of paper arrangement— showing Revenue items in one group and capital items in another. It does not necessarily mean that an Accountant should go into some metaphysical difference between revenue and capital. Also I would suggest to the Government that the accounts should be arranged and grouped according to the responsibility of administration. Every service comes under the responsibility of some Minister; as we see them here Secret Service jostles alongside Contingency Fund, and Development Grant and National Gallery keeps company with Miscellaneous expenditure. Ultimately, if lucidity in arrangement is adopted, it will lead to interesting avenues of exploration. Perhaps I should say this also, that the total cost including services rendered, should be shown on each Vote and that the footnotes now appearing should be eliminated. For instance, we see under head of "Ministry of Finance" a footnote to the effect that Stationery is included. I know there are difficulties, because I have had experience of them in other places, but it ought not to be impossible to show the cost of the stationery for the Ministry of Finance under this Vote, and, similarly, the Post Office and law charges, and so on, and then you will ultimately get all that can be done, but you should aim at each Vote showing the particular cost of all appertaining to it and all subsidiary services. There are three methods—of course, there are more —but I suggest three methods by which the Government could proceed with the reduction of expenditure. They could proceed on old Treasury methods, or rather the methods of the Babu where every detail has to come to the Treasury, which is highly centralised, and where the Treasury enters into voluminous correspondence with every service, and afterwards nearly always gets defeated, because the Treasury knows nothing about these services, and in the end the country suffers. There is the other method, that is, the "axeing" method which we have recently seen in practice in Great Britain, which had the effect of making economies. That was done by setting up a committee of experts, or business men, who went into every item of expenditure and then put up their own proposals. Of course, they had certain advantages. They had access to the records, but they had not the full confidence of the departments about to be retrenched; they had to take a good deal on technical points as told them by the Departments. They were in a position to recommend economies, but whether they were in a position to make the wisest economies is another matter.
The third method is that of rationing, and that is the method I recommend. Having got your accounts grouped by administrative or ministerial responsibility the Government decides that they have got to reduce expenditure to the extent of so many millions. They go into details in each Department and apportion the reduction among the Departments, making it mandatory on the heads of each Department to effect economies to a specified amount. That, I submit, is the right and proper way, because then you place the responsibility on the Minister who is in charge of the service. He passes on the responsibility down the chain, and you get economies made by the people who know where the fat lies. In fact, the only people who know where the fat lies are the people who have the fat lying on themselves, and you should put the responsibility of reducing the fat on the people who carry it. That, I suggest, could be effected by the system of rationing. I feel a certain amount of responsibility in dealing with this matter, because, at the present time, the question of finance is a very delicate one, but I have not approached it in any way that would hamper the Government in their difficult task. In taking these figures, I have given the Government the benefit of the doubt in every case, and if I am wrong I shall only be too glad to confess my error, but I do not believe there is anything to be gained—the Press is not here to-day, and if I have said anything that is indiscreet it will not be reported in the newspapers—by cloaking over the facts of the case, and I am sure the Minister for Finance will agree to that. The position is anxious but not alarming. There is great expenditure, and there will be difficulty in reducing that expenditure, apart from whatever sums may be allowed for the standing Army. There can be no more grants of any kind if we are going to maintain a business Budget. That is implicit in the situation. It can be done if the Government will accept the position and act with thoroughness and determination. Finance is the best index, and in fact the only true index of the political situation, and the Government can do much by a sound vigorous pronouncement on the subject. The Government under unparalleled difficulties have done great things and have advanced materially towards the establishment of stability in this country, but not until they can point to a balanced Budget can this Free State, in the full sense, really claim to have found itself.
I rise with some diffidence, following Senator Sir John Keane because I do not propose, in fact I do not consider I would be capable of entering into details of the financial provisions for carrying on for the present year. I think it will have to be admitted, taking the broad aspects of the Finance Bill, that there does not appear to be any constructive effort in that Bill to promote our own native industries. It is quite reasonable to plead that in the state of the country, the Government fighting for its rights, and expending all its efforts in preserving the State, could not possibly have under taken to frame an entirely new fiscal policy for Ireland. That is true and will be admitted by everybody, but still a great deal might have been done to alleviate the evils of the system which I presume I may say we have inherited. I suppose many of us are interested in agriculture. I do not think I am going too far in saying that farmers are surprised, not to say angered, that no attempt has been made to remedy their difficulties. Agriculture in this country is far more of a key industry than it is in England, and yet in England measures have been taken to mitigate the losses of farmers. I fail to see why something could not have been done in this country too. I need not go into details as to what we may expect to see carried through in the British Parliament for the relief of agriculture, but we know that the measures proposed include substantial relief from rates, and at the same time protection, to a large extent for barley, which is also a staple crop in this country, and for which it is proposed to do nothing at all. I am not going to labour the question of the respective merits of Free Trade and Protection. Free Trade is an exploded policy. No country in the world can be truly said to be a Free Trade country. You have only got to look at the Safeguarding of Industries Act, and from that you will see that England has certainly withdrawn from the Free Trade policy which she had followed until recently. Although we have taken over that Act, we have also taken over the various duties which, for excellent reasons, England has put on imported articles to protect her own industries. We have been protecting ourselves, but I know this is only repeating what has been said over and over again. The fact remains that the country is still halting between two opinions. I am convinced that, with a proper discussion on the matter, and when a proper investigation of the two systems is made, as I believe it will be made by the Fiscal Commission which is about to be set up, there will be no doubt whatever that this country will claim its right, the right of every new country, to say nothing of the old countries, to protect and foster its own industries. Now, we have had just one slight instance of what a measure of protection will do. I do not think it was intentional, but it certainly came as a surprise to many people that, owing to the fact that we had to set up a customs barrier between the Free State and the Six Northern counties, and between the Free State and Great Britain, when we levied our import duties, in the case of tobacco, the manufactured tobacco comes in at from thirty to eighty per cent. higher duty than the raw leaf, which is all in favour of our manufacturing industries here. Now, what is the result of that? Before the institution of the Customs barriers, the tobacco factories were only working half time. Hundreds of their unfortunate employees were walking about the streets drawing the unemployment dole. What is the result now? Every factory is working full time. You will have seen in the newspapers yesterday and the day before pictures of the car loads of new machinery coming into one of our largest factories. Every factory is working full time, and no man is unemployed. That is a result incidental to our position, but apart from that, you have this advantage: you have revenue rolling into the State from the extra duty imposed on imported manufactured tobacco. The Revenue is piling up, and there can be no question about that. We do not know how long that will last, but the fact that there is a tariff means that our competitors at the other side of the water, who supply seventy per cent. of what is consumed in this country, are not going to stay outside that tariff wall, and when they come here what will it mean? Why, tremendously increased employment. That is a small instance of what could be done. There is another point that struck me as rather anomalous. Why should we, out of our poverty, we will say, subsidise Indian, African and Colonial raw leaf coming in? Why should we do it? It is called Imperial preference. But I understood from a debate in the Dáil that the revenue could not afford to subsidise a few thousand pounds of Irish tobacco, yet they are subsidising Indian, Central African and products from other parts of the Empire. It is not an economic proposition to subsidise the product of our own native soil and our own labour, but I suppose it is considered an economic proposition to subsidise the produce of coolie labour paid at the rate of two pence per day! I dare say there may be an explanation, but I have not heard any satisfactory one. To call one an economic proposition and the other an uneconomic proposition appears to me hardly consistent with reason. It does not appeal to me. We have all, I am sure, been looking back upon the brief period of independence in the 18th century known as the halycon days of Grattan's Parliament. What was done then to foster industries? How was it that a wave of prosperity passed over this country and that the increase in tillage, I think it was in five years, amounted nearly to one and a quarter million acres as the result of Sir John Foster's Act? You see the ruins all through the country of the factories in every little country town. These factories were the result of the fostering care of a native Government. The doctrinaires who favour Free Trade, cheap food and free imports, which prevent a country developing its resources and finding employment for all its people, are, I think, making a grave mistake. It is said that import duties must increase cost. I only ask you to take the very case I mention. Has the cost of tobacco manufactured in this country gone up one penny per pound? There is one point that is lost sight of by those who bring forward such arguments, and that is internal competition. What brings down the price all over the world? It is the same thing. If an industry pays it will be extended. Many other factories will rise and the competition between those will bring down the price to what is called an economic level, to such a level as would enable the industries to prosper and the people to find employment.
The feelings of justifiable pride that one might otherwise have in discussing this first Budget of the Saorstát are considerably modified by the nature of the Bill. I am afraid it is another unpleasant reminder of the fact that we have yet to pay in hard cash for the orgies of the past twelve months. We have higher income tax than the people in Great Britain and the Six Counties, and we have more expensive postage. In addition, as an inevitable result of the setting up of the new land and sea Customs frontiers, we have to pay appreciably higher for many imported articles than was hitherto the case. We have not even the consolation of knowing that these new duties tend to foster or encourage existing Irish industries, with the possible exception made by Senator Sir Nugent Everard of tobacco and cigarettes. He has spoken in favour of protection and argues that the present conditions are evidence of the fact that the imposition of import duties will not increase the cost to the consumer. We all, I think, know very well why the cost of Irish tobacco has not gone up. I think a more striking example is our experience during the time that a boycott was imposed upon the import of many articles of British production such, for example, as agricultural machinery. We know from experience that the embargo had to be taken off some of these products because, instead of endeavouring to meet the increased demand and to establish a market for Irish produce, Irish manufacturers put up the cost of agricultural machinery and other items as high as 75 per cent., proving conclusively that protection does not in the end mean that you are going to benefit the country and certainly does not mean that you are going to get the commodity at the same price as if you had Free Trade. Some of the duties imposed as a result of the Customs frontier unfortunately have the effect of rather hitting an Irish industry. We have the example of the tax on methylated spirits which was mentioned in the Dáil. I understand that the tax is somewhere about 75/5 per gallon, and that the same tax applies to mixtures, such as polish, varnish, and other things made from these particular spirits. I understand that about three dozen Windsor chairs absorb a gallon of this varnish, so that the increased cost as a result of the tax will be about 2/- per chair. The extra cost of a bedroom suite will be about 25/-. Irish manufacturers of furniture found it very difficult to compete with English manufacturers previously, but I fail to see how they can at all carry on under the existing circumstances. The anomaly about this question is that British manufactured furniture, on which methylated spirits, or the varnish made from it, is used, is allowed in free of duty. The Minister for Finance, I think, promised to look into the matter, but the Bill seems to have passed the Dáil without any alteration having been made, although a special amendment was introduced and agreed to providing for the free admission of chloroform and sulphuric ether for medical and surgical purposes. I hope that some similar arrangement will be made in the case of methylated spirits used for industrial purposes.
Apart from the fact that this Bill does not bring any relief, but on the other hand imposes some new burdens, it contains some new phases which render it rather unique. I refer to Sections 6 and 7 of the Bill. Everybody knows that there is a comparatively large amount of income tax outstanding, just as everybody is aware of the circumstances under which that sum is outstanding.
I suppose everybody is equally impressed with the desirability of collecting those arrears except, perhaps, the people who owe the money. We know that the money is needed to replenish a very depleted Treasury, but there is certainly room for a good deal of difference of opinion as to the proposed method of collection. The proposal to make employers responsible for the income tax of their employees may seem to be a very happy and cheap way of collecting money, but it may in practice turn out quite otherwise. In my opinion it places the employer in a new relationship to the State and to his own employees, and that in a manner which is not either in his or the public interest. He earns, by assuming this responsibility, all the unpopularity of the tax-gatherer in addition to the other little eccentricities that tend to make the employer anything but a hero in the eyes of his staff. I am inclined to think that the very fact of this provision being passed would be rather an incentive to some people who are rather anxious to create trouble, and who might otherwise pay the tax, to withhold it in order to challenge the position of the employer in this respect. Even the Income Tax Inspector or Commissioner would receive more sympathy and, consequently, less opposition than an employer in this particular work. There is also in the case of any employer who is anxious to avoid this friction with his staff a strong temptation to collusion on the part of himself and his employees for the purpose of submitting erroneous returns in order to avoid this unpleasant duty. I hope no employer will fall a victim to this, but it is a temptation that should not be placed in their way if it could be helped. I know the Minister will repudiate the suggestion that there is a danger of the extension of this principle by making employers responsible for other debts, such as rates, butchers' and grocers' bills. Every person in a similar position is equally emphatic in repudiating any such suggestion, especially when engaged in inserting the thin end of the wedge of a scheme which he considers it inadvisable to introduce all at once. One would have imagined that the Government would have been satisfied with Clause 6 without introducing the rack and thumb screws of Section 7. Certainly the Government must have the arrears of Income Tax, but why did they seize these drastic powers for collecting them, before setting out to collect them, or, rather, before the employer set out to collect them? The main argument advanced in support of the proposal is that this is a very effective method or should be a very effective method of collecting the money. I do not think that that in itself is sufficient justification. Why not enact that any man or woman who owes arrears of Income Tax will, after a certain date, be hanged, drawn and quartered? It might be argued that that would be an even more effective method of collecting money than the provisions in the Bill, but that would not justify the adoption of such a policy. I wonder if the Government have made any serious attempt to collect these arrears of Income Tax with the existing machinery, and if so with what result. It would seem as if having become accustomed to some of the rough and ready, probably premature procedure, resulting from the conditions prevailing, that they now find it somewhat difficult and are impatient and unwilling to return to constitutional practices. It certainly is no surprise to learn that there are arrears of Income Tax any more than it is a surprise that many things should be disordered and disarranged as a result of the conditions of the last few years. I think it is not too much to ask that the existing machinery should get a fair chance in a normal atmosphere, before resorting to tactics which are more befitting a primitive tribe than a civilized community. One could understand the ferocity of mind with which the punitive measures proposed are employed if the Government were absolutely ignorant of what has been happening during the past few years, but seeing that they are intimately acquainted with every detail, one would have expected them to be a little less panicky in the proposed legislation. If they had given a fair and reasonable trial to the existing machinery, and as a result found that it had definitely failed, then it would be ever so much more difficult to oppose the proposals that they now bring forward, than it is at the present time. We may be told it has failed, but we must remember it got no chance in anything approaching a normal atmosphere. I think, in conclusion, before asking the Dáil, at all events, to give them these powers they should make the attempt I have suggested, and that it is only as a last resort that a measure of this kind should be allowed to go on the Statute Book.
I happen to know a good deal about the furniture trade in which methylated spirits is employed as a mixture in making furniture polish. The value of the commodity as purchased in the market is 12/- a gallon. The tax I believe at present being imposed is £3 15s. a gallon, which makes the cost impossible, and there is no substitute. I am very glad to mention this matter because all the makers of furniture in Dublin have been coming to me to know what I am going to do about it. They will have to stop finishing their goods here and send them to Manchester or Liverpool to be polished. I believe that has already been done, and a large quantity of furniture has been sent to Liverpool for polishing. I think this is a very opportune time to mention this matter as the Minister for Finance and the Chairman of the Commissioners are present. I am certain that they did not know anything about the effects of this tax. This tax is an impossible one and ought to be removed at once, as it has given rise to a large amount of unemployment. While it exists no work can be done here at a reasonable price. Goodness knows, at the present time, the cost of production in this city or in this country is abnormal. Wages in my particular business are at least 25 per cent. more than they are in London, and I find I cannot get any more money for Irish goods than the London firms. Sometimes I cannot get as much money, with the result that if we go on manufacturing the one alternative and the one end is bankruptcy. I am sure the Minister for Finance does not want that. No one wants it if it can be avoided, but the weight of taxation to-day, rates insurance and the cost of labour are burdens that industry will not carry. You may collect your taxes this year. I am not out against taxes, and I am not going to say anything against them, whether right or wrong, but I say deliberately that this country will not carry the present load of taxation for any greater length than one year.
Anybody who is in the habit of reading the "Weekly Trade Gazette" and finding four pages of debtors' registered judgments, will see what condition the country is in. I remember during the war we were often months without a single judgment in Ireland, and now you have two hundred. There is no better index. People say they have money but will not pay. I do not believe that. I believe that any respectable trader will pay if he has the money, sooner than have his name registered as a defaulter. We are all quite willing to pay our reasonable accounts, but, as I said in this Chamber before, we are not going to carry an enormous load, because if we were to do so the whole business of the country will go to pieces. It is already in a bad way. Sir Nugent Everard's speech appeals to me very much. I have been trying to find out in industrial history if there was any nation or country in the world that ever became a manufacturing country without some sort of protection, and I failed to find any, with the exception of England. America, the greatest manufacturing country in the world, is the highest protected country. France, Holland, every country in Europe but England has protection, and the only great country that ever carried on with free trade was England. Seventy years ago the great leaders of trade in England, Bright and Cobden, made up their minds, and I think wisely, that they would buy the cheapest food in the whole world, no matter where it was got, and that they would pay for it by manufactured goods. That policy, applied to Ireland for seventy years, has reduced her population by 4,000,000, and it has reduced her industries to nil, and these industries will never be restored as long as you have free imports into the country. I do not want to raise the cost of living if it is possible to avoid it, but something will have to be done. We cannot go on in a fool's paradise, thinking that something will turn up this year or next year. Nothing will turn up. Except you can employ your people this country will not make any progress. Agriculture, the chief industry, we have it on the authority of men who know, is absolutely not paying its way. Then, where is your revenue to come from? What new money from abroad is to come into this country? There is nothing to bring it in except a few isolated industries in Dublin—Guinness, Jacob, Jameson and Power. Take these away and what have you? You have nothing left. I am no good to the country though I turn over £100,000 a year. I am not worth two pence to the country because I bring in no new revenue. I ask the Minister and the Chairman of the Finance Commission to look into this item of methylated spirits and have it eased, because it is doing great harm to the trade by sending these manufactured goods to Liverpool or Manchester to be finished, which is absurd and ridiculous.
I agree with Senator O'Farrell on the question of collecting Income Tax arrears, and I daresay every employer would say the same thing, but it is not about that I rise. Would I be in order in discussing the question of the loan? It does not actually come into the Bill, but I think, from what you said the other day, that we might discuss it.
AN CATHAOIRLEACH
Go on until you are stopped, Senator.
What I wanted to do was to make a tentative suggestion on the question of Premium bonds. These bonds have been issued in other countries with success. I do not regard them as a panacea for all financial ills, but so far as I can see they have not received very much consideration by the public. What they have received from the Ministry of Finance, of course, I do not know. There are two kinds of Premium bonds, the French kind, which carry current interest, and, of course, redemption at a certain date, and the proposed British bonds, which carry no current interest, but which provide, or would provide, for redemption with a premium at the end of a certain time It seems to me that the French kind, carrying current interest, would suit us best. I do not want to go into the details at all, but I want to point out that perhaps if we had bonds at £5 each, bearing 2½ per cent. interest and repayable at par for 80 or 90 years, it would probably suit us. We would then require one and three-quarter per cent. to meet the premiums. If one worked it out it will be seen that there would be a very substantial sum—£87,000 per year if you had a £5,000,000 loan—with which to give prizes. I see people smiling. This, I might say, is a perfectly orthodox financial operation. It is in operation in France and Belgium, and I believe in a good many other countries, and even in England they adopted the principle when they put out the Victory Bonds. But although they do not go quite so far as I think we ought to go, nevertheless, the principle of lots was adopted there. Knowing the kind of nature we have in Ireland, I think we might reasonably say that Premium bonds would be a success here. It would not prevent us from having another loan if the banks did their duty. Knowing the amount of Irish money that they have invested, they ought to be able to provide enough money to cover one loan by themselves, and I am not, therefore, proposing that Premium bonds should be put out for the purpose of attracting that class of money, but a different class of money. I am referring more to the small investors. Apart from the fact that you may get millions by this means, one point I want to stress is that of political stability. It is obvious, I think, that if you have a tremendous number of small investors, holding money in a Government loan, you will have a tremendous number who will be interested in the stability of the Government. That is an argument which would apply to any country to a certain extent. It ought to apply to us here where we are always having rebellions, or on the edge of one, and I think it would appeal very strongly indeed.
I think the people of Ireland will take up this loan. It need not be a very large one, and if they did that would do more to establish the credit of the country than anything else. We cannot have an outside loan without having our credit established, and I presume that we want to avoid having some British or American underwriting guarantee. This matter received a great deal of attention in England during the Great War and a Select Committee of the British House of Commons sat and heard a great deal of evidence on the subject. They reported against it. Boiled down their reasons were: in the first place, such a thing as Prize Bonds were unsuitable to the dignity of an ancient nation like Great Britain; secondly, they had the Non-Conformist conscience, and the third was one of party and of a temporary nature, that does not apply. Well, so far as dignity goes we need not say anything about it; so far as the Non-Conformist conscience is concerned I do not think that exists any more than the dignity. I hope the dignity will exist, but I do not express any opinion about it. Those reasons do not apply in any way to Ireland. I think I have shown or tried to show, that there is, at any rate, a case for considering this form of obtaining money. I do not think we ought to attach too much importance to the gambling argument. I used to have the habit of sitting in Stephen's Green during the luncheon hour for a few minutes. I noticed that everyone, whether he wore a high collar and spats, or whether he wore no collar or socks, was reading the racing "Herald," picking out winners. That is what we are in this country; we ought to recognise it, and turn it to some account.
I am anxious for a little guidance as to whether this is the proper time to deal with one Section of the Bill. I should know, but I must plead ignorance, because the finances and the revenue on income tax are in such a mixed condition for the last year or two that one never knew where he was, or what was the basis of the new taxes. I see that Section 1 sub-section 3 says "The annual value of any property which has been adopted for the purpose of income tax under Schedules A and B for the year beginning on the 6th day of April, 1922, shall, subject to the provisions of this Act, be taken as the annual value of that property for the same purpose for the year beginning on the 6th day of April, 1923." I know that during periods of the war the basis of taxation on land in Ireland was taken as twice the annual value, or twice the annuity, whichever was considered to be the lower. That, as far as I know, is still the existing basis in Ireland. If I am wrong, I ask the Minister to let me know whether that is the case, whether we are going to be assessed on twice the valuation of the land or the actual valuation. That is very important. I should like a statement from the Minister on the matter. Regarding the other matters alluded to, I was very much struck by Senator O'Dea's case for protection, that no country has succeeded on Free Trade except England, and even in England the wisest political economists hold that nascent industries ought to be protected. Most of the industries in Ireland are infant industries. I think every political economist I have studied, and I have read a few, said that they should be protected. After all we are not an exporting country to any extent, and practically our only exports are cattle, sheep, pigs, and so on. There need be no fear, I think, on the part of the people of the country, where we have such vast quantities of food and such great quantities of land capable of raising this food, that the cost of living in the country will in any way be increased and, if it is, wages will be correspondingly increased by the building up of industries under such a system.
When the Minister for Finance was introducing the Bill in the Dáil he stated that the general principle on which our taxation proposals are based is that our existing taxes should be continued as far as possible for 1923-24, according to the same rates and conditions as they applied in 1922-23. It is in consequence of that principle being departed from that I raise objection to one Clause in the Bill, that is Clause 5, the effect of which is to make the taxes on a certain section of the farming community higher than they were during the past year. The section changes the meaning of the word "annuity" in the previous Finance Act, and gives it a meaning of an annuity which might have been in existence 30 years ago. It is a very jealous thing for any class to find themselves exceptionally treated whenever there is a question of taxation. I am quite in favour of the farmers having to pay their share of the taxation of this country, and of having the most drastic measures taken for the collection of that tax, but I do object to having them exceptionally treated in the matter of having their Income Tax raised when all other sections of the community are allowed to have their taxes remain at the same rate as in the previous year. I do not know what amount will come into the Treasury from this increased taxation. I should be glad to know whether the Minister has made any estimate of it, and I should also like to know how he proposes to collect in these cases, because the original annuity which was in existence 30 years ago in the case of the Ashbourne and Balfour tenants, and the unpurchased tenants, and in the case of tenants who purchased prior to these Acts, in very few cases is the same. In my opinion, there would be very great difficulty in identifying the original annuity with the holding which, in the meantime, has been split up and given to different claimants. You are aware that the Labourers Acts, and other Acts, compulsorily took away certain portions of farms, and it would be very unjust to ask the present holder to pay on the basis of the original annuity. I do not know whether the Minister went into the question of the enormous increase of the Income Tax on farmers compared with other classes of the community since pre-war days. I think the Seanad will be astonished to learn that the increase has been 36 times the pre-war rate—that would be 3,600 per cent. increase. I am not surprised at members smiling, because only those who suffer the loss of having to pay it would think that it would be possible that such an enormous increase would be put on any class of the community.
In pre-war days the basis of taxation was one-third of the valuation, and the rate at that time was 1/- in the £. Two years ago, when the highest rate of taxation existed, the rate of 1/- had been increased to 6/-, and the basis of taxation was changed from one-third of the valuation to twice the valuation in some cases, or twice the annuity, or twice the interest in lieu of rent, so that it will be seen that I am correct in stating that the Income Tax two years ago was 36 times the amount it was in pre-war days. It is quite true that in the last year or so the double valuation and the double annuity have been reduced to one-half, and that the Income Tax had been reduced from 6/- to 5/-; still that leaves it at 15 times pre-war rate, on the rate of increase to the farming community. Now I should not object to any revision of the incidence of taxation of the people constituting this State when the whole question would be gone into, and when the different interests will be able to show cause why one particular interest was over-taxed, and another interest was under-taxed; but taking this Bill, which is more or less an urgent one, and where, probably, there was no time to go into all these matters of the inequality of taxation, we find that in one special case only the decision has been come to, and an increase proposed to be made. I think it is rather bad policy, on the part of the Government, to bring it in, particularly when the amount involved I am sure is not a very large item. With regard to the other clause of this Bill, objected to by some Senators here, I may say I am entirely in favour of that clause. I think it is an excellent method of collecting tax from people who can quite as well afford it as the farmers of the country, and the Government, in doing this, are only doing what they have put into force themselves as large employers. The Government has a big staff for adopting certain methods of getting their Income Tax. Now when it is a matter of spending money, of providing money for doles or for other things, there is a great deal of sympathy for people who get it, but these doles and these sums cannot be paid unless the money comes in from some source; and in the case of those employers, I do not remember seeing that they made any objection when they were called upon to deduct weekly certain sums from their employees for National Health Insurance and Unemployment Insurance though the fixing of stamps gave them a great amount of trouble. They had to make a certain amount of calculation in these cases every week, that is to say, that 52 different calculations had to be made, whereas the Government propose only to have quarterly or half-yearly deductions from employees' wages or salaries for the payment of this Income Tax.
I do not think there is any real substantial reason whatever for this objection. You must also remember in the case of insurance stamps that it is only from the lowest paid class of employees that the deductions have to be made. But in connection with Income Tax it is the married men with over £5 a week that they are asked to take something from. Now, it has been urged that the Minister should have adopted other methods in endeavouring to collect this tax. I have been told by an employee that he was prevented from paying this tax by the society to which he belonged, and that he would have no objection whatever if an employer kept it from him and handed him the balance. He would not then be breaking any rules. As a matter of fact I do not think the Irish Treasury would be able to recover this sum at all, except by adopting the means suggested by Clause 6 in this Bill.
I should like to make a suggestion that I think would fit in with that made by Senator MacLysaght. The recommendation which I make is not in any way aggressive, and I hope the Minister for Finance will accept it. The Minister is aware that the 4 per cent. War Loan issued in 1918 was tax compounded to the 1st April, 1923. That was the particular merit which recommended this 4 per cent. compounded tax loan issued by the British Government in 1918, and it was issued at a time when the British Government were in a very tight corner for money. It was issued at 100 per cent., which meant that the tax was purchased as well as the loan, because a 4 per cent. loan at that period if floated at all would not fetch more than 88 per cent. in the open market. This loan was issued and paid for at 100, and it carried the full credit and backing of the Lords of the Treasury. The contract was to pay the 4 per cent. in full to each investor during the life of the Loan. I regret to see that the Government on Saturday last announced their intention of taxing the interest on that Loan, and I consider that a breach of faith. But who is responsible for the breach of faith I am not quite sure. We had the statement in a leaflet, issued during the time from the Lords Commissioners of His Majesty's Treasury, that the interest will be paid in the whole of the United Kingdom free of Income Tax now and at any future time.
The loan may be satisfied and repaid in 1929 if the Government think proper to do so. I believe the Lords Commissioners of His Majesty's Treasury are the Crown, and they throw their whole weight of guarantee and credit into that loan which was looked upon as the most secure investment in the world. Now, we have got notice that this loan, or the interest from this loan, is going to be taxed to the extent of 25 per cent. I say that is not keeping faith with the people. Who is responsible exactly I do not know, and I am not going to make any charge, but I am afraid the English Treasury are largely responsible, and the Irish Government to a smaller extent. Everybody knows that Governments, for expediency, have confiscated the property of subjects. That does not say, nor does it prove, that that is just, for Governments or States in necessity cannot justify an act that is not just in itself, and any public advantage gained by a loss of good faith is bad and injurious to that Government. I find that under Article 5 of the Treaty the representatives of what is now the Irish Free State contracted with the British Government to make themselves responsible for all liabilities for pensions to policemen, civil servants and judges.
Now, I certainly take no exception to that. I think it is very fair, but I think that the interest on this loan is covered by that responsibility that they took over, and even if it was not covered I believe that if the holders of this 4 per cent. war loan went to the High Courts and took action against the British Government they could recover this interest, except there was some other arrangement with the Irish Government. That, of course, is a matter I am not aware of. Senator MacLysaght made a suggestion which, I think, is a very useful one. Perhaps the bankers here to-day may be able to give us the precise figure, but I believe there is about £10,000,000 invested in that loan. Unfortunately at the present moment we have no Government loan in Ireland to absorb that money, and I think if we had, Senator MacLysaght's suggestion would prove a very useful one. I would go a little further. His suggestion would be to attract the smaller investors. I suggest that if the Government were to create a 4½ per cent. tax compounded loan that most of the proceeds of these 4 per cent. war bonds would flow into that loan. In fact, I am sure they would. In Ireland, at the present time, we have nothing in the nature of a trustee investment. This is a very critical thing, and a very delicate thing, and people have to act very cautiously. I happen to be a trustee in a number of cases, and I am a good deal more careful about these trustee funds than I would be about my own personal affairs. There are not many attractive trust funds in Ireland at the present time. The railways, which were the most attractive as trust funds, are institutions that we have got to be critical about now. We have the Minister for Finance here present—and I would like to have an expression of opinion from him if he thinks it is convenient, practical or wise to set up and open these loans. If not, we will have to sell out our bonds and stocks and invest them in English securities. That is all that is left for us to do.
I hope the Minister will favourably consider the suggestions made by Senator Sir N. Everard as regards aiding agriculture and our industries generally. At the present time agriculture is in a very depressed state, but of course I know it is very difficult for the Minister to please at the one time all the conflicting views. Senator Sir John Keane would have him to balance his Budget without borrowing, and Senator MacLysaght would have him to borrow. Other Senators would expect the Minister to arrange his accounts in such a manner that we could all understand them. I think that might be a difficult matter, too. In connection with the proposal, or the recommendation of Senator Linehan, regarding Sub-section 1 of Section 5, as to assessing farmers who have purchased out under the Land Acts previous to 1903, the present system is to revert to the purchase annuity, that is taking the original annuity. The original annuity in this case was 4 per cent., while under the Act of 1903 it was at the rate of 3¼ per cent., and it would be, as it were, going from one extreme to the other to adopt what the Minister suggests here.
I would recommend that instead he should put all on the one plane and that the assessment should be made as under the 1903 Act, that is, for all tenant purchasers on 3¼ per cent. basis. On the question of the collection of Income Tax, I recommend to the Minister to adopt what is adopted in other countries, and what is a well known business practice, namely, to give a discount for prompt payment on a fixed date on all Income Tax payments. That, I suggest, would not mean a loss to the State. In fact, I am certain it would save enormous expense in the matter of the collection of Income Tax arrears. I recommend him favourably to consider that and to give an extended period of payment, even if that period were to carry a reasonable rate of interest, so as not to have the State at a loss, or any difference between the taxpayer who paid and the taxpayer who did not pay. I am positive that most of these arrears accrued because of the economic depression that has existed in trade for various reasons during the last few years. It would be a great hardship on a great majority of people who are willing to pay, but who are unable to pay owing to the depression, to have to pay the arrears of Income tax and the current taxation in a lump sum.
The Section to which exception has been taken by the last Senator is Section 5, Sub-section 2. It appears that the practice up to quite recently was to charge on the purchase annuity and one decision only in the Courts was given against that, the Judge in giving his decision saying that it was fairly evident, although not clearly expressed in the Statute, that it was the original purchase annuity that was in the mind of the legislture when considering this particular term. From the point of view of equity no undue burden is placed on any person affected by this particular section. If it can be shown that the person's income is less than the amount at which he is assessed he can claim exemption to the extent of the difference. If he has made no profit whatever he can claim entire exemption. But it must be borne in mind as between two holdings on one of which the purchase annuity was at a higher figure than the present annuity, if there be any, that the value of the holding has unquestionably increased during the time that has elapsed from the date of the payment of the first purchase annuity. Having regard to these facts we consider that it is only fair that this particular term should be inserted in this way. The amount involved is inconsiderable. The vast number of holdings were bought under the Wyndham Act, not many people are affected, and I do not think there is very much money in the business. In any case the opportunities are there for any person who is prejudicially affected by this particular description to get exemption, and the only question that then arises is: are farmers, as such, who have bought out their land within the last thirty years, entitled to be relieved from any assessment with regard to their profits? Business men, and, I presume, tradesmen, Ministers and Senators and others are assessed, and it does not appear to be equitable that one particular order in the community should be relieved, because when any particular person who is affected can produce evidence to the effect that we are assessing him on a profit that he has not made he can get relief from it.
I am taking the points in the order in which they were made, but going backwards. I think the last point was dealt with by Senator Linehan also. The next point was made by Senator O'Dea, who mentioned the four per cent. tax-compounded securities. We are not parties to the bargain that these particular securities should be tax free. When they were issued, if they had been subject to income tax reduction, there would have been something like £5 14s. 0d. per cent. dividend. They are now worth only £5 6s. 8d. dividend with the income tax deducted. Two years ago it would have been four per cent. and the present year four per cent. also, the difference being as between 6/- in the £ income tax and 5/- in the £ income tax. We endeavoured to come to an arrangement with the British Government with regard to our portion of the profit as between £4 and what would normally be paid for a security of that type if it were not tax-compounded. We were not able to come to any arrangement and we have consequently got no alternative but to give notice that it is our intention to tax that particular security on and after a certain date. One particular dividend has been allowed by us to go free—the April dividend—because we were not in a position to give notice, and I would be prepared to consider this suggestion of the Senator's if the case be put on the ground that these people cannot sell out between this and, say, the 1st of August. They have until the 1st of August, when the next payment is made. If the Senator or the Seanad is of opinion that it would be difficult to unload this particular security within that six weeks then there is a case for consideration. I think something like £2,000,000 is held in this country in that security. If that case can be made it would be our duty, I think, in all fairness to consider that proposition.
I think you should put it on to the end of the financial year.
The Senator must have made a mistake. 1923 is down, I presume he meant 1924.
Yes. It would be better to put it on to the end of the financial year.
A good deal of criticism was urged in connection with the fact that we had no provision in this Bill for dealing with the special circumstances of the country. We admit that the special circumstances of the country have not been explored. It is an agricultural country and the case is made that a special effort should be made to foster agriculture. It is our intention to set up a Committee to examine that question, and I promised in the Dáil last week that the Committee's operations would probably commence within a fortnight. Without having some information from a responsible Committee such as that any attempt that we would make to deal with it would be open to objection. Even here in the Seanad it is fairly obvious that there are divided views upon the question of protection. A case has been made out here by two or three Senators that there should be protection. When in the ordinary course protection is afforded by reason of the Customs barrier we are told that we are hindering trade, interfering with production, making the costs of certain manufacturers heavy, and, generally speaking, playing the devil with the business that we have got. I do not know whether members of the Seanad have really made a study of this particular question or not, but in the Dáil I got rather a shock when the matter was first put forward. I find that it is stated that there were no Irish manufactured varnishes or polishes available for the purpose, or suitable for their purpose, that is the manufacturers' purpose. I am advised that that should be accepted with reserve, and that the Inland Revenue Commissioners have recently had experience of specific cases bearing on this subject. It was urged that the importation of 25 gallons of spirit stain was liable to a duty amounting to about £130; that it was a specialised product essential to the manufacturing business and that it could not be produced in the Free State. The difficulty has been solved by the importation free of duty of the dry ingredients which are now dissolved in Free State industrial methylated spirits delivered to them duty free under a special authority granted by the Commissioners. There are at least seven manufacturers of varnish and stains in the Free State who are authorised to use large quantities of industrial methylated spirits free of duty. There is obviously a case in which we have carried out all the wishes of one side of the Seanad, and disappointed the other side by taking away the case they had against us in the matter.
Considerable criticism was levelled at us for taking steps to collect income tax, and it is alleged that we have not made a case, that we have not endeavoured to collect this money. The facts of the case are that there are two or three millions of money uncollected, notwithstanding the ceaseless activities of the various collectors throughout the country. Every adjective of opprobuim that it is possible to think of has been thrown at us by a particular order of the community. If my recollection of my earlier experiences is correct, I think there are some sectional orders of the community who serve notice upon employers that if certain employees do not produce an instrument duly signed and receipted, the labour of the other people will be withdrawn from certain houses. I do not know whether that practice is a vile practice or whether it interferes with the liberty of a large number of people, but I believe it is in existence.
Perhaps the President will say what he is referring to as I am sure we are in ignorance of it.
I am referring to a case in which, if there is an organisation of anything from one hundred to thousands of members, and that a condition of the organisation is that a receipt must be produced showing a paid up membership of that organisation, and if that receipt cannot be produced by a certain man, that other men are withdrawn from their employment. Now, we are not asking that a man who owes income tax should be ostracised from mankind and looked upon as a public enemy, and that other honest men in the employment should be withdrawn rather than work with a man like that. We are not asking for that. All that we are providing for is that steps will be taken to make it easy for that erring son, and that only small deductions will be taken from his salary in order to enable him to meet a certain charge of the State which, otherwise, would be oppressive, and might interfere with his normal activities if we did not make provision for taking it from him in small quantities. I think that will compare very favourably with the other side of the case I have mentioned. I rather welcome the criticism of Senator Sir John Keane, and regret very much that the Press was not here to take a note of it. We are arriving at a stage when it is rather difficult to balance accounts, but it scarcely matters, and is not very material to the point at issue whether the accounts are placed before you in a way in which they can be easily understood, or in a way in which it is difficult to understand them. The balance is always easily discoverable, and the balance in this particular case is on the wrong side. We can put forward explanations for it being on the wrong side, but those explanations do not usually satisfy financiers or bankers, and we are arriving at a time when we must satisfy the scruples of these two particular orders of the community.
It may be urged that during the last 12 months it would be impossible to expect any normal business, and that you must have normal business in order to deal with the various costs we have had to meet during that time. If it would be any assurance to the Senators to say that although the estimates we have put have been very carefully considered, they do not exactly represent what we believe will be the ultimate expenditure, it might perhaps appear to them in a more favourable light. In other words, there are various sums included in the estimates which may not be spent and which every effort will be made to economise on. There are some items on which it is impossible to economise, such as Old Age Pensions. It is possible to economise there to this extent, that some of us know from experience of abuses in connection with that particular service. Then there is the Army and various other items throughout the estimates upon which savings may be anticipated. We intend to make these savings, if it is possible, but we are very near a line ball with regard to the matter. It must be borne in mind that a great many people have escaped paying their due quota to the State for political reasons, apart altogether from those in whom Senator O'Farrell is interested, and if he were aware of the personality of some of the cases, I think his anxiety would diminish very rapidly. Further, it is a fact that there has not been as appreciation of one's responsibilities to the State, and we must endeavour to get that. We must bring home to every person that no matter in what walk of life he is, he cannot expect his brothers and sisters to contribute towards the upkeep of this important State unless he himself bears the same burden. Complaints have come to me particularly from my old political friends that while the British were here they never paid Income Tax, and why should they have to do it now? I am sure Senator O'Farrell, when he meets any of these people, will inform them that that is a vile and unjust thing and that he hopes they will not persist in it. There are three or four items in our accounts for the current year which make up the heaviest end of the expenditure. The expenditure on the Army I think it may be safely predicted, will not reach one-third of the sum estimated now, for the year 1924-1925. By reason of the exceptional and abnormal circumstances of the time, there are expenses which are unavoidable just now. Steps will be taken during the year to limit any unnecessary expenditure, but I am not satisfied that it is fair for people interested in what are called trustee securities to expect a poor country like this, which is just now starting on its work, to pay ½ per cent. more than, say, a rich country like England. On a tax-compounded security if we were to issue it here, we should certainly not be asked to pay 1/2 per cent. more than they are over the way. As regards the issue of premium bonds the matter has been under consideration, but we do not like starting off with them. They might perhaps have a certain attraction in the future, when things are on a very level and stable basis.
I think it would be inadvisable for us to mark the first year of our existence with an issue of that sort. I do not know that there is any other matter that I should have replied to. I expect that during the course of the Committee Stage of this Bill we will have an opportunity of dealing specifically and in detail with any other matters that will arise.
My question was partly answered, but I would like to be sure on the matter.
It is on the single basis.
Question put: "That the Bill be read a Second Time."
Agreed.