The Minister, in his closing remarks, to some extent anticipated what I intended to say when he stated that the basis of the distribution of this grant is going to be revised. I cannot help feeling, however, that at a time like this when there is so much discussion in regard to the general financial position of the country, the whole basis of the Grants-in-Aid of agricultural rates should be revised and should be examined afresh.
The present position has been largely the result of a series of compromises which have been drifted into without any very considered long-term policy in mind. I suggest that, as this Bill is purely a temporary measure, for one year only, before the Minister comes to the House next year, he should be prepared to defend the general principle of the Grants-in-Aid. Not merely do I suggest that it should be an examination into the distribution of the grants, but into the whole principle of the grants themselves. It is common knowledge that in the next couple of months this country will encounter a very difficult Budget and that in that Budget the Minister for Finance will be trying to meet greatly increased expenditure. It is therefore a matter of public interest to everybody in the country that every possible source of wasteful expenditure should be very carefully examined between now and the date of the Budget. The only possibility we have of avoiding great increases in taxation, which have an extremely adverse affect on many people in the country, is to cut out every single unnecessary piece of Exchequer expenditure. I suggest that some of the Grants-in-Aid of rates on agricultural land could possibly be reduced or dispensed with without doing any very great harm to any section of the population.
It might be no harm to recall very briefly the origin of the agricultural grant as far as I know it. The Local Government Act of 1898 began the agricultural grant in the form in which we know it to-day. Up to that date the local rates on land were paid, generally speaking, as to one half by the landlord and one half by the tenant. The Local Government Act of 1898 shifted the whole control and patronage of local government from the landlords to the tenants in the country. I have always understood that the agricultural grant which was given under that Act was meant to compensate the landlords for the half share of the rates they used to pay, that it was a consideration for the taking away of the power and the patronage they possessed in local government and that the actual amount of the agricultural grant as defined in the Act of 1898 was the amount which had been contributed by the landlords as their half of the local county rates before that date. In 1925 the agricultural grant was doubled. The reason for this great increase in agricultural grants is, I think, very interesting in view of the situation to-day and the situation which is coming in the near future in the Budget.
In 1925 the worst repercussions of the first world war were gradually dying down and it became possible to reduce income-tax, though the younger generation of the present day may find it impossible to believe that. In 1925 the standard rate of income-tax for this country was reduced to 3/- in the £. At that time the farmers' representatives in the Dáil very properly complained that the reduction in the rate of income-tax conferred no benefit on farmers for the simple reason that farmers paid, as they pay to-day, a very small portion of the total income-tax of this country. It was in order to give the farmers some equivalent relief for the reduction in income-tax that the relief from rates on agricultural land was doubled in that year.
What I suggest is this: if the agricultural grant is raised when the income-tax is lowered then the agricultural grant should be lowered when the income-tax is raised. When other sections of the population derived benefit from the decrease in the rate of income-tax, we gave farmers an equivalent relief by way of increasing the agricultural grant, and it seems to me to be just and logical that, at a time when other sections of the population are called upon to bear the greatly increased income-tax, the farmers should bear their own part of the fiscal burden by being deprived of part of the agricultural grant which goes towards the relief of rates on agricultural land. If the reason which was given by the Minister for Finance for increasing the agricultural grant in 1925 is a good one, I find it difficult to see his argument against reducing the agricultural grant if income-tax is again increased. Remember, that the standard rate of income-tax paid nowadays is more than twice what it was in 1925 and that the agricultural grant, which in 1925 stood, roughly, at £600,000, is now, as the Minister has told us, over £4,000,000, and under the new principle which he outlined to-day is rapidly and automatically increasing with every increase in local expenditure.
I do not wish to stray from the text of the Bill. I have no intention of doing anything so disorderly. I do not propose to discuss on this Bill some of the matters I would have discussed on the motion with regard to income-tax, if it were taken. However, what I am going to say is strictly relevant, and it is this. At the present time, owing to the nature of the assessment under Schedule B in the income-tax code, the farmers enjoy very preferential treatment. Without going further into that question, I feel I can say without any fear of contradiction that, owing to a series of historical developments, owing to the fact that the income-tax code has not been brought up-to-date in the light of modern circumstances, owing to the changes in the value of money, to the rise in agricultural prices and to a whole series of circumstances which I hope, at a later date, to discuss in the Seanad, Schedule B does, in fact, favour the farmers more than other sections of the population. At the present time the only contribution which the farmers make, with the exception, of course, of very large farmers, to the direct taxation in this country is by means of the rates on the land.
I suggest some revision of the income-tax laws which will bring farmers more in line than they are at present with other sections of the population for income-tax purposes. Pending that revision, farmers should share in the burden of direct taxation in the only way in which they can share under the existing law, and that is by contributing more to the rates on land. The way that can be done, and this is strictly relevant to this Bill, is by varying the agricultural grant. This grant is an extremely delicate mechanism for the purpose of varying the amount of direct taxation on farmers. It was increased in 1925 when it was desirable to reduce direct taxation on farmers. I suggest that, in the present emergency, the increasing of the direct taxation on farmers is unfortunately desirable. The most convenient means of imposing this taxation is by changing, in the opposite direction, the agricultural grant.
I remember serving on the commission in 1931 which went into the whole question of the derating of Irish agricultural land. The object in setting up that commission was to see if Irish farmers could not get some relief equivalent to what was being enjoyed by British farmers under the derating of agricultural land in Great Britain. I need not weary the Seanad with the arguments of that commission. Suffice it to say that a small majority of the members of the commission were of the opinion that the complete derating of Irish agricultural land was impracticable in the circumstances of the country. Certain recommendations were made for the grading of the agricultural grant in the way in which it is graded at the present time. Certain of the recommendations of the commission have been carried into effect and were mentioned in the Minister's statement this afternoon. Two years later, in 1933, the land annuities were halved.
If reference were made to the Parliamentary Debates of the time I would probably be proved correct, though I am only speaking from memory, when I say that I understood that the halving of the land annuities at that time was meant to give to the farmers what the Derating Commission had found it impossible to give them by way of complete derating. Whether that was the reason or not, the halving of the annuities in 1933 conferred a very great benefit on the farming community of this country. It relieved the people who had purchased land up to that date of 50 per cent. of their contractual obligations. It had precisely the same effect as the halving of a monthly payment on an article bought on the hire-purchase system would have. I always understood the halving of the annuities was meant as a partial consolation for the great difficulties of the time. It is no use harking back on these difficulties such as the economic war. It was not possible to give complete derating to Irish farmers as was given to English farmers but, instead, their annuities were halved.
The reason I am referring to those rather distant events is that it was in those years that the present system of agricultural derating began to take shape. Certain benefits were conferred on farmers in those years for certain well-defined reasons. Like so many other things that happened, those benefits have been almost automatically increased without regard to the background or the circumstances. I suggest that the time has now come to inquire whether this country can afford this great measure of relief given to one section of the population at the expense of others.
There is no doubt at all about it but the agricultural community of this country enjoys a very favourable fiscal position. Owing to the manner in which income-tax is assessed under Schedule B, farmers enjoy a favourable position. That is common knowledge. In addition to that, owing to the operation of the agricultural grant, they pay on their agricultural land lower rates than other people pay on their rateable property. Both in regard to the main national tax and to the main local tax, farmers enjoy a distinctly more favourable position than other members of the community.
It has been said, and I have no doubt it will be said again, that farmers themselves contribute so largely to some of the other taxes in the country that they do not get any practical benefit from derating at all. In 1931 an effort was made by the Derating Commission, of which the result is printed in the report—and I wish some similar investigation could be made to-day—to allocate the revenue and the expenditure of the country as between the farming and the non-farming classes. The result shown in that investigation was that the farmers were deriving a greater percentage of the national expenditure than they were contributing to the national revenue. Those figures are 20 years old, and I would like to see some similar inquiry to-day.
Whatever the result of such an inquiry might be, we find ourselves in this dilemma: If the whole of the amount of the agricultural grant is paid for by the farmers in indirect taxation, then the position is that the farmers are giving with one hand what they receive with the other. If the case made by the farmers that they pay such heavy indirect taxes can be justified, then the whole thing is farcical. If, on the other hand, they do not pay with one hand what they receive with the other—and I do not believe that they do—then the position is that one section of the population is in a position of preference as compared with others. I am not saying that in any country you should not have preference of that kind. It is the essence and basis of the so-called welfare State that the less favoured section of the population should derive certain benefits paid for by the more favoured section, and the whole basis of modern redistribution of taxation on social services is explained on that principle. There are subsidies on food, housing and other services paid for out of taxation.
Many of these subsidies have an overwhelming justification and others have not. In the coming Budget, I have no doubt, the Minister for Finance will search for justification for the retention of some of these subsidies and, I hope, for the abandonment of some of the others. People are waiting with interest to see which of the subsidies will disappear in the Budget, but the point I want to make on this occasion is a point that seems to be overlooked, at least I have not seen any reference to it in public discussion. That is that the increase of the agricultural grant and the halving of these land annuities appear to be subsidisation of the agricultural population. Many of the local services which the farmers enjoy are subsidised by the non-farming population and in the halving of the land annuities the farmer's purchase price for the land of which he is rapidly becoming the fee simple owner is being subsidised.
What I suggest is that, at a time when the financial position is so stringent, when taxation is rising and when everybody is urging that every unnecessary expenditure should be pruned and that every subsidy that has no overwhelming justification should be cut down, this is a type of expenditure which is growing almost continuously from year to year without question. It is almost regarded as unpatriotic to question the agricultural grant and it is argued that this does not fall under the heading of subsidy in the same sense as food, housing and the other subsidies. I hope when all the other subsidies are being considered between now and the Budget that the agricultural grant will also come in for its due measure of consideration.
I just want to make one other small point and it is something which the Minister has already referred to. It is in regard to distribution of the grant. The present grant is distributed on two differentials. With one everybody will agree and with the other they will not agree. The first is an effort made to try and give a greater amount of relief to the small holders. That, I think, is right. It was recommended by the Derating Commission, who considered it was right that they should give some differential treatment to the small man. The other system of gradation is on the basis of the amount of employment given.
I really think that represents a certain fallacy and muddled thinking which is very common in this country, namely, that the amount of employment given is in itself something to be desired for its own sake. I cannot accept that. I consider the basis of a good agricultural policy is not the number of hands employed in producing the products of the country but the amount of the products produced in relation to the amount of labour employed. Therefore, I suggest that in this matter the present system of distribution is unscientific. If the grant is going to be distributed by any other gradation outside that of the size of the holding, I urge that the volume of produce should be the basis, and not the amount of employment.
The agricultural grant should not be used as a method of giving relief through employment by the farmers. That is retrograde and out of date in these times. I am not suggesting what the system of gradation should be because the Minister said it is going to be investigated, but I agree it should be on a rough and ready measure of the area of the land under tillage. Everybody in the country is agreed that an expansion of tillage is desirable.
I suggest that a gradation of the agricultural grant in relation to the amount of tillage rather than the number of men employed would be more consistent with general agricultural policy. In other words, the agricultural grant is a very delicate mechanism for guiding agriculture, as it gives to the Government an extremely mobile and flexible instrument for helping agriculture in various directions. I suggest that a scientific and rational grading of the grant, not in relation merely to the number of men employed—because that is simply the old relief work mentality and we are back in the days of the Famine— but in relation to the amount of produce of the land, would enable this delicate mechanism to be utilised for the general furtherance of the Government's agricultural policy.
I am sorry for delaying the Seanad so long, but I ask the Minister to give us some assurance before this time next year that the larger items of expenditure of public money will receive some more serious consideration.