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Seanad Éireann debate -
Thursday, 16 Jul 1953

Vol. 42 No. 6

Sir Patrick Dun's Hospital Bill, 1953. - Finance Bill, 1953—Second Stage (Resumed).

Last evening, Sir, we had reached, with regard to the Finance Bill, the matter of the duties on whiskey and beer, and tobacco. I indicated that the Minister had made a grievous mistake in expecting to receive an additional £1,000,000 from the duty on spirits. The Minister, I think, observed that he had not made a mistake. Now, it would appear that the yield from whiskey last year showed a deficit of £591,713. The Minister had believed or told us last year that he believed that he would get a much more substantial revenue from the increase in the whiskey duty than he had got in previous years. I think he overestimated his receipts from that source altogether by £1,500,000. The position with regard to the whiskey and beer industries by reason of the imposition of the additional duties in last year's Budget, is very, very serious.

Undoubtedly, in the case of tobacco the revenue has been up. The Minister was right in saying that he would obtain a bigger yield. He obtained a very, very big yield from the additional duty on tobacco, but the fall in consumption of tobacco was really phenomenal. Whilst the Minister got a very substantially increased revenue, the fall in consumption of tobacco was over 2,144,430 lb. Let us pause for a moment to consider that. What we have to consider is that as a result of the imposition of this additional duty on tobacco the fall in consumption has been over 2,000,000 lb. In other words, we must expect that if this duty is to continue to be imposed, the fall in production of tobacco will be very, very substantial, with the results that will inevitably follow that fall in production. We shall have people thrown out of employment. I do not know what is the position in regard to the tobacco industry to-day, but I am sure that if unemployment has not taken place in that industry up to now, if this duty is continued it is inevitable that there must be unemployment in the tobacco industry.

I have mentioned the matter of spirits. There has been a deficit in the yield amounting to nearly £600,000 —£591,713 to be accurate. The fall in production of spirits was over 281,359 gallons. Again, we must consider what this will mean. You will have distilleries producing less whiskey, with only one result, that is, unemployment.

Now the position with regard to beer is that the Minister obtained a substantial additional revenue. He obtained over £2,500,000 by reason of the addition in duties, but again the breweries in this country produced, because there was a smaller demand, 105,773 gallons less than in the previous year. Undoubtedly it was a small quantity of under-production, but nevertheless, it was an indication that if the additional duty on beer is to be continued, there will be a further fall in production, with the results I have indicated. I ask the Minister once again to consider carefully these duties. In the face of what he has been told here and elsewhere, he surely must consider favourably alleviating the position.

I am certain the Minister will tell us that in regard to whiskey the position is artificial, that the figures—which cannot be disputed—cannot be taken as an indication of the true position. He will tell us that certain persons withdrew whiskey from bond in anticipation of a Budget increase. If he tells us that, later on I will endeavour to show that he is wrong. We have numbers of people employed in these industries. The additional imposition will mean a considerable falling off in business, which will worsen as things go on and mean further unemployment.

Another result of these increases has been to interfere in a very adverse way with the business of the publicans. As a result of these duties they are in a bad way. They have suffered considerably, there has been considerable unemployment in the licensed trade and, indeed, a number of licensed houses have had to close. For all these reasons, I would earnestly ask the Minister to consider reducing these duties.

I mentioned last evening what the Minister is doing with regard to the 5 per cent. National Loan by way of accepting it in discharge of claims for death duties. I would mention again the matter of Land Bonds. If the Minister acts in accordance with his offer on the National Loan when he agrees to take it in discharge of death duties, he is making the case for the acceptance by the Revenue Commissioners of Land Bonds in discharge of claims for death duties. We must bear in mind that in 90 per cent. of the cases the holders of Land Bonds were unwilling acceptors of those Bonds. They received the Bonds in payment for their lands, which were compulsorily acquired from them. I am not suggesting that the State was not quite right to acquire the land compulsorily—in fact, it was quite right —but I am suggesting that, to unwilling vendors who had to give their property and had to accept payment therefor in Land Bonds, it would be only fair that the Minister should accept his own Land Bonds in discharge of his claims for duty. I am not suggesting that anybody but the original holder of bonds or his estate should be entitled to have them accepted. I think I have made a case for the acceptance of these Bonds by the Revenue Commissioners in payment of death duties.

It will be noted that under the Bill, National Loan will be accepted for death duties "in pursuance of regulations to be made by the Minister." This brings up again the passing of a Bill here under which regulations are to be later on, made or prescribed. Why does the Minister not put his regulations into the Bill here and now? What difficulty would he have in framing them or putting them in? I see no difficulty. If there is difficulty in doing that, there must be difficulty in putting them into a document later on. There is no reason why we should pass legislation by virtue of which the Minister is going to put through further legislation, later on, by these regulations. I ask him to consider that carefully and to decide that we should have the regulations in the Bill to enable us to see what we are going to do. If he will not accept that view, if for some strange reason he thinks he should make his regulations later on, it would be only fair that he should give due publicity to those regulations by publishing them in the Press, by sending copies to, say, the Bar Council, the Incorporated Law Society and the Chartered Accountants' Council. Otherwise, we shall have difficulty in ascertaining what regulations are being made from time to time.

The matter of regulations brings to my mind the position of our Finance Acts, which are in an unholy mess. Since 1947, apparently, we in the Oireachtas have been doing nothing but taking our scissors and paste-pots and cutting out and pasting in this and that. That is a wrong approach. It is practically impossible for anyone but the Revenue Commissioners to ascertain accurately, in a simple but perhaps unusual case, what the position is to-day in regard to stamp duty. You had the 1947 (No. 2) Finance Act and then subsequent Acts with sections repealing this and that and with the interlineation of this and that. I would like the Minister to tell us what difficulty there is in bringing his Finance Acts up to date every year. I would ask him to make those regulations now and also to see that the Finance Acts are not cut to pieces year after year but brought in in a manner that will enable the ordinary person to see exactly what the position is in regard to, say, stamp duties, death duties or income-tax.

I think I have made it clear that the Minister cannot feel there is any support in the country for this Budget. If he has any sense of political honesty he will tell us that, but apparently he is going to put his Bill through, whether we like it or not.

During the course of this debate, a number of Opposition speakers stated that this Budget— which is represented here by the Finance Bill—must be looked on in conjunction with the Budget of last year, that you cannot look at this Finance Bill by itself: that you have to have regard to the financial position as revealed by the Finance Bill of last year. I think we must agree that in that they are right—that you cannot look at this Budget just by itself, but must consider what came before it.

I feel that the error which speakers on the other side of the House have made is that they do not go back far enough. It is not in any way sufficient to go back to the Budget of last year. One must go back one year further— to Deputy McGilligan's last Budget of May 2nd, 1951. As Senators on this side of the House pointed out last year —and we have to point it out again this year—a large part of the task which the present Minister for Finance has to carry out is the righting of the state of the nation's finances as they were left to him by his predecessor in office, Deputy McGilligan, who was Minister for Finance in the Coalition Government.

It is generally accepted that the Budget of May 2nd, 1951, was an election Budget and that it was introduced purely for the purpose of an election. It deliberately left out of account expenditure amounting to millions of pounds, for which not one penny was provided in revenue. In this connection, I should like to quote a statement made by the man who, for most of the period of office of the Coalition Government, was a member of that Government in the capacity of Minister for Health—Deputy Dr. Browne. I have here an extract from a speech which he made on the 28th May, 1951, and which was reported in the Irish Press on the 29th May, 1951. In that speech, Deputy Dr. Browne revealed that while he was still Minister for Health in the Coalition Government he was asked to “cook” his Departmental Estimate by reducing it by a sum of £300,000. An undertaking was given to him that, later in the year, he would be allowed to apply to Dáil Eireann for a Supplementary Estimate to cover that deficiency. In the speech to which I have referred, Deputy Dr. Browne said that he refused to do that:—

"My view was not altered by the information that other Ministers had agreed to a similar suggestion in relation to their own Departments to mark down their Estimates in order to facilitate the preparation of a favourable Budget".

I think that that passage of his speech is particularly significant in the light of the speeches to which we have listened, not merely in this debate, but in the same debate last year and, meantime, right throughout the country. The report continues:—

"I was told that if the Ministers did not agree to this subterfuge then that it would probably be necessary to reimpose the taxes on beer, cigarettes, and cinema seats, removed in 1948, and that this could be politically very embarrassing when it came to making speeches at election time."

Did Deputy Dr. Browne not say, also, that the Hierarchy had accepted his Health Bill?

He did all that with £300,000? Taxes on beer and tobacco——

I will expand on this business of politically embarrassing Budgets.

You will need to have a better authority.

While he was Minister for Health in the Coalition Government, Deputy Dr. Browne was told that the expenditure would have to be left in the Budget and not provided for out of revenue because, if it was provided for, it would be politically embarrassing. Let us consider what sort of a Budget this Budget of the 2nd May, 1951—that was not to be politically embarrassing—turned out to be.

A sum of £3,600,000 was required that year for an increase in salary to State servants. Is that so, or is it not? It is all very well to laugh and snigger but is any member on the opposite side of the House prepared to say that what I have just said is not true? In Deputy McGilligan's last Budget, which was brought in two days or so before the dissolution of the Dáil, not one penny was set aside for increases in salary to State servants and the amount that fell due to be paid was £3,600,000. Will any member of this House deny that?

Does the Senator assert that the increases to civil servants amounted to £3,600,000?

No, civil servants, Gardaí, and so forth.

State servants.

If the Senator has to be tutored by the Minister——

I said "State servants". Senator O'Brien brought out that point yesterday.

Did anybody, at that point, know how much it would be?

I do not think so.

Who knew it?

I will deal with that point. It has been suggested—not, I must say, with a great deal of conviction—that if that sum could fairly accurately be computed it might have been a guiding line to put in the Budget. So far as that is an argument at all, it could have been met by putting £2,500,000 or £3,000,000 in the form of a blanket sum to meet unforeseen contingencies without mentioning civil servants, State servants or anything else. Surely Senator Hayes will not seriously suggest that a responsible Minister for Finance would allow a position to arise where a sum of at least £3,000,000 would fall to be met in the year and, simply because he did not know down to the last penny how much it would be, would not provide for it.

A further sum not provided for in that Budget was £2,230,000 for losses incurred by C.I.E. in that year. Not one penny towards that amount was provided. Will anybody deny that statement?

Another amount which was not provided for in that election Budget—the Budget which was not to be politically embarrassing—was a sum of £835,000 in the form of Supplementary Estimates required for health. The great bulk of that was for increased salaries to various local authority employees. Incidentally, there is an interesting story about that. These salaries had been a matter of negotiation for some considerable time. The suggestion had been made that, in fact, a 20 per cent. increase should be paid to those local authority employees as from the 1st of November of the previous year, i.e., 1950. A fairly short time before the dissolution of the Dáil in May, 1951, a circular was sent round by the responsible Minister stating that he was not prepared to agree to the proposal.

On various dates between the 4th May and the 17th May—that is, during the election campaign—further circulars were sent out to the local authorities by the Minister concerned stating that the Government were now prepared to agree to the increase of 20 per cent. in the salaries of those local authority employees as from the 1st November of the previous year. That represented a present of some six months' back pay as well as an increase for the future to the people concerned. In the light of the other circumstances of the time, I think that the reason for that step is only too obvious. Be that as it may, this further sum had to be met in that year and in succeeding years but no provision was made for it in the Budget of that year.

It is not surprising that, in view of the manner in which Deputy McGilligan's last Budget was made out, there was, at the end of the financial year, a deficit of £6,700,000. That is the position which the Fianna Fáil Government had to cope with when they resumed office. It is no use looking at this Finance Bill in the light of the events of the past year: we cannot avoid looking at it in the light of these deliberate omissions, for election purposes, from Deputy McGilligan's last Budget. All of the items I mentioned which had to be met that year were items of a recurring nature. They could not be met that year and they simply resulted in a large Budget deficit. They had to be met in succeeding years. They have to be met in this year and they are part of this Finance Bill, and a considerable part of the taxation which is being objected to so strenuously by Senators on the other side springs directly from that last Budget of Deputy McGilligan.

What do the members of the Opposition want? That is a question I asked them last year and which I ask again this year. Do they want a balanced Budget or not? If they were to say that they feel that a Budget deficit is a desirable thing, that deficits of £4,000,000, £5,000,000 or £10,000,000 should be indulged in by the Minister, it would at least be an argument, but is there any Senator opposite who thinks that? Is there any Senator who will say that the Minister should deliberately run a deficit on his Budget? I do not think there is. I do not think that a single member of the House is prepared, in public—forgetting altogether about election Budgets or what might be done secretly on the eve of a dissolution—to expound as a financial doctrine that there should be a deficit on the present Budget. There is not one who will do it and, that being so, we are left with the plain elementary position that, if expenditure amounts to a certain figure in this or any other year, taxation in one way or another must be raised to meet it.

That is the issue which members of the Opposition, not only in this but in the other House, have not at any time been prepared to face. In order to avoid facing it, we had this ludicrous proposition put up last year, and repeated this year by Senator O'Higgins, that the Minister last year budgeted for a surplus. The way in which the Budget turned out showed— what everybody knew already—how ludicrous that proposition was. Except for Senator O'Higgins, we have heard very little about it this year, which is just as well.

We are faced with this position, that a very large amount of money is being spent by the State at present. We have not had any suggestions from the Opposition as to how that amount can be reduced or what particular services should be cut. We have had no suggestions from any member of the Opposition as to what alternative taxes should be imposed, instead of the taxes being imposed. We have had objections to the whiskey tax, the beer tax, to income-tax and to every conceivable kind of tax which this Budget imposes, but nobody has suggested any alternative. Do the Opposition seriously think that they have made a constructive approach to this matter? I am afraid it is only too clear this year, as last year, that they are interested only in making things—to use their own term—as politically embarrassing as possible for the Government.

They could not care less about the state of the finances of the country, or about the important question as to what can be done to balance the Budget while imposing the least possible hardship on the public. All they are interested in is making as much political capital as they can. They did it last year and they are doing it again this year, and, unless there is some radical change between now and the end of the debate, which does not seem likely, we must put down the whole debate, from the point of view of the more politically-minded members of the Opposition, as simply a further attempt to make political propaganda at the expense of the Government, propaganda which arises in great part out of the deficiencies of their own financial policy which have meant that the Minister has had to deal with the problems of several years prior to his coming into power, along with the problems which have arisen since.

Perhaps it might add to the realism of the debate if I make a few brief and possibly rather incoherent remarks about some of the points raised in the course of yesterday's debate. We had a good deal of talk about subsidies. I personally was in favour of the abolition of subsidies in the Budget of 1952, when the Government certainly went a considerable distance in the direction of abolishing subsidies, while leaving a substantial contribution from the public revenue to the cost of wheat and flour. I regard it as a characteristic and possibly an essential principle of a free capitalist economy that everybody, except the most destitute citizens, should pay the full economic cost of the goods and services required for food, clothing and shelter.

The introduction of the principle of people generally being able to buy things, whether food or otherwise, at less than their economic cost is a typically communist principle introduced into our otherwise capitalist economy. Under war conditions, we had to adopt that communist principle of selling food at much below its cost price. Therefore, I welcome the fact that we are now moving back towards one of the essential principles of the free economy and requiring everybody to a greater extent than before to pay the full economic cost of food. Of course, we always required them to pay the full economic cost of clothing, but there is one element of subsidy, a communist element, which has remained in our economy for the past 30 years and which no Government has had the political courage to abolish. I dare say that, if any Government did abolish it, they would most certainly be defeated at the next election, though possibly they might win the election after that and the election after that again. I refer to the subsidy for shelter, the housing subsidy, which is another communist element that has characterised and perverted the economy not only of this country but of many Western European countries ever since the first European war.

The original cause of the housing subsidy, the reason why we cannot allow the principle of private enterprise to operate freely in the matter of providing houses at a rent, is of course, the rent restrictions code, which has dominated the whole situation with regard to the renting of houses to a substantial proportion of the population ever since the first world war. The fact that a statutory tenant is able to acquire shelter, housing, at a price probably not more than 50 per cent. above the level of the price that prevailed 30 years ago, has given everybody a completely perverted idea as to the price he should pay for that necessary element in the cost of living. We are all familiar with the necessity of paying about three times the pre-1914 price for food and clothing, but we still think of house rents on very much the basis that existed in 1914, with a moderate addition of perhaps 50 per cent., which in many cases barely covers the additional cost of upkeep to the unfortunate owner of a house let to a statutory tenant.

If we could wipe away at one fell swoop the whole rent restriction code and restore housing to free private enterprise, we would, I think, go to the root of the necessity for the heavy cost of subsidising all new housing which is erected at the expense of the State to a very large extent and for which the tenants pay only a fraction of the weekly economic cost. I am saying that, though I know it is not practical politics. I know that the Government, however much they may be convinced of the economic wisdom of what I suggest, are quite aware of the political considerations that would make it highly inconvenient to adopt that policy. I should like the people, generally, to realise that the fundamental cause of the heavy drain on our capital resources, that is caused by the high cost of housing, is due to the existence of this rent restriction code. You could leave the whole thing to private enterprise if you would abolish the whole rent restriction code.

Another aspect of the matter is that the rent restriction code has virtually confiscated a large part of the capital value of all houses let to statutory tenants and transferred it to the fortunate tenants who enjoy those statutory rights. That is a principle of confiscation which I think no capitalist economy can really give moral approval to, but there it is. Many of the people to whom I refer have a genuine grievance against the whole economy and against, not only this Government and the inter-Party Government, but against successive Governments over the last 30 years.

There has been a good deal of talk about the 6 per cent. charged by the banks for loans. I agree that, perhaps, it was necessary in the course of the year 1951 and, perhaps, early in 1952 to shock people into realising the serious state of the national economy by a sudden increase in the rate of interest. After all, we had been accustomed for years to borrowing money at 4 per cent. or 5 per cent., and just as Samuel Johnson said, it caused a great stimulus of intellectual activity if you knew you were going to be hanged in a fortnight's time. Similarly, the sudden shock of having to pay 6 per cent. where before you paid 4 per cent. or 5 per cent. has made people sit up and take notice and refrain from certain enterprises involving capital expenditure that they might otherwise have indulged in.

In the situation of our economy in 1951 and 1952, it may have been necessary to impose that shock, but I think it would be undesirable to continue too long so restrictive a rate of interest as 6 per cent. The mere raising of the rate of interest not only eliminates certain people from the queue of borrowers but it is also apt to eliminate those would-be borrowers who combine caution with enterprise, and it leaves in the kind of borrower who is a chancer and, perhaps, a speculator or a profiteer to whom 6 per cent. is a mere flea-bite compared to the exorbitant profits he hopes to gain. In other words, this difference between 5 per cent. and 6 per cent. is indiscriminate. It would need to be accompanied by some other principle of differentiation if we want to encourage the right people to borrow for various productive purposes and discourage the people who are prepared to pay almost any rate because they hope to make anti-social gains.

Therefore, I recommend the suggestion of Senator George O'Brien that there should be some impartial tribunal to estimate the relative priority of the various claims for capital resources, and to encourage those to come forward that are socially and economically desirable, and discourage the others, however high the rate of interest they would be willing to pay. That being so, I do not think you will need to insist on the 6 per cent. rate very long. In fact, if only you could have the right principle of discrimination between would-be users of borrowed capital you might get back to something approximating to a standard 5 per cent. rate. The sooner the better and the sooner it can be done the more you will encourage the best kind of economic enterprise.

There is another aspect of that matter referred to in the I.B.E.C. Report that I quoted in another connection yesterday. The authors of that report pointed out that we over here professed to believe in private enterprise but, in fact, we are in many respects a much more socialist economy than the people of Britain who professed to be, at all events under the Labour Government, more socialist but, in fact, are a much more private enterprise economy than we are in the important matter of the control of capital resources. That report pointed out that an overwhelmingly large proportion of capital resources used in this country are channelled into enterprises which directly or indirectly are dominated and controlled by the State.

In other words, the State here has the major share of the demand for the capital resources available in the economy whether they originate in savings currently accruing or whether they can only be realised by repatriating external assets. That being so, the State by its policy in capital expenditure can, without any alteration in the rate of interest at all, alter the total demand for capital resources by restricting the extent to which the State itself makes a claim on these resources. If the State is not prepared to restrict its own claims on capital resources available in the economy and if those total resources are limited partly because of the inadequacy of current savings and partly because of the undesirability of repatriating external assets, and if the State insists on taking its £40,000,000 worth of capital resources in the course of any financial year, the whole of the restriction of the demand for available capital resources will have its impact on the private sector of the economy; that is restrictive of private enterprise and to my mind is departing from what should be one of the fundamental features of a capital economy.

Therefore, we have to be realistic and if we really believe in private enterprise the State will have to be a bit less greedy, shall I say, for the limited amount of capital resources that are available and leave more of those resources available for the best kind of private enterprise, industrial and agricultural, and at a rate of interest which does not penalise that kind of enterprise.

There was also much talk about unemployment. I gathered from the remarks of some Senators that the Budget of 1952 was regarded as a primary cause of unemployment. Well, I have already implied that I thought it was necessary to pursue a restrictive credit policy for a time but that, I think, it would be a disaster to continue pursuing that policy too long. I think the causes of the unemployment that was experienced in this economy in the course of the last 12 months or so are not peculiar to our country but are, in fact, an aspect of phenomena experienced in other countries as well. We had exactly the same kind of outbreak of increased unemployment in Northern Ireland and no one will accuse the Minister or his colleagues of having any responsibility for the political and economic welfare of Northern Ireland.

There was also a recession in the volume of industrial output in Britain and in other European countries as well, all because of the various changes that happened after the outbreak of the Korean war and the temporary buying spree that set in immediately afterwards, followed by a temporary cessation of buying in the world markets of primary commodities.

There was some talk about the right to work as embodied in the Constitution. We have to be a bit careful how we handle that right to work because in a free country the citizens claim not only the right to work but the right not to work, the right to leisure. I would be sorry to see him deprived of these dual rights. If the State is going to admit for all citizens the right to work the State will have to go further than that and impose on all its citizens an obligation to work, because the individual cannot have it both ways in his relation to the State. If he insists on the right to work, the State has the right to insist on his obligation to work and that means on his obligation to work at whatever type of work the State chooses to provide for him and at whatever rate of payment the State chooses to fix. That is not freedom; that is a fundamental principle of Communism. If you go too far with the principle of the right to work, you will go far in the direction of a communistic organisation of the economy.

Now for a few amiable platitudes about the general financial situation. I think we must all agree that there is a fundamental principle in regard to public taxation, especially in an economy like ours and that is, that current expenditure should be met from the proceeds of current taxation. Therefore, to the extent that the Government increased taxation a year ago and maintained that taxation in this Budget in order to meet current expenditure, we must accept their action as necessary and desirable, however unpopular it may be from an electoral point of view.

We may also agree that capital expenditure may justly be met by borrowing of genuine private savings and only under very unusual circumstances by borrowing from the banking system. But there is an important distinction between two kinds of capital expenditure. There is the kind of capital provision which involves an amenity expenditure—improvements in hospitals, schools and even roads, public parks, and other items of that kind— which is not self liquidating but is apt to add to the dead weight debt of the community. I would say that capital for the purposes of amenity expenditure should not be borrowed to an extent that exceeds the currently accruing savings of the national economy.

On the other hand, capital which is self liquidating, which produces remunerative assets like the capital involved in the development of the activities of the E.S.B. and of Bord na Móna may be borrowed even in circumstances where it means the realisation by somebody or other within the economy of external assets hitherto invested abroad. In that case the only question is whether the national assets created will be worth more in real value to the national economy than the external assets which have been sacrificed.

It is essential to the stability of the monetary unit of the nation, which is an Irish £ based on sterling, that the Budget should be honestly balanced both on current and on capital account. The failure to balance the Budget honestly, if persisted in sufficiently long, would sooner or later exhaust our external assets and create a situation in which the Irish £ would have depreciated heavily in comparison with all other monetary units.

The balance of payments in 1952 improved considerably as compared with 1951. Some people argue that as that happened it proved that it was not necessary to do the drastic things in that year of 1952 that were done. Actually the relationship between the Budget of 1952 and the balance of payments of 1952 was a relationship of cause and effect. The classical method of remedying an unfavourable balance of payments is to avoid deficit financing, to make the taxpayer pay the full cost of current expenditure of the State and to be a bit more "choosey" about the objects of capital expenditure.

May I briefly run over what I regard as the main objects for which revenue is raised by the Central Government. First of all, of course, it is raised to cover the necessary costs of the public services. Secondly, the budgetary engine is now a recognised means of redistributing the national income in favour of the less fortunate classes in the community. In the third place the Budget is and should be used to promote the kind of development and differentiation of the national economy which we desire to promote in any case; in other words we want to promote industrialisation but only as a means of increasing the real national income. Therefore, we want to promote "agriculturalisation" so to speak, as well as industrialisation, and the general object must be to increase the real national income if we can by a suitable budgetary policy. In the fourth place there is a kind of negative object of public taxation which should impair economic incentive as little as possible and, if possible, strengthen it.

With regard to the second object of public taxation, to redistribute the national income in favour of the less fortunate classes that is represented on the expenditure side by the social services. The necessity and desirability of the social services is now generally recognised and commands general approval. But we have to have a due sense of proportion with regard to expenditure on the social services. That portion of the national revenue which is taken from the taxpayer is spent by the State for the citizen and not by him. Therefore, to that extent the citizen's choice of objects of consumption, the citizen's pattern of demand, so to speak, with regard to his income, is perverted by the interference of the State. He has to pay his taxes whether he wants it or not and the State then decides on using part of that money to transfer to certain other less fortunate citizens; if too large a proportion of the national income is taken from the producers of the wealth of the nation by the State and spent on however worthy objects to the advantage of other less fortunate citizens, who are not producers, you create a gap, a divorce between effort and reward.

The citizen is conscious of the effort he must make in acquiring his salary, but he gets no conscious advantage from that part of his income which he transfers to the State for the State to transfer it to one or other of his poorer neighbours, and to the extent that you divorce effort from reward you do create a disincentive effect in a free capitalistic economy and remove one incentive to full production. Therefore you have to preserve a certain proportion between the amount you can afford to spend on social services and the total of the national income, and it would be a disaster to increase the proportion spent on social services in such a way as to bring about a reduction in the real national income available for all purposes.

Now, with regard to the use of the Budget for the promotion of industrialism, here the main object is to bring about such a re-distribution of human manpower resources and natural resources as will maximise the national wealth of the country, and from that point of view it does not matter whether the new employment and the new wealth created is agricultural or industrial. The main object should be that it should be a positive addition to the wealth of the nation. In the last ten or 15 years statisticians tell that there has been an increase of 60 per cent. in the volume of industrial output, but the volume of agricultural output still hovers rather close to and just underneath the level of its achievement in 1938; and because the industrial sector of the economy is still relatively a small sector of the total economy the effect of a 61 per cent. increase in industrial output is reflected only in a 24 per cent. increase in the real income of the nation as compared with 1938. I would say that the policy of this and preceding Governments has been more successful in altering the pattern of production, in introducing a kind of game of musical chairs in which everybody moves about to a different occupation and some people find no place to sit on and are unemployed, than in increasing its total aggregate; and I would echo again the sentiment of the I.B.E.C. report which says that: "Further industrialisation should be planned with rifle selectivity rather than with shot-gun diffusiveness," reminding the Seanad briefly of some debate we had yesterday, might I say not perhaps entirely shot gun diffusiveness but blunderbuss diffusiveness and, in some cases, all the emphasis on the blunder.

However, I am not arguing now that none of the industries established in the last 20 years is worth while. On the contrary I believe that many of them were worth while, but I am questioning whether every one of them deserves to be where it is, and whether more discrimination in the choice of new industries might not with advantage have been made if we had used the rifle principle instead of the blunderbuss principle; and in particular I would echo the sentiment which runs all through the I.B.E.C. Report that we should in future concentrate on those industrial developments which depend on agricultural raw materials, home produced here by our own agriculture—things like hides, wools, skins and that kind of thing.

In that connection there are certain statistical facts that should be present in the mind of every responsible citizen. The value of industrial raw materials imported in 1949, when you leave out tax on tobacco, was roughly £80,000,000. The value of industrial exports in that year was £19.2 million. In other words, 8 per cent. of out total industrial output was exported, and the value of the raw materials on which that industrial activity depended was four times as great as the value of the industrial finished products that were exported. Consequently our industrial economy depends in its present conditions excessively on imported raw materials and is able to pay for those imported raw materials only to the extent of 25 per cent. What balances the account and what alone enables our industrial economy to survive on its present basis is the fact that 25 per cent. of our agricultural output is exported. In the year 1939, raw materials imported for agriculture amounted only to £3.9 million but the value of agricultural exports in the year was £32.4 million, or 25 per cent. of its total output. Even that was far too low, but without our agricultural exports the necessary industrial raw materials we had to import would very soon have exhausted our external assets; so that our industry depends on the export capacity of our agriculture, and therefore, every industrialist has a direct economic interest in such an agricultural policy as will maintain and expand the export capacity of agriculture.

The I.B.E.C. Report also commented unfavourably on the fact that those £80,000,000 worth of industrial raw materials imported carried 8½ per cent. of customs duties, thus adding to the cost of industrial raw materials from the point of view of our industrial producers. It commented on that:—

"The enormous dependence of manufacture in Ireland on imported materials carries with it sufficient inherent handicaps to effective competition without adding an 8½ per cent. overburden."

I hope the Minister will seriously consider the advisability of removing that handicap from our industrial producers.

The fourth object of public taxation is to diminish economic incentive as little as possible and if possible to stimulate it. I would say with regard to income-tax and profits tax that in their very nature they tend to impair economic incentive. They are perhaps a necessary evil, but let us emphasise their evil character from this point of view, however much we may admit their necessity. In the nature of the case, income-tax is a tax on efficiency and on honesty and those are two very valuable qualities in any community which it would be 1,000 pities to penalise or discourage in any way. The whole income-tax code very effectively penalises both efficiency and honesty. I wish we could invent some kind of tax that would penalise the inefficient out of business, whether agricultural or industrial, and at the same time penalise the dishonest out of every kind of business.

It has been urged that the essential features of the income-tax code, as it applies to the professions and so on, should be applied to agriculture, so that the agriculturist would pay not on his poor law valuation but on his actual realised agricultural profits. I would strongly deprecate any suggestion which would have the effect of imposing a burden of income-tax in that form on our agriculturists, primarily because it would penalise efficiency and honesty and would single out the best farmers in the country for the most severe treatment, while it would have no moral or social effect on the great majority, who would probably escape it altogether.

The rates on agricultural land are not exactly popular with my farmer friends but they are not open to objection of the same kind as I found in the principle of income-tax. The more profit a farmer with a given valuation can make out of his land, the smaller is the proportion of his total income which the burden of rates represents. In other words, rates are, in the technical phrase, "regressive on income", and the greater the income the smaller the rate per £ that he pays in respect of rates. Therefore, rates on agricultural land as such do not penalise enterprise and efficiency. In fact, in so far as they have any effect at all, they should tend to encourage these highly desirable qualities.

On the other hand, there is one aspect of the principle of rates assessment which has a very objectionable effect on enterprise and efficiency. I understand that if a farmer adds substantially to his buildings and premises —and only the best farmers are disposed to make such additions to farm buildings and, goodness knows, there are a great many farms that would be better if they had a better lay-out and more up-to-date farm buildings—one of the first results of increasing the farm buildings is that he becomes liable for a higher valuation and therefore a greater amount of annual rates on agricultural buildings. I am aware that the State, by its various farm improvements schemes and so on, contributes to the cost of various farm improvements, some desirable and some not so desirable; but I would say: "For heaven's sake, sweep away all these farm improvements schemes, which only delay the people in getting things done, which the best farmer would do himself; and reward the farmer by not only not adding to the valuation of his premises, but, as a result of those new buildings, by making a reduction for seven years on his total valuation, exactly equivalent to the increment as calculated by the principle which now operates." In other words, if a farmer adds £10 to the valuation of his farm buildings by reason of new buildings, so far from taxing him on that additional £10 I would exempt him from £10 of his former valuation, whether on land or buildings, and allow that exemption to continue for at period of at least seven years. That kind of change in the rating system would have a very desirable effect in encouraging the best farmers to make a desirable type of improvement.

I would like the Minister to give us some information about what he proposes to do with the agricultural grant. It is not, perhaps, his Department, but it is his Department that will have to provide the money for the grants. There is a great deal of confusion in the minds of farmers and of members of county councils about statements that have been made recently and I think it would be in the public interest for the Minister to have the matter clarified without delay.

I wish to answer some of the statements made on the other side of the House. Senator Yeats said that when considering the Finance Bill we should go back to the Budget of 1951. Why he suggested that restriction I do not know. I do not know why he would not go back to the whole budgetary system since the establishment of the State. Naturally, if there has been a comparison of the Budget this year with that of last year by this side of the House, it was the same Minister who introduced these Budgets. Senator Yeats also suggested we were engaged in a sort of Rake's Progress. Nothing is further from the truth. I never heard that our present Minister for Finance has made any contribution to economy or relieving the burden of rates, other than the statement made in the Budget where he said it was possible to save £3,500,000. We will look at these proposed savings with interest and we wish him success; but we are surprised to notice that if he is so interested in savings he paid 5 per cent. for the loan which he floated last year. I do not know why he paid that large amount of money.

There have been defences made as to why we should pay 5 per cent. for money, but it is a certain slur on this State to pay that amount. During the period of the inter-Party Government, the then Minister for Finance was able to get all the money he wanted around 3 or 3¼ per cent. Let me remind the House that on last year's loan the payment of 2 per cent. additional will cost the taxpayers £400,000 per year until this loan is liquidated and paid off. That is a considerable amount of money. I notice that about two weeks ago an English municipal corporation —the corporation of the City of Bristol—were able to borrow a considerable amount of money at 4 per cent. If you like, it was slightly over 4 per cent. They issued it at 97 and they paid 4 per cent. for the money. The newspapers said that the stage were able to get 2 per cent. or 3 per cent. premium on that money. I wonder if the Minister would tell us what sort of antlers the stags in this country have that we had to pay 5 per cent. for a Government-sponsored loan. This State is in a very sound financial position and it is a pity to pay £400,000 a year of public money to benefit insurance companies, banks and financial institutions and to impose it as a long-term burden on the ordinary taxpayer of this small country.

We were all very interested yesterday in the analysis by Senator O'Brien of the financial position of this country. I think that both he and Senator Johnston are doing a very great service to this State in pointing out many of the things which, if the trends are allowed to continue, will affect our future in a very adverse way. One matter on which both of those professors are completely in agreement is the investment of large amounts of the State's money in nonproductive works. Both of them are very interested in demonstrating that they are not against sociably desirable work but that it must be balanced and related to the taxation capacity of the people of this country.

Speaking of about £40,000,000 in a capital Budget, Senator O'Brien said that only about £19,000,000 of that was invested in a way that would give a return which would help to redress our external balance of payments and that the other £21,000,000 was being expended on items which would, I presume, have an adverse effect on that situation. He instanced, particularly, the bad value which the State was receiving on the very large amount of public money that was devoted to the subsidy on housing. He said that £10,000,000 was being devoted towards that purpose. I cannot remember whether he said so in his statement yesterday, but I remember that on one occasion he stated that housing was the least efficient of our great industries. Any of us who are on public bodies and have a certain responsibility in that respect know that housing is costing much more than any other goods or services. It is quite common to see houses let to-day at about 30/- a week and being subsidised, between local and national taxation to the extent of at least double that amount. The economic rent of these houses would, in most instances, be somewhat over £3 a week. No industrial or craft worker in this country could afford, at the present rate of wages and remuneration, to pay anything approaching £3 a week for his house.

As Senator Johnston has said, we will not be able to bring this problem into proper perspective until we are able to do away with subsidies. We will not be able to do away with subsidies until some body is set up in this country that will be able to direct how houses should be built, and must be built, at a figure which the people who require to live in them can afford to pay and that the taxpayer can afford to subsidise. I believe that we are arriving at a dilemma in this problem. Most of our public bodies and our county councils have reached a stage where they will not be in a position to further tax their ratepayers to give a further subsidy, in lieu of rent, in respect of these houses, and to pay for the very large repairs that will also have to be done on them. I think I ought to remind Senators that, in Britain, a commission is sitting continuously to investigate the cost of housing. I believe that we ought to have some body in this country charged with the responsibility of seeing that we get reasonable efficiency for this very large public expenditure, apart from the socially undesirable aspect of very dear housing. Dear housing tends to be responsible for late marriages and many other social evils which could also be avoided.

In this country, also, we have a number of hidden taxes. Perhaps the Minister for Finance could, in some way, have these matters investigated. It was said yesterday that recently there was an increase in post office charges. That represents a further overhead on the commercial life of the country. Again, many boards have been set up in this country and they are allowed to put levies on the productive effort of our people. One of these boards is, for example, the Pigs and Bacon Commission. On an average, the number of pigs in this country is 1,000,000 per annum and, on them, the commission collects a sum of about £60,000 in administrative fees. That £60,000 has to be borne by the pig producers, by the processers of the bacon and by the consumer.

I give that merely as an instance because a number of boards of all sorts have been set up in this country with statutory powers. In many cases, these boards are collecting a levy of which even the members of the Oireachtas are not aware. It is in the public interest that their activities should be brought to light and that the amount collected by them is the very minimum. If it should be found that some of these boards are no longer required then in the public interest, they should be dissolved and this hidden and, in many cases, unknown tax removed.

We all know that, in the case of a bill, it is not the pounds but the shillings and pence which make up the large amount, and the cost of living, in my view, is very often a matter of hundreds of little charges which are made for this and that and added on to the cost of production. We wonder, then, where the high cost of living comes from. It comes, if you like, from cumulative inefficiencies.

Another matter of some importance on a Finance Bill is the general effect of the present heavy burden of taxation and the pattern of that taxation on the type of the economy we are developing. I believe we are entitled to put on the present very heavy burden, only if it can be shown that that burden is in the common interest and for the common good. I believe that we should have a comprehensive tax system which will be fair to all types of citizen. The present system is tending to destroy the type of economic growth which all of us, deep down in our hearts, would like to see. We would all like to see most people in possession of property, independent of the State, free men in the economic sense as well as in the national sense, but with the State, directly and indirectly, collecting around £120,000,000 per year, I cannot see that sufficient of that money is being redistributed to create a position suitable for giving us a large number of property owners.

In fact, we are tending unconsciously and against our own wishes to develop a super-State, to build up a number of State corporations, State-sponsored companies and our system of taxation is tending to destroy the family business and the privately owned company. The small business is tending to pass out and to fall into the hands of the public company. Anyone engaged in industry knows that it is easy for a public company to get money to help over inflation or to pay for the machinery which inadequate allowances cannot provide for, but the private company has no way of getting money, other than going to the bank for it. They may possibly not wish to go to the bank and put themselves in pawn for the money and I, therefore, hold that taxation should not be such as to destroy these businesses.

By and large, we have the same system of taxation in this country as they have in Britain. I was very interested recently to see from the Financial Times of the 24th March last that they are establishing a company in Britain known as “Edith”—Estate Duties Investment Trust, Limited. The particular article in the Financial Times is headed “Edith to the Rescue.” That company is coming to the rescue of the private company and private business in Britain which is being destroyed by the huge multiple trust, and it might not be out of place if I were to quote briefly from this article, which says:—

"Recent memoranda by the Associated Chambers of Commerce and the National Union of Manufacturers, as well as articles and correspondence in the Financial Times have established beyond reasonable doubt that the high rates of estate duty are having a disastrous effect on private companies. At one of the critical points of the economy, where traditionally savings are accumulated and development financed, not only is income-tax and E.P.L. applied with full rigour, but estate duty is levying a capital tax on each generation as well.... Nothing can be done about this short of a reform of the law and a reduction in the general level of taxation. If the Chancellor is thinking of relieving company taxation in his Budget, the private company has the strongest claim for consideration. One of the problems that is created by this tax, however, the actual problem of financing it, can be mitigated. And yesterday it was announced that a new company, backed by the Industrial and Commercial Finance Corporation, investment companies, and insurance companies is being formed to do so. With a capital of £1,000,000 in ordinary shares and the homely name of ‘Edith’ (Estate Duties Investment Trust, Limited), the company is to provide ‘a reliable and neutral means of acquiring and holding, as an investment, the shares of private companies.’ For this highly specialised and risky business, the management has been entrusted to the I.C.F.C., which of course already has a great deal of experience in this field.”

We have in this country almost identically the same system of taxation and it is, therefore, natural that we, too, would tend to drive out of business the small industries, in the same way as in Britain. I know the City of Birmingham, which, in some respects, is the traditional home of private enterprise. By and large, the great bulk of the manufacturers there manufacture speciality articles. One man may manufacture a sort of peculiar shaped nut but manufactures it for the whole world over. He may have 15, 20 or 100 people working for him, while his nextdoor neighbour may be doing something completely different but the whole world would be buying his commodity. These people tend to be pushed out of business. With the exception of Messrs. Arthur Guinness and a few other firms of that kind, businesses here are small, and must be small in a nation of 3,000,000 people, and I believe that if we do not do something in our fiscal system to protect these privately-owned companies, we will be doing a very bad day's work for the nation.

In order to reinforce this argument, I recently asked for a schedule of the death duties leviable on estates. At this point, I should like to remind my friends, the Revenue Commissioners, that both my parents and all my uncles and aunts are deceased and I am, therefore, very unlikely to benefit in any way from any reduction in estate duty which might come about.

You are not without hope of posterity.

Posterity never did anything for me. I have here a case which may be regarded as a typical case of a small industry. In 1914, a business was worth £7,500. If the owner died, his estate would be required to pay £300 in death duties. It is quite safe to say that that industry to-day might be worth £20,000 and the heirs to-day would have to pay £2,400 in estate duty on the same physical size of business. If you multiply the 1914 figures by three they ought to pay £900 now instead of £2,400. What happens when that business passes and the £2,400 is to be paid? I know the Revenue Commissioners are often not unmindful of the difficulties that arise and are often sympathetic in that they take money by instalments over a long term. Still, the money has to be paid and the Revenue Commissioners are obliged to collect this money, and the normal expansion that would take place by the active young heirs of this company is arrested by the fact that they have to provide several thousand pounds in estate duty.

I know of cases where development which would be not only to the good of the family but to others has often been arrested for many years by the impost of taxation. Perhaps the Minister for Finance, when he is considering the effect of wear and tear and replacement on capital goods and industrial equipment, might widen in some measure now the terms of reference of the commission he proposes to set up.

If he can strengthen industry and help it to have sufficient economic strength, I believe he will be laying a permanent foundation for trade and industry in this small country of ours. It is only during the last 30 years that we have entered upon industrial expansion. In fact, I remember a time when it was considered fashionable not to engage in trade and when people thought it would be much better if they sent your son into the professions. I think we are losing a certain amount of that foolishness. It would be bad if those who stayed in industry in this country found that taxation and inflation made it impossible for them to make the industry a success. That would be a very great loss, indeed, to the nation. I would ask the Minister in all seriousness to consider the point that I have made and have it included in the terms of reference of the commission which he is about to set up.

A friend of mine came back from Australia recently. He is engaged in industry. He was a local boy from our own town who went to Australia. He had no surplus of this world's goods. He worked hard and started a factory which now employs some hundreds of workers. He told me that for the first three years after the war they were allowed 40 per cent. on building construction and on equipment so that Australian industry would be brought up to date and made so competent that it would be able to produce good quality goods at a price the people of Australia could afford to pay. That is the only justification we could have for asking the Minister to give us allowances. There ought to be a difference between money which is left in a business for the purpose of developing it and money that some foolish young fellow would take out to put on a horse running at the Curragh.

How can a man with a reasonable income and working hard spend any more than a reasonable amount of money on himself? If he does not live ostentatiously that money goes into the development and improvement of his business. It goes to the good of the district in which he lives. It gives him security, but at the same time it gives security and provides incomes for those who work for him. It also provides a certain amount of taxation for the State. I would also ask the Minister, if this commission is set up, that he might see a way of distinguishing between money ploughed back for the good of the individual and the country, and money that is taken out and spent on items which are of no advantage to the national or any other kind of good.

I have delayed the House somewhat, but I know it would be appropriate at the moment to give this quotation. Speaking exactly on these lines, His Holiness the Pope gave an address to the delegates of the International Association of Catholic Employers on the 7th of May, 1949. He spoke about giving too much back to the State and too much of the resources of the country to the State. This is what His Holiness said:—

"However, to make State ownership the general rule of the national system of economics is to overstep the frontier of right order. The purpose of public law is without any doubt to serve private right, not to absorb it. Economics are by nature no more a State institution than any other branch of human activity. On the contrary, they are the living product of free initiative either of the individual person or of groups of persons in free partnership."

Further on His Holiness states:—

"It is clear that to carry this teaching into effect, and to apply it, cannot be the work of a day. This demands from all concerned a clear and wise foresight as well as a strong dose of good sense and goodwill. Moreover, it needs the complete rejection of the temptation to seek one's own personal advantage at the expense of one's fellowmen, and this, whatever may be the nature and form of partnership, or to do anything harmful to the common weal."

An Leas-Chathaoirleach

Would the Senator give the source of the quotation?

It is a quotation from Catholic Documents containing recent pronouncements and decisions of His Holiness Pope Pius XII. It is published by the Pontifical Court Club. The publication is edited by His Excellency, the Most Reverend William Godfrey.

I have tried to show that the system of taxation has a very important effect on the type of society that we have. After 30 years of native Government we ought to have an agreed policy on the influence of the type of taxation we impose. In conclusion, may I ask the Minister for Finance, when setting up this commission, to make use of the opportunity to investigate the problem because we ought not destroy private initiative and the idea of national and economic freedom? I think it is truly said that there is no good in being nationally free if we are not also economically and individually free. It is very true to say that it is no use being nationally free if we are not also economically and individually free.

Senator Burke, in his opening remarks, took Senator Yeats to task for having gone back as far as the 1948-49 Budget. I believe that in order to get a true picture of the conditions that brought about the introduction of this year's Budget and last year's, we must go back even a small bit further. When we carry out a short examination, we find that the Book of Estimates for 1947-48 provided for the expenditure of a sum of £51,000,000. The then Minister, in introducing his Budget and his Finance Bill, took it upon himself to say that this was a huge burden, that taxation must be reduced, and he set about doing so.

The very first step he took in this direction was to slash the subsidies to the tune of over £3,500,000. Having made that good start, in the short period of two and a half years he made a demand on the taxpayers of the country of no less than over £90,000,000. As has already been pointed out, that sum was making provision for the finding of something in the region of £8,000,000 to meet commitments that were then undertaken. There was a sum of £2,500,000 necessary for C.I.E.; there was another sum for the G.N.R. Company; there were increases in remuneration being given to practically all the State employees. When a change of Government came about the money had to be found and the commitments entered into by the inter-Party Government had to be honoured by the incoming Government. It required the sum of £100,000,000 to meet these commitments. We have that huge sum being placed as a burden on the people this year and last year.

If we examine the matter carefully we will find that in that short period our taxation increased by over £31,000,000. Those people who are levelling charges in regard to the placing of very heavy burdens on the backs of the Irish people should acknowledge their responsibility, because they are the people who placed the burdens there. It is in order to relieve the people and to avoid the possibility of very much more serious consequences, that the Minister found it necessary to take the steps that were taken.

Nobody in this House or throughout the country will accept that the imposition of that heavy taxation on the people was any pleasure to the Government or the Minister. The Party the Minister represents is the largest Party in the State. He has the greatest number of supporters throughout the country and no one will for a moment suggest that merely for the pleasure of doing so he inflicted a Budget of this kind on his own people.

That was not the whole picture. Senator Burke objected to the Minister for Finance paying 5 per cent. for a loan to the Irish people. I would like to remind Senator Burke that whether it is 5 per cent., 6 per cent., or 7 per cent., it is being paid to the small investors of the country and will be utilised by them, and the moneys that were subscribed will also be utilised for the country. Senator Burke had no objection to the paying of £1,200,000 for the Marshall Aid loan. That payment will continue for 50 years, and what have we as a result of it?

Senator Burke made reference to the loans Deputy McGilligan obtained from the Irish people. Any loans he went for were never fully subscribed and had to be taken up by the banks. Together with this high taxation we also had this £39,000,000 borrowed from the Irish people. But we had another huge sum that was borrowed from the American Government by way of Marshall Aid. When this project was mooted first, promises were made that £40,000,000 was going to be ploughed into the land to increase production. However, we found that the greater part of the money was spent on consumer goods. If that £40,000,000 was ploughed into the land, what results had we during those three years? We had a reduction in the acreage of tillage, particularly in the acreage of wheat; we had a reduction in the number of milch cows, in the number of pigs and poultry.

It is because of that particular set of circumstances brought about during the inter-Party period of office that the new Minister coming in had to take drastic steps to remedy the situation, not in the interests of a political Party, but in the interests of the Irish nation. We are proud to say that the remedy is at hand. The most difficult days are over, we hope, and from now on, conditions should greatly improve, provided, of course, the Irish people are sane enough to prevent the people who put them in such a plight from ever being in a position to put them into it again.

During those three and a half years you had increased unemployment. We had a great deal of talk over the last two days about unemployment. What was the greatest cause of the creation of this unemployment? The Minister for Industry and Commerce in the inter-Party Government opened the door and abolished almost all the protection that was afforded to Irish industries, with the result that we had a flow of goods into the country that could have been very well done without so that our Irish workers could have found employment at home.

It is hardly true to say that the increased unemployment to-day is due to Government policy. There is more money being provided now for houses, for afforestation, for rural electrification and for all the other schemes that were initiated by Fianna Fáil and given effect to during their years of office, than there was at any other time. The position in a good many trades and occupations has arisen due to the steps taken by the inter-Party Government at that time.

Yesterday evening we listened here to Senator Michael O'Higgins. I do not think it is right that a member of this House should attack members of the other House in the manner in which they were attacked by him here last night. He accused a number of members of the other House of keeping the Government in power because, as he stated, they were afraid to face the people. What are the facts of the position? The facts are that the people he has referred to as keeping the Government in power are the very people who put the last Government out, and they went before their constituents, and the people who elected them previously elected them again and gave them a mandate to keep that Government out as long as they possibly can.

I think we should have a more direct approach to these matters than we have, and from my experience in this House I may say this, that a tendency is creeping into it since the influx of some of the members of the other House which has not been very good.

I do not wish to detain the House any longer except to say that, coming from Galway as I do, I would like to avail of this opportunity to thank the Minister for Finance and the Minister for Industry and Commerce for having sanctioned a grant to the Galway Harbour Commissioners in recent weeks. It is a matter that we greatly appreciate, particularly the expeditious manner in which it was done.

I find myself in some embarrassment because I have been so flattered by the regret which certain Senators expressed that I did not make a second Budget speech when I was introducing the Finance Bill. I think I am, in that regard, particularly indebted to those Senators who used to enjoy the privilege of hearing me at first-hand in Dáil Éireann, and I would like to say to them that it would be well if they would take counsel from the words of a song which was one of the hits of a recent musical play at the Gaiety here: "Don't throw bouquets at me—people might think we are in love."

Senator Hayes opened the debate by complaining of the burden which had been imposed upon our people, but several of the Senators who spoke after him and, if my memory does not mislead me, he himself as well, complained that we had not made the burden heavier by taking more money out of the people's pockets in order to distribute it among the public servants. It seems to me that it is quite inconsistent with the attitude which the Fine Gael Party in particular have endeavoured to maintain here, that the present rate of State expenditure is more than our economy can afford, that they at the same time should criticise me because I did not increase that rate of expenditure by something like, I think, £800,000.

But now is there any real justification for the lamentations which the critics of the Government have expressed in the course of this debate? I suggest that there is not, that so far from the country being in the parlous condition which they have described it is, in fact, very much on the upgrade; and though I do not propose to make another complete exposition of our economic and financial position, I will give the Opposition Senators who have been so vocal during the last two days some facts to ponder over and, perhaps when the full significance of these dawns upon them it may help to lighten the gloom with which they have enshrouded themselves.

First of all, agricultural production has gone up by 1.6 per cent. in volume in 1952. It is now higher than it was in 1938. In 1950 and 1951 it was lower than it was in 1938, but in 1952 it has gone up in volume by 1.6 per cent., and I should say, judging by the export figures and the 1953 harvest prospects, the improvement is being well maintained. Again, the volume index for production of transportable goods for the March quarter of 1953 was 4.4 per cent. above that for the same quarter of 1952. Now undoubtedly industrial production here in the year 1952 suffered a decline which amounted to 2.2 per cent. as compared with 1951, but, as Senator Johnston has pointed out and, as I am sure every student of this matter will agree, that was a world-wide experience. We were not unique sufferers in that regard. In virtually every country in the world following the Korean war boom there was a decline in industrial production in the year 1952, and in most countries it was very much heavier than it was in ours.

Again, regarding national income we have heard Senator Frank Hugh O'Donnell talking about the Government having deprived the people of purchasing power. I will deal more fully with that criticism in due course, but national income in real terms increased in 1952 despite all the difficulties of that year. There was, if I might say so, by contrast a slight fall in Great Britain, but here at any rate, whatever the position was elswhere, national income increased in the year 1952.

And as to farmers' incomes— Senator Baxter was talking as if agriculture was a depressed industry— farmers' incomes rose by £10.6 million in 1952 and employees' incomes rose by £9,000,000. The rise in domestic costs and prices of which these figures are to some extent the occasion was about 6 per cent.

Exports, in regard to which Senator Baxter was so pessimistic, rose by £20,000,000 in 1952 and are still rising. In the first five months of 1953 they were £5.4 million above the corresponding figure for 1952.

And the balance of payments deficit to which Senator Johnston has referred, the balance of payments, a factor and a force which has such a great influence upon the stability of our currency, the balance of payments situation which was the cause of acute anxiety to the head of the Coalition Government in 1948, an anxiety which was reflected in every Budget speech which my predecessor delivered in 1948, 1949, 1950 and 1951—that balance of payments deficit, which was £62,000,000 in 1951, £30,000,000 in 1950, was reduced in 1952 to the more tolerable level of £9,000,000. And the deduction to be drawn from that is that, that to-day we have a more stable currency, a stronger currency, a currency whose purchasing power will tend to appreciate.

These are the main features which mark the steady improvement in the economic position of this country which has taken place over the past two years. I would recommend that those Senators who have spoken so despairingly and so pessimistically about the condition of our people should think about these things, should meditate upon them and see how they can reconcile these facts with the gloomy figments of their imagination which they conjured up for us during the debate of the past two days.

Senator George O'Brien spoke about the tendency to mis-apply in the very different circumstances of to-day and of our economy the economic theories which are associated with the name of the late Professor Keynes. I agree with him in that point of view, but I do not agree with his suggestion that Budget deficits or surpluses in this country are not so relevant as they are in other countries. They are not, it is true, of such great importance as the balance between private earning or getting and spending, but the fact that they are inflationary or deflationary, as the case may be, can be of great importance as I think the Senator himself would admit.

Senator O'Brien also took me to task for a passage in my Budget speech which referred to suggestions which have been made recently by certain politicians, in whose ranks I do not include Senator George O'Brien. I think that my criticisms were perfectly justified, because the type of board which has recently been advocated by the Leader of the Opposition is not the type of board or commission to direct and advise about public investment which the members of the Banking Commission had in mind; and it is certainly not the type of board which Senator O'Brien referred to in his speech. Therefore, I would wish to assure the Senator that what I had to say in the course of my Budget speech in regard to this matter did not apply to any suggestion which he has made.

The Senator says, however, that he has an interest in the conscious direction of Government investment. Surely in that event both the purpose and the extent of such investment are set out in the Budget speech, not merely for this year but for many preceding years. Under the ægis of our present President when he was Minister for Finance, the general form of the Budget speeches, if I may put it that way, was more or less standardised; so that people hearing the financial statement for the year would be able readily and easily to compare the situation in the year to which that financial statement was relevant with the situation as it obtained in other years. Here there is set out very fully the purposes for which, and the extent to which, public moneys are to be invested. Naturally, these purposes are determined by discussion between the Minister for Finance and his colleagues in the Government from time to time. Taking it by and large, fortified as we are with expert advice if our own knowledge of the problems should be insufficient. I do not think there is very much to be gained by setting up another board, to operate outside the control of the Oireachtas and to give it functions which would fetter and bind the Government of the day, while still holding the Government responsible to the people.

We have had a couple of instances of that recently. We had it in relation to the arbitration machinery which has been conceded to the Civil Service. There is a case in which a board, operating completely outside the whole constitutional framework, comes to decisions which are virtually binding upon the Minister. He certainly must give very full consideration to them and, in my view, he can fail to implement those decisions only if, in his view, it would be detrimental to the national interest to give effect to them. But what happened? That board made an award in 1951 which involved an expenditure of £3,500,000 in one year. Another arbitration board, dealing with the same type of matters two years later—in fact, less than two years later—made a second award, involving an expenditure of almost £2,500,000. The Government of the day, this Government, had to tax the people to raise the revenue to give effect to these awards—and then the Government is held up as the scapegoat by the politicians who happen to be in Opposition for the time being.

Are we to have the same sort of thing repeated in regard to the direction and control of public investment? I think that the Government is as good a body as one can secure for this purpose. Every member of the Government knows his own particular capital requirements; and the Taoiseach and the Minister for Finance will endeavour to ensure that no public expenditure is undertaken which will exceed the capacity of the country and which will not be justifiable on economic, moral or social rounds. We will take that decision, knowing that it will be criticised in both Houses of the Oireachtas and on every public platform and that it will have to be a decision that we can stand over on its merits. I think that that is a very much better way of determining how the public funds should be invested.

The Senator, in the course of his speech, quoted from the current report of the Bank of International Settlements a passage criticising the policy of imposing high taxation in order to produce Budget surpluses. But, while our direct taxation is high we are not imposing it at such rates in order to secure a Budget surplus. We are imposing it in order to secure a balance upon our Budget—that balance of the Budget which, as Senator Johnston told the House, is so essential if we are to maintain the stability of our currency. I hope that, this year, we shall secure a balanced budget but let us not forget that, though we had to impose heavy taxation last year, we wound up the year with a deficit of almost £2,000,000 on the Budget—showing that we had failed to reduce expenditure by £2,000,000 or to raise sufficient revenue to meet the expenditure which we had contemplated.

I have devoted a little time to dealing with the remarks of Senator O'Brien. I should like, however, to assure him that if I speak somewhat loudly it is only because Senator Hayes complained, on the last occasion on which I spoke in this drawing-room that my tones were so gentle and my voice so mild that he failed to hear me.

I heard the Minister perfectly.

He described me as speaking in an undertone. I am now making certain that my words will not fall on deaf ears. However, I should like to say that I regard the contributions of Senator O'Brien and of Senator Johnston to this debate as very valuable indeed and I would hope that they would all be read again, even by those who have heard them, and that many of the things which they said would be hearkened to.

Now I come to Senator Baxter. Unfortunately, the Senator is not here now but I should like to correct one or two misapprehensions under which he seemed to be labouring in a marked degree. First of all, he accused the Government of having contracted expenditure. The position, of course, is something very different. Whether it is good or bad that it should be different, I do not propose to say. The over-all expenditure of the State, above and below the line— the expenditure which has to be met out of taxation and the expenditure which has to be defrayed from borrowing—has increased this year as compared with last year, as it increased last year in comparison with the year 1951-52. In 1951-52, the total over-all expenditure from public moneys amounted to £122.7 million. In 1952-53 it amounted to £127.3 million. In 1953-54 it amounted to £139.7 million. A very large part of this expenditure was capital expenditure—capital expenditure above and below the line. Some of it was voted capital expenditure—a phrase that was coined by my predecessor to cover borrowing for certain purposes which, when I previously held office as Minister for Finance, was provided out of revenue so as to avoid imposing undue burdens upon future generations and hampering the economic development of our country.

For reasons which I mentioned in my Budget statement, in the plight in which we have found ourselves, we have had to accept the position as we found it and to borrow for these voted capital services. These services are included in the item "expenditure" which you will see in the normal Exchequer returns. Then, naturally, we have had to borrow to meet the requirements of the E.S.B., of Bord na Móna and of the Local Loans Fund. I hope, therefore, it will be quite clear that, so from the Government's, by a deliberate act on its part or by the adoption of a deliberate policy of restricted spending, causing any decrease in the volume of purchasing power—such as Senator O'Donnell alleged—on the contrary, it is tending to put more money into circulation this year than was in circulation last year or in the year before it. The average daily bank debits for the period for the five months, January to May, bear that out. In 1952, the total of these amounted to £8,114,000. In 1953, the average daily debit had increased to £8,898,000. That does not indicate that there has been any slowing-down in the velocity of expenditure.

We have some rather remarkable facts about individual spending which I think I might deal with here and try to kill another two or three birds with one barrel. We have heard Senator Baxter, Senator P.F. O'Reilly, Senator O'Higgins and Senator O'Donnell—I must not forget him—all proclaim that our people are living under an enforced austerity. Let us see what foundation there is for that statement. I have here an estimate of consumer expenditure on cigarettes for the first quarter of each financial year from 1947-48 to the present time. In the first quarter of the financial year 1947-48, our people spent £4,000,000 on cigarettes; in 1948-49, they spent £4,500,000; in 1949-50, £4.8 million; in 1950-51, £5.1 million; in 1952-53, £5.3 million; in 1952-53, .6 million; and, in the first quarter of this year, they have expended £7.4 million. It does not look as if there were a very marked reduction in the consumer expenditure upon an item which cannot, by any stretch of the imagination, be described as an essential one. But what is more remarkable, in the first quarter of this year on the basis of the tobacco cleared from bond, the public would appear to have absorbed 63.3 million packets of cigarettes as against 61.9 million packets in 1951-52 and 60.7 million packets in 1950-51.

Now let us turn to beer, porter and stout and see what the position was for the first quarter of each of the financial years to which I have referred. I am leaving out 1947-48, because, owing to the bad harvest in that year, there was an abnormal decrease in the consumption of beer—the beverage was simply not available for drinking. In 1948-49, the consumer expenditure on beer amounted to £4,550,000; in 1949-50, it amounted to £3,700,000; it will be noted that there was a marked decrease in the expenditure in 1949-50 as compared with 1948-49, a decrease which even Senator P.F. O'Reilly will not, I think, attempt to ascribe to any malevolent action on the part of the Fianna Fáil Minister for Finance —in 1950-51 the consumption had increased in value to £4,150,000, still less than 1948-49; in 1951-52, it increased to £4,250,000; in 1952-53 it amounted to £4,950,000; and, in the first quarter of the present financial year, it has gone up to £5,350,000.

These figures are in respect of home consumption?

These are the figures of home consumption—consumer consumption here in this country. Let us take home-made spirits. For the quarter which ended 30th June, 1948, the approximate consumer expenditure on home-made spirits amounted to £1,730,000, and, for the corresponding quarter in 1949, it amounted to £1,750,000. For the quarter ended 30th June, 1950, it had increased to £1,900,000; for the quarter ended 30th June, 1951, it amounted to £2,060,000; in the quarter ended 30th June, 1952, if we are to assume that clearances from bond reflect the actual consumption of home-made spirits, we take it that it had fallen to £1,580,000; but, in the first quarter of this year, according to clearances from bond, it has jumped to £2,320,000.

Why confine yourself to the figures for the quarter?

Because these quarter figures are comparable. Only one quarter of the current financial year has elapsed. I shall be glad to give the Senator these figures for the half-year on the 30th September. There is no indication that the upward trend in consumption is falling off. I do not want to burden the House with too many statistics, but if the Deputy wants yearly figures, perhaps I can give them to him. I can give them to him, however, up to the end of the financial year, 31st March, in each year. In 1948-49, the consumption of home-made beer, consumer expenditure on home-made beer, amounted to £16,100,000; in 1949-50, it amounted to £15,900,000; in 1950-51, it amounted to £16,300,000; in 1951-52, it amounted to £17,500,000; and in 1952-53—would you believe it?—it actually amounted to £19,800,000. For home-made spirits, the position, of course, as the Senator knows, is somewhat different. I am sorry I cannot give the figures for home-made spirits at the moment, but Senators may take it that the position is that there has been some decrease in the expenditure during the year 1951-52, but it is not nearly as large as has been suggested.

I can, however, give the Senator the figures for expenditure on cigarettes, which ought to gratify him. In 1948-49, the total consumer expenditure on cigarettes amounted to £18.9 million; in 1949-50, it amounted to £19.9 million; in 1950-51, it amounted to £21.1 million; in 1951-52, it amounted to £22,000,000 and in 1952-53, it amounted to £27.3 million.

Is it correct to say that production in quantity is down?

I am talking about expenditure. Senator Frank Hugh O'Donnell and other Senators have suggested that there has been an actual decrease in consumers' purchasing power. They could not buy these huge quantities of beer, spirits and cigarettes unless they had purchasing power in their hands. The only thing about it is that apparently the purchasers think that the people who are selling these commodities would give them better value for their money than some other people who are lamenting about how poor trade is.

They are trying to console themselves.

The position in relation to spirits—I have the information now—is that the approximate expenditure by the consumer in 1948-49 was £7,450,000; in 1949-50 it was £8,200,000; in 1950-51 it was £9,050,000; in 1951-52 it was £9,600,000 and in 1952-53, on the assumption that the clearances from bond accurately reflected the consumption of home-made spirits, a matter about which there is a great deal of doubt, it fell back exactly to the level of 1950-51— £9,050,000.

Senator Baxter, in the course of his speech, expressed some concern about the future trend of our external trade. I am not going to say that we can assume that all the factors which have operated in our favour during the past four years are going to continue to operate with the same force. It is possible that the market for meat in Great Britain may not be at all what it used to be, not due to any action of ours but merely to the fact that the tastes and the desire for meat in Great Britain may have declined.

I am not going to say either that other producers will not break into that market and secure it because their prices, if not their quality, would appear more attractive from the point of view of the British consumer than ours would appear to be. Nevertheless, at the same time we have a number of factors in our favour. The first, of course, is that we are both in the sterling area and that it is more attractive for Great Britain to buy and pay in sterling than it is to have to buy and pay in currencies which might stand at a premium in relation to our currency. Of course, there is the fact that we are so close to her that we can supply a high-grade article and supply it fairly rapidly and fairly regularly. But the principal ground, I think, for the doubts which Senator Baxter expressed in regard to the future of our export trade was the fact that he thought we would not have the live stock or the commodities to export.

The fact of the matter is that the census of live-stock population which was taken in January, 1953, recorded increases in the numbers of all classes, apart from poultry, as compared with last year. I should say that when Senator Baxter was speaking I expressed the view that the live-stock census was not taken with anything like the same accuracy as the population census is taken and that we could not ascribe the same reliability to the figures as we would to the population census, but for what they are worth here they are. The cattle population has increased by 5 per cent. Sheep have increased by 5.8 per cent. Pigs have increased by 38.7 per cent., but poultry has fallen by .8 per cent.

These figures do not indicate any lack of capacity on our part to sustain an increasing export trade. If the record for the rest of the year continues to show the same favourable trend as the first five months has shown, I think we shall have reached the highest figures for our export trade in our whole history.

I referred earlier to the balance of payments and I should like just to bring out one salient fact in regard to the improvement which has taken place in our position. There has been a decrease in the value of our imports from £86.6 millions in the year 1951 to £74.7 millions in 1953, but there has been an increase in our exports from £27.1 millions during the first five months of 1951, to £42.7 millions in the corresponding period in 1953; that is to say, as compared with the first five months of January, 1951, the import surplus has declined by £27.5 millions. That is to say that instead of having an import surplus of £59.5 millions, as we had in the first five months of 1951, we have to-day only an import surplus of £32,000,000. As I said, the import surplus has been almost halved.

There are a number of other very interesting things I should like to say, but I am sure the House would prefer to have this Bill disposed of before the tea recess.

I cannot help, however, having a parting shot at my good friend, Senator Frank Hugh O'Donnell. Last night he took occasion to display a newspaper advertisement here in the Seanad. I assume, Sir, it is quite in conformity with the dignity of the House to call attention to the fact that while you see, "Complete sell-out" in the advertisement, that must, of course, have been the sell-out of the Coalition groups to each other in 1948; nevertheless, the advertisement also says this: "It is big news for every Dublin shopper." That would rather indicate that so far as these particular goods are concerned, the Dublin shopper is now getting the benefit of the decline in the prices of raw materials which has been world-wide and which, of course, has helped us very considerably in redressing the adverse position which existed in regard to the balance of payments.

I deprecate the endeavour of certain persons who ascribe every ill that befalls them or every difficulty that they encounter to the ill-directed activities of the Government. I say in relation to the difficulties through which certain trades are going in Dublin at the present time that they cannot be ascribed to the Budget of 1951, to the Budget of 1952, of 1953 or to any other Budget. They arise very largely, I think, from one fact, that people are not prepared or can no longer afford to make the journey across the Irish Sea or to come down from the Six Counties to procure foodstuffs and drapery goods which are now freely available to them in their own homes at prices that are, perhaps, lower than we are prepared to charge for them.

That is one of the great reasons why there has been this depression in certain business in the City of Dublin, but there is nothing the Government can do to remedy that. The remedy for that must lie in the hands of those who are conducting these businesses. If they are overstocked, they had better get rid of their stocks. They had better go in for the type of business activity—I may as well give the firm the advertisement—which the Blackrock Tailoring Company are going in for. It is the only way we can possibly deal with the situation. The longer we hang on to these stocks the heavier our losses will be in the end. The thing to do is to clear them out and start to place orders with the Irish making-up trades and with the Irish textile industry for fresh stocks, stocks which will be attractive to people in the Six Counties. After all, they will probably be buying utility garments there and in Great Britain. If the stocks here are made attractive it may induce them to make the voyage across the Irish Sea or the train journey down from the Six Counties. There is nothing the Government can do to help. This is a case where these trades must help themselves.

Question put and agreed to.
Committee Stage ordered for next Wednesday.
The Seanad adjourned at 5.55 p.m. until 3 p.m., on Wednesday, 22nd July, 1953.
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