When the House adjourned last night, I was expressing some amazement at the zeal with which Senator O'Brien was pleading that the Irish public should be permitted to make offerings to the goddess of Chance. His justification for that was that he felt that the terms on which the last national loan had been offered to the public were unnecessarily high. I had pointed out that, despite the fact that the Senator regarded the return offered on the national loan as being unduly attractive, it had nevertheless taken five days to persuade the Irish people and some outside investors to entrust £20,000,000 to the Government, mainly for works of capital development. I say mainly for works of capital development, because I do not want to disguise the fact that some part of this loan was being used for purposes which, I think, my predecessor, or, if not my predecessor the ex-Taoiseach, described as social capital.
The Senator is entitled to that point of view. Nevertheless, I think it is well recognised among the exponents of the science—or is it the art? —of which he is such a distinguished practitioner that the price which must be offered in relation to any particular proposition is that it will attract the marginal element and secure the full satisfaction of the purchasers' need. On that principle, it is possible, if one's offer is not sufficiently attractive, to defeat one's own purpose and I take it the purpose of any Government endeavouring to carry out a programme of national development is that in order to avoid the inflationary dangers which might otherwise arise, their financial requirements should be met, if possible, out of current savings.
In the case of this country that, at any rate, was the position prior to 1948. In the years 1949 and 1950 that principle was not observed because State expenditure on what our predecessors described as capital purposes so far exceeded the current savings that not merely had the State to borrow from our own people but from abroad, and to realise a substantial proportion of savings which had been previously built up.
If one wishes to secure the use of any commodity in considerable quantity, it is necessary to pay the price for that commodity which will attract an amount which will meet one's own requirements. We did that in regard to the last national loan, and because we did it that loan was fully subscribed and, indeed, over-subscribed, not to any great extent, but I think I can say it was fully subscribed by the Irish people in the person not merely of institutions but of small, medium and large private investors.
We should contrast that experience of the 5 per cent. loan with the experience which my predecessor suffered in September, 1950, when he offered a loan of £15,000,000 at 3½ per cent. The hard fact which transpired as a result of that offer was that the terms were insufficient, the loan did not fill and the general public—and in that term I include not merely investors who are domiciled or resident here, but investors from outside this country — only subscribed approximately two-thirds of the total amount required. The balance of approximately £5,000,000 was supplied by the underwriters, by the banks on the one hand and by the Government. Obviously as the Government had to realise existing securities and put new money into circulation and the banks had to do the same, the general influence of that 3½ per cent. issue, which failed to fill, was inflationary. It contributed, if one might say so, to the rise in the cost of living and in prices which began to manifest itself at that particular period.
I think, therefore, that it would require something more than a merely ex parte statement on the part of Senator George O'Brien to convince me at any rate and to convince any person who meditates upon the characteristics of these two transactions, the one signally unsuccessful, the other the most successful issue that has ever been made in this country, that the rate of interest offered on the last national loan was unnecessarily high. Starting on that assumption, Senator O'Brien offered one or two suggestions which he thought I might bear in mind so that we might issue a loan at a lower rate of interest, that is nominally. It is important that we should bear in mind what Senator O'Brien proposed.
He offered two suggestions. First, that we should float a loan at 3 per cent. free of tax. Of course, that does not necessarily imply and, indeed, in our circumstances could not possibly imply, that the real rate of interest offered on the loan would be lower than 5 per cent. On the contrary, if we consider what the standard rate of tax is we shall see that in regard to many investors, those, for instance, who pay tax at the full standard rate and pay surtax, the net yield to them would be very much greater than 3 per cent. Of course, that is a very important consideration to bear in mind, but there are other objections to that proposal and the greatest to my mind, having regard to the general public interest, the interest of the State and to social factors, is that a loan issued on those terms would be unduly beneficial to the large investor and correspondingly unfavourable to the small man.
Take the case which was quite frequent in regard to the 5 per cent. loan. By far the largest category—I am talking from memory now—of subscribers to that loan was that which invested up to £1,000. In many cases the net rate of tax payable by the small man on the loan would be considerably less than the standard rate. Those who invested £100 or less—and there was a substantial number; I think, about 800—in that loan would probably not pay tax at all. Therefore, the tax-free concession would be of no value to by far the largest category of subscribers to the last loan but it would be of considerable value to insurance corporations, surtax payers and others who were able to take up substantial blocks of the loan. They would get a very considerable benefit indeed. So that, though the net cost to the Exchequer would be considerably higher, I think, than in the case of the 5 per cent. loan issued subject to tax, nevertheless all the benefit would, in fact, inure to the more substantial taxpayers with the consequence that the number of subscribers to the loan, I think, would be considerably reduced.
I think it is generally recognised that it is beneficial to the public interest to have the greatest possible number of citizens interested directly in the stability of the State and in the soundness of the public finances. Therefore- from the point of view of the State, Senator O'Brien's proposal for a tax free loan would tend to exclude from a direct interest in the finances of the State and the soundness and stability of its currency a very substantial proportion of our population. It has been, I think, the aim of every system of Government that has wished to ensure that it will perpetuate itself and survive, to see that the greatest possible number of its citizens are directly concerned to ensure its survival. From that point of view, Senator O'Brien's proposal for a tax free loan can scarcely be regarded as a commendable one.
The next suggestion which the Senator made was that we should consider whether we could not make the loan more attractive to subscribers if we incorporated in it a very large element of chance. He went so far as to say that perhaps a 4 per cent. loan issued at a discount, issued at £80 per nominal £100 stock, and subject to the condition that small blocks of the stock would be drawn from time to time for redemption at par, may be a much cheaper way of getting the money than the straight and honest offer which was made to the public last October. I think that the Senator has somewhat overrated the possibilities that the State may be able to run itself very much like a gaming house and that the public finances can be conducted on the same principles as a man may run a roulette table at a fair.
The thing which we will have to concede is that the gambling instinct upon which Senator O'Brien relies to such an extent is, in general, not highly developed in the thrifty and industrious sections of our people who are prepared to stint themselves a little to save, in order that they may invest and in other years enjoy the benefits of the self-deprivation to which they submit in order that they may amass a little loose cash to invest in a long-term loan such as the national loans are going to be. Therefore, I do not think that an offer such as the Senator has suggested would be likely to be very much more attractive to the investing public in general than a straight offer would be.
I think that the origin of the Senator's suggestion was that, again, the rate of interest on the last loan was unnecessarily high, that by some subterfuge we could secure our money at a lower nominal rate of interest. Undoubtedly, if you offer 4 per cent. stock at £80 per nominal £100, the 4 per cent. looks less than the 5 per cent.; but when you begin to take into consideration the discount at which you are offering the stock you will find that the overall cost, the true cost, to the State would be considerably higher.
Assume that this 4 per cent. loan, issued at such a heavy discount, is going to run for a 20-year period. If it is issued at £80, that gives a capital profit of £20 at the end of 20 years; that is the minimum yield which such a stock will give to the unluckiest investor, the man whose bond is never drawn at all but who has to hold on to this nominal 4 per cent. stock until it matures 20 years later. On the other hand, let us assume that the number of lucky investors and the number of unlucky ones are equal; then, on the average, one would have to wait, say, only ten years for one's £20 and this, even on a flat rate, is equivalent to an extra £2 per annum on every £100 cash, that is to say, it is equivalent to 2½ per cent. on top of the original 4 per cent. Therefore, instead of paying 5 per cent. subject to tax— which Senator George O'Brien rates unnecessarily high—we should be paying 6½ per cent.
When one considers, again, that the premium would be free of tax, the real rate of interest on this 4 per cent. stock would be higher still. I would say that, taking it all in all, if we worked it out, probably the true rate which this 4 per cent. stock would carry would be of the order of about 8 per cent. I think that would be a rather expensive price to pay in order that we might allow the gambling members of the community a chance for a flutter in Government stocks.
Though I have criticised the proposals which Senator O'Brien has put forward, I do not think he intended them to be taken seriously, but rather that he offered them as an incentive to the Minister for Finance to try to approach the question of raising capital from the public with, shall we say, a more alert mind than perhaps the Senator thinks he has hitherto done. I can assure the Senator if I can find any possible way of raising the capital requirements of the Government at a lower rate than heretofore which will attract the full amount of money we require, I shall certainly have recourse to it provided, of course, it is not a method which would carry such a heavy inflationary influence as to be harmful to the general economy.
It is hardly necessary for me to say very much about Senator Burke's speech. I know that the view he has expressed that housing subsidies have led generally to inefficient building and perhaps to excessive profits on the part of the builder is one which is shared by many people, not merely by those who sit on that side of the House, but by people who do not participate to any great extent in the public life of our country. But there is a difficulty here again. Supposing we were to cut subsidies out altogether, how are we going to ensure that the housing problem, which is among the greatest of the social evils we have inherited, will be solved? Uutimately it would appear that the offer of something for nothing is one of those factors which influences people to decide to provide themselves with their own home. The justification for the subsidy is perhaps more psychological than economic.
Senator Johnston asked me a number of questions in relation to the various contributions and grants which appear in the Estimate for the Department of Local Government. He suggested that it was wrong from the point of view of the general canons of public finance which used to prevail to borrow these moneys. He was referring in particular to sub-head I (1) on page 185 and sub-head I (3) on page 186. So far as I (1) is concerned, I can give him this assurance, that the subsidies in relation to grants towards housing loan charges of local authorities, for which £840,000 is provided this year, is taken out of revenue and is not borrowed for. On the other hand, I have to confess that the grants under I (3), that is, grants under the Housing (Financial and Miscellaneous Provisions) Acts, 1933 to 1952, and other Housing Acts, have been borrowed for since 1950-51; so also has the grant which is provided under I (6). They form part of the voted capital supply services which, as the Senator knows, has been a matter of controversy and contention elsewhere.
If times were different—and it must be remembered we could not do everything at once—I, at least, in so far as I could influence Government policy in relation to these matters, would endeavour to secure that they were provided out of revenue for the reason which the Senator himself has given, that the number of houses built in respect of which these grants are given barely makes good the depreciation and wastage on existing houses. That was the principle on which these grants were voted from 1932 to 1939, when I was formerly Minister for Finance and on which they continued to be voted until 1950 when a new procedure was adopted.
Senator Johnston also asked me does the principle of rates remission apply to farm buildings. I have not had time to verify my recollection but I think my recollection is correct, that in the case of farm buildings the original Valuation Act of 1852 provided that reconstruction, improvements, extensions or enlargements of farm buildings were not to be valued for a period of seven years. That is not precisely the same thing as granting a remission of rates but it does mean that for a period of seven years the improvements are not valued and accordingly escape rates; but at the end of the seven years rates must be paid at the full rate. However, it is, perhaps, from the point of view of the farmer, much more advantageous than any rates remission might be because the rates remission would entail valuation straight away; there would only be a partial remission of the rates, say, two-thirds, and that would continue for only a limited period of seven years.
Senator O'Higgins has been complaining very bitterly about the increase in unemployment. That increase in unemployment has, for a number of reasons, been concentrated very largely in the City of Dublin and also very largely concentrated in one trade, the building trade. We know, of course, that no housing programme, no matter how extensive you may make it, no matter how well you may plan it, no matter how you may regulate it in regard to time, can be carried out at a continuous fixed rate. There must be periods when there will be considerable slackness, not merely in the building trade but in an ordinary manufacturing industry, and we have run into such a period here in the City of Dublin. The corporation own considerable tracts of land which they acquired for the purposes of their housing programme, but they have not been able to develop those lands and to build upon them because there is a major engineering work which is only now in course of execution, and so accordingly we had this increase in unemployment in the building trade of Dublin arising very largely out of the cessation of the corporation building programme. Again, you see, we have also had a temporary decrease in the amount of building carried out for private persons.
I am going to give figures which will show that that situation also is righting itself. We have had long experience—after all we have been in Government for 16 years. When we came in and took office in 1932 we inherited an unemployment problem of dimensions at least four times that with which we are dealing to-day, but it was an unemployment problem for which no provision whatever had been made for the sustenance or subsistence of the people who had been unemployed.
There was then no Unemployment Assistance Act. People who had been for years out of employment and therefore out of unemployment benefit were depending entirely upon home assistance, and for the six or seven years that we were there from 1932 to 1939 the then Government had to vote considerable sums for the relief of unemployment not merely in the City of Dublin but throughout the whole of the Twenty-Six Counties; and during that period prior to 1932 those of us who are old enough to remember it will recall that we had not people marching through the City of Dublin asking for increased unemployment assistance. What we had then was people marching through the City of Dublin who were hungry and asking for bread.
The situation, as I have said, was very much graver then than it is to-day, and it was because of our experience during that period that the Government which was in office from 1932 to 1948 set itself to devise, to draw up, a programme of useful public works, not a programme of sporadic relief works which would be undertaken for three, four, five or six weeks and which would yield no permanent benefit to the community. We set ourselves to draw up a programme which involved among other things the reconstruction of certain buildings which were dilapidated and in a dangerous condition and which themselves had been, as I have said in the other House, in some cases, converted stables which were, apart from anything else, apart from the menace which they may have constituted to the health of the staff, certainly not conducive to efficient or economical administration. Among these projects was, as I have said, this Dublin Castle reconstruction.
Now what do we find? We find people like Senator O'Higgins who have been trying to make capital out of this unemployment problem, the moment that the Government indicates that it is prepared to proceed with a public work which will justify itself in the savings in the cost of administration which will accrue from it, then begin to talk about constructing palaces for civil servants in Dublin. Of course, that may appeal to the patriarch of 80 or 90 living somewhere in the remotest parts of the country who has not been in any Government office in Dublin, but it is not going to carry very much weight with the ordinary person who knows that if you want to have work done efficiently and economically you must house your staffs properly. You must do it with your live stock on the farm and you cannot propose to treat human beings with any less consideration than you will treat them.
Let us have a look at this unemployment problem of which we have been hearing so much. The remarkable thing about it is that the number of people who are on the live register and claiming unemployment benefit has very substantially diminished over the past four or five weeks. Now that has happened before any proposal was made for carrying out special works or for undertaking those major works which the Government has indicated it proposes to proceed with. I have here the live register statistics starting from the 20th June, 1953, and dealing with claimants to unemployment benefit.
Now, we may take this as being in general true, that the people who are normally employed are those who draw unemployment benefit. The people who have to have recourse to unemployment assistance are in general people who are not in insurable employment, people who live down the country and people who have been so long out of a job that nobody is prepared to give them a job. Again, of course, there we have to consider a great many things. So far as the unemployment register is concerned any person who claims to be out of work, to be looking for a job, is entitled to sign it whether he is actually working or not, and he is entitled to sign it and probably will continue to sign it until he reaches the age of 70 years.
We cannot assume from the figures that I give you that all these people who are on the unemployment register drawing unemployment benefit are all young people in the vigour of their youth, or indeed are all people who might be described as likely to give a satisfactory return for the wage which they are paid.
However, having made these prefatory remarks, let me get back to the real statistics. I am giving now the number of claimants to unemployment benefit on the live register for a number of weeks. This live register, let me point out again, covers the whole country. The preponderating class of individuals who sign the live register will, I assume, be those who live in our cities and towns. The number of people who sign the live register for unemployment benefit in country districts is comparatively small. What proportion it bears to the whole, I am not prepared to say. On 20th June, the number of men—and I think we should deal only with men because there is no use talking about women and girls—who signed the live register was 36,577. These were claimants to unemployment benefit. On 27th June—a week later—that number had fallen to 35,875. On the 4th July it had fallen to 34,952. On the 11th July it had declined to 28,118 and on the 18th July it had declined to 26,177.
Another factor which we have to keep in mind when we are considering these figures is the fact that the Social Welfare Act of 1952 made it much more easy to become entitled to unemployment benefit. Not merely that, but the number of persons and classes who were covered by the Unemployment Insurance Acts was very considerably enlarged so that—even there—there is no true basis of comparison between the year 1953 and, say, the position as it was in 1950 or 1951. By reason of the changes which the Social Welfare Act of 1952 has brought about, the number of persons claiming unemployment benefit was certain to increase. I am not going to suggest the extent to which the figure may have been enlarged but I think it is not insignificant. The main thing I want to point out is that, without any special action being taken by the Government, there has been a considerable decline in the number of persons claiming unemployment benefit since 20th June last. So far as one can see, that trend is continuing.
We had another statement from Senator O'Higgins which I think it is necessary to correct. The Senator suggested that the wage rates had been declining over the past few months. That statement is contradicted by the index numbers of wage rate which the Senator will find on page 127 of the Irish Trade Journal and Statistical Bulletin. There he will see that, in the Dublin district, the wage index has gone up from 158.7 in 1948 to 192.7 in 1952 and 210.6 in 1953—showing, I suggest, that so far as the cost-of-living index is concerned, wage rates followed the rising trend in it very closely.
Senator Commons asked me whether I was in a position to make any announcement regarding the projected change in the system upon which the grant for the relief of rates on agricultural land is given. I am not able to add anything to what the Minister for Local Government himself has said on that matter. Some change will be brought about, but I think I can say that no county—I want to be quite careful—will be any worse off in the year 1953 in regard to this matter than it was in the year 1952.
