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Seanad Éireann debate -
Thursday, 4 Jul 1957

Vol. 48 No. 6

Finance Bill, 1957—Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Some of us were here last night and were privileged to hear the very fine analysis of our present economic situation by Senator O'Brien. The analysis was very fair and I think I am not unfair in saying that it was certainly in very favourable contrast with the contribution given before that by Senator O'Donovan.

Most of us will agree that Senator O'Donovan, instead of making a balanced contribution from a financial and economic point of view to a very important debate was instead rather prone to indulge in political debate and juggling with figures in a political manner. In particular, I should like to take two or three of the very emphatic statements he made and on which he made a lot of play and examine them.

He made a lot of play on the current estimate for the Supply Services. It is quite clear that the estimate for the Supply Services with which the present Minister for Finance was faced when he assumed office last March had been prepared by his predecessor. That estimate was prepared and printed for the present Minister for Finance by the previous Minister and, as Senator O'Donovan pointed out, it amounts to £112,000,000 for the year 1957-58. However much Senator O'Donovan may deplore that amount, I suggest that any criticism he may have to offer of it should be directed at the former Minister for Finance. On coming into office at the end of March last and being faced with the estimate prepared by his predecessor, what was he further faced with? The Minister was faced also with a deficit of £9,000,000 for which there was no revenue expectation.A sum of £9,000,000 had to be found in order to balance the figure of £112,000,000. I do not think Senator O'Donovan can deny that.

In further criticism of this Bill, Senator O'Donovan said that the deficit £9,000,000 might have been met by economies. He was no stronger than that. He did not offer one constructive suggestion as to how that money could be found. All he said, in a vague fashion, was that the deficit might have been met by economies. In the Dáil, some Fine Gael Deputies mentioned that the Minister could have got the money by transferring the income from the capital levies to the current account. Senator O'Donovan did not offer that as a solution because he knows well it would mean further unemployment and that money at present being spent on capital development would be transferred to finance the Budget on current account. We refused to do that because the Minister believed in implementing his Party's policy of ensuring as full employment as possible. With that object in view, the Minister decided to balance the Supply Services by current revenue and the only way of doing so was by the abolition of the subsidies.

Senator O'Donovan had a lot of theoretical argument about the loss of revenue that would result from the abolition of the food subsidies. He said people would have less to spend and that there would be a reduction of £1.9 million in the coming year from beer and cigarettes. On his own admission, that theoretical speculation was based on the assumption that there would be no change in income during the next year. Senator O'Donovan is not such an abstract economist as not to know that already the trade unions are in negotiation with the Minister for Industry and Commerce in regard to wage increases for the current year. Therefore, the theoretical argument of a loss in revenue, based on the fact that incomes will not change during the coming year, falls immediately, because, in fact, negotiations are in process of being concluded in regard to the fixing of a general wage pattern for the current year.

Senator O'Donovan had to admit, in giving us figures as regards the capital end of the Budget, that the present Government is spending £2.2 million more in capital development in 1957-58 than was spent in 1956-57. He quibbled about the direction that capital development should take. He gave the figures himself — the local authorities will get more to cater for increased housing; Aer Lingus, the Road Fund, the E.S.B. and C.I.E. are all to get more. The important thing is that we are spending more money on capital development. That is merely another facet of the Government's policy in regard to capital development which will improve the unemployment figures.

We had another fallacy in Senator O'Donovan's argument in relation to the National Development Fund. He referred to the fact that at 31st March, 1956, it was £2.6 million; in March, 1957, it was £2.6 million; in other words, that it had gone down by £4.2 million in 1956-57.

Again, that can hardly be laid at the door of the present incumbent of the Department of Finance. That was a loss in the Road Fund from March, 1956, to March, 1957. The present occupant of the Department of Finance went in at the end of March, 1957. That loss took place in the year 1956-57.

The grossest error in Senator O'Donovan's argument, which was answered very simply last night by Senator O'Brien, was contained in the implied statement by him that our balance of payments was really of no consequence at all. If that is so, I should like to know why the Minister for Finance in the previous Government saw fit to impose the very drastic import levies last year in order to cater for a balance of payments position that was getting out of hand. Does Senator O'Donovan not agree that last year the balance of payments position was getting out of hand? Does he not agree that in the year 1955, £35.5 millions was a very unfavourable balance in our external payments? Does he not agree that the import levies were imposed to deal with just that situation?

The former Minister and his colleagues thought the balance of payments position so bad that they had to impose those drastic import levies, which caused recession in trade and unemployment during the past 12 months. It was quite apparent to the Minister in that Government that our whole economic position depends on preserving a proper balance of payments.I think the best comment on this Finance Bill, incorporating as it does the Budget Resolutions, came from Senator O'Brien when he said quite simply: "This is a step in the right direction." I think the Minister is to be congratulated in taking that step within a month or two of coming into office. The Seanad should bear in mind the economic environment within which this Bill was introduced. It is well known and is one which will probably mark out the year 1956 as the worst year, from the economic point of view, since the formation of this State.

There were fewer people at work in 1956 than ever before since 1922. There were 8,000 fewer people employed in industry and 9,000 fewer employed in agriculture. There was the highest emigration rate ever since the formation of the State. Output in agriculture was down; industrial production was down. That was the depressing economic pattern in the year 1956. It was caused by the restriction on hire purchase and credit and by the import levies that were imposed by the previous Government. They were imposed because in the year prior to that the balance of payments position had been allowed to get out of hand to the extent of £35.5 millions.

In an effort to rectify that situation, the previous Government brought in the restrictions I have mentioned. While they reduced the balance of payments position to £14.4 million, they caused unemployment and the recession of trade I have spoken about. That cannot be denied. The figures are there. That is the economic context in which the present Government took office at the end of March this year.

The political context was quite simple. Undoubtedly, the major issue in the last general election was that the people wanted a Government and the reason they decided to give the most overwhelming majority in the history of this State to a single Party was that they simply wanted a strong, effective, vigorous Government to stay there for five years. A Party was given power with a strong majority in order to clean up the economic mess left by the previous Government. That was the directive given to them. This Budget is the first step in the direction of obeying that directive.

There is nothing very conservative about having a proper balance of payments position and a properly balanced Budget. Senator O'Brien last night rightly gauged the importance of a properly balanced Budget in relation to current supply services. As he pointed out, if you do that, it means that all borrowed funds available to the State can be utilised in capital development in order to give employment.Some people are apt to sneer at the theory of a balanced Budget and say there is no need for it. If you have a balanced Budget on supply services, which the Minister for Finance has achieved, you then make available all the borrowed funds, which the State can get, for the various capital schemes which the State can undertake and so give employment to the people. The Minister for Finance has followed that principle.

A second principle is involved in this Finance Bill and it is also a very good principle. It is the principle behind the fact that the Minister has chosen as part of this instrument in this Finance Bill the abolition of the food subsidies.As well as seeing to it that all State borrowed funds shall be utilised in capital investment, he is also seeing to it that the budgetary proposals do not impinge too much on private enterprise so as to deter private enterprise and thereby curtail employment. The Minister could have met the deficit by borrowing. If he had done so, it would have affected the State capital investment programme. He could have met it by transferring the import levies to current services. He avoided doing that because that would also have affected the State capital investment programme.

Thirdly, the Minister could have put up taxation further. He could have put up income tax, and corporation profits tax and could have put on various indirect taxes. But if he had done that, he would have deterred private enterprise.So curtailing private enterprise would probably have resulted in a recession in employment. He avoided both of those pitfalls and decided instead to balance his Budget and provide out of current revenue the current State expenditure on supply services. By not increasing income tax and corporation profits tax and by not increasing any taxes, apart from the petrol tax, he had seen to it that private enterprise and industry will be able to expand in the coming year. He has seen to it that two employment factors in the State, private enterprise and the State itself will be given a full chance and that in the coming year we shall continue to have an enlarging field of State and private investment activities. That has been the main object of the Budget and it is a very sensible object. It will achieve a greater volume of State and private investment activity.

There is one other thing in the Finance Bill which is of great importance. It relates to our exports. We cannot progress in this country, we cannot move from the basis of a balanced Budget or a growing volume of private and State investment activity, unless we are balancing our external payments. We are all agreed on that. In order to do that, we must have a growing volume of exports. That is agreed by everyone.In the long run, agriculture must provide that; but, in the short run, we must have a greater volume of industrial exports. In the short run, if we are to get down to a radical solution of the unemployment problem, we can provide a greater volume of employment in this country only from industry. A rapid expansion in industrial progress provides the greatest chance of providing greater and growing opportunities for our people here at home. I agree that, in the long run, it must be agricultural development; but, in the short run, as regards exports and as regards providing employment at home we must depend on industry.

In that context, Section 5 and 16 of the Finance Bill in particular are very welcome. Section 5 extends the provisions in the Finance Bill of last year and, as I read it, it provides for 100 per cent. income-tax remission on profits derived from exports, over and above the profits of the company in the standard period, which is the year ended 30th September, 1956. Section 5, in addition, provides, that profits on the sale of goods exported out of the State can be computed. It also provides that income-tax referable to profits on exports shall be reduced to 25 per cent. In other words, by Section 5, the Minister is carrying that out on either of two bases, either on the basis of 25 per cent. remission on profits derived from exports or on the basis of 100 per cent. remission on profits derived over and above the profits of a standard period. He has provided there a real encouragement for industrialists who wish to go into the export market. The other section I mentioned, Section 16, merely is the same provision in regard to corporation profits tax. That is a big inducement to people to go into the export market. That is a fiscal encouragement.

The other encouragement towards greater industrial investment and greater export from that industrial investment must come in the form of capital investment from external sources. The Minister has there provided the inducement to people to export.The next question must be to get the risk capital to provide the industry for that export. I am afraid that risk capital is probably not to be found here to the extent we would like, the risk capital is probably not here to provide the exports really necessary to tackle our problem.

In that context, the recent announcement that the Minister for Industry and Commerce is contemplating an amendment of the Control of Manufactures Act is welcome. I should like to cross swords with Senator O'Brien on some of what he said here last evening in regard to that matter. Senator O'Brien implied that the present Government had seen at last the error of its ways in passing that Act in 1932. I think the Senator is wrong. In the context of the situation in this country in 1932, that Act was very necessary. It was an Act designed by a young State, which a young State felt necessary to give proper control to Irishmen in industry, providing goods for the Irish market in their own country.In the environment of 1932, it was very desirable.

That Act has ensured that the control of industry providing for the home market will be in the hands of Irishmen.Senator O'Brien is wrong in saying that the Government has "seen the error of its ways". The Act was right and proper in 1932, but I think it is not a relevant Act in 1957 or for 1958, or the future. That is the view which the present Government is taking in regard to that Act, that, in 1957, it is not suited to our needs. That is why its amendment is under consideration.That is very important, since most people will agree that the risk capital for rapid industrial development is not available here.

In that, there is hope for the future. The fact that in this Bill there is an inducement to people to engage in export, by means of a 25 per cent. or 100 per cent. income-tax remission, coupled with the proposed amendment of the Control of Manufactures Act, should induce both people at home to export more and people outside to come in and provide industries here for the export market.

There is one question I should like to ask the Minister before I finish. I read in the newspapers to-day that he stated yesterday in the Dáil that these fiscal measures in this Finance Bill would mean that a new industrialist starting a fresh industry would get 100 per cent. remission of income-tax on profits derived from export. As I see the Bill at the moment, Sections 5 and 16 relate only to this specified or standard period — ending in September, 1956. Is it true that a new industrialist starting a new industry, geared entirely for export, will get 100 per cent. remission of income-tax on all profits derived from those exports? That is the only query I should like to ask the Minister.

Finally, I think we can state with assurance that the political situation of our country to-day is one in which there is a Government in power with an over-all majority. That immediately guarantees confidence. I will not say anything critical of the previous Government, but the plain fact of the matter is that there was no confidence. I think it is agreed by all that the very fact that there is a Government in power — no matter what you call it — guaranteeing to stay in power for the next five years, is a factor already inducing confidence in our economy.

There has been a step in the right direction by balancing the Budget on current services. There has been a further step in the right direction by increasing the State capital investment by £2,000,000 and, in particular, by increasing the investment in housing.There has been a real step in the right direction in this Finance Bill by providing these inducements for exports.There has been a further step in the right direction in the announcement recently by the Minister for Industry and Commerce that he is considering amendments to the Control of Manufactures Act. The Seanad should have no difficulty in commending this honest and forthright Finance Bill, enshrining as it does the Budget resolutions for the year 1957-58.

The debate so far has been of a very high standard and I wish I could keep it at that high standard. I shall do my very best to follow the standard of the previous speakers. I find it strange to have a speech by Senator O'Brien on the Finance Bill lauded so much by Fianna Fáil. If Senator Lenihan had been here last year to hear Senator O'Brien then on the Budget introduced by the Minister's predecessor and to hear him call it a "good 19th century Gladstonian Budget", as given in Volume 46, column 226, he would appreciate that Senator O'Brien is using exactly the same argument now. It is good to see that Fianna Fáil are in agreement with him this year, though last year they were not.

I have every respect for Senator O'Brien, especially when he speaks on economics — because as well as being a man of integrity, he is a man of great learning. It might have struck the Seanad, however, that we had two economists speaking last night and they disagreed. We all know that economics is not an exact science and that different economists have different views at different times. I am not concerned about economic theories — I never could understand them. When they are stated, they sound very laudable and very right, but if somebody else comes along and gives me a directly opposite theory, I can accept it as being equally laudable and right.

What I am concerned with is whether or not the theory, when it comes to be applied, works, whether it is good for the ordinary worker and the ordinary inhabitants of this country. I sometimes think that the economic theories which are practised now in most modern countries would raise the hair of the old Gladstonian economists, and I am afraid that that is one of the troubles. We should be more concerned with getting the system to work for the benefit of the people rather than for the benefit of the pound sterling.

Having said that, and having admitted my economic ignorance, might I say, speaking as one representing labour interests, the ordinary working people of this country, that I regard this Budget as economically unwise and socially unjust. It is for those two reasons that I think we should oppose the passage of this Finance Bill in the Seanad. The fact of the matter is that when the Minister came to take over his responsibilities, the economy of this country was on the road to recovery.That cannot be denied. I refer in the first place to the balance of payments. An awful lot is said about the balance of payments — I have said a lot myself on the matter, I must admit. The Minister for Industry and Commerce, for instance, quoted the calendar year of 1956 when speaking to his Estimate in the Dáil during the week, but of course those figures are six months out of date now. What we must have regard to are the fairly current figures, what has been happening since the levies have had effect.

The position, as far as I see it, is that we can judge the situation by looking at the balance of visible trade. We have monthly figures for that, and when looking at that balance of visible trade we must take into account that we earn a surplus of approximately £60,000,000 on the invisible trade; that is, tourist receipts, emigrants' remittances, and so on. We have a surplus per annum of approximately £60,000,000, or, in other words, a cushion of £5,000,000 per month on our invisible balance of trade. Let us look at what has been happening since the levies have had effect. The visible deficit in August, 1956, was £3.1 million; in September, £2.4 million; in October, £3.4 million; in November, £3.2 million. Having regard to the cushion of £5,000,000, you will see that we were in those months earning a surplus. In December, the deficit was £5.6 million; in January, £4.9 million; in February, £5.2 million; in March, £4.7 million; and in April, £2.9 million. In fact, we have been building up a surplus in our balance of payments in the months since the levies had effect last year.

It was in those circumstances that I urged on the Minister, when we were dealing with the Central Fund Bill in March last that he should quickly look at the levies, in so far as they affected employment. He said at the time that while he was sympathetic with the views I expressed, he could hold out no hope of doing anything in the immediate future. Within two or three days, he was able to do something in regard to the levies and in regard to hire-purchase. I make no complaint about that. I was glad that he was able to see his way to make that improvement, even though, if we came down to details, we might quarrel as to whether or not certain levies which have been lifted had a bearing on employment.

The point I am making to the Seanad, however, is that in so far as the balance of payments was concerned, the situation was mended by the time the Minister came to take over his responsibilities. In addition, the Government were able to ease up on the credit squeeze. Another factor in regard to the general economy was that there was a gradual reduction in the number of unemployed. Granted, that reduction was small enough, but the tendency was for the number of unemployed to show a reduction.

Since 1955, there has been stability in this country in regard to wages. I am saying that because of this Budget and because of the withdrawal of the food subsidies, that desirable stability has been destroyed. That is inevitable now. The Minister and the Seanad well know that. Trade unions are democratic bodies. They move according to the wishes of their members.They have the duty as far as possible to preserve the standard of living of their members, and those members, faced with a rise in the price of essential foods, must press their unions for corresponding improvement in their rates of pay. But when we come to look for revision of rates of pay, regard must be had to all the changes in circumstances since the last adjustment. What the Minister has done is that he has pushed off a round of wage claims when, I think, all of us, including trade union leaders, would have much preferred stability for the sake of the economy at the present time.

The trade unions, however, have been pushed into this situation by the removal of different subsidies. This is a very serious situation. According to the Minister, the effect of the Budget on the consumer price index will be an increase of 4½ points. That is the result of the direct effects of the Budget only. I made the point, I think, that when you come to adjust wages, you must have regard to all the circumstances, all the changes since the previous adjustment. It is not an increase, therefore, of 4½ points in the consumer price index, because there have been other increases, other changes, since 1955, and all those changes taken together mean that the cost of living has gone up in the meantime by 11 per cent. That is, taking account of the Budget changes, an increase of 2/2 in the £.

Business suspended at 6 p.m. and resumed at 7 p.m.

Before we resume, a Chathaoirligh, I wonder is it the intention of the members to wind up the debate to-night?

I think we should finish to-night, if we can. I think we should finish this Stage now and finish the remaining Stages next week.

We will probably know how the debate is going about nine o'clock.

An announcement will be made at nine o'clock then.

When we adjourned, I was saying that the Budget, in my opinion, was economically unwise in that it upset the economy of the country at a time when that economy was tending to improve after last year's recession. I pointed out that inevitably there must be adjustments in wages, another round of wage increases, and that the stability on the wages front which had existed since 1955 must now end. I think it is unfortunate that the Minister, by abolishing the food subsidies in the Budget, should have precipitated that round of wage increases. As well as being economically unwise in disturbing that stability, it was economically unwise because I do not think that the economies which the Minister expects by abolishing the subsidies will, in fact, be realised.

We have seen that in the Dáil last week there was mention on both sides of the House of 20,000 tons of butter exported last year which were exported at a loss to the Exchequer. It is understood and expected that there will be at least the same tonnage of butter for export again this year. I should imagine, because of the drop in the consumption of butter, arising from the increase in price, and the improvement of milk supplies to the creameries, that in fact there will be a bigger surplus this year for export. Senator O'Donovan made some reference to this last night. The price which was given in the Dáil for butter sold abroad was 3/- a lb. and that involved at least a loss of 1/3 a lb. The export of just 200,000 tons this year would mean that the taxpayers would have to pay over £2,798,000.

I wonder if the Minister in his reply would say whether that is expected or not. I want to underline the fact that I am taking the loss at its very minimum.I am taking the figure which was used as last year's export and I am taking the loss per lb. as being the very smallest. Because of the abolition of the food subsidies, the Minister will not make the saving expected.There will be a greater surplus of butter to be exported because our people here will not be able to purchase it at the increased price. That loss of export must be paid by the taxpayer in this country.

Let me come to my second point, that the Budget is socially unjust. I feel I should not go over all the points here because we dealt with them. We made our views known when we were dealing with the Social Welfare Bill and the Health and Mental Treatment Bill in the Seanad. Suffice it to say that the abolition of the food subsidies imposed a very severe burden on that section of the community least able to bear that extra burden.

We demonstrated on the Second Reading of the Social Welfare Bill that in fact, the compensation of 1/- per week to those in receipt of social welfare assistance is not good compensation for the burden which the Budget places on them. We pointed out that, on the Minister's own calculation, the removal of the food subsidies meant an extra cost on the community of 1/1 per week per person, that is, taking the whole community. We all know that bread and butter are of far more importance in the diet of the poorer section of the community, of those in receipt of social welfare benefits, than the well-off section, the people whose diet is composed of foods other than simple bread and butter.

The Minister made an attempt to compensate to some extent some section of the community. He gave an increase of 1/- to those in receipt of old age pensions, the blind, and those in receipt of non-contributory widows' pensions. He has not, however, proposed any increase to those in receipt of social welfare benefits, those in receipt of unemployment benefit, the insured widows and orphans. These people are equally affected by the rise in the price of essential foodstuffs.

We had also under discussion the rise in the charge for hospital treatment for the middle income group. I have a feeling that some of the Fianna Fáil Senators, some of the Fianna Fáil Party, are not very happy at all because of the Budget. It struck me in the debate we had in the Seanad on hospital charges that they attempted to justify the increases, while in their conscience, especially in the case of the younger people, they did not think it was right.

I notice that the Irish Press, the organ of Fianna Fáil, carried a very large headline on 30th May. That headline read: “Free services for lower income group”. That was a very plausible cover for the fact that the Minister, as a result of the Budget, was, in fact, permitting an increase in the maximum charge of 6/- per day to 10/- per day. As I said, we made those points already on the relevant Bills when they were going through this House, but I think it is well to remind the Seanad of them in support of my argument that this Budget is socially unjust. It is laying a burden on the people who are least well able to afford an extra burden at this time. We all know that the Minister had to find extra money. He had the course of trying to find it by extra taxation. What he did instead was to withdraw the food subsidies and, in fact, put extra taxation, and extra burden, on the people least well able to afford that extra burden. I think that was socially unjust.

I cannot accept the argument that the limit has been reached in regard to taxation. In dealing with the Social Welfare Bill, I said I was satisfied, from speaking to people of my own generation, that they would much prefer to bear extra burden taxation if, by doing so, the burden of the people least well off could be eased. I said that we must develop a social conscience. I think that in the younger generation on both sides of the House, there are encouraging signs in that direction. We feel we would gladly bear the extra burden rather than see it placed now on people on whom it is a grave hardship and a social injustice.

It is because of these two points — that the Budget is economically unwise and socially unjust — that we say we should oppose the passage of this Finance Bill.

Nílim chun mórán a rá ar an mBille Airgeadais seo, tá an oiread sin ráite ag Seanadóirí eile. Ach i dtosach báire, cuirim fáilte roimh an mBille mar tuigtear dom gur iarracht é chun cúrsaí airgeadais agus cúrsaí geilleagair agus tráchtála do chur i gceart arís. Tá a fhios ag gach éinne go bhfuil droch-bhail ar an dtír le cupla bliain agus go raibh muintir na tíre seo tuitithe in éadóchas i dtaobh cás na tíre agus do tuigeadh dóibh ná tiocfadh aon fheabhas ar an scéal go dtí go mbeadh athrú rialtais ann. Ní gan dua a cuirfear cúrsaí na tíre i gceart arís agus tá a fhois ag an saol go raibh gá le breis chánach. Muna gcuirtí cánacha breise, a bheag nó a mhór, i bhfeidhm, conas a líonfaí an bhearna idir theacht isteach agus caiteachas. Cá bhfaighfí an t-airgead chuige? Sin í an cheist agus ba mhaith liom freagra d'fháil ó lucht cáinte an Rialtais ar an gceist sin. Muna mbeadh an bhearna sin a bheith ann, de dheascaibh an Rialtais a bhí ann le déanaí, níor ghá na cánacha breise a chur i bhfeidhm in aon chor. Cé orthu mar sin go bhfuil an locht?

I have listened to the various speakers in this debate and I must say that nobody on the opposite side of the House has made a convincing case against this Bill. As Senators know, this Bill is based on the provisions of the Budget that was introduced in the Dáil a few months ago. Every person is well aware that no Minister for Finance and no Government could, in view of the circumstances which prevailed, carry on the affairs of our country without introducing additional taxation.

The point I want to make is that were it not for the fact that a deficit in current expenditure appeared after the change of Government it would not be necessary to impose this fresh taxation.I think it is right to say, then, that when Opposition speakers complain about this extra taxation on beer, tobacco, cigarettes, petrol and oil they are actually holding themselves to blame because were it not for the fact that an unsound economic position existed when the present Government took over it would not be necessary to impose the additional taxation enshrined in this Bill.

Senator Murphy has referred to this Finance Bill as being "economically unwise and socially unjust". I wonder how many people would agree with him in that statement. Certainly I would not. I regard a Budget and the Finance Bill that follows it which aim at a balanced situation in the country — a proper balance between current revenue and estimated expenditure — as sound. If this Bill represented a policy by which sufficient provision would not be made for the maintenance of the services of the State, thereby leaving a deficit at the end of the year, that would certainly be an unwise and unsound policy.

As regards the statement that the policy enshrined in this Finance Bill is socially unjust, I do not see how that arises. The people most deserving of our consideration are the weaker sections of the community. When the Government decided to withdraw the subsidies from certain items of food, they took the necessary steps to compensate the weaker sections. It is only a couple of weeks since we were considering legislation here that was deemed necessary for that purpose. Senators will remember, as was pointed out at that time by the Parliamentary Secretary to the Minister for Social Welfare, that the increases being given were calculated to compensate the weaker sections of the community in increased social benefits and increased children's allowances to the extent of £2,000,000.

A lot of discussion has taken place here and it also took place in the Dáil, as to the wisdom or otherwise of removing the food subsidies. I am one of those who hold that the policy of subsidisation was never calculated to be a permanent policy. It was first introduced in 1947 to deal with very special circumstances that had arisen in the country at that time. Inflation had become an increasing menace. The then Government deemed it wise to introduce the subsidies to deal with that very undesirable situation. Indeed, certain people who are now very vocal about these food subsidies gave the policy of the Government at that time a very poor reception. We remember how they went around the country and spoke about the cruel attitude of the then Government when they had to impose taxation for the purpose of paying these subsidies. How has the attitude of these people changed so much in that short space of time? As has been said by other speakers, this policy of food subsidies is a justifiable one in times of emergency, when the economic position of the country is disturbed and when the weaker sections of the community have to get special attention. It was principally to come to the assistance of the weaker sections of the community that the food subsidies were introduced.

We had the complaint that the food subsidies applied all round and benefited both the rich and the poor. We had the same complaint about children's allowances a few weeks ago. Certain Senators criticised them because they were made available to the rich as well as the poor. If that is a sound argument as far as children's allowances are concerned, it must be conceded there is merit in the argument vis-á-vis food subsidies. One would think by the way certain speakers dealt with the matter that there was something sacrosant about food subsidies. Everybody knows that one of the recommendations of the Capital Investment Committee was that the food subsidies should be abolished——

In conjunction with four other recommendations.

I am dealing with the food subsidies at present, and not with the other recommendations. I am inclined to think that the members of the previous Government were well aware of the existence of that recommendation, but they made no reference to it, good, bad or indifferent. I regard food subsidies in normal times as creating an artificial position and giving people certain essential items at a cost lower than the economic price. I think it is better in normal times to bring the people back to reality and let them see what has to be paid for these items.

Senator O'Brien referred to the fact that the people of this country were living beyond their means. There are a good many people who would agree with the Senator in that. Until such time as production from the land and production from our secondary industries is stepped up, there will be no lasting prosperity. As I have said, we should come down to reality in all these matters.

As regards the increased taxation— and it is not very much—Senator Murphy tried to convince us that the proposals contained in the Budget, and now enshrined in the Finance Bill, were given a very bad reception by the people. The people did not give it a bad reception because they understood the position. They fully expected there would be increases in taxation; it was only a question of where the increases would be put. As has often been said, no Minister for Finance imposes taxation for the love of it; nor does he impose taxation for the purpose of creating hardships amongst the people. He has to do it to meet the requirements of the situation facing him.

The Minister was faced with a deficit on current account of £9,000,000 What would the people, who have criticised the actions of the Minister, do if they were dealing with the situation? It is not sufficient to say that there should not be increased taxation on commodities and that they impose an undue hardship on the people. They should constructively point out where the money could be found otherwise, that is, of course, unless their policy is one of continuing gaps between revenue and expenditure. Nobody who has the welfare of the country at heart would want to see that situation continuing.

The Minister for Finance and the Government are to be congratulated on the courageous way in which they have handled this very difficult situation.Of course, they did not expect to be patted on the back; but it was expected of them by the people that they would do their duty and face up to the realities of the situation. They are doing so. As I said, the Minister for Finance has to find the wherewithal to keep the ordinary services of the State going. Such services as educational facilities, the administrative staffs of the Civil Service and local authorities, the Garda Síochána and the Defence Forces have to be maintained.If there are Senators here, or people outside, who find fault with the amount of expenditure envisaged here, what services would they curtail in order to effect a reduction? The social services are also very important. Are there people here who would advocate a reduction in them in order to reduce expenditure? I do not think so. It is one thing to criticise the Government for the expenditure and quite another thing to pinpoint the items which should be pruned.

Many people sincerely believe that the personnel of the Civil Service could be reduced. I do not know if it could, but if it could be done, it would, of course, be very desirable. People think sometimes these things can be done, but when they find themselves face to face with the problem, they are often brought to a different conclusion.We remember the time, not too long ago, when a previous Minister said he would bring the economy axe to bear on the Civil Service and so reduce expenditure substantially. He did not succeed in doing that: on the contrary, the expenditure on the Civil Service went up. If the present Minister succeeds in reducing expenditure on the Civil Service, he will have the gratitude of the people but I would not be too sanguine about it.

Senator Lenihan referred to the importance of stepping up agricultural and industrial output. We are all in agreement with his sentiments. I could not entirely understand why he differentiated between agricultural output and output from manufacturing industry. He mentioned a short-term policy for manufacturing industry and a long-term policy for agriculture. I think it should be a long-term policy all round. The development of the country's resources should be a long-term policy and should be planned well ahead. Everyone knows that until there is a substantial increase in output, both from farm and factory, the standard of living cannot be improved.

Apropos of agricultural development, I wonder if we pay sufficient attention to the educational aspect. I hold that enough attention is not being given to agricultural education. As proof of that, I give the example that last year, and I think the year before, only two agricultural scholarships tenable at University College, Dublin, were made available by the State to boys who intend taking up agricultural science as their vocation. That is an aspect of the case which should get the attention of the Government. There were two scholarships in agriculture, two in horticulture and two in dairy science.

It might be more appropriate to raise that matter on the Appropriation Bill.

Very well. I hold that number is not sufficient. If it is our policy to improve agricultural methods, we must make sure that the education necessary is imparted in our schools and colleges. I will leave it at that.

This Finance Bill—based as it is on the budgetary proposals of a couple of months ago — is an honest and courageous effort on the part of the Minister to put the country back on a sound footing. Everyone knows that a certain economic malaise overtook the country a few years ago and brought a period of depression. There were many causes of that—I do not say they were all domestic — but, whatever the causes were, I am afraid those in charge of the last Administration did not realise them in time.

One remark I heard from Senator Murphy this evening reminds me of the complacent way in which certain Ministers at that time referred to the economic difficulties which confronted the country then. They made little of them; they made little of the adverse balance of payments; and they lulled the people into a false sense of security. Then, when it was almost too late, they brought in certain measures. No doubt they were courageous enough measures, but they were not brought in in time, and I doubt also if the measures they had recourse to were suitable for this country. I think that these special levies were not wisely considered and the credit squeeze they had recourse to was not suitable for this country. These measures may have been suitable for the people in Britain where, as I think I said before here, they have full employment and full capital development; but we have not these things here.

Did all Parties not approve of them in the Dáil?

We had underemployment and undercapital development here; therefore, the remedies applicable to the economic problems of Britain were not applicable here. Time has proved that to be the case, because as a result of the application of these measures, the volume of unemployment increased until it had reached alarming proportions, and it was only then, in the early spring of this year, that really serious notice was taken of it. Senators remember that just as well as I do. Also there was dislocation in industry and trade as a result of those measures, and many people were glad when they saw that the present Government lost no time, when they took office, in reviewing these measures and effecting alterations where they were necessary. We are all glad that the unemployment position is easing somewhat, gradually but steadily, and I hope that that trend will continue.

It is a long way from the 146,000 it was in 1944 and 1945.

Senator Murphy did not express himself as being too pleased with Senator O'Brien's contribution to the debate and his reference to the courageous policy of the Government.He reminded us of the Senator's pronouncement on the Budget of last year when he described it as a good old Gladstonian Budget. I think it was very aptly described as such because the Budget which was brought in would probably be suitable for the Gladstonian age, but was not suitable for this age, and time has proved that it was not. It must have been the case that in the days of Gladstone, the policy was one of unbalanced Budgets, and that has been the policy here recently. It would be a very bad thing for the country if that position were allowed to continue. I am confident that when the Government have taken control of the position and faced up to the solution of our financial and economic problems boldly and courageously, that policy will bring good results in the long run, even though there may be people in the country, including some Senators, who would not give the policy their wholehearted support, or any support at all. There may be people who would describe the imposition of extra taxation — a penny on the pint on beer, a penny on the packet of cigarettes, and so on — as a hardship. It is not such a hardship, and it has been accepted as not being a hardship, but in any case it is said that we have to be cruel sometimes to be kind, and that is exactly the position as regards this Finance Bill and the Budget that was brought before the Dáil a few months ago.

I should like to make a few comments on this Bill. In the first place, I should like to compliment Senator O'Donovan and Senator O'Brien on the speeches we heard last night. They were careful and analytical and, if one might say so, they were in every sense particularly constructive and most revealing to those of us who had not the opportunity or competence to study these economic problems in the way they can with their trained minds and capacity for research. If I might say so, I should also like to applaud the effort of Senator Lenihan, who is a young and new member of this House, on behalf of his side of the House to-day.

This whole problem of the Finance Bill is very difficult for a Minister for Finance, and it is a perplexing problem for every honest-minded Senator who wants to discuss it in the way we ought to try to discuss our problems, if we are to resolve them. The problem of every Minister for Finance seems to be growing more difficult with the years. I do not know why Ministers for Finance will not make some effort to examine in greater detail the causes of this struggle which they are forced to make. It seems to me — and I have said it years ago in this House — that the major difficulty in regard to the collection of taxes in this country, and the major factor in regard to the hardships which taxation imposes, arises from the fact that altogether too high a proportion of our people are engaged in carrying and selling goods which our people or other people produce.I feel that until we make a new type of economic survey of the conditions as they exist here, this problem of finding the moneys for the carrying on of State services will become increasingly difficult with the years, and will reach a stage some time, not in the far distant future, when the problem for the Minister involved will be almost insoluble.

I do not know, and I would not venture to suggest, what is the number of producers in this State relative to the numbers of people who are selling goods and trying to earn a living from transporting goods, but the position is entirely unsound. What we want in this State is to add to our producers and reduce the numbers engaged in secondary services of one kind or another, a number of which we could very well get on without.

It was interesting to hear Senator Kissane's point of view on the whole problem of subsidies. I should like to have some enlightenment from the Minister in regard to this policy of subsidies. I am not quite certain that Senator Kissane cleared up the matter to my satisfaction. There has been a great deal of talk about the taking away of the subsidy on butter. I think it has agitated the minds of the people of the country to a greater extent than Government decisions have in the past. I do not know exactly what the Minister is driving at in taking that decision. As I see the situation, I do not think he is going to save any money at all and that in fact the Exchequer position, as a result of the decision, will be worse in 1957-58 than it was in 1956-57. Perhaps that is the heart of the policy, but if it is, it would be better that it should be frankly put before the people.

Butter production for 1956, as far as I have been able to obtain and analyse the figures, was about 860,000 cwt. Production up to 31st May was up by 26 per cent. It has probably fallen to a certain extent now because of the drought in the last month, but if we say that over the period there was roughly an increase of 10 per cent. it would mean a total production for 1957 of 950,000 cwt. Consumption last year, before the subsidies were removed, was approximately 750,000 cwt. but since the subsidy was removed, there has been a drop approximately of 27 per cent. in consumption. If that situation continues, and there is no evidence to the contrary, it would appear that this year we will have about 300,000 cwt. of butter for export and at present prices on the export market the cost to the Exchequer will be about £2,000,000.

I know that some of the producers' representatives seemed to think that when the subsidy was taken off, it would be of no consequence to the producers.Some of them said it was a consumer subsidy and that the producers were not going to be affected. You cannot take £2,000,000 out of a pool which is there to subsidise a food, without to some extent influencing the amount of the food which will be purchased.That is revealed very clearly in the fall in the purchases of butter. We are now going to export this butter and it will cost us over £2,000,000. The Minister can correct these figures if they are wrong and I am sure he has up-to-date figures.

What is the Budget position then arising out of the decision to remove the subsidy on butter? Last year we spent £2,000,000 on the consumption of butter at home; this year, we will spend £2,100,000, on the export of butter. Is the position then that this is part of a Government policy to help exports in order to do something to rectify more fully our balance of payments position? Have we now decided to take away the subsidy on the consumption of butter in Ireland and back its export to this amount so as to help our balance of payments? If that is the policy, it is not one that I quarrel with, if it be absolutely essential. It is well known that we have got to import and that we must send something out, if we are to take something in. If it is the Minister's policy, it is very interesting.

I should like to remind the House of another point of view expressed by the Minister for Finance when he was Minister for Agriculture a few years ago, at a very critical time in the development of the dairying industry. I presume that Senator O'Callaghan was present on the occasion at a meeting of the Dairy Science Society in University College, Cork, on 17th September, 1941. This is what the Minister said:—

"We may be compelled to discontinue some of the exports that before this war had become entirely uneconomic. The first of these and the one that will interest the present audience most, is dairy products.

For almost ten years the taxpayer has been helping the dairy farmer to tide over what we persuaded ourselves to be a temporary difficulty. Though we did not care to face the facts, I think we must admit now that the difficulty was more than temporary and that the same conditions may prevail when the war is over.

We may have little faith in the future, but who would dare prophesy what conditions after the war may be; and who would be foolish enough to base policy on such a prophecy? We can only mark time until the war is over and see what conditions are like then. It would not be either wise or equitable, however, to use public money in an attempt to increase our dairy stock at a time when our exports are uneconomic.

The elimination of the export of dairy products, if such a course should eventually become necessary, would not be so disastrous to farming economy as might at first sight be feared. The question would have to be examined very carefully and the object achieved by deliberate and careful planning."

I want to know from the Minister when he addresses himself to this question: is this decision a deliberate policy to help our exports so that we may help our balance of payments? If it is, we should say so frankly, because it is the position which many countries are faced with. I am not the least convinced that this governmental decision was a wise decision, I do not think, from the budgetary situation, that it will improve the position; rather will it leave us in a worse position at the end of the financial year than at the beginning.

I am not going to delay the House dealing with the fact that the Government has given certain compensations to people whose pockets have been injured, but if we take that as amounting to £2,000,000 and take the removal of the butter subsidy into account, it does not need a mathematician to be quite satisfied that the finances of the country are in no way improved.

I want to go on to another aspect of this financial policy which, to my mind, has much more serious implications.I do not think the Minister himself will deny, or any thoughtful member of his Party reject, the notion that long before the election the people who compose the present Government were convinced that the position of the country financially was serious. As far as they were concerned, it seemed to be much more serious than it was in the judgment of the people then in authority.

When the former Taoiseach, Deputy Costello, was declaring that there was a problem in the matter of the balance of payments, the Minister for Finance and his colleagues were declaring that there was a crisis. If that is what they thought before the election came at all, they cannot pretend to have been in ignorance of the difficulties that would confront them, if they got into office. They could see that the revenue rates were falling and they knew that commitments made by the Exchequer had to be honoured. They had the competence to analyse all these figures and to see the position; yet they left the people with the impression that things would be better, if they were returned to office.

Is it not a fact that the Taoiseach and the Tánaiste made the declaration before the election that the food subsidies would not be interfered with? That is so and I do not think it can be challenged. And so they got into office. I do not think that any Budget produced in this country for a very long time gave the country a greater shock than the policy enunciated through this Finance Bill. I find fault with it for that reason.

Democracy was given such a shock on account of that decision by the Government that grave doubts were created about the honour of men in public life in this country. It has caused many of them to say that the word of public men cannot be trusted. That does not do credit to our parliamentary institutions or to the people who man them. What is disturbing about the matter is that our parliamentary institutions are being attacked to-day from the right, the left and the centre. Accordingly, it behoves everyone who wants to see our institutions maintained and worked the way their founders hoped they would work, for the betterment of the people of the State, to have a sense of responsibility when he goes before the public to ask their support so that, when he comes to honour his bond, the people who supported him will see that he meant what he said and that he would carry out his undertakings.

Our institutions are being attacked from the right, left and centre — a fact which is as clear to other members of this House as it is to me. It does not matter whether it is the man who has a bomb in his pocket, a gun in his hand or a stone in his sleeve in this House or in the other House — all of these people are making their contribution to prevent these institutions working as they were meant to work. I might almost say that the Government of the day has betrayed democracy in changing completely from the policy which it put before the people when out of power to another policy when they are in power. Let us not find fault with the people if they suspect us.

Unquestionably, that is the greatest error of judgment in Government policy as enunciated through these Budget proposals. I am satisfied that we have many difficulties to face. We cannot, in the first place, resolve our difficulties by being faint-hearted or displaying pessimism or doubt. There is no justification for the people of this country having any doubts about their ability to resolve their problems, if they face them frankly and courageously and by speaking truthfully about them.

There are things which are very disturbing.Senator Kissane referred to the fact that the unemployment position is being solved. If Senator Kissane looks at the figures, he will discover that there are about 8,000 more unemployed to-day than this day 12 months. We know the problem with regard to emigration. It seems to be almost incapable of solution. It is certainly a very difficult, complex and perplexing problem.

When people speak of it, they talk as if the people who left this country were running from a land upon which the sun never shone, a land where there is never day, a land of poverty, misery and all the rest. Of course, that is a complete contradiction, but many voices are raised along those lines in connection with this problem. We ought to realise that this is an age of movement. This is not the only country from which people are emigrating.I spoke with some English parliamentarians within the past three months and they talked of the thousands upon thousands of people who line up every day in London to get passports to go out of the country. These people were not merely the young, the vigorous, the people with the pioneering spirit who in every land want to fly away; they are the settled middle-class people, people with technical skill and training. They are leaving the land to which many of our people go.

It is tragic in the extreme that our people have this attitude about their own country. It is an age of movement.Men have now taken wings. They are flying from one end of the earth to the other in a day and the Irishman was never last in any movement, whatever it was. You have the example of Brendan the Navigator who sailed out over the seas centuries before Columbus was heard of. Irishmen are like that. When we speak of emigration we ought not only attempt an analysis from the point of view of the characteristics of our race all over the conditions and times in which we live. We see in our own homes among our own families the very different approach to life in Ireland to-day compared with what it was when we were young.

Men and women now have not the same attitude to their native land as we knew it in our youth. That attitude is changing completely because the situation now is that men are free to travel such great distances. So much of the world is open to people to-day — you can have your breakfast in one country and your supper in another thousands of miles away. These factors are influencing the movement of our people. They also influence the national income and the taxable capacity of our people. That is a major problem confronting the country and, in my opinion, it is not a problem for us in this country alone.

Senator Kissane referred to what ought to be done in regard to agriculture.It is quite true that if our problems are to be made easier from the point of view of the present or future Ministers for Finance, that can be achieved, in the main, through our competence to raise our farm income and our ability to get a much greater output from the land. If we have much more productions from our fields and much more to sell, the total national income will be much greater and our taxable income will grow accordingly.

That is something which has never been tackled with the sort of spirit which is requisite for its solution. It is at this point I allege — and I do not mind who challenges me on the point — that the people who have failed mainly in that endeavour are the people in Government to-day. If they had tackled the problems in agriculture that are still left to be solved after 20 years or more, the position which the present Minister has to face would be very different.

He has his hands to the wheel. He has a majority the like of which was not available to him before. At the moment, the Government have no excuse from the point of view of the power they can exercise by the right of vote. We know well that votes alone will not achieve reform and will not bring about green fields where there is nothing but withered pastures. They will not increase the numbers of our live stock or our ability to export. We have got to use our brains and employ other faculties. I have no reason for optimism that these achievements will flow as a result of the financial measures before us to-day. It is not for me to prophesy the outcome, but if I have any view on the Minister's proposals, it is that he is resolving nothing by the decision to remove the subsidies. He is in no way improving the lot of our people from the point of view of the compensation he has given to the poor by way of benefits totalling up to £2,000,000. He has not brought any comfort, cheer or optimism into their financial world.

If our balance of payments position is better, I would point out that that development started in the time of the Minister's predecessor and had practically come to fruition before he put his hands to the wheel. It is due, in the main, to the fact that live-stock prices abroad had risen considerably in the past seven or eight months. The former Minister for Agriculture was denounced for urging farmers to hold their stock and saying that if they held them, they would get their value. Many sold, but many others held. To the extent to which farmers were able to hold on to their stock, they have made a very considerable contribution towards relieving our balance of payments position.

We want a financial policy which will enable us to have many more stock for sale, as that would be a great contribution to our balance of payments position. Much more requires to be done than is embodied in the Minister's proposals. I do not think they show either originality or any evidence that we can feel that, in 12 months' time, the situation will be any better than it is to-day.

At the outset, I should like to congratulate the Minister on Section 3 of the Bill in which he makes provision for a rebate of tax in respect of contributions towards research.That is a very worthwhile and long overdue concession. It should encourage our firms to sponsor research — research that will, no doubt, contribute much to our economic recovery.

I listened to Senator Baxter and heard one great note of encouragement when he pointed out that the Minister for Finance has changed his mind drastically.I regard it as very encouraging that he has changed his mind as between 1940 and 1956. At least the Minister has passed one of the qualifications for a scientist — a capacity to change his mind when faced with new facts and new situations. Speaking as a new member, I hope we shall see many more changes of mind because our previous work has not achieved what we had hoped for. Consequently, we shall have to have changes and let us welcome every change that is backed by compelling and cogent facts.

The main theme of the Budget is really the lifting of the subsidies. In modern trade, the fact that we are subsidising exports is no more remarkable than the fact that we are subsidising home industries. It is just part and parcel of the modern trade mechanism. I was taken to task yesterday by, I think, Senator O'Callaghan and some others for suggesting that we could sell dairy produce abroad. Of course we can. It may cost 4/- a lb. to produce the first ton of butter, but it will not cost 4/- a lb. to produce the next 10 per cent. increase. In other words, if what we are selling is increased production, then surely that is a benefit to our economy and to the nation.

In reality, it is only a simple mathematical calculation that we regard the farming community as entitled to a certain reward for dairy farming. Now we can give them that reward by saying: "You are entitled to, say, 5/- a lb. for the butter you produce which we consume at home and you send some more butter abroad and you get only 3/6 a lb. for it." We can go back to school and find out that if we sell, say, 10 lb. of butter at 5/- a lb. and 5 lb. at 3/6 a lb. the average price is, say, 4/6 a lb. In other words, our subsidising of exports could also be achieved by paying the farmer a certain price on the home market and letting him take whatever he can get on the foreign market and balance up his books accordingly.

We must not delude ourselves into the belief that we are subsidising people in England or any other place to eat our butter, because we are not. It is profitable for this country to produce more and still more butter, even if we are to sell it at 3/- or 3/2 a lb. If there is a drop in home consumption, maybe that is one way of tightening our belts slightly and getting the increased foreign earnings we need so badly.

I feel with Senator Murphy and others the lot of the unemployed especially. I would make one suggestion, namely, that unemployment relief or "dole" should be relaxed to the extent of allowing unemployed men to draw their present full weekly rate and still be gainfully employed for one or at most two days per week. Down the country at present I know several labourers who are on the "dole". They are afraid to work an occasional day at the harvest lest they should be refused the "dole" and it would take so much time to get back on it again. I feel that that is one practical way by which the hardships of the unemployed could be relieved. Furthermore, private citizens in general could be appealed to to carry out whatever home repairs may be necessary or whatever private building that can be done at their places so as to try to help to ease the present unemployment situation.

Senator O'Brien very ably pointed last evening to our main concern. Our main concern is not for the taxes that are imposed. It is for the lack of faith in the country that hangs over it at present, for the many people who are getting restless and feeling they must go abroad because they can earn far more there than here. That is something that can undermine our whole future.

Again, we have the lack of savings for capital investment and, above all, the all-too-slow rate of increase in our production. Nowhere are those three difficulties more evident than in our main industry, agriculture. The remedy for this is not to be found in economic measures. We have been trying them for a good while, perhaps not in the proper direction. The remedy is not economic — at least it is economic only in a minor sense. The main factor is the unsolved human problem of those engaged in agriculture.

Let us look at the men we are asking to increase their production. We ask the farming community to increase their production. What community? A community of an average age of 57 years. We ask them now to be good boys and work harder at the age of 57. Perhaps they do not feel like it at that age. Then, they must rely on their farm labourers and sons at home. What have we got at present? In the farm labourers, we have a class that feels it has the lowest occupation in the country and little or nothing to gain from increased production.

We must attack the problem on both of those fronts. Above all, we must ensure an adequate supply of skilled labour for our agriculture. That means we must ensure that the more intelligent sons of our small and medium sized farmers and of the rural workers will become the worker apprentices in agriculture of the future. We will not get those men to turn to agriculture, unless they see there a hope and a prospect of one day becoming owners of land themselves, if they are good enough.

At present, a young lad can aspire to become an engineer. Yes, he is in a back street; but he can aspire to become a medical doctor. If he is good enough, there is a pathway, however slender; but there is no pathway to the ownership of land at present. I hold that that is one of the main causes of the slow rate of increase in production in our agriculture — the only thing that will help the task of the Government and of the Minister for Finance in the future.

We must ensure as well that when we do get those intelligent young lads in, they in turn will become the farmers of the future. We hope that their age of succession will be far lower than the present age of succession, which is 39. These are the human facts of our problems of increased production.

Senator Kissane rightly referred to the necessity for education in agriculture.I believe we can encourage both education and savings in our young farm workers, providing we hold out to them a real hope of one day becoming owners of land themselves, that is, if they have sufficient perseverance and if they are good enough.

I do not wish to detain the House with long facts and figures. I will give the House one figure to take away. If a young lad at the age of 15 goes out working on a farm, if he saves £1 per week for each year until he reaches the age of 30 and if he invests that in Post Office Saving Certificates at 4 per cent., I will be telling you nothing new when I say that that amounts to slightly over £1,000 at the end of that period. Those are his savings.

Consider the help that that young man gives to others by making his savings available to them. The £50 he saves in the first year provides credit for a loan of £50 for somebody else for a full 15 years. The next £50 provides a loan for a full 14 years. Add it all up and you will find that this young farm worker has provided a credit of almost £7,000 for one year. Putting it in more practical terms, he has earned from the community, by giving them loans over his period of apprenticeship, the right to ask the community for a loan of £1,200 to be paid back gradually over ten years; or he has earned the right to £1,000 accumulation, plus a loan of £1,200, making a capital of £2,200.

These are some of the possibilities, if only we can put them across to our people. We have got to wake up our young lads and show them that in farming, even though they have to start from the beginning on the land of Ireland, there are opportunities and careers for them second to none. In dealing with that problem, we will solve the problem of the farmer aged 57, who is asked to increase production.If that farmer can be assured of getting a good assistant to help him with his programme, he certainly will increase production. It is in his own interest and the interest of the nation that he should do so. The farmer's son at home will be emancipated from his present rather difficult position by being enabled to go out and work for another farmer without any loss of caste, that is, if it is recognised that you can serve a form that will lead you to become a farmer's assistant, a farm manager and, eventually, an owner.

We have got to provide a farming ladder, if we are to realise our increased production, if we are to make it possible to have the savings we need to plough back into our agriculture, if we are to keep the flower of our young men, the sons of our small and medium farmers and our rural workers. We must ensure the best of these remain and, if we ensure that, we can look forward with confidence to the future, realising that if only we get down to it, with our advantages here, we can produce products second to none and can market them at prices which will give us a sound economy. I suggest we keep that day in mind. I suggest we realise that dairy produce will for ever remain the foundation of a really prosperous export trade in this country.

Most of us could usefully forego our speeches, after listening to Senator O'Brien's very eloquent and able speech last night. He pinpointed in detail most of the ills which are afflicting us now,

Before I proceed further, I would remind those who have spoken already that the Budget statement sets out briefly and forcefully, in my opinion, the general conditions which obtain regarding our financial, fiscal and economic position. In this opening remarks in the Budget statement, the Minister said he had to meet a deficit on current account of roughly £6,000,000. He said that £4,500,000 of this was due to the failure of revenue and £1,500,000 occurred because spending outpaced revenue. If we follow the Budget speech on to the capital account we discover that to the deficit mentioned has to be added the borrowing necessary to finance the capital programme. This adds up to roughly £35,000,000.

This is a significant fact, in the light of our savings campaign. From the speech, we discover that total savings amounted to £15,000,000, or half the sum necessary to finance the capital and current programmes. The opening sentences of the Budget speech amply demonstrate that savings to carry on national development are not available.

On those grounds, I think no one could make a case for an unbalanced Budget. In the light of the deficiency in public savings, people in favour of an unbalanced Budget should read paragraph 7 of the Budget speech and then refer to Table 3. In the paragraph mentioned, the means by which the money was raised are made clear. Roughly £9,000,000 was got from the banks and over £10,000,000 from departmental funds — mainly from the sale of securities. The following paragraph points out that £30,000,000 was raised in this manner. We have reached the stage, therefore, when the law of diminishing returns has caught up on us. We learn, for instance, that the much maligned banks have provided £9,000,000 to meet capital needs, apart from the sums they lent to local authorities and to companies and utilities — indeed, as a result of selling their investments abroad, sometimes in a very bad market. It may be noted here that they have provided roughly £40,000,000 inside six years in this manner.

While all this was happening, other measures of a more drastic nature had to be taken. We learn, for instance, that the effect of the Special Levies, which provided roughly £4,500,000, was cancelled out by a short fall of £6,000,000 on the housekeeping side. By the skin of our teeth, we kept our foreign account in balance last year. Now one wonders after the severe series of injections how the patient will survive at all.

Another point to notice at this stage is that, to make matters worse, stocks are bound to be low inside the country.I understand that the Government had to forego roughly £1,750,000 in order to relieve trade and help employment.One can note further from the Budget speech that Central Fund services have increased by roughly £1,500,000, mainly due to interest on debt. It is calculated that revenue will yield £111,000,000 this year out of a target of £120,000,000, leaving £9,000,000 to be met by the sum saved on subsidies.I understand that the capital development programme calls for £31,000,000 this year. I believe this will bear heavily on the saving public as the Government cannot fall back on the sale of securities any longer, simply because they are not there. These remarks emphasise the need for balancing the current Budget.

Senator Murphy was being less than candid when he said that he did not understand hard, cold economic facts. He may refer to this year's Budget, or to last year's for that matter, in any manner he pleases, but I think the following quotation would apply. It is a very old one:

"Where spades grow bright and idle words grow dull,

Where jails are empty and where barns are full,

Where Church paths are with frequent feet outworn,

Law courtyards silent, weedy and forlorn,

Where Doctors foot it and farmers ride,

Where age abounds and youth is multiplied,

Where these things are they clearly indicate

A happy people and a prosperous State."

I hope that we shall reach that stage some day, but I fear we shall not do so by the split personality we have developed to date.

After listening to the speeches made in this House last evening and this evening, and being present for practically all the debate, one has so much material to discuss that the difficulty one finds is what facet one will take up. I will try to deal first with some of the matters touched on by some of the previous speakers. I think it is true to say that in the Book of Estimates the previous Government looked for apparently £112,000,000, but that was not the final word. The previous Government had stated many times when they had been only a little over two years in office that one of the major points of policy was to reduce taxation, and one of the best ways they could do that was by investing in production. There is no proof that they would not reduce the figure, and I believe that the last Minister for Finance would have reduced it had he been in office.

It ill-behoves some of the speakers on the other side of the House to criticise the previous Minister for Finance, because some of the problems that were handed out to him last year were the result of some of the unwise spending that had come down to him. For instance, the Minister in this Budget is writing off £4.2 million for the National Development Fund, which shows that this project, which was borrowed money, was worthless and gave no real return.

1956 was a very difficult year. Anyone who looks at the economic history of the past 50 years will notice that there was always some recession of trade for some period after war, and 1956 was the first real jolt that was given to our economy after the war. A change of policy in the Argentine caused a great deal of dumping of cattle in England and reduced our exports. It was necessary for the Government to restrict purchases and to put on emergency levies for the purpose of securing the balance upset by the reduction in our exports. When the terms of trade changed early this year, and we had unprecedented exports in the first months of the year, that was the result of the prudent and wise policy that was pursued in developing agriculture by the previous Government. Any favourable terms of trade the present Government find are the result of the policy of the previous Government beginning to bear true results.

I often feel that economics is a dismal sort of subject. I remember somebody telling me that it was described as the dismal science. There was a well-known Canadian economist, Stephen Leacock, and when he brought his studies to a logical conclusion, in order that he should not go mad, he used to write amusing stories. One of them I remember reading some years ago when I was not interested in economics was "Gleanings from the Larger Lunacy". Without being facetious, I happened to pick up Dublin Opinion this morning and I notice that on occasion we find there economics from the sages. In that journal they said that the trouble with world problems to-day is that they are always being approached from a new angle instead of just straight. I think there is a great deal of wisdom in that remark.

An Leas-Chathaoirleach

Perhaps the Senator would give way for a moment until we can be clear as to what exactly is to happen with regard to business. I understood that we were to have a statement at 9 o'clock as to the course of business.Before we ask the Leader of the House to indicate his views, could we have some idea as to how many propose to speak on the Bill?

Could we not go on until some time later than 9.30?

An Leas-Chathaoirleach

Senator Sheehy Skeffington has a motion on the Adjournment at 9.30. I do not know how he feels about this matter. Would he be prepared to give way?

I am anxious to raise the matter, but of course it need not be at 9.30. I would be quite happy to raise it at 10 o'clock.

An Leas-Chathaoirleach

We could take the Adjournment at 10.30. How long would the Minister like to reply?

About ten minutes to 10 would do.

An Leas-Chathaoirleach

The Minister can conclude at ten minutes to 10 and we will take the motion on the Adjournment at 10.30.

I mentioned that Stephen Leacock found it necessary, in order to keep his sanity, to write amusing stories. When I saw that the present national income is in the neighbourhood of £450,000,000 and that the State is spending the enormous sum of £205,000,000, I felt that I wanted something to help me to put up with that impost. I believe that our economy will never be healthy while that large proportion, probably over 45 per cent. of the entire national income, is being spent by the State on various services. I believe we will never develop a vigorous economy while such an enormous burden of taxation is allowed to weigh on us.

As we are all aware, we are not endowed with mineral resources such as our neighbours have and we have to import most of the sources of our energy in the form of coal and oil. We are near the markets of Europe and the great industrial countries, but many of these subsidise their home products. We have certain advantages and I believe that among these is the fact that we are not required to make any large contribution to the defence of the free world. Neither are we asked, like the people of the United States, to bear taxes for the purpose of making contributions to underdeveloped countries all over the world. We have not got the burden and responsibility of an empire as the British have, or as our friends, the French, have. Any disadvantages that we have, I contend, have been self-made. We have not created the conditions here in which agriculture is considered as a first priority, with industry second and commerce third. We must remove the burdens of rack rates and high taxes before we can create the conditions that will give us the benefits that will create a healthy economy.

It has been said by speakers on the other side of the House that no one has given any indication as to where savings could be achieved. I believe that there could be savings under a number of headings in the Estimates of Receipts and Expenditure for the year ending 31st March, 1958. I believe that there could be savings under the Employment and Emergency Schemes Vote in which £658,000 is provided. There should be savings under Superannuation and Retired Allowances which are now costing nearly £1,000,000. Many of these people ought to be encouraged to work beyond the age of 65 years. In passing, I should like to say that the chairmen of a number of the largest insurance companies in Britain have recently stated at their annual meetings that pensions cannot be provided on a sound basis, unless the money has first been collected by contributions and invested in productive work that will bear the revenue necessary to give these pensions.

I doubt if we have applied that test to the money which we are raising for this purpose. There is a sum of £466,000 being collected for the Gardaí. With the improvements of motor transport and radio telecommunications between cars and so on, I believe we could reorganise that service and it would cost considerably less and be able to be called on when wanted with much more despatch than at present. What Local Government does with the £4,728,000 I do not quite understand. At one time Local Government used so supervise the expenses of the local authorities and sanction was required for their expenditure.

An Leas-Chathaoirleach

I think the Senator might leave these matters for the Appropriation Bill.

I did not intend to go into any detail.

An Leas-Chathaoirleach

It might provoke some other Senator.

May I just mention the headings under which I believe the savings can be made, because that has been put up to me? I also believe that a saving could be made on the £2,000,000 for Land, on the sum of almost £4,000,000 for Transport and Marine Services and the sum of over £6,000,000 for Defence.

An Leas-Chathaoirleach

The Senator will be at liberty to raise that on the Appropriation Bill next week when we are dealing with the spending of the money. We are dealing with the raising of taxation to-night.

I say that amount of money need not be raised under these heads. With regard to matters which arise directly out of this Bill, I want to say that in this Bill as in the last Finance Act, concessions are given in respect of income-tax payable by public companies. Export relief is being given and has been given to public and private companies. In our speeches, we always say that ours is a private enterprise economy. I think that all of us leave ourselves open to the accusation of indulging in a certain amount of humbug when we say that, because in this small country, with some 3,000,000 inhabitants, the people are mostly small traders, most of whom are not limited companies.

Under the last Finance Act and this Bill, these people apparently get no concessions whatsoever. The public company will pay income-tax at 6/- in the £. The profits derived from exports will not be taxed in this case. The same applies to the private company, but the private trader will get no concession whatsoever. If his family happens to be fortunate enough to have accumulated a considerable amount of money, it will be subject to a heavy impost of death duties. These death duties will be liquidated and spent for current needs, instead of being invested by the State in capital projects. This system is a deterrent to thrift.

Senator O'Donovan mentioned last night that 45 per cent. of the national income was spent on government, as I mentioned in my introduction. In a small country like Ireland our notions of spending are too grandiose. I think we have to become somewhat humble in that respect. Recently I attended a lecture given in the R.D.S. by Langdon Goodman, M.Sc. It was sponsored as a productivity drive by the E.S.B. In his opening lecture, he made a very shrewd observation when he said that every economy reaches a stage where, if there is a failure to invest adequately in production, the economy fades and dies. I think the challenge is thrown out to all of us in this country to invest in the productive entities of this economy and ensure they are not allowed to fade and die.

Sometimes I am interested in reading history. Lately, I came across a book by a well-known Spaniard who lives in England — Salvador de Madariaga. He wrote a book on the rise of the Spanish Empire. His treatment of the economic aspect of the rise and fall of the Spanish Empire interested me very much. He said that the fall was principally occasioned through the Spaniards endeavouring to do more than their economy would allow them to do. I do not think that Salvador de Madariaga can be considered a Conservative. He is very much left of centre and could probably be classified as being almost an intellectual.

From his book I draw the moral — I suppose Mr. Micawber had the same idea — that if we spend more than we save, there will be a day of reckoning. It is very true that we are spending more than we can afford. We are taxing our country more than the productive elements in the country can bear. We must have priority in regard to agriculture, industry and commerce and after that Government — in that order. Our education must be directed towards these ends. Opportunities must be given for the renting of land and for the new ownership of agricultural land if we are to bring new and virile entrants into that all-important vocation. I agree with most of what Senator Quinlan said in that respect.

Senator O'Brien said we must restore confidence. I believe that if we have low taxation, we can restore confidence.It will attract industry here and it may attract American industry. It may make of this country a manufacturing bridgehead from which the larger American companies might export to Europe. One of the large chemical companies has been attracted to Coleraine. There is no reason why we should not be able to offer facilities which would give greater encouragement to American companies than our brothers in the North. Another advantage about reducing taxation is that it would build up home industry. It would give an opportunity to Irishmen, who built up their own industries, to own them. We would not have to wait in the belief that nothing would be done in our economy, unless money came in from outside.

An Leas-Chathaoirleach

There is a half an hour left before the Minister gets in. I think I have tried to satisfy two or three Senators.

I should like to mention briefly that one of our industries which is grossly over-taxed is the whiskey industry. If an industry has a sound basis in its own country, it will be interested in promoting exports and I should like to ask the Minister to consider that aspect. To me, there always appears to be money in Ireland for non-productive work.

In conclusion, I want to say — although I have many things which I should like to say — that no Government in this country has ever had a majority as large as the present Government.I wish the Minister for Finance well. I assure him that people on this side of the House will give him every co-operation he could expect, provided he goes on the right lines. He now has an opportunity of doing things in a stronger and more active way than any Minister has had since this State was established.

A survey was recently made — it appeared in Studies— by a Cambridge economist named Carter. I think the Government invited him to sit on a commission here which has not yet concluded. He pointed to the road we should follow. The amount of literature available showing what must be done in this country is manifest to everybody. A reduction in taxation will improve the value of people's money. As mentioned by Senator O'Donovan, we have only 55 per cent. of the income per head of the population compared with what they have in Britain. If you lower taxation, money is more valuable. I think that that would do more to redress the balance as between ourselves and our neighbours in Britain than anything else.

I will give way to the Minister now, but I hope he will consider my suggestions.I may get an opportunity of developing some of them in more detail on the Appropriation Bill.

The worst feature of the Government's financial policy is, without doubt, the abolition of the food subsidies and the effect of that action on the weakest section of the community. Working-class housewives are, at the present time, grappling with a very serious economic problem —the purchase of the necessary amount of food to keep their families in health, on wages that scarcely balanced their budgets before the rise in food prices which followed the withdrawal of the subsidies.

Bread and flour are two indispensable commodities and, where there are children, they constitute a very big item of expenditure. The recent Budget, by increasing the price of the 2-lb. loaf by 3½d. and flour by 2/6 per stone, imposed an intolerable burden on the housewife. The only alternative to curtailing the family's diet is to fall into debt, with all the evil consequences that follow, should the housewife be compelled to take that course.

One of the very noticeable effects of the increasing difficulties of people with young families is the number of houses falling idle and being offered for sale in the suburban housing estates. These are, in the main, the homes of working-class people who had the courage to make sacrifices to provide themselves with homes of their own wherein to bring up their families in healthy surroundings.This position is causing a serious situation, particularly in and around County Dublin — as can be verified by the county council—but the householders explain that, with rising prices and the final blow of the withdrawal of the food subsidies, they cannot supply their families' requirements and meet their obligations in respect of loan and interest repayments. If we end up with a neatly balanced Budget, but with our great housing efforts nullified by rows of deserted homes, with our people back again in cheap overcrowded tenements, I do not think we can claim to have made the progress we aimed at achieving as a progressive nation.

The real tragedy, of course, lies in the fact that the Government's drastic action in regard to the subsidies appears to have been unnecessary. The retention of the import levies could have rectified the situation to some degree and other remedies were available, in the opinion of financial experts, which would have met the situation without imposing unnecessary burdens calculated to harm the health and wellbeing of the lower income earners who were, in many cases, making great efforts to bring up their families in decency and frugal comfort. It is sad indeed that these people have been reduced to such a position of insecurity that they must sell their homes and deny their families the opportunity of being brought up in decency and respectability.

The concessions offered in the Budget to offset the withdrawal of the food subsidies and other increased charges are, as has already been stated, entirely inadequate and cannot be considered as compensation in any serious degree for the steep price rises with which families are now faced and, in the case of those drawing social assistance benefits, are of no practical value at all.

I think the Minister should, at the earliest date possible, review his Budget actions and look at the country from the angle of its people, its families and its homes, rather than from the angle of balanced Budgets, banking interests and cold, hard, financial considerations.

I should like to refer to another small matter which arises on the Finance Bill. It relates to Section 16, the part which provides for the granting of increased relief for corporation profits tax purposes in respect of profits from manufactured goods. I wonder if the Minister would consider extending the provisions of that section to certain types of exports which are not manufactured? There are agricultural and horticultural establishments, particularly in County Dublin, which grow special agricultural produce for export. These growers do not benefit from the provisions of the Bill because their goods are not manufactured.I have in mind a fairly considerable trade for the London market in mushrooms and, to a lesser extent, tomatoes and flowers. This industry is an expanding one and gives considerable employment per acre at wages much in excess of the minimum agricultural rate.

Agricultural exports do not necessitate substantial imports of raw materials. I would ask the Minister to consider extending the provisions of the Bill to certain exports from agricultural and horticultural establishments to encourage the extension of this industry which, as I have said, has a considerable labour content.

It seems to me that a number of opponents of the measures proposed in this Bill are inclined to forget the circumstances in the country in the past 12 months. When I consider the deterioration that took place during 1956, I am surprised by the leniency of the taxation imposed in the Budget. Last year, we had rising unemployment, particularly in the last quarter; and for the first time since industrial development started in 1932, we had a lesser number employed in industry. A lesser number was employed in agriculture also. All round, the position which the new Government found was a very serious one.

Confidence in government had fallen very considerably. That was shown by the failure of the Government loan. The new Government found itself in a difficult position in providing for capital expenditure. The first thing it had to do was to try to restore confidence. That entailed making sure that the Budget would be balanced. It had to meet a deficit on current account and on the Estimates left to them by their predecessors. Extra taxation was required. From what I know of the City of Dublin, the limit in taxation had been reached and a large additional impost of taxation on the people was an impossibility. The Government had no option but to take off the food subsidies, not because they wanted to do so, but because there was no way of finding the money otherwise.

There are different views about food subsidies. Some people assert that, even if it were not necessary, the removal of the food subsidies was the best thing to do; but it is strange that the people who are now so demanding about the food subsidies are the very people who opposed them tooth and nail when they were first introduced to meet what was believed to be a temporary situation and when they had the effect of reducing the cost of living at the time by 13 or 15 points. To-day we have them telling us it was too drastic to remove the food subsidies, but they do not tell us what the financial position would have been, if they had not been removed.

Perhaps people will think I am partisan, but I really believe confidence has been returning over the past few months. We will have to wait and see. At any rate, never in my lifetime did I find such a position in Dublin as that which existed last year——

Do not be codding yourself. There were 40,000 more unemployed in 1945.

Go back to the Midlands and conduct yourself.

An Leas-Chathaoirleach

Senator Colley, on the Finance Bill.

I am a Dublin man: I have lived there all my life and I have been in intimate touch with it. I can tell you that I never found a worse position than that of last year——

Were they not worse when you were batoning them off the streets of Dublin in 1952?

With nearly 100,000 unemployed, Dublin was bound to feel the pinch. There are scores of small traders in Dublin who would be glad to hand over if they could sell their places or get a job; but they can do neither. They are just hanging on and being supported by the wholesalers.

This whole position arose because our balance of payments position was allowed to get out of hand. As I understood Senator O'Donovan last night, he seemed to think that the balance of payments was not of any great importance. We had advense balances of payments in the first Coalition. It is an extraordinary thing that in every Budget statement made by the then Minister for Finance, he took care to point out that it would lead to a lowering of our standard of living, if our balance of payments position was not corrected. When the adverse balance occurred in 1955, it did come to that stage; and the measures which had to be taken then led to the position to which I have already referred. If that had been allowed to continue and if we had tried to borrow more money, there is nobody who would not expect the position to worsen.

Will it help the ordinary worker if that position worsens? The confidence of the people in regard to their ability to get a livelihood here was completely broken. They were disillusioned because of what had been promised to them and what they got when that position arose last year. The election results prove that. In this Bill the Government is taking the first step towards putting the country in a position to advance, I do not say an immediate advance — we cannot have that, as we must get back on our feet first and build up again.

The last speaker referred to lower taxation. Before we get that, we must expand our industries. Then the greater production will lower the terms of taxation all round. That is what this Bill is intended to do.

In the ten minutes left, I regret I cannot cover the field I had intended to cover, in sducating Senator O'Donovan and Senator Murphy, enlightening Senator Miss Davidson and perhaps giving a lesson in decorum to that obstreperous young man who does not seem to be able to contain himself when someone hurts his corns.

I certainly would not like to get it from you.

I have had a long experience in dealing with people like him from the days of the Black and Tans to those of the Blue Shirts. I do not think his conduct here is in accordance with the decorum I thought one would find in Seanad Éireann.

He told a Senator "to shut his trap" last week.

An Leas-Chathaoirleach

I do not think, at this hour of the night, any note should be introduced which would be foreign to the tone of the debate during the day. Senator Mullins must set a good example.

I did. I sat here all the day and never interrupted anyone.

He told a Senator last week to "close his trap".

Well, if the Senator wants to have it that way, I am well used to dealing with that type of mentality.

You look for it.

How can one be courteous in debate when this type of mentality is brought into it? If the Senator thinks he is a little dictator in Westmeath, he will not be one here.

An Leas-Chathaoirleach

Senator Mullins should continue his speech and try not to be personal. He has very little time left.

I am afraid there is not very much I can say, except how amazed I was at Senator O'Donovan who seemed surprised at the urgency with which the Minister acted in this Budget.

The "hurry".

Yes, the hurry. The exact words were, I think: "There was an element of hurry in this Budget; the Minister should have waited 12 months to see how the situation would have developed."I just jotted down the reasons for the urgency. In 1956, as Senator O'Donovan knows as well as I do, national production fell by £9,000,000; the average number of employed in all industries and services fell by 8,000; the value of agricultural production fell by £6,000,000; the adverse trade balance was £73,500,000; emigration ran an all-time high: unemployment hit the highest total since the end of World War II. The value of exports fell by almost £3,000,000; the total number at work fell by 19,000; the private building industry came to a standstill; local authority housing, the building of schools and hospitals, all slowed down; the Small Dwellings Act collapsed; the road grants were slashed; rural electrification was slowed down; land reclamation and farm buildings schemes were stopped.

Tell the truth.

The last two national loans were a flop, from the point of view of attracting confidence. Now, if Senator O'Donovan still wonders why there was an element of hurry, that should enlighten him a little. I should like to refer also to the same type of statement made by Senator Murphy. He began by admitting complete economic ignorance, but then proceeded to declare that the Budget was economically unwise and socially unjust and that, when the Minister took over, the economy was on the road to recovery.

Some of the summarised points I have given there should enlighten Senator Murphy that things were far from well at that period. If he still has any doubts about it, I would refer him to the annual report of the Irish Transport and General Workers' Union, the report of the Congress of Irish Unions, and the report of the Irish Trade Union Congress. He will find that none of them were quite happy in December, 1956, about the position in which the country found itself. If he has any doubt on that score still and thinks I am exaggerating, I would draw his attention to a statement by Mr. Gibney, the Irish national organiser of the Amalgamated Society of Wood-workers, who only a few days ago told the annual conference of his union that there was a collapse in housing, that there were thousands unemployed and there was a growing stream of emigration.He said, for the edification of Senator Murphy and Senator Miss Davidson: "We are weathering a storm which has had no parallel in the history of this State." That was the position which the new Government faced when it took over, as a consequence of the unprecedented majority which the people gave it.

Why did the people give it that majority? They gave the Fianna Fáil Party that majority because they trusted it, because they had seen the rot, which began in 1948, which was temporarily halted in 1951, but which was resumed in 1954; and they decided that the time had come to give people, in whose programme they could have confidence and whose word they could trust, the opportunity once and for all to pull the country out of the mess into which compromise and weakness had brought it.

Senator O'Donovan asked last night did anyone believe that if the Coalition Government remained in office, there would be an increase in taxation. He said he did not think anyone would believe that. The fact remains that the Coalition proposed to spend this year no less than £11,000,000 more than they raised in taxes last year. If anybody still has any doubts, they need only look at the total in the Book of Estimates — which was prepared, but not published before the general election began.

My opinion on this Finance Bill — which I think is worthy of the support of the House — is that the decisions which it contains, implementing the Budget statement of the Minister for Finance, are a good national insurance policy for the country's future. They are the first step on the road to full employment; they are the first step on the road to economic recovery and social security. I think the Seanad would be well advised to pass this Bill and to enable the Government to get ahead with its job.

There are other items to which I should like to refer, but I take it that on the Appropriation Bill next week, we will get the opportunity of recalling some of the statements which we were unable to deal with here to-day.

First of all, I should like to say that I am very thankful to the Senators who have spoken, for the very kind way in which they have expressed their opinions. They carried on the debate at a very high level, without recrimination or even sarcasm, and I hope I will be able to keep up that standard in my reply.

One of the question I want to answer is that by Senator Lenihan, who asked me about the remission of income-tax on exports, as to the way it applies to new industry. The wording of the section is that there will be a complete remission of income-tax on all exports over those of the datum year and of 25 per cent, on all exports, so to speak, taking the old with the new. The new industry will take the datum year, presumably the year before it starts, and then will be entitled to a full 100 per cent. remission for five years. It is a five years' concession, as Senators are aware.

The first two speakers, Senator O'Donovan and Senator O'Brien, disagreed very much on many of the points that were made, and as one cancels out the other, it makes it easier for me to reply; but it must be stimulating indeed for the students in U.C.D. who are learning economics, and it is one thing anyway in which they will come to this conclusion, that there is no such thing as dogma in economics.

Hear, hear!

Senator O'Donovan referred to our antediluvian banking system, the depreciation of our sterling investments, and the limits of our taxable capacity. Senator O'Brien spoke at length on inflation and compared it with the Asiatic 'flu which flows over territorial boundaries. He illustrated it very well by saying that inflation does likewise. We cannot insulate ourselves from inflation, which is so prevalent in practically every other part of the world. As I have said already, Senator O'Brien, in his refutation of some of the points made by Senator O'Donovan, stressed in particular the necessity to retain confidence in our currency as a basis for sound economic development. The problem we have to face is to try to make it possible to have the highest possible level of production and to have for that purpose capital development. It is obvious that that is necessary, both in the interests of employment and in order to improve generally our standard of life.

I have assumed both here and speaking in the Dáil that every Party wants to see our standard of life improved. Therefore, we are on common ground in that regard. I think every Party also believes that that can best be done, and, in fact, can only be done, by increased production. Parties in this country do not disagree on the aims; they only disagree on the methods. Therefore, we come to some of these points and deal with them as we go along.

We have now reached the point where we are depending entirely on the support obtained from the public as far as finance is concerned. We had other aids in the past, as all Senators are aware. We had surplus external assets built up during the war which we were able to draw upon, and we also had Marshall Aid, but we are now without these and have to fall back on our own resources, as it were. Now the position has been reached that our development programme, and therefore our prospects for future development and future improvement in real income, are directly related to what we set aside year by year, raise out of our current yearly income.

In an effort to escape from this rather unpleasant prospect and rather tedious effort to build up like that from our own resources, people are inclined to turn for relief in other directions. External borrowing is mentioned; sterling held in the Legal Tender Note Fund is mentioned, and the sterling investments in private hands are mentioned.Another point mentioned sometimes is the creation of credit by commercial banks. When we come to consider those matters, we are driven to the conclusion that, again, we have to fall back on our resources.

First of all, let us take the Legal Tender Note Fund of the Central Bank. There is a good deal of talk about that fund, and people are sometimes inclined to look on our policy as being unnecessarily conservative in maintaining that fund there. It amounts to about £73,000,000 which includes gold and dollar reserves. About one-eighth of the total is made up in that way, and the rest is in sterling securities. Gold, as Senators know, does not depreciate, but the disadvantage of having too much gold—we never suffered from that, I must say — is that it does not bear interest. We have the benefit of interest from sterling reserves. If we exclude gold, however, we must fall back, then, on the reserves related to some other currency, and every form of security of that kind is liable to fluctuate in value and, of course, is liable to depreciate. It may, of course, appreciate, but it is liable to depreciate, too. So that if we are criticised — I do not mean this Government, but we as a nation — for putting ourselves in the position of losing on that Legal Tender Note Fund, it is difficult to see how we could have done otherwise.

There has been, as very clearly and, I should say, impressively pointed out by Senator O'Brien, inflation everywhere for some years past. It has been widespread all over the world since the war. Last year, looking at the figures on this matter, I noticed that prices rose without exception in every western European country — every single one of them — and also in the United States and in Canada. That gives Senators an idea of the difficulty we would have in trying to get securities which would not be subject to fluctuation.It would be almost impossible to get foreign reserves of any kind which would not be subject to that type of fluctuation.

The external assets of the Legal Tender Note Fund are often thought of merely as backing for the domestic not issue as if that was their only function their only function being to meet sudden and unexpected drawings on our currency due to some lack of confidence in the Irish £ or something like that; but is not the sole reason. They are, as a matter of fact, the reserve of foreign exchange against both external and internal contingencies, and when we look at them as having that double object, we must take a different view.

It must be borne in mind that there is very much more money in circulation than in the ordinary notes. We have, as, I am sure, Senators are aware, on deposit in our commercial banks and in our saving institutions about £400,000,000. That would be regarded as money in circulation. We are not alone in that either. It is the same in every other country where you have notes in circulation and you also have the banking system much the same as we have here; but it does, however, give an indication of the necessity for a reserve of some sort of foreign assets against our domestic note issue and against our money in general.

When one examines them, indeed, one finds countries regarded as being the strongest in their economies and therefore, of course, running the least risk of any crises with regard to confidence in their currency, hold very large reserves in gold and dollars, sterling and so on. The United States, which is a very strong country, Switzerland and West Germany all hold very strong reserves. Some authority must hold these reserves and in most countries it is the Central Bank that holds them. I do not think anybody will say that foreign exchange reserves are unnecessary. There may be some disagreement about the amount, but everybody will agree that to some extent they are necessary.

There are, as we have learned to our grief, unforeseen swings in the balance of payments and they do not occur alone in this country; they have occurred in better developed countries than this. For example, I could cite the case of Great Britain which had a gold reserve of something like £800,000,000, and yet, with this huge reserve, they had to go to the International Monetary Fund last year to get some help in their balance of payments holdings. As Senators are aware, our balance of payments has been largely in deficit for some years, not indeed appreciably, but close to the mark in some years and not so close in others. In 1955 it was £36,000,000 and that in a single year is something that would have to be taken note of, for we would have to have some reserve there to meet conditions of that kind.

With regard to public financing, I do not think that we could have any other aim at the moment. The financing of public investments must be made from resources currently made available by the public. In that way, we have the advantage that we do not deliberately create deficits in the balance of payments and we leave our foreign reserves as far as we can to meet these unforeseen crises that may arise. These unforeseen crises occurred in the past and may occur in the future. As I said, the maintenance of reserves is necessary, but we may have some disagreement about the amounts. If the Government has a little too much, it will not do a great deal of harm.

I mentioned external borrowing. External borrowing is not looked on as entirely wrong. I think we should consider the conditions carefully and all the implications, because there is a certain risk. First of all, I have already mentioned the point that if we were to borrow from a foreign country and if the exchange rate in that country improved relative to ours, we would owe them more than we thought we would owe when we borrowed the money. That is a point we must always watch. For instance in September, 1949, sterling was devalued and it made a great difference, naturally to any loans we had with countries outside Great Britain and the sterling area. I just want to touch on one matter, that is, that a new Bill will be coming here next week on the Bretton Woods agreements.We are joining the International Bank and I want to say that as far as that is concerned we have no intention at the moment of borrowing from that bank. I am not saying we will not borrow from it. We may find it very useful for any particular project we may have in mind, but we do intend, at the earliest possible moment, to get advice from that bank on our economic system here. I admit that that advice is sometimes followed by a loan, but we must get the advice first.

The next point I mentioned was in regard to sterling resources in private industries. We have no control over them and no Government has control over them. My predecessor put it very well when he was being pressed to try to bring some of those reserves into the service of the State. He said that he had no more control over them than he would have over people's houses, their lands, and their property and to try forcibly to get control of those could be done only by expropriation and no Party was prepared to do that. In regard to the question of private money, what we are doing is trying to induce people with private money to make investments.

As Senators know, the Budget and this Bill provided inducements to people to invest in private industry here. First of all, we give a better allowance for wear and tear, which will redound to the benefit of the concern receiving that allowance. A greater relief is being given in respect of liability to income-tax and then there is also the benefit being given to those who hold shares in manufacturing industries in this country. They get a 20 per cent. remission off income-tax on dividends deriving from these Irish shares, and there is also a benefit in death duty. We are doing everything we can to induce people to invest their money in private enterprise so that we may build up manufacturing industry and have more production which will raise the standard of living generally and give more employment generally.

In regard to the last question I referred to — the creation of credit by the Central Bank — I do not think that offers any solution of our investment problem. It would possibly be a dangerous thing to do, provided we were able to do it. We could not force the banks to do it, unless we took powers. If the banks created credit, then unless that money was used immediately in production the extra money going out would naturally be used on imports, thus creating inflation followed by an adverse effect on the balance of trade and that, as we experienced last year, would be followed by a credit squeeze, depression, unemployment and emigration.

Therefore, we ought to be very careful indeed about the creation of credit unless the use of that credit is well directed. If it were not, it would inevitably result in unemployment, so that far from doing any good, it would have the very opposite effect. I am not accusing any Senator of advocating any of these courses I am condemning, but, as they were referred to, I thought it well to give my views on them so that Senators might be aware what these views are.

Senator O'Donovan thinks that the present banking and currency arrangements are antediluvian.

The currency arrangements.

I thought it was the banking arrangements.

I was not referring to the commercial banks at all. I was referring only to the effect of the currency arrangements on the commercial banks, which is a different matter.

I think that, generally speaking, Senator O'Donovan may be right. Indeed, I do not want to cross swords with him on an economic problem of that kind. He has a much better grasp of it than I have. I am always afraid that, when we find ourselves in a rather unpleasant position and when we see that the only way to get out is work hard, not spend as much and put a certain amount of money aside for capital development, we say that is a poor way of looking at things. It is like the tradesman saying that if his tools were better, he might do a better job. We are tempted to think of these ways of getting out of our difficulties.

I am afraid we have to face the fact that we ourselves will have to get ourselves out of this difficulty. I believe we can finance an expanding economy without resorting to any of those methods I referred to and which are, in my opinion, at least, fraught with some danger. I believe it is not so much a lack of finance as a lack of a specific plan for productive development. If we had time to sit down and get our plans ready, the finance would be available, provided the plans were good.

I agree, indeed, with Senator O'Donovan that our taxation is too high. I agree with some of the speakers that if there were less taxation, there would naturally be more to spare for capital and for production generally. I hope that when we have time to examine all these expenditures, we may be able to reduce taxation in time. I am in agreement with both Senator O'Donovan and Senator O'Brien as to the importance of directing the available capital resources to the utmost to works of a direct productive nature. I should like to refer in that connection to my Budget speech in which I said that when capital resources are scarce, it would be fatal not to concentrate particularly on productive development.If we direct our capital resources in that way, it will mean an increase in real spending power for the community generally and, therefore, a demand for the output of the various factories and our agricultural industry. That, of course, would be a perfectly sound economic basis to build upon.

I should not perhaps be so dogmatic as to say it is the only way, but at least it is the best way. I have to defend another point in this Budget, but, before starting to defend it, I want to say that the direct provision of employment through public works may be the enemy of real and lasting employment because you waste capital and the increase in taxation as well may make it impossible to go ahead with a sound programme.

Having said that, we must recognise that it will take some time to redirect our capital into sound economic production.I made the case, which I believe is genuine, in my Budget speech that, pending that, it was necessary to spend a large amount of money on capital work which would not be regarded as being exactly productive.I felt that if we were to stop employment on housing, roads and pro jects of that kind, there would be a worse position in regard to employment and we would run into a serious position of deflation and might find it very hard to get ourselves out of that position again, even when things began to improve.

I felt we should try to maintain employment at least as it is while we are turning the corner and beginning to build up a proper capital programme.That is my defence for spending money on housing and road making. As soon as we can, we should turn from that to more productive employment and then we would be on the right road to economic recovery.

The fact that we are spending less on the E.S.B. does not mean that we can leave productive employment. After all, if the E.S.B. say they do not want as much this year, naturally we do not try to press the money on them. If they have not got the need for it, that is all right. Senators may ask: What are you doing about it? I can assure the Seanad that in my own Department we are giving very serious thought to this programme of capital production. The Departments of Industry and Commerce and Agriculture are also studying it, very carefully at the moment.

The Capital Investment Advisory Committee, at my request, have agreed to consider the desirable volume and composition of public investment and the manner in which that investment should be financed. I should like to pay tribute to that body. As the House is aware, they presented us with a report in February which, whether we agree with its recommendations or not, was very well thought out. It was presented very promptly and I am very glad indeed that they agreed to go on with what they themselves regard as the main part of their function in this further investigation. As I already mentioned, I look forward to getting advice from the International Bank on general economic development.

As Senator Ó Maoláin pointed out, Senator O'Brien gave a picture of the state of the economy here in March. Senator O'Brien was referring to the end of 1956 and Senator Ó Maoláin gave figures showing our position in regard to employment and unemployment, production, emigration and so on. I do not think it could be regarded in any way as a rosy picture. I agree with much that Senator O'Brien said. He said the balance of trade is precarious. Undoubtedly it is.

Senator Burke referred to the large exports of cattle in the first months of this year. That may mean the export of fewer cattle for the rest of the year and therefore we shall have to watch our balance of payments position. There are favourable items against that. We shall have a very large grain harvest which means that less grain will have to be imported. I hope that that will be the position. Nevertheless, we shall have to watch our balance of trade position very carefully.

When we took office, we had the problem of a deficit in last year's Budget.Taking the deficit that was there, the Estimates that were put before us, and making every allowance we could for an improvement in revenue from the taxes there already, we found we had to cover a gap of £9,000,000. The abolition of the food subsidies accounted for that. I should like to deal more fully with that point as it was raised by Senator Miss Davidson as the principal part of her speech, but it would be more appropriate to the Appropriation Bill as it is a saving of expenditure and I hope to deal with it when that comes along.

The 1952 Budget was referred to by Senator O'Donovan. I think he said this Budget would probably have the same effect.

Not as bad.

I hope it will. The 1952 Budget was brought in (1) to finance the very big Fianna Fáil social programme and (2) somewhat the same as now, to cover a deficit, apart from that altogether. It was a severe Budget, but I would point out that 1954 proved to be the best year this country has seen. It was the best for employment, for production, for export, for balance of trade, with the exception of last year. That was directly the result of the 1952 Budget. If this Budget has as good a result, I shall be very pleased.

There has been some confusion about the butter position. Senator Baxter wants to know our policy in regard to butter subsidies. I think the Parties in the Dáil all said the same thing. None of them had any doctrinaire views on food subsidies. They all said it was a temporary matter that would be got rid of at an opportune time. We thought this was an opportune time and we had to take it. As I say, there was no doctrinaire view. We all considered they were put on as a temporary measure.

It was said that we would save no money on butter. One fact is overlooked.Senator Baxter made out that we would export 300,000 cwt. of butter and calculated that we would consume 100,000 cwt. less than last year. I do not think it will be as bad as that from our point of view. Suppose it is. He says we will pay £2,100,000 in subsidy. Even if we had done nothing and the consumption was the same as last year — even if Deputy Sweetman were here now and talking to you and saying the subsidy is still here — according to Senator Baxter's figures we would have sent out 200,000 cwt. and we would be £700,000 worse off. We are only worse off by whatever the decrease in consumption may be. In our home subsidy, we gain over £2,000,000.

Senator Baxter and others — and, indeed, some Deputies, too — give a very optimistic estimate of butter production and also wheat production. I think they are giving these optimistic estimates because they think it will make trouble for us. Even if it does, I do not want to see butter production cut down this year until we make some other arrangement. If agricultural production is going up, and as forecast for butter and wheat, we have a huge production this coming year, we shall be able to bear any burden whatever put on us—the burden of extra taxation that is there.

Senator Baxter quoted a speech I made at U.C.C. in 1941. I was talking on the subject of exports when the war would be over. I have not read that speech for some years and I must say I was surprised to-night, on hearing Senator Baxter, that my prophecies proved so true. I do not know what view Senator Baxter took, but, as the Seanad will remember, I was very strongly criticised at the time for my pessimistic outlook. I am surprised that I foretold things so well.

Perhaps I shall be able to deal with some of the other points on the Appropriation Bill.

Question put and agreed to.
Committee Stage ordered for Wednesday, 10th July.
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