Finance Bill, 1958 ( Certified Money Bill ) —Second Stage.

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

The provisions in the Finance Bill may be grouped into three broad categories.

There are, first, those sections which incorporate in permanent legislation the Financial Resolutions passed in Dáil Eireann on Budget day. This year, in addition to the customary resolution dealing with the rates of income-tax and surtax for 1958-59, the Budget day resolutions covered proposals with regard to expenses allowances and benefits in kind given to directors or other employees, tax avoidance by means of superannuation schemes, retirement provision made by self-employed persons, the treatment for tax purposes of husband and wife, the removal of the customs duty on films, the abolition of the additional duty on tobacco dealers' licences and the restriction of double relief from death duties in certain circumstances.

Secondly, the Bill makes legislative provision for other proposals of which notice was given in the Financial Statement and, thirdly, it deals with some matters, notably "dividend stripping", which were not mentioned in the Financial Statement.

Part I of the Bill contains seven sections dealing with miscellaneous income-tax matters and five sections dealing with the taxation of husband and wife. The miscellaneous sections provide as follows:—

Section 1 imposes income-tax and surtax for the year 1958-59 at the existing rates.

Section 2 provides that income from market gardening is to be chargeable under Schedule D. The alteration is a technical one and does not impose any increased charge to tax.

Section 3 provides that an outstanding appeal may, at any time, be settled by agreement between the taxpayer and the inspector of taxes. Under existing law, such an agreement may be valid only if arrived at before the date fixed for hearing the appeal.

Section 4 relates to the admissibility of statements made or documents produced by a person in cases of fraud or wilful default. Statements may be induced by its having been drawn to the person's attention that—while the Revenue Commissioners cannot give an undertaking in any particular instance —it is their practice, in deciding whether to accept a pecuniary settlement or to institute proceedings, to be influenced by the fact that a person has made a full confession. The section secures that such statements shall not, by reason only of their having been possibly so induced, be inadmissible as evidence in penalty proceedings. The section will obviate the danger of proceedings failing on such a ground where a person has promised a voluntary disclosure but in fact makes an incomplete disclosure and deliberately withholds essential information.

Section 5 provides that any notice to be given under the Income-Tax Acts by the Revenue Commissioners or by an inspector of taxes may be served by post and also that any notice to be given by the Revenue Commissioners may be given by an officer authorised by them. Any doubt as to the validity of notices previously issued is removed.

Section 6, which is relevant to Part IV of the Bill, extends the scope of the information which employers are obliged to give the Revenue Commissioners regarding cash payments to or on behalf of their employees.

Section 7 brings up to date, by reference to the Army Pensions Act, 1957, the existing exemption in respect of wounds and disability pensions and gratuitites payable under the Army Pensions Acts. The section is so worded as to extend the exemption in the event of future amendments of the Army pensions code.

Sections 8 to 12 re-cast and assemble the chief provisions concerning the assessment and collection of tax in the case of husband and wife. Sections 10, 11 and 12 are new.

Section 10 enables the Revenue, for 1958-59 or any subsequent year, to recover from a wife, income-tax or surtax assessed on her husband and not paid by him, in so far as it is attributable to her income.

Section 11 empowers a husband to serve, on his deceased wife's personal representatives and on the inspector of taxes, a notice disclaiming responsibility for unpaid tax in respect of his deceased wife's income, whereupon the Revenue will exercise their powers of recovery under the previous section as against the wife's estate.

Section 12 defines the circumstances in which a married woman is not to be treated for tax purposes as living with her husband.

Part II of the Bill deals with various customs and excise matters.

Section 13 terminates the customs duty on cinematograph films.

Section 14 is a technical amendment of the law necessitated by the Transport Bill, 1958, so as to preserve the existing duty relief of 6d. per gallon on diesel oil used in road passenger services.

Section 15 removes (as it is now inappropriate) the limitation as to seating capacity placed on certain fully assembled private motor cars of British or Canadian manufacture admitted under quota at a special rate of customs duty.

Section 16 increases the entertainments duty rebate granted to certain cine-variety shows in patent theatres from 30 per cent. to 50 per cent.

Section 17 restricts to shows of the normal length (two-and-a-half hours) the rebate of entertainments duty payable on film shows having a specified content of sound films in languages other than English. This has been found necessary to stop abuse of the concession.

Section 18 terminates the additional excise duty on licences to sell cigarettes and tobacco.

Section 19 exempts persons who sell hydrocarbon oils or lubricating grease from the requirement of a hawker's licence.

Section 20 makes three amendments with regard to motor vehicle duties. It enables the Minister for Local Government to authorise the repayment of duty on surrender of a licence; it clarifies the law regarding farmers' tractors taxed at the £8 rate and permits such tractors to be used for the haulage of live stock for reward in certain circumstances.

Section 21 confirms in force three Imposition of Duties Orders, two relating to the special import levies and miscellaneous customs duties, and one relating to the termination of the customs duty on roofing slates.

In Part III Section 22 provides that any death duty payable in a foreign country on a death, whether occurring before or after the passing of the Finance Act, in respect of property situate there shall not, if double taxation relief arrangements subsist between Ireland and that country, be deductible from the value of the property for purposes of assessment to estate duty.

The eight sections in Part IV of the Bill deal with the taxation of expense payments and benefits in kind which employers may make to or provide for directors and highly paid employees. The provisions will not become operative until 6th April, 1959.

The purpose of the legislation is to tax benefits in kind and those cash allowances which purport to be made for expenses, but are in excess of the expenses "wholly, exclusively and necessarily" incurred in performing the duties of the office or employment. At present these, for the most part, escape tax, although they represent disguised remuneration. It would not be fair to the general body of taxpayers to allow this to continue.

The terms "director" and "employment" are defined in Section 26; employments, as distinct from directorships, are not, in general, within the scope of the new legislation unless the gross remuneration from the employment is £1,500 or more. It is proposed to treat such payments and benefits as remuneration of the director or employee concerned subject to his right to claim a deduction in respect of properly allowable expenses.

Benefits in kind would include the provision of living or other accommodation, entertainment, domestic or other services for the director, employee or his wife, family, guests, etc.

Part V contains nine sections the main purpose of which is to prevent avoidance of tax by means of schemes under which benefits are provided by companies and other bodies for their directors and employees on retirement or on death. Tax avoidance arises because the company is entitled to charge expenditure in respect of such schemes against profits and in this way to reduce its tax liability, while the director or employee, for whose benefit the scheme is provided, is not taxed on the contribution made on his behalf though it is equivalent to extra remuneration.

Usually the scheme is one under which an endowment assurance, maturing on death or retiring age, is effected on the life of the director or employee concerned. The amount of assurance is sufficient to provide a pension of, say, two-thirds of his salary. If a pension were provided income-tax would be payable on it, but it may be arranged that the pension may be converted into a lump sum payment which is not subject to income-tax. When this happens no income-tax is collected at all—the contributions are deducted from the tax liability of the company, the beneficiary is not taxed on the extra remuneration represented by these payments on his behalf, and, when the benefits are received, it is arranged that they come in a non-taxable form.

This part of the Bill is designed to correct and regulate the position. It will not take effect until 6th April of next year. Very briefly, the control will be as follows.

Sections 32 is a general barrier set up in order to regulate the traffic. Under it, an amount equal to the cost to the company of providing the retirement benefits is to be treated as taxable income of the director or employee for whose benefit the contributions are being paid. Where, however, the company pays a premium on a life assurance policy, the director or employee will get the relief to which he would have been entitled if he had himself paid the premium.

The trapping of the initial payments in this way will not, however, apply to various forms of legitimate provision for directors and employees. The director or employee will not have the company's payments counted as part of his taxable income where the retirement benefit provisions conform to certain conditions. These conditions are intended to secure that more than a normal proportion of the benefits does not become payable in the non-taxable form of a lump sum and that the benefits themselves are not excessive.

The intention behind the technical provisions of this part of the Bill is that retirement benefits will not get a double relief from tax—a relief when the contributions are made and a second relief when the benefits are paid out.

Roughly, reasonable retirement benefits, as envisaged in the Bill, would conform to what public servants are entitled to by way of pension and lump sum, that is, the aggregate benefits must not exceed the value of a pension for life of two-thirds of final salary, of which not more than one-fourth may be taken in the form of a lump sum. If the scheme which is adopted by any company for its directors and employees conforms to these requirements then, generally speaking, the contributions will qualify for tax relief and the pension when it becomes payable afterwards will be subject to income-tax as earned income.

Proprietary directors and employees are excluded from membership of schemes approvable under this part of the Bill. The interest they possess in their business represents to them at retirement the equivalent of the lump sum permitted to the ordinary director or employee under an approved scheme. Moreover, having regard to their proprietary interest their position is more analogous to that of owners than of "arms-length" employees and it is open to them to avail themselves of the reliefs in Part VI of the Bill in respect of provision made by such persons for retirement annuities.

The four sections in Part VI are concerned with providing a new relief from income-tax and surtax. Payments made by self-employed persons to secure annuities for themselves in their old age are being relieved from tax. The relief will extend also to payments made to secure, after the death of the individual, an annuity to his widow or other dependent. Relief of this sort has long been argued for by professional organisations and others but it is an extremely complicated one to express in legislative form.

It is obviously necessary to limit the amount of the payments which will qualify for the relief. The limit has been set at 10 per cent. of the person's "net relevant earnings" or £500, whichever is the less. "Net relevant earnings" are defined in Sections 40(8) and 41 (4). Roughly speaking, they correspond to earned income for income-tax purposes, as reduced by payments in the nature of charges on income and all losses and capital allowances which are regarded as reducing such income.

If a person, besides being self-employed or in non-pensionable employment, also holds pensionable employment or is over 40 years of age, there are appropriate modifications of the limit. These are detailed in the First Schedule to the Bill.

In order to qualify for relief, annuity contracts or trust schemes must be approved by the Revenue Commissioners and certain conditions have to be satisfied before such approval is given. These precautions are included to prevent abuse of the reliefs. A basic condition is that the benefits must in general be confined to an annuity commencing between the ages of 60 and 70 or, in the event of the individual's death, providing for his widow. The conditions may, however, be modified at the discretion of the Revenue Commissioners, for example, to permit of retirement before 60 years of age on grounds of ill-health or to allow of payment of an annuity to dependents other than the widow. An annuity under an approved contract or scheme may be payable at the age selected whether or not retirement has taken place.

The effect of Section 42 is that the investment income of the part of an annuity fund of an assurance company which relates to pension annuity business will be exempted from tax in so far as it is applied for the benefit of the annuitants. Profits on such business retained by the company would be subject to taxation.

The general idea behind the provisions is (1) that the premiums or contributions paid by an individual will be treated as reducing his income for tax purposes and (2) that the income arising from the investment of such premiums or contributions will be exempt from tax, but (3) that the benefits must be provided entirely in the form of annuities which are subject to tax.

The purpose of Part VII is to revise the machinery for giving statutory effect to agreements with foreign countries for relief from double taxation in respect of income-tax and surtax, corporation profits tax and death duties. At present the procedure is to schedule each agreement and the requisite technical rules to a Finance Bill. Instead of this, it is now proposed to enact the rules once and for all and to enable such agreements to be given the force of law by Government Order provided that the draft Order has been approved by resolution of the Dáil.

The rules, which are contained in the Second Schedule to this Bill, are similar to those enacted in the Finance Acts of 1950 and 1955 in relation to the conventions with the United States and Canada, respectively, and are made applicable to those two conventions also, so that the rules for all such agreements will be found in the one place.

To eliminate double reliefs it is provided that death duty reliefs granted under two existing statutory provisions shall not apply in cases covered by a double taxation agreement. The first of these is Section 7 (4) of the Finance Act, 1894, which provides generally for the reduction for death duty purposes of foreign assets by the amount of foreign death duty payable. The second is Section 20 of the same Act which allows double taxation relief in regard to certain British possessions.

Arrangements for giving statutory effect by Government Order to double taxation agreements with foreign Governments on sea and air transport profits already exist under Section 15 of the Finance Act, 1951. A technical point is cleared up by providing that these arrangements will apply if the agreement, instead of being concluded with a foreign Government, is made with the head of the foreign State, as is the constitutional practice in some countries.

The provisions in Part VIII of the Bill and the Third Schedule are intended to counter the device known as "dividend-stripping," which could make serious inroads on the Exchequer.

The idea in "dividend-stripping" is that one company artificially puts itself in a position to claim a refund of tax already properly paid by another company. The dividend-stripping company acquires shares in a concern which has large liquid reserves built up out of tax-paid profits and it uses those reserves to pay itself a large dividend, the amount of which (i.e. the gross dividend less tax, or the actual cash received) compensates it for its outlay on the shares. The dividend-stripping company, however, being in a position to claim repayment of tax, can then claim a refund of the tax already paid on the gross dividend. This brings it a net profit at the expense of the revenue.

Companies dealing in securities would be in a specially favourable position to exploit this device because they could establish a loss on the purchase and re-sale of shares entitling them to claim a tax refund on the dividend. But it could also be used to advantage by trading concerns with accumulated losses and by bodies such as charities which are exempt from income-tax and entitled to claim repayment of tax suffered on income which they receive. There is evidence that some dividend-stripping has already taken place, involving considerable and unjustifiable loss of revenue, to the detriment of the ordinary taxpayer. The provisions of this Part of the Bill, while applicable to shares acquired on or after 6th April, 1957, will, as amended in the light of prolonged discussion in the Dáil, affect only dividends payable on or after 19th June, 1958, the day following that on which the relevant Financial Resolution was moved. In this way, retrospection is being avoided.

The protective measures to be taken in the case of investment-dealing companies and tax-exempted persons such as charities are set out in Section 51. Section 52 deals with the measures to be applied to the operations of ordinary, that is non-financial, trading concerns. Special precautions are being taken to avoid interference with normal transactions.

The provisions of the Bill are designed only to catch the culpable cases where, for instance, the dealing concern acquires a sizable proportion of the shares of the company possessing accumulated liquid reserves and being thus able to dictate its dividend policy in fact distributes these accumulated reserves. They do not apply where merely a trivial holding is acquired. Nor is there any quarrel with the case where the post-acquisition dividend represents distribution of genuine post-acquisition profits.

The Third Schedule to the Bill contains the rules for ascertaining whether a dividend is to be regarded as paid to any extent out of pre-acquisition profits.

In Part IX, two of the Sections relate to recovery of tax while the third has to do with the amendment of the Finance (Miscellaneous Provisions) Act, 1956.

Section 54 will, broadly, bring the position in the High Court as to recovery of tax into line with that existing in the Circuit and District Courts under Section 11 of the Finance Act, 1924, and Section 39 of the Finance Act, 1926. It authorises High Court proceedings to be taken in the name of an officer of the Revenue Commissioners and prescribes a simplified mode of prima facie proof.

Section 55 extends to surtax and corporation profits tax the recovery procedure laid down in Section 7 of the Finance Act, 1923, in respect of arrears of income-tax. In other words, recovery of arrears can be effected by a county registrar or sheriff on the authority of a certificate issued by an authorised officer of the Revenue Commissioners.

Section 56 of the Bill amends the Finance (Miscellaneous Provisions) Act, 1956, mainly as regards the Tax reliefs in respect of exports:—

(i) It extends those reliefs to profits from the export of fish produced on a fish farm and of cultivated mushrooms and it also enables the reliefs to be granted to publishers in respect of the export of books printed within the State.

(ii) In relation to new or increased exports, it lengthens the exemption period from five to ten years. Relief is not to be given for any year subsequent to 1969-70.

(iii) Where a company gets relief under the exempting legislation, it is required to pass on that relief when making a dividend distribution. It is proposed now to ensure that, if the recipient of such a dividend is itself a company, it will likewise be required, on paying a dividend, to pass on the relief to its shareholders.

(iv) This section also provides that, where an "industrial building allowance" prevents the granting, within the six years limit, of relief in respect of a trading loss carried forward, the displaced loss is to be carried forward for relief purposes without restriction as to time.

The four sections in Part X deal with stamp duties.

Section 57 authorities the Revenue Commissioners to enter into agreements with bankers for the payment in bulk of the stamp duty of 2d. chargeable on cheques. Under existing law, each cheque must be separately stamped with either an adhesive stamp or an impressed stamp.

Section 58 exempts from stamp duty receipts issued by the Land Commission for certain payments made to them in their capacity as successors to the Commissioners of Church Temporalities in Ireland.

Section 59 exempts from stamp duty any instrument which otherwise would have to be stamped solely out of moneys provided by the Oireachtas.

Section 60 repeals the stamp duty on bonds required for customs and excise purposes. These bonds relate mainly to the temporary importation of motor vehicles, the importation of goods for further manufacture, the payment of entertainments duty on the basis of certified returns, etc. This duty is no longer worth collecting.

The provisions in Part XI of the Bill are of a miscellaneous and general nature.

Section 61 is the usual section to provide for the charging of annuities in respect of voted capital services.

Section 62 removes the requirement contained in Section 4 of the Central Fund Act, 1956, that Exchequer receipts in respect of special import levy be paid into the Capital Fund.

Section 63 consolidates and extends the powers relating to the holding and investment of moneys of the Post Office Savings Bank. The new powers of investment relate to the holding of these moneys in stock of the Bank of Ireland, mortgages of certain local authorities, securities and mortgages of harbour authorities and (arising out of the winding-up of the Foreign Exchange Account) United States and Canadian Government securities. It also adds the power to hold United States and Canadian dollars and to lodge them to an interest-bearing deposit account in the State, Britain, U.S.A. or Canada.

Section 64 provides that the powers of investment of the Savings Certificates Reserve Fund shall be the same as those for the time being applicable to the Post Office Savings Bank.

Section 65 enables the Minister for Finance to determine the manner in which the remuneration payable for the management of prize bonds will be computed.

Section 66 and the Fourth Schedule deal with repeals.

Section 67 is the customary clause placing the various taxes and duties under the Revenue Commissioners' care and management.

Section 68 is concerned with the Short Title of the Bill; and with its construction and commencement.

I have alluded to the Schedules already in the course of my comments on the relevant provisions in the Bill but perhaps I should mention again that the First Schedule contains certain modifications of the limit for payments for retirement annuities for self-employed persons. The Second Schedule contains the technical rules to govern double taxation agreements. The Third Schedule is relevant to the provisions of Part VIII of the Bill regarding dividend-stripping. The Fourth Schedule is confined to setting out enactments repealed.

I hope those remarks will help to clarify for Senators the various provisions of the Bill.

I thought the Minister gave a sigh of relief when he had finished. I must say I did not read the debate in the Dáil on this Bill in any detail and I was therefore interested in his statement and my mind was quite open about it. I propose to make very few remarks indeed about it, except to say that I thought the first part of the Minister's speech this evening was a terrible indictment of our system of direct taxation: for instance the suggestion that people must not alone work to make their income but must themselves work—and get other people to work for them—so that they may pay their taxation and also, the use of the word "catch" on a number of occasions. The Minister used a very apt phrase in relation to what people would have to do: they would have to work without restriction as to time if they were to understand this type of financial legislation.

This is by far the biggest Finance Bill introduced in this country, perhaps since we became independent, but certainly since the excess profits legislation during the war. I think this is bigger than that Act of 1942, or whatever year it was passed. Could anybody say that there is in this long Bill of 68 sections a single clause that will have a worthwhile effect on our decaying economy? Could anybody say this honestly? I do not think anybody could. I do not propose to speak further about this fat volume. I want to speak about matters which I think are of far greater importance.

When the Minister introduced his Budget this year in the Dáil at the beginning of May, I had the impression that he said: "Would everybody look at this little mouse of a Budget? Look, it would not even nibble a little piece of cheese." Of course there was a good reason for this mouse, because last year he had introduced a great rat of a Budget, which in one year had eaten away 10 per cent. of the people's bread and flour—10 per cent. of their bread, if you could use that term to describe it, and 12½ per cent. of their butter. Accordingly he had good reason to introduce a mouse of a Budget this year, but it did have inherent in it a provision that this large quantity of butter, which would not be eaten by our own people, would be sent abroad, every lb. of it taking a half-crown away with it.

It is also most noticeable this year that the figures which used to appear in the text of the Budget were relegated to a statistical appendix. I must say that there were plenty of them in the statistical appendices, including two tables about the capital position of the State which did not agree with one another. Perhaps I could understand why the second one, which did not agree with the first one, was put in. It may have been an attempt to show that some of the capital expenditure was not as productive as it might have been in past years. It certainly makes the point that the writing out of the books of the State of the millions expended on the National Development Fund in 1953 and the beginning of 1954, which was carried out during the period when Deputy Sweetman was Minister for Finance, was a necessity. The matter was referred to by Senator Lenihan last year and Senator Lenihan indicated that he did not understand the matter at all.

Of course, it is quite usual for us to listen to lawyers making the queerest kind of cases, but at least they might understand what is being done before they speak about it in that fashion. This taking out of the figures from the main part of the Budget is an improvement. It used to be referred to by one Minister for Finance as the "economic guff". I am glad the "guff" is gone. What I propose to show to-day is that the financial policy inaugurated in 1952 by Deputy MacEntee has had the most deplorable effects on the economy of the country. That policy was continued last year by the Minister. At a time of declining money values, one could show all kinds of things with figures. As I mentioned last year, you have the elastic figures—ten last year is equal to 15 in two years' time. That is the kind of game you have and you can always show an appearance of an increase when, in fact, there was not an increase.

As far as possible I purpose to deal with this matter in real terms and when one is dealing with economics in real terms, the first reality is people. That was not discovered yesterday or to-day. A man named Davenant writing in the 17th century said: "The bodies of men are without doubt the most valuable treasure of a country." Our own Oliver Goldsmith had a verse on it, which is very well known, and coming nearer to our own times, one of the finest contributions made on the matter was by John Ruskin, the critic, in a small booklet of his entitled "Unto This Last," written about economics, where he says: "There is no wealth but life."

To-day, for a few minutes, let us examine what is the position about life in this country. The position is shown in the Statistical Survey this year. Total emigration figures from 1946 to 1951 were 120,000 and the total of emigration between 1951 and 1956 was 200,000. Those figures are on page 42 of the Statistical Survey, which was published recently for the year 1957. When the census report for the census taken in 1956 was published, the Minister for Industry and Commerce came to the Dáil and said, roughly speaking: “Look, boys, you can jeer at us all right, if you want to, but we are all in the same boat.”

That, after all, was only two years ago and was said three or four months after the census was taken. The emigration between 1951 and 1956 was 200,000. What will it be in the five year period from 1956 to 1961? It increased from 120,000 to 200,000, which is an increase of two-thirds. Will it again increase during this five year period from 200,000 to 300,000? What does the evidence show? I see Senator Lenihan shaking his head. I believe in going by what the facts show up to the present. What were the figures for last year? I will come to them later.

Let us go back for a moment. What was the result of an emigration figure of 200,000 from 1951 to 1956? It was a decline in the population of this country, if my recollection is correct, of about 50,000. I see that the figure given here is 62,300. Supposing we have an emigration figure of 300,000 during the present five year period, what will that represent by way of loss of population? It will represent a loss of 150,000 in our population. The population will drop by that number.

As I asked, what are the pointers? In the general election of last year, the Government Party got back to office, so far as the City of Dublin was concerned, on the slogan: "Wives, put your husbands back to work." I must say I did not think it was an unfair slogan. The Fine Gael Party, to which I belong, had produced a somewhat similar slogan. In my constituency, we produced a very similar one and an appropriate one. I did not think it was an unfair slogan, but it was the manner in which it was produced and the effect which it had, which had such a desperate effect on the economy of this city. The effort that was made since shows that it was extremely cynical. It was just the kind of thing that one would expect from old men.

During 1957, 58,000 insurance cards were given in Britain to people who came from the Irish Republic, and that figure has been disclosed in the Dáil. Some of those people might have been students going over for a short time and there would be some few who came back, but, as against that, there would be a much bigger number because very few came back last year as compared with those who went to the United States and Canada, and the smaller numbers who went to other countries. Am I wrong in suggesting that emigration last year was somewhere between 60,000 and 70,000 persons? All the evidence points that way and if, in fact, you take it that it was 65,000, there is a good plus for the rest of the period to make up the total figure of 300,000.

The natural increase in our population at present is about 30,000 a year, so that last year the population of this country declined by about 35,000, or more than 1 per cent., and if the examples which I have given of what people have thought previously, are to be any guide, that is a serious loss of treasure, of real treasure. There is nothing ficitious about it and nothing arithmetical about it. There is a worse aspect about this matter. Were the people who went away old people? Were they decrepit people or were they, in fact, the most able people in the community? They were of course, as we know, the most able people in the community so that the loss was not 1 per cent. of the population, but, from the point of view of production, which we are always hearing about—certain people never stop talking about it— there was a direct loss of probably 2 per cent. in the productive capacity of the country. That, of course, was responsible for the decline in the real income of the country last year.

I know that certain complicated tables have been produced in the Statistical Survey. All the daily newspapers last week referred to this subject and one, in particular, on its main news page had a heading: “Increase of £19,000,000 in National Income Last Year.” What is the fact? The fact is that there was a drop of £9,000,000 in the national income last year in real terms. I may add that I will continue to use these real terms throughout my speech. The expenditure table in the Statistical Survey, page 9, shows gross national expenditure last year of £577,000,000. One of the three wise men appointed by the British Government, Sir Denis Robertson, said recently, in a small volume published by him on theoretical economics, that he could not understand how exports were part of national expenditure. I think he said it with his tongue in his cheek and it is certainly a most peculiar way of doing a job of work, but this peculiarity shows a slight increase. This statistical approach of adding a lot of tables and subtracting other tables from them, and generally chasing your tail around, shows a slight increase in real income last year.

There is a much more direct method of of finding out whether the income of a country is declining or increasing, a method approved by, I suppose, one of the greatest economists who ever lived, the late Professor Alfred Marshall. This method is to find out what the value of money is one year, then find out what it is the next year and you find your national income on that basis. The value of money last year dropped 6 per cent. as compared with the year before, so that the net income of £450,000,000 odd would need to have gone up by £27,000,000 to equal the income the year before in real terms. Instead of that, it went up by £19,000,000.

I am glad to be able to call on such an eminent authority as The Irish Banking Review for June, 1958, for authentication of this figure of 6 per cent., though The Irish Banking Review in an article on “The Budget and National Economy” said:—

"Judged by the trend of the major economic indicators, the Irish economy showed signs of welcome advance and strengthening in the course of the past year."

That is their terms of reference, adopted by themselves, and I have no doubt they took account of the mass of emigration and were able to equate that emigration against other figures. The article goes on to say:—

"Agricultural production increased by more than 3 per cent. in volume."

and, having made that little statement, it could go no further because in the very next sentence it departed from its own terms of reference and said:—

"Industrial production also increased significantly in the second half of the year."

Having said that all major economic indicators showed improvement in the country's economy, the article could not produce those economic indicators for two consecutive sentences.

As regard agricultural production last year, I think we all know the circumstances in which it was increased, particularly as regards the export side of agriculture. The fact is that farmers were not prepared to sell their cattle at comparatively low prices in 1956.

Let me make one technical comment on the tables in the Statistical Survey, tables IV and V. Table V would be a genuine table when it includes exports, if, in fact, all the money was brought home and spent at home, but, of course, the money was not brought home and spent at home. The official figures show a plus of £9,000,000 on the balance of payments, but I think there are clear indications the plus was substantially more. I think a careful examination, or any examination, of the banking figures shows that there was an increase in the amounts of money which our commercial banks, and our Central Bank, had in London and elsewhere, of about £15,000,000 in 1957.

In this connection, I think the comment I heard the other day is appropriate, that is, that a man's legs ought to be long enough to stretch from his body to the ground. The statisticians, when they are making their calculations, always ensure that the statistical legs are long enough to stretch from the body to the ground. They do not mind pulling them a little bit if it is required.

Yesterday, in the Dáil, I noticed that the Minister, having regard to information which is available to him, while there is large-scale unemployment in this country, as to the monetary assets we have in London, said that these were required for trading purposes and that they had not gone up very much yet. If Britain can carry on the entire trade of the sterling area with an amount of liquid assets which is only equal to three or three and a half months of their own imports, I fail to see why we should require to have liquid assets in London which are more than 12 months of our imports. I do not pretend to understand why we should have it. I will come back later to its value.

These figures I have given of the fall in the value of money show that, far from there having been an increase in the real income of this country last year, it declined by about 2 per cent. There was another decline which should be added to that, just like sensible people do, who make a calculation when reassessing their position at the end of the year. In the year 1957, we had—and we still have—about £200,000,000 in London of first-line assets. That, of course, declined also by 6 per cent. in real value. That loss is a loss of £12,000,000, equal to about 3 per cent. of the national income, so that the real income of this country last year, when you allow for that depreciation—and, of course, there are no people who pay so much attention to depreciation as statisticians—you find a 5 per cent. reduction in the real income of this country last year.

Anybody can put any gloss he likes on that. These are the facts. They are real facts. They are not elastic facts—facts which change from one period to another. I have read the reports of the Central Bank regularly down the years and I have never once seen a reference in any publication by the Central Bank to that fact—never once to the fact that the commercial banks and the Central Bank have large assets in London which are constantly depreciating, rotting away.

The second point I should like to refer to is the number of people who are employed in this country to-day. In the year 1951, there were 1,220,000 people employed in this country. In 1957, there were 1,142,000 people employed in this country—a decline of 78,000. This year, of course, the country will be lucky if there are 1,120,000 employed, that is to say, 100,000 fewer are at work in this country at the moment than in the middle of the year 1951 when the country was lucky enough to get Deputy MacEntee back into office! There is a loss of 100,000 people in employment in a period of seven years. Then the Government, if they ever bother to take thought about the matter, probably wonder why the economy is not looking better in regard to certain favourable factors, the better prices we are getting for our exports and the decline in the price of imports.

Whenever I think of our financial system at present, the letter "M" comes very much into my mind because, when most of us were younger than we are to-day, there was a great deal of talk about an institution known as the Maginot Line. That line had two defects in it. It did not cover Belgium and Holland but, above all, it did not close the hilly part of the country. There was a gap in it. Subsequently, we heard that people were Maginot-minded and it became the term to illustrate a certain type of mind.

There was another example of the same type of mind about ten years ago when a man named MacMahon got the United States to pass an Act that their Government would not share atomic secrets with anybody. This gentleman named MacMahon had the bright idea that the United States of America and its scientists had something it could keep for ever as a secret. When speaking to a colleague of mine about this matter of scientific research some little while ago, he said to me: "You know, if you are going into your lab, interested in a line of country and plugging away at it and getting nowhere, the day you hear that some other fellow has done the job, you go into your lab that morning with a completely different step. You know it can be done. It is a different proposition."

I regret to say that we have had in this country since 1951 the MacEntee mind and the MacEntee mind is the same as the Maginot mind and the MacMahon mind. The deplorable thing about it is that there is evidence all over the western world that the particular job that some of us are suggesting should be done can be done, that is to say, the preservation in this country of reasonably full employment.

Our young people will not stay in this country at low wages. They do not have to stay. They can go to Britain and increase their earnings by anything from 60 per cent. to 100 per cent., if they work hard enough, and they can go to the United States and treble or quadruple their earnings. Does any person believe in the adoption of short-term financial solutions such as the solution which has led again, as it did in 1952-53, to the accumulation of £23,000,000 abroad? That is the figure given in answer to a parliamentary question in the Dáil some little time ago. Between May, 1956, and May, 1958, our Central Bank accumulated £7,000,000 in London and the commercial banks accumulated £16,000,000, a total of £23,000,000.

That is a delightful result. Presumably, it is one of the favourable statistics referred to by the Irish Banking Review. When you are considering the human side of this matter, you must add the increased number of unemployed out of a smaller population compared with two years ago. There you have a picture of an economy decaying.

One final comparison—in this Statistical Survey, personal expenditure on consumer goods and services is shown as being reduced from £428,000,000 in 1955 to £426,000,000 in 1957. On the surface, that is a very small reduction; but if you inflate the expenditure in 1955 so as to get a comparable real figure for 1957, in accordance with the value of money, you find that to give the community the same amount of goods and services, assuming no change in the population —and there was a small reduction in the population—it would have required an expenditure of £466,000,000 in 1957 instead of £426,000,000. So that the real income of the community went down in two years, not by £2,000,000, but by £40,000,000. I am talking about the real income, the income in goods and services enjoyed by the community as a whole. It dropped by approximately 10 per cent. in the two years.

We have one other aspect of this matter. The Minister and I had a certain amount of discussion on the Central Fund Bill about whether or not the cost of living was going up. Whatever discussion there was about it at that stage, at least my point of view was vindicated not alone for that particular quarter, but for the following quarter as well. Despite the tremendous push given to it last year, the cost of living has gone up by two points in each of the first two quarters of this year. Despite falling import prices, that was as great a rise as used to occur in each year when the previous Government were in office. In other words, broadly speaking, the present Government pushed up the cost of living by their actions last year. The results of many economic actions do not come for a good period after they are taken. They pushed up the cost of living in this year up to the present by as much as it went up for the whole period of office of the previous Government. That is despite the fact that the British Government belatedly, on the very verge of further devaluation of the £ last September, took steps which have had some effect towards making the value of sterling stable.

I noticed recently, reading through the Dáil debates, that the Taoiseach referred to a statement he alleged Deputy McGilligan had made that certain assets were waste paper assets. He subsequently withdrew when there was a protest and Deputy McGilligan said he had called them paper assets. I want to give the Taoiseach a present of something, free, gratis and for nothing. These assets in British Government securities are wasting paper assets. They are wasting every year. We are not yet finished with the year 1958 and I am prepared to stake a little money that before the year 1958 is out they will have wasted a bit more.

What is this process of wasting? The wasting was 7 per cent. in 1956 on the £200,000,000. It was 6 per cent. in 1957. Since September last, when certain action was taken by the British Government, the value of the £ sterling has remained relatively stable. Of course, it is only a temporary matter. Already there are increases in wages. There is talk about keeping increases down to three per cent. This three per cent. is roughly intended to be equal to the progress in the economy—the increase in output in the economy—so that you would keep the value of money stable.

What about our economy? What about the retention of this large amount of liquid capital in London? What about the decline in the value there? Of course, the fact is that, in spite of the great welcome which the Irish Independent gives each month to what it calls the wonderful results of the measures taken by the British Government, they have built up a flimsy dam. There is nobody in Europe but knows it is a flimsy dam against the continuing decline in the value of sterling. I understand from people I have been speaking to that the British people are sick and tired of talk about the balance of payments. If the British people are sick and tired of it, how much more reason have our people to be sick and tired of it?

From the point of view of this community, by far the most important part of this matter is the financial arrangement by which we back our currency in the main with British Government securities. The only change in that connection was the change made by the previous Government in the middle of 1956 when they began to take into the currency fund the capital moneys coming from the United States. Before I go on to develop this matter, I want to say there is no question of my advocating legislation about it. Legislation already exists in Section 3 of the Currency (Amendment) Act, 1930, passed by a Government who were supposed to be so ultra-conservative that they would allow people to die of hunger, but at least they passed that Act with that section in it. The only extent to which it has been implemented at all was by the previous Government.

I am not one of the people who, during the 30's, was anxious that we should cut the link with sterling— I am still not anxious that we should do so—but there is no connection whatever between backing our currency with British Government securities and the link with sterling. We could back our currency with Irish Government securities and the link with sterling could still go on. All that is required in connection with the link with sterling is the necessary moderate amount of liquid funds in London to carry on our trade.

How has this matter become of importance to the economy? It has become so because the part of the liquid assets of this country as a whole which was required to back the currency in the 30's was very small. The total amount was £10,000,000 in 1938 out of £250,000,000 of external assets. That has changed now until it is £80,000,000 out of about double the nominal amount of external assets, that is to say, from being approximately 4 per cent. of our external assets involved in the backing of the internal currency here, it has worked up until it is approaching 20 per cent.

The practical significance of that is as follows: the commercial banks must pay cash in London for Irish legal tender notes they have here in Ireland. If they could always keep them in their tills, it would do them no harm at all. They would still be as well off as if they had the money in London. But they cannot do that. Taking one period of the year with another, they can keep only about one-fourth of them in their tills, so that they can keep only about £20,000,000 out of the £80,000,000 in their tills. The other £60,000,000 are out among the people. That means that they are out of £60,000,000 of liquid money to build up this method of issuing currency. It had great merits while Britain was on the gold standard. It had considerable merits during the 30's when Britain was off the gold standard because the £ sterling was still a stable currency. I would say it has no merits at all when you come up to the present period.

There are other methods of arranging for the necessary liquid funds in London for the purpose of trading and financial transactions between this country and Britain and the rest of the world. This has now been going on for 20 years. The value of the £ declined by a third during the war years up to 1945. It has halved in value since. It does not matter what point of view one has—whether one is an extreme Socialist, a middle of the road person or an extreme conservative— that is one of the most surprising developments in modern monetary events. It has certainly never happened to sterling previously, and to the best of my knowledge, never happened to any other currency, except perhaps the German mark and the French france between the two wars. The normal development is that when a war ends, the value of money tends to go up and prices tend to come down.

Even to-day I would not be so concerned about this matter if I thought that it was now over, but suppose the value of sterling halves in the next 12 years as it has in the last 12 years. That means that our monetary circulation internally will be £150,000,000 or £160,000,000 and the commercial banks out of the earnings this country has from export trade will have to put up again a further £75,000,000 in London or elsewhere—either in London or in the United States. That means that £6,000,000 or £7,000,000 of liquid capital is or will be sterilised every year, during the next decade. It would not be even during the decade, because it will be smaller at the beginning. This thing is a genuine spiral, and the spiral whirls at an increasing pace.

In these circumstances, I cannot understand why the necessary steps have not been taken to deal with this net problem. There are other people, I know, who believe that if the reserves of this country were centralised, the country could carry on its business much more readily than with nine individual banks each operating with its own little system. That, of course, is part of another problem, but it is obvious that a small country like this cannot operate an economical banking system if it has nine commercial banks where Britain can operate with five.

This, of course, involves a re-thinking by the Central Bank of its own functions. I notice that in its recent report the Central Bank is talking about the need to re-assess the position. The first position that should be re-assessed is its own position. Its primary duty under the Act of 1942 is to safeguard the integrity of the currency. I do not know whether any institution can be regarded as carrying out its primary duty of safeguarding the integrity of the currency, if the backing for the currency is in a form which is declining in real value at the rate of 4 per cent. to 5 per cent. a year.

I was very interested in the views which Lord Pakenham expressed at the two meetings of the National Bank since he became chairman. The first occasion was on 7th February, 1957 when, dealing with the problem of banking between this country and Britain, he said:—

"I do not propose to-day to explore the extent to which Irish rates can profitably diverge from British. As the present Minister of Finance has said, the room for independent manoeuvre is always bound to be limited. I take it for granted that it would be absolutely disastrous to steer along a road that leads towards a tampering with the admirable arrangements which secure parity between the Irish and the British currency. I assume that the maintenance of an interchangeable connection at the present parity is an absolute objective of Irish financial policy. But the events of the last two years suggest most clearly that an automatic—"

and he underlined the word "automatic"

"—adherence of the trend of Irish interest rates to that of British rates is a thing of the past. Somewhere, therefore, in Ireland and by some body or combination of Irish persons, a credit policy has to be formed.

The present system of negotiations between the Department of Finance and the banks, friendly though they be, is vitiated institutionally by the existence of a vacuum in the places usually reserved for a central bank. There have been signs during the last year that the Central Bank has been brought more into the centre of the picture but its establishment for the first time as a strong expert middle term in the Irish financial system can only come about as an act of deliberate policy, approved, one would hope, as an essential stage in national maturity by all major sections of opinion.

It is being forcefully urged that ‘the banks should be required by the Central Bank to make changes on a selective basis in bank overdraft interest rates as an aid to national policy so that bank credit will be easy and cheap for the most desirable purposes and difficult and dear for the less desirable.'

Whether or not we agree with that precise reasoning, a strong Irish Central Bank empowered to play a vital constructive part in formulating and operating a national financial policy is patently overdue. Of all Ireland's needs it is the most obvious and the one which could be met most easily."

What is my surprise 12 months later when Lord Pakenham—naturally enough, I was interested in what he had to say—spoke at the annual meeting of the National Bank on 6th February, 1958. He was talking about the maintenance of parity with sterling. He said that all sensible people are agreed that the Irish £ should be maintained at parity with sterling and all practical convenience suggests that the Irish £ should be maintained at parity with sterling. I am taking the Seanad into enough technical matters without taking them into that technical matter, but it is desirable for sufficiently cogent reasons that the Irish £ should be maintained at parity with sterling. That is why the then Deputy MacEntee engaged in the campaign he had in the middle of 1956 to suggest that it might not be possible to maintain that link.

Lord Pakenham went on to say:—

"But at that point the paths of thought diverge and great argument has developed on various levels of discussion. Nor am I thinking primarily of technical banking issues. Last year I argued at some length the need for a stronger Central Bank for Ireland. We have since seen the counter-argument set out effectively in the Central Bank Review. I remain unconvinced but temporarily silenced while events take their course and the Central Bank exerts a greater and ever more helpful influence in Irish banking.”

Let me cease quoting for a moment. "I remain unconvinced but temporarily silenced." One wonders who silenced Lord Pakenham. One wonders what influences were brought to bear on him to put in the sentence at the end:—

"The Central Bank exerts a greater and ever more helpful influence in Irish banking."

I think the Central Bank did help the Irish commercial banks in the autumn of 1956 by discounting certain bills they had, by discounting in London. I am under the impression—I may be wrong —that they have ceased to do that— I suppose on the grounds that it is no longer necessary.

Lord Pakenham goes on:—

"Two years ago I called for a fundamental reappraisal of financial ideas and policy. Looking back, I find rather to my surprise, that I described the suggestion at that time as having already received ‘powerful backing'. But not, if I recollect rightly, among bankers. Last year I returned to the charge, supported soon afterwards by Sir Oscar Hobson and other pundits. I am glad to think that a small, but very strong committee under Lord Radcliffe is now considering all these matters."

He goes on to deal with the British conditions. I could make a number of comments—but I do not think there is any necessity to do so—on the campaign that has been waged in this country by the Central Bank of Ireland in recent years that the internal currency in the country must always be backed by external assets. That is not accurate; that is not true. It does not exist in any country in the world and therefore they are attempting to put across the people of this country something that is false. They have never ceased to do it. It is one constant thing through the reports. Whereas they have not a phrase to give to the deterioration in their own backing for our currency, they have kept on this topic continuously: "You must back your internal currency by external assets."

I am not going to take the Seanad into the reasons why that is just a lot of rubbish. In the days when gold was currency, it was understood, of course, that you had to have a certain quantum of gold—liquidity, as it was called—in case anyone brought in a bank note and demanded his gold, he having given you his gold for it. It was for reasons, of course, of safety.

It has been urged many times that monetary policy is neutral where economic questions are concerned. I was glad to see that the Central Bank in its report this year did not attempt to put that idea across. It said that monetary policy was of great importance. I think the phrase "neutral" has been misunderstood. What monetary writers have meant usually is that where you have a good monetary and credit system, it is neutral as regards economic progress. I think there is no doubt that that is what is meant.

I have just one final point to make on this matter of the economy of the country as a whole. The economy of the country will not be brought into order until the State allows the individuals in the country with fairly sizeable incomes to put their own private individual economies into order. In other words, as long as the State continues to do the kind of things which are set out in the great bulk of this enormous Finance Bill, as long as it continues to apply itself to doing these kinds of things, we will continue to have massive unemployment and large-scale emigration, emigration which is really reaching the dimensions of an exodus, or, if we might look at it in another way, reaching the dimensions of a blood-letting.

The Minister, when speaking on the Central Fund Bill, promised me that he would demonstrate in his Budget statement that he had made an economy of £250,000 on the Civil Service. The Minister did not say a word about the matter in the Budget and let me say that I think it was decent of the Minister to say nothing about it. I think he was wise.

It was published in the Table. The figure was given in the Table.

Given in the Table? Look, what is the use of talking that way? If the Minister is going to start on the technicalities of the matter then we can look at the Estimate Volume where there is provision for an additional £600,000 for administrative purposes without provision for any extra increase.

I am talking about payments to the Civil Service. It was given to the Civil Service.

You were going to cut administrative expenditure by one quarter of a million pounds and——

And we did, by £300,000.

You cut it by £300,000?

We did.

There is no use arguing in that way. Every year there is this provision for expenditure that is not incurred.

The Senator will not accept anything except his own figures. He will not even accept statistics.

I will not accept these fantastic calculations when you have the obvious simple approach——

The Senator's whole speech is made up.

It is not made up.

An Leas-Chathaoirleach

The Minister will permit the Senator to make his speech.

That is an improper remark by the Minister.

The Senator was the first to make the remark.

I am making true remarks.

I published it in the Table which was attached to the Budget.

The Minister told me he would demonstrate it in his Budget speech. He did not do that.

Is Senator O'Donovan not entitled to speak?

An Leas-Chathaoirleach

I think the Senator should be allowed to make his speech. I will see that the Minister will get a fair opportunity to make his.

Let me say that when the Estimates Volume for this year was produced, without provision for any increase of 10/- a week, it showed an administrative increase of £600,000. I went to the trouble of going through it and getting the figures. There was no denial from the Minister, or from anybody on his behalf, and there is no use in the Minister trying to push his words down my throat. He said: "I hope to demonstrate in my Budget statement that I did make that saving."

He did not demonstrate anything of the kind in his statement.

I did, it was published in the Table.

I will say no more about the matter. I will just leave it at that. I read the Minister's statement and he made no reference to it.

I published the Table.

The Minister published a lot of things that he wanted to take out of the Budget, as I mentioned already.

Every year the Finance Bill gives the Seanad an opportunity of discussing general financial policy. It is a very long Bill and we can deal with many of the details on Committee Stage. Many of the details in the Bill are really more of an administrative character than of high financial policy and we can, as I say, if necessary, deal with them on Committee Stage.

I purpose now to make some general observations regarding the financial background of the Bill. The inclusion of all these administrative clauses has the effect of making the Bill extremely complex and difficult to understand. I am not complaining about that. I think it may be inevitable with our taxation code. The income-tax code has developed into a sort of struggle between the gamekeepers and the poachers. It is a battle of wits between the Revenue Commissioners, on the one hand, and the avoiders, or evaders of tax on the other. The consequence of this is a certain amount of obscurity regarding the rights and obligations of the individual citizen. The ordinary taxpayer is slightly bewildered regarding his obligations.

The debate in the Dáil on Part IV on this Bill illustrates this very clearly. A very clever member of the accountancy profession, one or two clever members of the legal profession and the Minister took part in the debate, and I got the impression that they were all rather baffled to understand precisely what the Bill meant. That, as I say, may be an inevitable part of our income-tax code and one of the things we hope for is that the Income-Tax Commission will succeed in recommending certain simplifications of this code. The present administration is necessarily wasteful. On the one side, the Revenue Commissioners have to employ a large staff of able people in order to assert their rights, and on the other side, there are a large number of people engaged in trying to help the taxpayer to reduce his obligations to the Revenue Commissioners. A number of accountants and solicitors derive quite a considerable income from that activity.

I was amused recently when I was speaking to some young commerce students in University College about the question of reforming the income-tax code. One or two of them said: "Oh, Professor, the simplification of the income-tax code would be doing a very bad service because most of the accountants would not have very much to do if it were made simpler." Although I would be the very last person to deprive Bachelors of Commerce of a living, at the same time I should like to see the income-tax made more simple.

My main reason for saying that is that I think the present Finance Bill is a good example of the type of measure which may frighten foreign investors coming into this country. We had a lot of debate here on the Encouragement of External Investment Act. That is a complicated measure, but compared with the present Finance Bill, it is simplicity itself. At the end of the debate, several people suggested to the Minister for Industry and Commerce that a brochure should be published showing foreign investors precisely what degree of freedom they would have in investing in Ireland. In his reply, the Minister for Industry and Commerce, at column 695, Volume 49 of the Official Seanad Reports for June 25th last, said:—

"In connection with the criticism of the idea of an explanatory brochure, may I say that this morning I had discussions with one quite important personage associated with industry in the United States and the only page in the brochure in which he was interested was that dealing with taxation? I think that would be the approach of quite a number of people in that country who would be interested in the industrial possibilities here."

I certainly would not like it if an American investor were to ask me to explain the position with regard to taxation. I should not like to have to say to him: "This Finance Bill is part of it and if you can unravel the 68 sections of it, you will have a slight idea of the taxation code".

I seriously suggest to the Minister that the taxation code, even before it is simplified, should at least be simply explained in some form that foreign investors could understand. I believe that investors would be frightened away by the extremely complicated code which has resulted in the great war which is being waged between the gamekeepers in Dublin Castle, on the one hand, and the poachers all over the country on the other. Therefore, I do think that the taxation code should be presented as simply as it can be for the benefit of foreign investors.

Indeed not only foreign investors but even we natives might benefit by some simplification of this kind. I think business people would benefit considerably, if they had to waste less of their time and money on dealing with income-tax and other taxation problems. One businessman told me that he spends approximately three days each week manufacturing a commodity and the other three days dealing with various Government Departments in relation to taxes, licences and so on, and I know that is not any exaggeration.

It is an unhealthy state of affairs which could be partly remedied by the Minister presenting the taxation code as simply as possible for the benefit of foreign investors and, as I have said, native investors might derive some benefit from that as well; but I am afraid, however, that, even if the taxation code were simplified, and simply presented, foreign investors would still be slightly deterred by the weight of taxation in this country. As far as I can ascertain, last year local and central taxes together took 28 per cent. of the national income and that is a very high figure. The fact is that taxation rates in this country are exceedingly high and, in spite of the fact that the standard rate of income-tax is lower than in England, many income-tax payers actually pay more here than people with the same income in Great Britain.

I will just give a few examples of the difference in the British taxpayers' favour. In the first place, children's allowances in Great Britain are much more generous than here. Secondly, the earned income allowance in Great Britain is as high as £1,550 as against £400 in Ireland. Thirdly, surtax starts at £1,500 here as against £2,000 in Great Britain and, fourthly, many allowances against surtax are made in Great Britain for children, housekeepers and other dependents which are not allowed here. Therefore, in spite of the fact that the standard rate of income-tax is lower than in Great Britain and Northern Ireland, many taxpayers here pay more in income-tax and that, of course, has a deterrent effect on people who are thinking of investing in this country. It also has the effect of deterring rich people from settling here, and may even have the effect of driving a certain number of pensioners and independent people away from living here.

In addition to the income-tax, which, as I have said, is unfavourable in certain ranges, death duties in Ireland are unfavourable in certain ranges also. In England, the legacy and succession duties were abolished in 1949. They still remain here. The differential between British and Irish estate duties have been narrowed since 1951 and, at the moment, quite a large range of estate duties in the Irish Republic are higher than those in Great Britain and Northern Ireland. In addition to that, there is the high rate of stamp duty on the purchase of agricultural land, and all these are factors which tend to deter rich people from living here and may, in fact, as I said, drive some residents away.

That has a bad effect on the volume of employment, on the income derived from abroad in dividends and on the yield of taxes. It has a cumulative effect because when some people go away, others tend to follow them. Therefore, I suggest that the high rates of taxation in this country at the moment may have a deterrent effect on potential investors, on potential residents, and even on existing residents. The fact is, of course, that the public expenditure is rising more rapidly than the national income. I will give one or two figures on that later on, but the fact is inescapable that in the past ten years public expenditure has been rising more rapidly than national income.

The high taxation in Ireland has a disincentive effect on business, apart altogether from the dislike that people have of paying taxes, which is very natural. There is a concrete disincentive effect in the existing high taxation system, and it is disadvantageous to saving because many people have no surplus income left. The will to save is killed because the income on savings is also heavily taxed. It discourages investment, partly because of the shortage of savings and partly because of the reduction of the net return on investment. Replacement and extension of plant are rendered difficulty by the high rates of income-tax. That is important and it is injurious at a time when Irish business should be thinking of how it is going to adapt itself to the changed conditions brought about by the Free Trade Area in Europe. The high taxation also has an adverse effect on enterprise. The high progressive nature of the tax makes it not worthwhile to try to earn more than a certain amount, and the surtax limit is admittedly absurd.

Surtax was introduced in Great Britain in 1910. It then began at £2,000. In Ireland, it now begins at £1,500 and, taking the change in the value of money into account, that represents an income of £300 a year in Britain in 1910, when surtax was introduced under the name of supertax. Nobody, no matter how egalitarian, would suggest in 1910 that a man with £300 a year should be asked to pay heavier additional taxation, but the fact of the matter is that surtax has now descended on a class of people that should never be picked out for such treatment and, as I have said, many of the allowances that exist in regard to surtax in England do not exist here. I do not know what anybody would have said in 1910 if he were told that a man earning £300 a year was such a rich man that he should be able to pay surtax, or supertax as it was known in those days.

The high taxation here also has an adverse affect on professional labour. The very high marginal rates of taxation prevent people from making their best efforts, and I know from personal experience that professional men emigrate because of the disincentive effect of such high taxation. The taxation system should, as far as possible, provide incentives and not disincentives. The present taxation system, to a very large extent, robs people of their legitimate rewards. The whole object of taxation should be to fit the burden in relation to the strength of the shoulders that have to bear it, but, unfortunately, instead of the Irish taxation system doing that, it has the effect of weakening the shoulders through its disincentive effect on production.

As I said I would refer to the stagnant condition of the national income, the best reference I can produce on that is to be found in Paragraph 47 of the Report of the Central Bank of March, 1958, which says that the latest Economic Survey of Europe published by the United Nations shows that Ireland, with an annual rate of increase in real gross national product of 1.9 per cent. in the years 1949 to 1953, was the last of 17 West European countries. It goes on to say:—

"These countries, taken together, averaged 5.2 per cent. and eight of them registered 4 per cent. or more. During the years 1953-1956 the average annual rate of increase in real gross national produce for all 17 countries declined slightly, to 4.9 per cent. but the rate was 4 per cent. or more in 10 out of the total number. Ireland, in the latter period, not only continued to occupy the last position in the table but was the only country in which any year showed a decline in real national output."

When we compare that very depressing figure with the figures of public expenditure and taxation, the contrast is quite remarkable. In the years between the financial years 1950-1951 and 1956-1957, current State expenditure increased by £49,000,000. The greater part of that increase was on non-pro-ductive and re-distributive services. The debt services increased by £15.7 million, social services by £12.76 million and remuneration of public servants by £10.36 million. The only productive expenditure that seems to have increased is the agricultural grant which increased by £1.57 million and expenditure on education, £1,000,000. In a country where so little, fortunately, has to be spent on defence services, these are very alarming figures. That increase in expenditure beside the stagnant national economy is a matter for great alarm.

Of that increase of £49,000,000, over 30 per cent. was caused by an increase in debt charges. This points to the growth of a great deal of deadweight debt. The question of priorities in regard to capital expenditure is being fully dealt with by the Capital Investment Advisory Committee and I do not propose to say any more about it until the publication of their final report. But it is perfectly obvious that a great deal of the debt incurred in the past ten years must have been of an unproductive kind, owing to the great increase in debt charges shown in these figures.

The result of that increase in expenditure was, of course, that taxation had to be increased. Part of the additional expenditure was met by non-tax revenue and part from a return from the State assets created by the debt but, having made full allowance for that in the period of six years, there was an increase of £32,000,000 in taxation.

The taxation on tobacco increased by £8.98 million, on oils, by £7.78 million, income-tax and surtax by £7.71 million, beer duty by £3.57 million. If these increases in the amount of taxation collected represented an increase in the yields, it might be a healthy sign, but, unfortunately, it was mainly the result of an increase in the rates of taxation.

Income-tax was increased a shilling in the £. Death duties were raised. Petrol was increased by 1/7 a gallon and spirits by 5½d. a glass, beer by 3d. a pint, cigarettes by 1/- for every 20, so that the picture really is one of stagnant national income, rising Government expenditure matched by rising taxation and rising rates of tax. The position has now been reached that most of the taxes, if increased any further, would yield a diminishing return. It is very difficult to say where additional objects could be found for taxation, if it was needed at the present time.

Let me summarise what I have said. The level of taxation shown in the Irish finance accounts has an adverse effect on saving in the country. It has an adverse effect on investment, risktaking and work. It has an adverse effect on potential foreign investors thinking of investing in Ireland and it also has an adverse effect on possible rich people thinking of residing here. Finally, it may even have the effect of influencing certain independent people to shift their residence to another country.

I know it is no use just complaining in this way about the high taxation, without making some suggestions as to how the position might be improved. Of course, in the long run, as everybody is agreed, the increase in the national income is the only way in which the national economy can be made go ahead. If the national income was increasing at a normal rate, additional public expenditure and additional public taxation could be absorbed without any great strain. Meanwhile, pending the increase in the national income, there are certain things which a Minister for Finance can do.

In the first place, he can try to shift expenditure from unproductive to productive uses. That is particularly true in regard to capital expenditure, consideration of which I will defer, as I have already said, until we have the report of the committee. Secondly, he can curb administrative costs. He can cut out all waste in public expenditure. Thirdly, he can refrain from increasing social services except in proportion to the increase in the national income. Finally, he can cut out all subsidies, many of which have no effect on production. They simply distort the price structure in the country and redistribute incomes in a quite undesirable way. One of those subsidies which we will be dealing with next week is the subsidy on housing. I shall deal with that matter next week.

Generally, the finance structure should be titled towards production rather than towards redistribution. Until the total level of taxation has been reduced, I do not see any great object in discussing the evils of one tax in particular, because if one tax is reduced, it simply means that more will have to be raised by other taxes. The major object of policy in the short period should be to keep public expenditure down at least to the level of having it at the same rate of increase as the national income.

The Central Bank Report on this question, in Paragraph 50, says something which I quote because I think it expresses my own view:—

"Our taxation, central and Local, reflects this proneness to match improvements elsewhere with corresponding changes here despite our natural disadvantages. It is seen too in the sphere of Exchequer finance where the spate of Supplementary Estimates that follow with monotonous regularity the Budgets of each successive year more than absorb any natural growth in the yield of taxation and thus postpone the day when the economy can have the stimulus of a reduction in taxation. Similarly, in the case of local authorities, the ratepayer has had to endure successive additions to his burden and looks in vain for some diminution. These cumulative demands cannot be borne indefinitely. Expenditure, both national and local, should be made in each year to conform in some precise degree with the original Estimates. With a stationary population, high unemployment and considerable emigration, we can scarcely sustain for a prolonged period the heavy burden of a complex administrative machine and highly-geared social services. Economy, however, though a popular slogan is unpopular in practice, and where savings have been effected by successive Ministers for Finance, often in the teeth of strong opposition from a variety of quarters, they are too frequently absorbed in further expenditure."

I do not wish to take up the time of the Seanad by enlarging on that subject. I think it is pretty well admitted by all students of public affairs that the level of public expenditure has been running dangerously high. The only way to keep it down is to prevent it rising further. Once the commitments have been undertaken, it is very hard to cut them down. The Minister may remember that, in an earlier debate this year, I was pleading for some economies in the Supply Services and he very properly asked me where economy could take place. I quite see his difficulty in that. Once the services have been begun, it is exceedingly difficult to cut them down. Therefore, it behoves the Minister not to undertake any additional services that can be possibly avoided, unless the national income expands in a corresponding measure.

There are two special points in regard to the Finance Bill to which I should like to draw attention. The first is the change in the destination of the import levies. One of the features of our Budget speeches has been an attempt to justify transferring certain current expenditure to capital account. That is a perfectly legitimate objective for a Minister for Finance who is trying to show that his Budget balances. The more current expenditure that can be shown to be nonrecurrent and, therefore, properly charged to current account, the less has to be met out of the taxation for the year. But it does have the effect of falsifying comparisons between one year and another.

There were one or two items this year, the inclusion of which in capital account was slightly questionable, but the point I want to make is that, by transferring income that used to be applied for capital purposes to current purposes, a similar—I do not like to use the words "juggling operation"—piece of Budget balancing, by means of changing the nature of the accounts, is effected at the other end. As I said, income which has been regarded as of a capital nature is taken and put into the current account for the year. Then, of course, the necessity for additional taxation in other directions has been avoided. If a Minister were to include enough items on capital account and if he were to include enough capital income in current account, the Budget could be balanced without any taxation at all. But before he got anywhere near that, he would be pulled up by his officials, however much he might desire to do so himself.

The point I want to make it that, by taking income which was specially designed to go into the capital Budget and putting it into the current Budget, he is doing an operation similar to that of putting current items into the capital account. That is why I suggest that the Budget for this year, although it does balance on paper, has had one or two adjustments made in it to secure that balance which are not wholly legitimate.

Furthermore, making the levies part of the indirect taxation on imports is, in fact, increasing taxation. The levies were regarded as something not to be continued indefinitely. Now they have entered into the general customs revenue, and the cost of imports and, to some extent, the cost of living, have been raised. It also deprives the Government on capital account of a useful source of revenue. Looking at the capital Budget for the last year, the import levies brought in a considerable amount. In future, that amount will be used for balancing the current Budget. This means further demand on the scarce savings of the country and greater difficulty in raising what is necessary for the capital programme.

My final objection to it is that it deprives the Government of a rather flexible weapon of control. The temporary improvement in the balance of payments last year is not likely to continue indefinitely. The figures for the first half of the present year are not very encouraging. The Minister himself in his Budget speech said that he hoped he would not have to grapple with a serious deficit in the balance of payments. I took that phrase to mean that he was more or less reconciled to deal with a deficit, but he hoped it would not be too serious. However, we cannot prophesy the future, but if the balance of payments should disimprove again, the Minister has thrown away a very flexible and valuable method of correcting it. It is a mistake to throw away weapons which should be used for particular purposes. The Finance Bill could be criticised on the ground that the import levies have been deflected from their original purposes and have been taken into current income, with the effect of giving a picture of the Budget which is over-optimistic.

The final matter to which I wish to refer I have referred to already. Parts of this Bill are very obscure and very complex. It gives new powers to the Revenue Commissioners. It imposes new duties and obligations on the taxpayers. Small businesses and private companies have now duties and obligations they did not have before. It may be necessary to do this in the interests of the revenue, but the work of the Income-Tax Commission is being anticipated to some extent. I think it is rather a pity, when an expert commission is actually sitting on income-tax, that the income-tax law should be changed. I hope the Minister will refrain from changing the income-tax code more than is absolutely necessary, until we have the report of the commission. That report is awaited by everybody with considerable interest, with some hope and also, I am afraid, with some anxiety.

If what I have said about the Finance Bill sounds like repetition of what I said on previous Bills in previous years, all I can plead by way of excuse is that things which are sound do not cease being sound with the passage of time and may need to be repeated. After all, since we were children, we have all had the Ten Commandments repeated to us at frequent intervals. The fact that they have to be repeated so frequently indicates that they are occasionally broken. I take the view that it is the duty of people in this Seanad to proclaim unpopular truths and to continue proclaiming them and, if necessary, to weary the Seanad and the Minister with the repetition of them. At least, one would feel at the termination of one's term of office in the Seanad that, however much one may have reduced one's popularity, at least one would not have betrayed one's principles or disobeyed one's conscience.

Tugann an Bille Airgeadais seo caoí chainte dhúinn ar imeachtaí na tíre seo faoi mar atáid faoi láthair, go mór mhór ar an tslí ina bhfuil an Rialtais agus na Ranna Stáit ag cur díobh. Dar ndóigh, d'fhéadfaimís cur síos a dhéanamh ar an iliomad neithe a bhaineann le leas, nó aimhleas, na tíre, ach tá an oiread san ráite cheana ar na rudaí sin nach mian liom-sa dul ró-dhoimhin sa díospóireacht so.

Ba dhóigh le duine ó bheith ag éisteacht le cuid de na hóráideacha a tugadh anso agus sa Dáil agus in áiteanna eile nó ó bheith á léamh sna nuachtáin gur ó tháinig an Rialtas seo isteach athuair a tháinig na deacrachtaí go léir chun cinn, na crua-fhadbhanna atá ag cur as don tír faoi láthair. Ní mar sin atá, áfach. Na cúiseanna buartha ar a bhfuiltear ag gearán, bhíodar ann cheana agus bhíodar níos measa ná mar atáid anois. Is dóigh liom go bhfuil sé ró-luath an Ríaltas atá istigh faoi láthair a lochtú mar gheall orthu. Ba cheart dúinn fanacht go ceann bliana eile nó dhó féachaint cad é an dul a bheidh ar chúrsaí na tíre. Ní hionann san is a rá gurbé mo thuairimse gur cúrsaí so-réitithe iad, pé Rialtas a bheadh i gceannas.

Cloisimíd mór-thrácht ar an imirce, ar an mbánú agus an scrios a ghabhann leis mar imirce, ach an dóigh le héinne anseo nó sa Dáil nó in aon áit sa tír amuigh gur galar so-leigheasta é sin? Más dóigh, ní foláir nó is duine mí thuisceanach é. Nuair a deirim é sin ní hamlaidh atáim ag iarraidh an Rialtas seo, ná aon Rialtas eile ach an oiread, scaoileadh saor ón a ndualgas maidir leis. Sé dualgas é ná an oiread agus is féidir dár ndaoine óga a chur ag obair sa bhaile, ach ní féidir é sin ag dhéanamh gan airgead chun monarchain a chur ar bun ar fud na tíre agus ní éiroidh leis an iarracht gan cabhair a fháil ó mhuintir na tíre i gcoitinne, go mór mhór uathu san atá gustalach. Níor mhór dóibh ar a laghad cabhrú le déantúisí na hEireann go hiomlán agus gan leigint do ghnólucht iasachta teacht i sealbh an mhargaidh anseo le hearraí a fhéadfaí a dhéanamh in Eirinn. B'fhéidir go mbeadh sé i gceist maidir leis sin gurb'iad na daoine is airde glór i dtaobh na himirce, agus mar sin de, is lua a thabharfadh cabhair uathu chun ár monarchain agus ár ndéantúisí a choimead slán.

I do not intend delaying the House very long with my contribution to this debate, because many of the things we could say on this Finance Bill have already been said on former occasions. When the Central Fund Bill was before the House, many of the things referred to to-day were dealt with, but at the same time that does not mean to say that Senators should not dwell on those things again, if they think the importance of those problems justifies it. We have had reference from Senator O'Brien to the question of income-tax, and that has been referred to on many occasions. There has also been correspondence in the Press about this iniquitous tax, but it would be well to get some indication, from those people who complain about the incidence of income-tax, of the method of assessment whereby the money the Exchequer would lose, if the tax were abolished, would be got, of what alternative method they would suggest to recoup the Exchequer the amount that would be lost by the abandonment of income-tax.

We would, of course, all like to see income-tax completely abolished, and I am sure the Minister for Finance and the Revenue Commissioners would also, if they could do without the money; but those critics of income-tax and those who say it should be abolished altogether should show us what method causing less hardship could be found to collect the money that would be lost to the Exchequer, or, failing that, should point to what State services or social services could be cut down if the money lost to the Exchequer by the abandonment of income-tax could not be found. That is not to say, however, that I am not in agreement with those who say that the position should be examined to see if the method of assessment could not be improved upon; but, seeing that there is a commission at present examining the whole position, it would be as well to await their report before proceeding any further with the discussion.

We have heard a few things to-day about the national income, national expenditure and so on. Senator O'Donovan gave us a few points, with some of which I should like to deal. The strange thing about Senator O'Donovan's attitude is that he did not seem to accept the figures given in the Statistical Survey regarding our national income and I think there can be no doubt or ambiguity about the figures as they appear on page 3 of the said Statistical Survey. The national income increased from 1956 to 1957 from £457,000,000 to £477,000,000. That is an increase of £20,000,000.

It is different money.

We are all using the same money.

Oh no—6 per cent. less value.

An Leas-Chathaoirleach

The Senator must be allowed to make his speech. He did not interrupt any of the previous speakers.

We are all using the same money. The increase from 1956 to 1957 was from £457,000,000 to £477,000,000. Those figures cannot be played on. I should like the Seanad to note that in the year before that, the last year of the Coalition Government, there was a decrease from 1955 to 1956 from £462,000,000 to £457,000,000, so you can see that in the last years of the last Coalition régime, the trend of the national income was definitely downwards. What about the money value now?

Cattle prices went down.

Whereas since the change of Government, it has been upward and I consider that a healthy sign of the country's economy.

You were born since 20th March, 1957.

They do not want to hear any argument they do not like, but at the same time we have to follow the figures we get here because this survey is the only reliable, authoritative source from which we can get them. If Senators are not prepared to accept the figures compiled here, then there is no remedy for them and there is no use talking.

The Taoiseach said the cost of living had not gone up.

I am not dealing with the cost of living now. I notice that very little reference was made by speakers opposite to the cost of living to-day or to the question of unemployment about which we used to hear so much before. Why?

If you read the Irish Press yesterday——

Because the position regarding unemployment to-day is much better than it was 12 months ago or a year and a half ago——

They have gone away.

That is why we did not hear so much about it to-day.

They have gone away.

We heard a lot about emigration from Senator O'Donovan. He tried to persuade us that the figure for emigration has gone up. Where did he get the figures?

I got them from replies to Parliamentary Questions in the Dáil.

I should like to know if the Senator took into account the number of people who leave this country every year and come back again. As far as I can ascertain, there are no reliable figures at the present time, on which we can base our judgment regarding emigration.

Deputy Lemass did not say that in 1956, when the census returns came out.


One would think from the way Senators opposite speak that all these social and national problems have arisen since the present Government came into office. They were there before and were much more in evidence before the change of Government, but I hate to draw comparisons between Governments, between what happened in 1956 and 1957 or in 1954 and 1955. It would be better if we could get away from that line of argument and face the future with more confidence and a better outlook, with less cynicism and with less pessimism than we have in this country to-day.

Hear, hear!

I am glad to be able to gather also from this survey to which Senator Dr. O'Donovan referred that profits in agriculture have gone up. If we turn to Page 5, we see that profits in agriculture as a proportion of the total national income went up from 24.5 in 1956 to 26.4 per cent. in 1957. Mark you again, in the year before that, again the last year of the Coalition, national profits in agriculture as a proportion of the total national income decreased from 26.8 in 1955 to 24.5 per cent. in 1956. That is something in the nature of national stagnation, or worse—the trend was downward. It is gratifying to be able to say that the trend in all these cases now is upward and let us hope that the trend will remain upward and will never go down again.

Did Fianna Fáil do anything to get increased prices for our cattle? Will the Senator answer that question?

Let us hope the trend will be upward and that it will never go down again.

Apart from this question of emigration and unemployment, what are the signs by which we can gauge the healthiness or otherwise of the national economy? It is, in my opinion, whether the national income is going up or down; whether as a result of the Government's efforts and of the people's efforts, we can meet current expenditure out of current revenue; and whether we can maintain a reasonable balance between what we pay out to foreign countries for the goods which we purchase from them and what those countries pay us for the goods we sell to them. This is what Senator O'Donovan refers to as the balance of payments.

Oh, no. The MacEntee mind was what I called it.

He seemed to make light of the balance of payments. He dismissed it as being of no importance whatever.

Deputy Sweetman did not.

Of course, he did not. Deputy Sweetman, as former Minister for Finance, had to face up to that problem, but unfortunately he was not permitted to face up to it.

Did he not rectify it?

The former Minister for Finance rectified the balance of payments. Go bhfhoiridh Dia orainn!

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

Before the Seanad adjourned, I was dealing with certain points raised by members on the Opposition side. When I stood up to speak on this Bill, I told the House that I would not be very long, but circumstances arose over which I had no control, and that being so, I am still on my feet. Our discussion centred around certain problems that confront the country and have confronted the country for some time past. These problems are the questions of unemployment, emigration, the balance of payments and so on. I was surprised to find Senator O'Donovan dismissing this question of the balance of payments as one to which very much importance should not be attached.

It is a pity that a Senator should refer to it in that way because I am inclined to think that it was that very attitude that was taken up some years ago by certain politicians, that payed the way for the deplorable situation that arose afterwards. It is very important that the balance of international payments should be kept under control, and it is very gratifying to know that it is being kept under control by the present Government. I also referred to certain economic trends in the country to-day which would be a guide to the welfare, or otherwise, of the country. The trends in the economic position to-day are, in my opinion, in the right direction. The national income, as I have said, is increasing. The output from field and factory is on the increase, as can be gathered from this document we have here, The Irish Statistical Survey.

We are now pursuing the sound and sensible policy of meeting current expenditure out of current revenue and, if the Government maintain that position during the coming years, they will be rendering a good account of their stewardship. Above all these things, we have the element of confidence in the country, confidence in the Government, confidence in the policy being pursued and confidence in the future of the country, despite certain cynical and pessimistic statements that have been made, from time to time, by people up and down the country. What we want here is confidence in our country, and if we have that side by side with the sound policy being pursued by the Government, then everything will be right with the economic and political condition of the country.

I am sure I am voicing the opinion of many of the members of this House when I congratulate and thank Senator O'Donovan for his very comprehensive and lucid speech this afternoon. I must say I learned a very great deal from it, and I am sure many of us look forward to many more speeches of that kind in the future. It was sad hearing for the House, but it was necessary hearing. Despite what Senator Ó Cíosáin has said, with some justification, it is true, I think, that our body politic is suffering from a grave illness. I do not think we can shut our eyes to that. It is, in a way, bleeding gravely. I do not know what the remedy is. I wish I were a better economist to suggest one.

Senator O'Donovan mentioned, and I agreed with him, that one necessary remedy is to give greater freedom and greater encouragement to individual effort, but that is only part of the picture. There seems to be something very much more drastic needed. Again, Senator O'Brien in the lucid and informative speech that we have come to expect from him, suggested that easement of taxes would help. I suggest that is only, perhaps, a palliative, and I do not think it goes to the root of the trouble. It is impossible for me, not being an expert economist, to suggest anything that could really help, but, speaking as an ordinary man, we must not forget that ultimately, whatever the economists say, the cure will mainly come from harder and more intelligent work, more courageous enterprise and planning, and from honest dealing.

I am convinced we are capable of curing ourselves; I am convinced we will cure ourselves. This is not a dying country; this is a young country, and it will recover. But the cure seems to me to lie more in morale than in economics. It depends more on the leaders of opinion and our guides in ethics and morale than on experts in economics, at the moment. What we want is public confidence, and a greater degree of public loyalty to the country, simply because it is our country.

As has been said before this evening, most of us in this House could increase our salaries by a half or a third simply by going across the sea to Britain, during the next few months, and taking jobs similar to what we hold here. That includes the Minister; he would do a great deal better than a half I am sure. Why do we not go? Will someone say: "Because we are lazy and unenterprising"? I do not think that is so. Our strongest motive in staying is that this is our country, and we are prepared to do our jobs here, even though we are not getting the equivalent in pay that is given for similar jobs elsewhere. But the young people have not on the whole got that point of view. That is where the danger lies. They see the bigger salaries across the water. They see what looks like better opportunities, and somehow a sense of loyalty, a sense of affection, does not seem to hold them.

Perhaps this sounds sentimental. Perhaps it does not sound realistic. But I am convinced the roots of this matter lie here. We can never pay our people quite as good salaries as they would get in England and America, but we have something to offer them in the country itself. I can only appeal to leaders of morale in this country to put that point of view across. Even if it is derided by so-called realists, it will count. However, that will lead us into deep waters.

Now before referring to specific matters in the Bill, I want to say that what we must hope for from the Government is some imaginative, spectacular, constructive scheme. Those are big words. I know they may seem like foolish dreams. But we must restore public confidence. We want to catch the imagination of the young people. I cannot confidently suggest any such specific, spectacular, imaginative, constructive scheme. There is one at the back of my mind which I hesitate to mention. It is full of difficulties, but perhaps I shall mention it as the kind of thing we might do. We might reclaim the land that lies between the West Pier at Dún Laoghaire and the Poolbeg Lighthouse and gain over a square mile of magnificent territory for the City of Dublin. I know that the inhabitants of Blackrock, Monkstown, and others along the coast would not be happy about that.

There might be impossible difficulties, but that is the kind of thing which might catch the public mind and strike home to the young people when they see before their eyes the great construction work and the great energy and planning that go into it. That kind of scheme is what we want. It must be something we can see, something constructive, perhaps some great and useful building. I think that would be one of the things that would best help to staunch and stop this bleeding. However, it is vague. It may be impracticable but I am convinced that something of the kind would greatly help. Now I must not ramble further. I must be practical.

I should like to refer to three special provisions in the Bill in Sections 5, 6 and 9. The first of these has been referred to already at some length in the Dáil, but I make no apology for raising it here again in this House. It is a matter of grave legislative principle. I think we, as the Upper House, should consider it with very considerable care. I should also like to raise it so that the Minister may have an opportunity of reconsidering it—I hope he will at least give it sympathetic consideration—Section 33, sub-section (1) (b). It has been accused in the Dáil of involving the principle of retrospective, or, if you like to call it so, retroactive legislation.

I think there is some justice in that claim. I hope the House will consider it carefully for a moment or two. Section 33 (1) (b) provides that payments of retirement benefits for proprietary or part-time directors or employees will not be exempted from being deemed to be their incomes whether or not the contracts—these are contracts already entered into— to secure such benefits were made before the 24th day of April, 1958. This provision singles out these directors and employees, proprietary or part-time directors or employees, for definitely unfavourable terms compared with everyone else. All other directors and members whose benefits are secured by contracts made before the day I mentioned will be unaffected by the Bill. To my mind, and, I think, to the mind of a good many others, the provision not to exempt proprietary and part-time directors and employees is grossly unfair to those people who were qualified and admitted to membership of insurance schemes before 24th of April, 1958, in accordance with the legislation then in force.

Here I take a little exception to a phrase used by the Minister in his opening remarks. He referred to some things—I am reading my notes—as not being legitimate provision for the future. I think the term "not legitimate"— I may be wrong — implies that this particular means of providing for the future was not specifically legitimate. It that was the meaning, I do not think he is being quite just to these people. It was perfectly legitimate under the law as it then existed. They took the opportunity—call it a loophole, if you like— of getting lower income-tax rates under the existing law. Now they are being, in a sense, penalised.

It was never contemplated, when these people took out their contracts that legislation would be enacted which would be to the detriment of existing membership of insurance schemes at that time. To these directors or employees, the legislation will certainly have an element of retrospection or retroaction.

For example, one type of member affected would be the proprietary director or employee who might hold just more than 15 per cent.—that is the amount quoted in the Bill—of the ordinary share capital of the company in which the majority of the capital is held by members of the public or persons unrelated to him. It is unfair on that kind of person. It is even more unfair on the kind of person I will now describe. This is another type of member affected. He might be a director or employee who has no holding whatever but who is constituted a proprietary director or employee by Section 31 (2) and where shares are held in trust for the benefit of his children. This would be particularly harsh in a case where the capital was never owned by the director or employee himself but was settled on his children by another person, for example, by his father-in-law. It does seem particularly hard on that special type.

There is, I think, a reasonable solution to the problem before us here. It would be to provide that existing benefits for such persons be exempted as they are for good reasons for other persons, and to allow further adjustments in benefits in the future. In other words, the existing contracts should be allowed to stand, and those who are already members of insurance schemes on the appropriate date should be allowed to continue. The position of the proprietary or part-time director or employee would be still worse than others for whom increases in benefits would be approved, but the element of retrospection in the legislation would be eliminated, if this suggestion were accepted. Then all existing members of the schemes could be advised that the retrospective provisions of the Finance Act, 1958, do not affect them because their contract was already in force before the Act came into operation. That is the point.

If we make their contracts invalid, it seems to me to be clearly a case of retrospective legislation. Many times in this House, we have deprecated retrospective legislation. I hope the Minister will consider removing this breach of principle, as I think I might call it, in this case. It would be very simple to amend it. I suggest an amendment although I know that the Seanad has no power to amend Bills involving expenditure of public funds, in the hope that the Minister may consider it: in Section 33, sub-section (1) (b) line 4, page 23, between the words "or" and "in" to put in "in respect of any additional contract effected on or after the 24th April, 1958." In other words, the contract stands up to the stated date; after that, no further contract may be entered into. This does seem to be reasonable. The Minister may have very good arguments against it, but I would urge him to give it a moment of final reconsideration.

The second matter is in Section 40, sub-section (2). Here also there is a matter of general principle. In fact, I think we could go as far to say that it is an unreasonable restriction on the liberty of the citizen. If that is so, I think it is up to the House to consider it in that light, and for the Minister to reconsider it in that light. It is a rather technical matter, but I think we can grasp it fairly easily.

Section 40, sub-section (2) provides that an individual must receive payment of his pension benefit from the particular insurance company with which he entered into the contract. The position is this. Suppose I want to provide for a pension on my retirement. I take out a policy with a certain insurance company by which I will get a lump sum at the age, say, of 65, of, say, £1,000. Under this Bill I will be compelled to take the annuity based on that sum from the insurance company from which I took the original policy. But, as is well known to people expert in these matters, it is possible that if I take that £1,000 to another insurance company, I will get a getter pension. Instead of, say, £50, I might get £55. Under this section, I am compelled to reinvest, or whatever the right word is, that lump sum with the same insurance company. I cannot go to another company which offers me better terms.

I think this is unreasonable. It has nothing to do with income-tax at all. I do not believe the Revenue Commissioners will gain a penny by this. As far as I can see, the only people who will gain are certain insurance companies. I do not see why they should gain at the expense of the ordinary citizen. I would plead with the Minister to relax that restriction, to make it possible for a man who is providing for the future to get the best benefit from his lump sum, irrespective of what insurance company he goes to. If the Minister refuses, I should like to hear a justification of that. It does seem to me to be an unreasonable restriction.

Actually, an amendment could very easily be made, and I venture to suggest one now. Section 40, sub-section (2), paragraph (a) to read:—

Provide for the payment by that person or any other such person to the individual during his life of any sum ...

The point there is this. Instead of just saying "Provide for the payment by that person"—which means the same insurance company as he took his policy with originally—to add "or any other such person", which allows him to go to a second insurance company and say: "Here is my £1,000. You are giving me £55 a year and my original company would only give me £50 a year. May I please invest with you?"

I must say that, apart from the interests of certain insurance companies, I cannot see why we should be restricted in that way. However, I must add that these are very technical matters and I may have misunderstood the sections in question. If so, I should like to be enlightened. But, as I understand the matter at the moment, there is a certain injustice involved in both these sections.

The third matter is more straightforward. With a certain amount of indulgence from the Chair, I raised it already on a different Bill during this sitting. This is the question of authors' fees on books which are sold in the United States of America. It is page 46, Section 56, sub-section (2), paragraph (d), which says:—

"... and, in a case in which books are printed within the State otherwise than by their publisher ..."

and so on. I may be wrong, but as I read it, it seems to me that books published in Ireland and exported will get certain relaxations in taxation. If that is so—as a matter of fact, even if it is not so—I think the following step is desirable. At the moment there are several Irish writers who are gaining dollars for this country by publishing articles, critical essays and so on in journals, newspapers and various learned publications in the United States and elsewhere in America. Those are exports—exports designed by Irish brains and produced by Irish hands with pen, typewriter or whatever it may be. Is there any reason why they should not have the same consideration given to them as the products of our factories or of our fields?

I am informed by those who publish articles of this kind in America that they have no tax relief of any kind. Would it be possible, either in this Bill or perhaps next year, to make the small concession that they should have tax relief just as well as the factory owners and manufacturers, who are getting it for other products? It seems to me to be a reasonable thing that we should encourage this form of dollar-earning activity. It might grow considerably in time. I would ask the Minister, first of all, whether I am right in my assessment of the situation and, secondly, whether he would be good enough to meet me on that point.

I remember, when I was speaking on the Finance Bill last year, I termed it "socially unjust and economically unwise". I was stressing the point it was socially unjust because, owing to the withdrawal of the food subsidies, it was putting an unjust burden on the people with lower incomes, and in regard to the economic situation, I suggested it was unwise in that it would disturb the stability in regard to wages which had existed since 1955. It is not really to the credit of the Minister that my prophecy at that time in regard to disturbing the stability of the wages front did not prove correct. The trade unions displayed a remarkable sense of responsibility in the matter, and it is to their credit that, in order to avoid industrial unrest, they negotiated with the employers what is known as the 10/- formula.

It can be readily appreciated that an agreement that the highest increase that should be demanded in the circumstances then existing should be 10/- was a very heavy sacrifice for the trade unions and their members. That is so particularly for the higher paid workers and people on salary scales, because the trade unions were not dealing simply with the increased prices arising out of the Budget. Once you come to deal with any increase whatever, you must inevitably have regard to the increase in the cost of living since the previous adjustment, and the previous adjustment generally in wages in this country was in 1955.

The point I should like to make in that respect—and it has already been made by the Minister—is that not alone did the trade unions, with a sense of responsibility, accept increases which did not go anywhere near giving them compensation for the increased cost of living, but as well, they increased productivity to the extent that it took care of the increased cost of the general wage uplift of 10/- per week. The Minister, speaking in the Dáil on 11th June—Volume 168, columns 1530, 1531—said:—

"... Increased earnings under that national wage agreement have been almost exactly compensated by the rise in productivity with the result that, so far as industry as a whole is concerned, labour costs per unit of output have remained stable and its competitive position has not been seriously impaired."

It will be generally appreciated that the purpose of the unions in agreeing to the sacrifice at that time was, first of all, to get some immediate easement for the lower paid workers; secondly, to avoid industrial unrest; and, thirdly, though this might not have been stressed too much, to give the new Government a chance to do something about expanding the economy of the country and case the unemployment problem. In those circumstances, the Budget which the Minister introduced in May was a matter of great interest to the trade unions, and it was certainly a disappointment to find that in the capital Budget the Minister was providing only for the same amount as had actually been expended the previous year. For 1957-58 the estimate of capital expenditure in the Budget was about £41,000,000. There was something like £36? million expended. For 1958-59, there was only £36,250,000 estimated and we will not know how much will actually be expended, so that therefore we cannot look forward to any great expansion in the economy, at least in the public sector, for the coming 12 months, and we can have no hope of a substantial increase in employment.

The Budget has been termed a standstill Budget, and I think the Minister would accept this; but the trade unions and the workers and the Labour Party certainly do not want any standstill in the present circumstances. What we want is an expansion in the economy. We are not concerned with scoring petty political points as to who said what in 1950 or 1930 or any other year. We are concerned with the fact that there is heavy unemployment—not as heavy as it was 12 months ago but still heavy. We are concerned with the fact that many of our people have to emigrate to find work, and that the Government, in spite of all their promises, are not giving any indication of giving the economy a substantial drive towards expansion.

When we look around at the position, we cannot see any great hope. Perhaps we look at industries like Bord na Móna and the oil refinery where you can say: "These are industries which will expand; they have within them the power and the ability to expand," but where else is there hope of expansion? We cannot see, as we can see in the Six Counties, industries being set up in Coleraine and Larne in respect of which one can say: "In years to come, they will provide employment for thousands of workers; there is hope from those industries."

The Government, I know, are pinning their faith to a great extent on private enterprise, but when all comes to all, if private enterprise does not provide sufficient employment in the country, are the Government then to sit back and say: "We have done everything possible; there is no more we can do"? It is our view that it is the business of the Government so to organise the economy that employment will be provided for our own workers at home. We accept that it is a very difficult task, but it is the business of the Government. This Government have a safe majority. They gave every indication when they were in opposition that they were anxious to get into power and to provide employment, but sometimes we wonder whether they have the ability or indeed the energy, using their own words, to get cracking.

We know that there are some 60 proposals—the figure was mentioned by the Minister—before the Industrial Development Authority, but we have no information as to the extent of those proposals. We do not know whether 58 of them will be undertakings which might provide employment for ten or 20 workers and I think it is up to the Government to give the information and to instil more confidence into the economy.

I do not want to stand up here and be critical simply because I am on the Opposition side, but I think it is not the business of the Opposition to govern; it is the business of the Government. They have asked for the responsibility and they have been given the responsibility. They have been given a sufficient respite to settle down and to get on with the job. I referred to a standstill Budget, but the Government cannot expect a standstill for ever. They cannot expect the trade unions to sit tight and continue to accept a sacrifice in the standard of living of their members.

Earlier, the cost of living was mentioned. I do not want to start quoting how much the cost of living has gone up under various Governments; it has gone up under every Government. We all agree on that, but it is a fact that since wages generally in this country were adjusted in 1955—that is, ignoring the 10/——the cost of living has gone up by 18 points. In August, 1955, the figure was 128; in May, 1958, it was 146, an increase of 18 points or 14 per cent; in other words, I think somewhere about 2/9 in the £; so that a person with a wage of £5 a week would need an increase of 14/- a week, of which he has got 10/-. A person with £10 a week would need about 28/- increase and a person with £15 would need an increase of 42/- a week.

The trade unions accepted a sacrifice last year. That cannot be denied. It is on record that the members increased productivity to meet the 10/- a week increase they got. The trade unions cannot continue indefinitely to accept a sacrifice. The Government have had plenty of time to settle in and I say it is the Government's responsibility so to arrange things that the economy will be sufficiently expanded to provide employment here.

I hope that in the very near future the Government will be able to announce plans providing for a substantial expansion in the economy and in employment. They have got every co-operation from the trade unions since they came into office. That cooperation will continue, but I do not think that the trade unions can any longer sit back and see the standard of living of their members diminished by an ever-increasing cost of living, without making the effort to increase wages and salaries to compensate for the change in the value of money.

There are one or two comments I would like to make but not at any great length. I am glad that Senator Ó Ciosáin is in the House because he said a couple of things which, I think, demand a slight correction. Senator Ó Ciosáin, as the House cause he said a couple of things which, knows, is always a very gracious and courteous member who rarely makes a partisan speech, but on this occasion I think he misused figures. I merely want to put him right because it is important for any member of the House, but particularly for a front bench member, if he is to make a contribution of any value, to be as close to realities as possible. The impression I got from listening to him was that he thought the economy was considerably strengthened and the whole general position of the country better since the change of Government. He gave us figures which indicated that, in his judgment, anyway, trade had run much more favourably for us. This is the net point: he attributed all that satisfactory position to the achievements of his Party.

I got out a few figures. I am not much good at figures and I am not going to spend much time on them. Here they are and I want Senator Ó Ciosáin at his leisure to examine them carefully, relate them to the situation and see what conclusions he will then draw.

In 1956, the total number of cattle exported from this country was 675,000, valued at £36,407,000. In 1957, the number of cattle exported was 831,000 valued at £45,700,000. I know that Senator Ó Ciosáin knows enough about country life to know quite well that none of the cattle exported in 1956 or 1957 was born during the days of his Government.

As a matter of fact, I did not mention cattle at all.

You spoke about exports and the balance of payments.

That is only £9,000,000. It improved to £23,000,000.

I would ask the Senators to throw their minds back and recall what a colleague of theirs said, I think, during 1956. I think he was a particularly intimate colleague of Senator Lenihan's—at least he ought to be because they have a very common interest. He told farmers that the bottom had fallen out of the cattle market. That was at a time, mind you, when the Minister for Agriculture was telling farmers to hold their cattle. He was trying to create an attitude of mind, impressing on farmers that they ought to get out of them. I will leave it at that because every serious member of the Government Party will recognise that that is the fact. When you make claims about what you have done to rectify the balance of payments, you ought at least look back at the work of your predecessors and see if they did anything and if you came into an inheritance of very considerable value to you when your turn came to pay your accounts.

I want to raise an issue on this Bill and perhaps I should say that I feel I ought to crave the indulgence of the Chair to some extent because some of what I have to say would arise more properly on the Appropriation Bill. I want to urge on the Minister the importance of keeping our finances in good shape and the importance of pursuing a policy that will help to keep our balance of payments right. I am one of those people who are quite convinced that you must pay for your keep, that you must pay as you go along. In your own home, you must have as much on hand, or as much credit, as will keep your housekeeping in order. Our little society here must find itself in the same position with regard to external purchases or sales and if we are not able to produce or export the value of what we seek to bring in, we may have to go short. It would not be a great disadvantage to us to go short of some of the things we are purchasing, but when people have the money in their hands, they do not like to go short.

I have to confess that I am considerably disturbed about an aspect of our economy to which I do not think sufficient attention is being paid to-day. I do not think we will be able to keep equilibrium in the balance of payments in the future, unless we do something about our cattle industry which is not being done at present. No matter how much you may denounce the farmer, or how much contempt you may have for how he manages his business, it is the sheet anchor of our economy and to the extent to which we are able to expand it and develop it, then to that extent we are going to develop the total economy of the country.

This is what I want to draw the attention of the Minister to. I will go back again to the figures, 675,000 cattle exported in 1956 and 830,000 in 1957. We ought be able to produce and export 1,000,000 cattle in the year and if our farming was done as it should have been done, if we had concentrated as we could have and should have and not wasted our energies and words on the wind, we would have done this years ago. It is there to be done yet. You can say what you like about the Minister for Agriculture in the previous Government, but he made an immense contribution to agriculture and if that contribution were being built on, we would be progressing on sound lines.

What frightens me is that if there was a test made to-day of the number of T.B. free cattle that would be available for export to Britain, I doubt if we could export half of that number, or perhaps not even one third. In the next two years, that is what we are going to be up against. This country cannot afford a shock like that. It cannot afford to be in the position that only 250,000 or 350,000 cattle can be sent out of the country, to England, Scotland or Wales. The situation as I see it is that we are talking about it, and the Minister in charge of it is talking about it, but nothing is being done. There is a situation now in regard to the eradication of bovine tuberculosis where we have no veterinary officers tackling the problem. There is nobody in my constituency tackling it and the same position exists up and down the country. I do not know what difficulties have arisen in regard to the veterinary services and the veterinary officers, and I do not propose to go into it, but I say that the veterinary officer is a vital cog in this machine, and if you do not get that cog working, the whole machine will slow down, with disastrous consequences. It can cost us millions and millions of pounds two years hence. I am astonished that greater alarm was not expressed about this matter. If you take that £45,000,000 and say that two-thirds of that figure is not available to us because we cannot export the cattle, you can then begin to think about the balance of payments.

I am not going to dwell at any great length on this matter, but I do urge all serious-minded people to appreciate that, no matter what the cost may be, we must get these people working. I know some of the men have gone from the Department's service into private practice because they are making much more money and men are not available to deal with the herds of this country.

Perhaps further consideration of this matter might be left over for another occasion.

I appreciate that it is a matter that will arise on another occasion, but I do not want to come back to it again. It is so stupid that it does not bear discussion. There is just one other comment I want to make and I had hoped that Senator Hayes would be here to make it. There is an announcement in the newspapers to-day about the personnel of a committee which this House was responsible for setting up to deal with the future of the Irish language.

That matter, I am afraid, should be left over for the Appropriation Bill. It is scarcely related to the Finance Bill.

It relates to Government policy.

We are concerned here with taxation.

I will accept the ruling of the Chair. That is all I have to say on this Bill.

In this debate, we are concerned with finances and with possible ways and means of reducing the taxation load. Of course, the obvious, and perhaps the only way to reduce the taxation load is to get more people to carry that load. That means that we have to get more people in employment and therefore we have got to face up seriously to our greatest problem, the problem of emigration. We take the figures rather complacently. There are 50,000 a year leaving the country and our birth rate is only 60,000. Five out of every six born to-day are destined to leave the country, unless we can do something about it. I am not saying that this should be charged to any one Government, or that it is due the fact is that it national defect, but the fact is that it is so and a very great contributing factor is the ease with which our people can leave, which greatly increases the difficult task of the Government in trying to do something about it.

The fact remains that that is so and I believe that if we can harness this, it can become the greatest single urge we can have for working for the country and developing it. Let us not merely look at the figures—50,000 leaving out of 60,000—but let us bring it down to the family level. Let us look at your family and at my family. Let us look at the six children playing around and let us realise that if nothing is done about it, and if present trends continue, one is all that will remain. If we have an average family of four, then statistically the odds are that none will remain to work at home. Yet that is our problem. Unless we can increase the working force in the country, we cannot spread the load of taxation. We cannot provide all the services that a modern nation must have.

The greatest spur to action in any nation is the pressure of an expanding population, of an expanding population looking for work and having to find it in its own country. Another spur is the great demand created by the needs of that expanding population. For instance, should we lose, in one single year, 50,000 people what does that mean? It means 20,000 families some time in the future and 20,000 homes. The cost of building the 20,000 homes, even very moderate homes, would be over £20,000,000. What would such an injection do for the building trade in this country in any one year? That is part of the pressure we are lacking and I am afraid we will continue to look at the problem complacently, unless we bring it down to our own families.

Can we buy Irish products? No, we believe some imported goods are better but, if when we make that decision we see five out of our family of six emigrating as a result of it, we would buy Irish and would quickly get over our prejudices in that regard. Can we afford to carry on with the old machinery? Can we afford to repair it? Can we afford to carry on for another year with the old car by repairing it? We can, if we think of the picture of five out of six of the family emigrating. Can we work harder and longer hours? We do not like it, naturally, but if we see that it is part of the price of keeping our family at home, will anybody hesitate to do it?

Reference has been made to the level of taxation. It is very high, extremely high. Can we pay more taxes? Of course we can, if that is the price we must pay to provide for our family at home. These are the considerations, I think, that underlie the only real prospect we have of providing the money and the will power for the effort necessary to develop our country.

We are doing quite well in many respects, especially in the agricultural field, but I do not wish in this debate to dwell much on that. I hope to deal with it at much greater length next week. Perhaps we are not conscious of the great strides being made there. Do we know that our rate of increase for the years 1950 to 1955 tied for the highest in Western Europe, with Western Germany and with France, at 4 per cent. per annum, over the rate of increase in Denmark and far higher than the increase in England in that period? Are we aware that that rate has jumped to 6 per cent. at present?

We are climbing upwards. It is only a matter of creating the national all-out effort and the national plan to show us where we are going and, unfortunately, after completing one year in the Seanad, I am sorry to say I still cannot see any overall plan emerging. I cannot see any definite plan, especially in agriculture, to tackle the problem of increasing the work force in Irish agriculture. That is our task —increased production—but the increased production target has to be at such a level that it will also increase the work force, because the primary injection for increase in work force will come in agriculture. It will follow in all other fields, once we get the primary injection in there.

At present, it is pretty well established that there is an increase in productivity generally of about 4 per cent. per annum on an average in all agricultural countries. We are meeting that, but we have to strike for a higher increase if we want to settle, and provide work for, more people on the land. I will discuss ways and means of doing that in next week's debate, but, at present, we find a very definite reluctance on the part of the Government to set definite goals for the agricultural community and to say to them: "Keep increasing production. Marketing is a challenge, but we will accept that challenge. We must accept it, if we are to succeed as a nation."

I see in the Estimates that £1,400,000 is provided to secure ways and means of better butter exporting. This is, perhaps, a necessary evil at present, but I look in vain for the increase in research to provide a better outlet for our surplus dairy products. Even 1 per cent. of that figure, £14,000, would be a substantial contribution. In fact, it would increase by 50 per cent. the amount at present being spent on research in the dairying industry.

Again we look for imagination. It is not imagination that turns our dairy products into butter and sells it at 2/- a lb. We will never prosper as a nation if we shoot for the ditch at all times like that. At the present price of 2/-, that is probably 9d. a gallon for milk, and it would be far better to have the milk fed to our calves in spring-time, with the high prices prevailing at present. In fact, I have made an interesting calculation that if we fed just 60 gallons of new milk to each calf born, it would use up our whole surplus of 14,000 tons of butter.

We are concerned with the raising of money on this Bill, rather than with the spending of it.

I am taking the line that to raise money we need more people to contribute in the raising of it, and that our main task in financing the country is really that of getting the co-operative effort that will face the future in confidence. However, I will leave that point and just simply say that if that output of additional butter were put into our stock, especially into our young stock, I have no doubt at all that it would come back three or four-fold in the increased value of the product at the end of the year, and certainly would bring nearer Senator Baxter's 1,000,000 cattle. It would bring that within a reasonable distance of achievement.

Speaking of imagination, I cannot let this occasion pass without some little tribute to the late Reverend Father E.J. Coyne and to his splendid article, the last article he wrote, which appeared recently in Studies. In that, he was, as usual, seeking for the imaginative solution, away from the orthodox and I might just quote his suggestion for increasing the prosperity and the population of those regions that are dying, that are losing their populations, along the seaboard. He says:—

"Kerry and West Cork would soon become very different counties, if a small area, say, a strip three miles deep along the coast from Glengarriff along to Waterville, was declared a district in which income-tax would be charged at not more than 2/6 in the £"——

Hear, hear!


"and death duties would be abolished or else made a small fraction of what they are elsewhere. To qualify, of course, persons would have to be in actual residence for seven months of the year and, for death duties, to have lived in the district for five, seven or ten years. The natural attractions of this particular strip, climate, scenery, etc., would make it a Riviera or a Channel Islands for many people, anxious to avoid the ever more confiscatory taxes of modern states. As very little income-tax or death duty is paid there now, the State would lose little. But the demand for commodities and services would rise, with a ‘multiplying' effect, and spread prosperity far outside the area."

In other words, we have got to be unorthodox. All the trends are with us at present, if we only go ahead. The greatest spur to going ahead is our emigration problem, if we bring it down to our own families. It is only when it comes home to roost that it pinches. No one will cavil for one moment at the sacrifices to put this nation on its feet, if that means keeping some of his own family at home.

With all due respect to Senator Stanford who appears to hold another view, I was vastly unimpressed by the contribution made this afternoon by Senator O'Donovan. I think it was Benjamin Disraeli who coined the famous three categories of lies—lies, damn lies and statistics. We certainly had a good example this afternoon of Senator O'Donovan dabbling in the third category of lies. In particular, he made great play with the statement—the undoubtedly true statement—made by the Minister for Finance that our national income in 1957 was approximately £25,000,000 over what it was in 1956.

Senator O'Donovan quoted from the Irish Statistical Survey and agreed that was the case in money terms. I will read the quotation on page three: “National income declined from £462,000,000 in 1955 to £457,000,000 in 1956 and increased to £477,000,000 in 1957, while gross national expenditure at current prices was £546,000,000 in 1955, £552,000,000 in 1956 and £577,000,000 in 1957.” Senator O'Donovan went on to suggest that the increase in the gross national expenditure of £25,000,000 and the £20,000,000 in national income between 1956 and 1957 was due merely to the fall in money values.

Senator O'Donovan omitted to turn to page four of the Irish Statistical Survey which he had in his hands, in which there is set out on Table 1— National Income and Gross National Expenditure. In that is shown an increase of £25,000,000 in the gross national expenditure and £20,000,000 in the national income as compared with 1956. He explained that increase of £20,000,000 and £25,000,000 by saying that it was due merely to a fall in the value of money. That is a great example of a statistical lie. Anybody who looks at the index of the gross national expenditure at constant market prices will see that allowance is made for the fall in the value of money. In the column, 100 is set out as the constant for the year 1953, making due allowance for the fall in the value of money.

We have the figures in regard to gross national expenditure. For the year 1956, the figure is 101.1 and for 1957, it is 102.9, an increase of 1.8 in our gross national expenditure in 1957 as against 1956, while making due allowance for the appropriate fall in the value of money in the two years. Senator O'Donovan made great play with the fact that he was quoting bulk figures for which no allowance was made for the fall in the value of money. That is a great example of the third form of lying about which Disraeli was so eloquent, but if Senator O'Donovan had turned over the page, he would have seen that due allowance is made for the fall in the value of money.

Abolish all subsidies.

We are talking about national income.

Unfortunately, Senator L'Estrange speaks from a deep well of ignorance. The figures in relation to gross national expenditure are directly related to national income. Anybody with an elementary knowledge of economics would know that. Due allowance is made for the fall in the value of money. I think that closes that.

If they took the subsidies out, in the first instance.

We might promote Senator O'Donovan to a post in the Central Statistics Office.

I might put some economic ideas into their minds.

Senator O'Donovan spoke for an hour and ten minutes.

We had a further instance of statistical juggling from Senator Baxter when he spoke about the cattle trade solving our external balance problem. I agree with him that our cattle exports in 1947 were 45,000,000 and that this year they were 36,000,000. That is quite true. However, that point was designed to prove the case that the improvement of our external account in 1957 was due entirely to the cattle trade.

I did not say that at all.

That was the inference from the Senator's remarks.

That might be the Senator's ignorant mind.

In 1957, there was a surplus on current account of £9,200,000. The previous year there was a deficit of £14,400,000. Therefore, by adding the £14,400,000 and the £9,200,000, even the most obtuse people can see that there was £23,600,000 in our external account between 1956 and 1957. The cattle trade contributed £9,000,000, but there was still over £14,000,000 of an improvement effected by the courageous budgetary policy of the Government.

There is a lot of talk in this country at the moment about emigration and unemployment. I will not deny that there is emigration and unemployment but I would say that people should get down to proposing practical suggestions as to what we are to do about it, instead of uttering jeremiads about the awful twin evils, as they call them, of unemployment and emigration.

You say you have a plan.

That problem should be discussed in a practical manner with a view to getting a solution. We ought to do that instead of talking in idle generalisations about the problem. Briefly, what is the problem? There is a problem in this country. The problem is this, the constant unemployment and emigration which we talk about. I think the Government have set about laying the basis for the solution of these problems in a big way. These are not problems which can be solved overnight by any flashy solutions. They can be tackled only gradually over a period of four or five years.

The Government have been in office for one year. What has been done? Let us examine it. First of all, the essential prerequisite for any development in this country is a sound financial framework. We have that. We have a condition now neither of deflation nor inflation. We have a condition in which two balanced Budgets have been presented, a condition where, last year, we had a surplus on our external balance of payments. We have a condition this year where we will probably balance the account. That is a good start made as a basis for recovery in our public financial attitude.

A certain groundwork in the way of a legislative framework for an improvement in investment in this country has been laid down in the past 12 months. We have had the External Investment Act, providing greater means of encouraging foreign capital to come in. We have had the Industrial Credit Act in which the Industrial Credit Corporation has been widened and broadened and given further financial means to expand industry by way of loans. We have had the Bretton Woods Agreement Act and, at present, the International Finance Corporation Bill is before the Seanad, so that these international corporations can contribute by way of financial aid to the public and private sectors of our economy.

These are all practical, legislative proposals of a framework nature within which we can work over the next few years. Within the administrative framework, the Department of Industry and Commerce has been busy seeking in the U.S.A. fields for capital development here. We are negotiating with other O.E.E.C. countries, with a view to having this country regarded over a period of years as an undeveloped country, so we can get some investment from the wealthier participants in the European Free Trade Area. These are all practical, financial, legislative and administrative steps, which have laid the basis for recovery.

The next step would be to tackle the problems within that framework which has been laid down by the Government. The problem is a very simple one. It has been adverted to here this year and last year. It is quite simply, to raise the level of our national income and, thereby, the level of our gross national product, so that all the resources of our community are employed and we have as reasonably full employment as is possible. It is quite simply that problem. It is not enough to balance our Budget or our external accounts. We must raise national income to a higher level so that there is a greater amount of expenditure within the economy sufficient to absorb more people in employment.

How are we to do it? That is the net problem which faces this Government at present—how to raise the national income of our community so that there is more money circulating within the community and more money to absorb people in employment. To give him his due, Senator O'Donovan did tackle that problem. I am sure he would agree with me that is the problem and he spent some time on it. However, he tackled it by producing the outworn and outdated theory of financial manipulation—the old theory we have heard from other crackpot theorists over the past ten years, that all our financial ills can be solved by means of financial arrangements with the Central Bank and by our famous external assets. I am firmly of the view that no financial jiggery-pokery, no financial juggling of this nature with the Central Bank or the commercial banks or our assets here or in England, will solve anything.

If Senators look at the report of the Central Bank this year, they will see my point fairly fully brought out. Senator O'Brien also referred to page 32 of that report, in which our gross national product, related to national income, is unfortunately the lowest in Europe. As he pointed out, our problem is to raise that to a certain higher level to absorb our people in employment. Senator O'Donovan's answer to that problem is his famous theory of money manipulation. The figures in Table 13 at the back of that report, at page 58, which relate to page 32, clearly bear out my contention that there is no shortage of capital here. There is plenty of capital in the country; plenty of assets, both here and abroad. There is no shortage of money, but there is a shortage of risk capital.

If Senator O'Donovan and other Senators look at Table 13, in which Ireland is at the bottom in regard to gross national product from 1953 to 1957, they will find we remained static, although there was a slight downward trend in our gross national product, a downward trend of 0.1 per cent. During that period, from 1953 to 1957, the two countries at the top of that table were Austria and Western Germany. In both of those countries, the average annual rate of increase in their national product from 1952 to 1957 was 7.7 per cent. We are at the bottom with 0.1 per cent. In the previous four years, we increased to 1.9 per cent., but we were still at the bottom of the table.

The important point, which completely demolishes what Senator O'Donovan so glibly sought to show, is this: whereas Austria and Western Germany are at the top of the table in regard to an increase in their national product over the past four years, equally, those same two countries in the year 1956 had less money on supply in relation to their gross national product than any other country in that table. In other words, in both Austria and Western Germany, there was less capital available in relation to their gross national product than any other country in that table.

No, the value of their money was more stable.

It is quite clear from the figures that it is not capital that counts or the availability of capital; it is the availability of risk capital backed by "know-how"—risk capital that can go into immediate productive enterprise and give employment. Ireland is at the bottom of the table and has a figure of 105 in relation to 100 in 1953. In other words, there has been an increase of 5 per cent. since 1953 in the ratio of money supplied in this country to gross national product compared with 100 in 1953. In both Austria and Western Germany, in 1956, it was 94 and 99 in relation to 100. From 1953 to 1957, during the period in which Austria and Western Germany were improving their national product at a rate of 7.7 per cent. per annum, and during which ours was going down, there was more money available for the development of industry in this country than in either Austria or Western Germany.

No, the value of our money dropped 12 per cent.

It is as clear as crystal. That has nothing whatever to do with it. I am talking about the ratio of money supplied to gross national product. It is referred to in the Central Bank Report, paragraph 47, page 32. I should like to quote from it:—

"Those who advocate radical alterations in the existing monetary arrangements fail to appreciate that shortage of money has not been a problem in this country, as can be readily seen from the graph on page 33."

That is the table to which I have referred:—

"There has been growing realisation, in recent years, of the extent to which internal credit is governed by external reserves, and by the effect on the latter, not of existing monetary arrangements but of the current processes of trade."

That is their statement. That is where I part company with them.

The third sentence bears out the point I make that the problem is to find risk capital backed by technical "know-how". These famous external assets are not risk capital. In this third sentence, you have the kernal of the problem:—

"There has been forced upon us a belated recognition of the basic defect, i.e., our failure to apply the available money to sufficiently productive use."

The money is there, and any sort of financial manipulation or jiggery-pokery between the Central Bank and the commercial banks of the assets held in British Government securities would not affect the situation.

The main problem is how to use the capital resources we have towards improved productive endeavour. How do we go about it? Senator Murphy, in a very good contribution, emphasised the part the State could play in an increase in public investment. I do not, however, think that that can be the panacea for our ills to any great extent. There might be some truth in what he says, but I do not think we can expand the field of State investment to such an extent as to make a radical difference to our unemployment problem. The extent to which we can advance in that sphere is limited. Senator O'Donovan failed to mention any single project which he thought the State could enter into with fruitful results.

The Minister has taken it in hand. It is agricultural credit. I see he has been talking about it.

We had an hour and ten minutes listening to Senator O'Donovan. Surely, we do not have to have more of it?

It must be admitted by all sides that the problem is to provide more investment in industrial activity in Dublin and in our towns. Senator Quinlan may talk about agriculture, and I agree with him about its importance, and the N.F.A. are doing a great job of work in encouraging greater investment in agriculture, in marketing methods and in improvement of the agricultural advisory services, and getting the farmers together in arguing their case, but inevitably there is going to be a flight from the land. Certain people making public utterances loudly deprecate that flight from the land, but I am afraid it is a world-wide trend: with increased mechanisation on the farms, with the increased and rightful demand of the farmers for a higher standard of life, it is inevitable that there will be a movement from the land. It has probably reached a stop now. We have reached the base in regard to it and will not have any further great depopulation, but we are not going to get back people to any great extent on the land. The problem is, therefore, to provide greater industrial activity in towns and cities. I do not think the State can provide that. It depends on a vast increase in private investment activity in industry.

How can the Government face up to that? They brought in legislative proposals during the past year in which assistance can be hoped for from the World Bank, and the external investment legislation designed to secure greater foreign participation in industrial activity, but the greatest extent to which the State can help towards improving private industrial activity is by greater tax incentives. That is the major inducement that every foreign industrialist or indeed anybody, native or foreign, with risk capital looks to—what are the tax inducements? For that reason, I welcome Section 56 of the Finance Bill which provides for 100 per cent. remission of income-tax and excess profits tax on all profits derived from exports for ten years. Last year, it was five years. We appealed to the Minister on that occasion to extend it to ten years, and it is now being embodied in this legislation.

The weakness in that section is that it does not apply to undistributed profits. There may be administrative difficulties, but I think that the Government should include them, as it rather defeats the purpose of the section if undistributed profits are not to get the benefit of this remission. I should like the Minister to clear up that point— whether it applies to undistributed as well as to distributed profits.

It does.

I am glad to hear that. I thought otherwise. If it does, that makes the inducement all the more effective. With an enlightened outlook on our whole tax code, the Minister for Finance would probably go further than that. There is roughly about £22,500,000 collected by income-tax. The Minister for Finance can say that that is very good value. I do not know what are the administrative costs of collecting it, but they are not more than £1,000,000 or £2,000,000, but I think it should be examined in regard to whether it operates as a disincentive factor. Our whole tax code—stamp duties, death duties, succession duties, legacy duties, income-tax—should be examined with a view to eliminating all disincentive factors, which could deter either a native entrepreneur or a foreign one, for that matter. There should be a ruthless examination of our whole tax code to eliminate these disincentive factors affecting any industry, large or small. If this were done, the greatest step forward would be made. For instance, the whole question of death duties should be examined as to what we would lose or might gain by undertaking their abolition.

As regards income-tax itself, I do not think anyone could seriously suggest that we should abolish it or replace it entirely by an alternative tax, but it does deter business and the expansion of business. I should like an examination to be made into how much it costs to collect income-tax from people under, say, £1,000 a year—whether or not the State would be better off if it dropped altogether taxing people under roughly that limit, if similar provision could be made at the top by raising the surtax limit. Any alternative taxation to income-tax should be extracted with as little cost as possible to the State and as little effect on industry as possible. I appreciate that my suggestion about not collecting tax from people under £1,000 a year might mean a loss of revenue of from £5,000,000 to £7,000,000, and that problem would face the Minister.

I am not advocating the complete supplanting of the income-tax code by an expenditure tax, but to a limited extent in regard to, say, £5,000,000 to £7,000,000 the loss by pruning the present income-tax code which might be something around that amount might be collected alternatively by an expenditure tax. I know the argument against expenditure taxation is that it is not progressive. Income-tax affects people as their incomes increase, whereas an expenditure tax applies to everybody and, is, therefore, unfair; but this expenditure tax is rather like a painless extraction—although it is a flat uniform tax on everyone, people do not feel it going. An individual decision has to be made in each case when it is proposed to purchase a radio set, a bicycle or whatever else it is, and I do not think the individual feels it when paying the extra percentage in tax. It is not nearly as great a deterrent as income-tax is, especially at the lower levels.

That is the only suggestion I should like to make—that consideration might be given to pruning the income-tax revenue with a view to substituting for part of the present income-tax revenue some form of expenditure tax, because for any future development we must rely on building up our towns and industrial activity enough to absorb the people who will come off the land. To do that, there must be the fullest incentive given to any person with risk money from this country or abroad willing to put it into industry to develop it and give the employment so necessary. It is in that connection that the Government can best help towards any solution of the problems mentioned in this debate.

The play that has been made on truth has been interesting to-day. I am surprised that Benjamin Disraeli used the rather prosaic definition, "lies, damn lies and statistics". I should imagine that a man as colourful as Disraeli would have used a more colourful phrase. "Truth is a gem that has many facets" is, in my opinion, a kinder phrase than the one Senator Lenihan used.

Looking at the Statistical Survey, I felt that some more gems could be extracted from this little volume. On page 4, Table 3, I notice that the national income for 1957 was £477,000,000. If Senator Lenihan turns to page 31, he will notice that, according to Table 17, the increase in wholesale prices between 1956 and 1957 was 6.8 per cent. That percentage, multiplied by 4.7, means that the national income in 1957 was, according to my calculation, £445,000,000 in true values. Therefore there has been a reduction of almost £32,000,000 on the basis of the actual value of money during that period. That is caused by the withdrawal of subsidies from foodstuffs. Personally, I dislike subsidies, but I think that in an economy like ours they may have been useful in one respect.

I will give you a simple analogy. One of our greatest assets is our live stock. If we sell a bullock for £50, that is what we are putting into the country. If people here have a good £50, whatever wages they get will be of value, but if everything is inflated by the removal of subsidies and by fifth and sixth round wage increases, then the money will not be of value and we will have to accept what other countries give us.

The Irish Banking Review, June, 1958, referring to the economic background to the Budget, states:—

"Earnings in manufacturing industry increased by over 6 per cent. during the year 1957; this rise was, however, almost exactly counterbalanced by a corresponding rise in the cost of living index to about the same extent. A slight increase in national income in real terms occurred and savings showed an upward trend."

It is wrong to say, therefore, that there was an improvement in the position, but these are nice debating points. What we should be called upon to do here, both on the Government and the Opposition side, is to suggest ways and means of improving our economy. I believe it is a challenge to all of us.

We have heard people here to-day speaking from different vocations. I wish to speak as a businessman and to put the businessman's viewpoint before the House. I believe that the businessman's viewpoint is often an unpopular one, but it is realistic and if it were given a chance, it might well be better than the theoretical ones that have been applied.

If you ask a person engaged in business, or industry, he will tell you—as the Ibee report and others suggest— that the climate and conditions are not being created in Ireland to allow business to prosper. Senator O'Brien said that 28 per cent. of our national economy was being taken up in taxation and that does not include, I presume, local taxation, which is on quite a high level in this country.

Any country that ceases to be backward does it by a continuing injection of new capital into industry. The new capital that is being created by industry here, however, is being taken from us in taxation and is being used on things that are generally non productive. He said he had a certain sympathy for the gamekeepers who had to go down the country and catch the poachers, but he was not quite right in that analogy, because the gamekeepers here were catching poachers who were poaching on their own land rather than on somebody else's land and these gamekeepers were keeping 28 per cent. of the birds off the land of the people who produced the birds.

I want also to refer to another thing that is, and must be, a certain deterrent to people who wish to engage in industry. Criticism was made recently in some Labour papers, particularly in Liberty, of private enterprise. In the recent edition, Volume 13, No. 7, July 15, the editor said:—

"The present Government and the past Government, too, know full well that the so-called private enterprise in Ireland has failed to provide many of the essential needs of our people."

While that sort of statement is being made, while private enterprise and private industry are being taxed to the extent to which they are being taxed, we are not creating the climate or the conditions which will allow private enterprise or any enterprise to make the progress it ought to make.

This is a small country and I think we must have a different type of industry from that which they have in large countries like Britain or America. It has been one of our disadvantages. It may be one of the disadvantages to our economists, too, that they are comparing conditions here with conditions in Britain, America or on the Continent of Europe. Tables were quoted here on conditions in Western Germany and in other very large industrial countries but we must create conditions which will allow industries natural to Ireland to prosper, and that is where we fail.

I want to make a few pertinent remarks on the Finance Acts, as they stand. If a State-sponsored body wants to engage in industry here, the State will float a loan to finance it. The State will see that the company has the necessary capital and that it is protected by the laws necessary for it to operate. Take the E.S.B. The E.S.B. has all sorts of privileges which might even be challenged constitutionally, if they were given to other persons. They are allowed to engage in a monopolistic way, for instance, against private enterprise in the distribution of equipment in our country towns.

Much the same thing applies to public companies. The Industrial Credit Corporation includes apparently in its conditions that it will assist public companies, while it does not assist private companies. I had reason some years ago to inquire from the Industrial Credit Corporation about capital required for a private company and I was informed that the money could not be loaned, unless they could issue redeemable profit shares. It is easy to see how it can be loaned to a public company with a stock exchange quotation, because they can instruct their stockbroker prudently to sell that stock according as people are looking for them on the stock exchange. That advantage is not there in the case of a private company and a private company cannot be given the money.

I think for that reason that the Minister should consider giving special reliefs to private companies and to individuals to overcome the disadvantages they have in financing themselves as against public and other companies. This does not happen to the same extent in Britain or America, where the business entities are so very much larger than in Ireland.

Senator Lenihan, and many others, referred to death duties. In many ways, I regard death duties as wholly iniquitous because they affect the agricultural community. The parent dies and a small bit of "dry money," as they say, is taken off in order to satisfy the demands of the Estate Duty Office and that farm, perhaps for a decade, is starved of capital and its production thereby reduced. The same thing happens in the case of businesses. I have been an executor on many occasions for businesses and I have seen the progress of the business arrested for a decade because £3,000, £4,000 or £5,000 has to be paid away in estate duty which could have been invested in that business. I know one business from which £8,000 or £10,000 was taken to pay estate duties. They are now employing 100 persons, but I believe the business would have employed 100 people ten or 15 years earlier, but for the fact that they had to pay out that money. I challenge anybody to say that the State makes as good use of the money as private business does.

There is another factor which has been overlooked. Something over £3,000,000 a year is taken on that tax. It is capital and the money is being spent as revenue. If there is any justification for taking it, the State should regard it as something sacred invested in the means of production and it should be reinvested. If it is handed over to the Industrial Credit Corporation, or the Agricultural Credit Corporation and if the State said: "You have a sacred trust to give this money either to a farmer or a manufacturer to reinvest in some form of productive enterprise", then there might be some justification for taking the money. I doubt if there is justification for taking it from business or private interests, but I say that it is wholly inflationary and irresponsible to take that money and spend it as if it were day to day revenue.

I should also like to refer to the size of the Finance Bill. Senator O'Brien mentioned that if Finance Acts were made simpler, many of the people engaged as accountants and taxation consultants in Ireland would be unemployed. This new monstrous Finance Bill is going to give the taxation consultants and the auditors more work to do. It will also make the task of manufacturers and other people engaged in business and industry more difficult. It will create a certain amount of distrust and I should like to ask the Minister to consider not applying some of these provisions to private companies and private individuals. From reading some of the debates in the Dáil on this Bill, I believe that very strict accounts will have to be rendered with regard to any form of travelling allowance or anything in which members of companies or private individuals engage. The furnishing of all these returns will take considerable time in the smaller businesses, with perhaps only one or two directors actively engaged who are more interested in production than in income-tax. Another burden will be placed on these people and if the Minister does anything to relieve the anxiety with regard to this section of the community, he will be doing a good day's work.

I was told during the last day or two that some big businesses in Dublin give very fancy concessions to managers in order to secure the right type of person in their employment. I do not think that applies generally in the country and I do not think it applies to the smaller private companies or private businesses. If the Minister, or his advisers, do not require these sections to be brought in, but said they were necessary in the case of the larger business companies, I think the case can then be made for excluding the private companies or private individuals from this new system of returns, which I understand the Revenue Commissioners will ask them to make.

I have no further comment to make on the Bill, except to say, in conclusion, that the whole incidence of taxation in Ireland is far too heavy. We have no Army to maintain. We are not a great international power which has to engage in the costly prestige associations which other powerful nations may have to engage in. I think we should be able to create, as Senator Quinlan said, a position which will bring in people from outside, because we have lower rates of taxation and because we have not many of these difficulties which being a great power entails. We should make an eff rt to do that and I think we have lost many years in this century in not doing that.

Anything that is not wanted in the trappings of the State should be done away with, because if we could once restore confidence to our people, and restore confidence to people who want to live here, then we would have passed the turning point and everything else would be an advantage. I should like the Minister to consider the suggestions I have made. Some of them have been made as a result of practical experience in the type of small industries which I believe are natural to this small economy of ours.

Most of us are agreed that the cattle population is the backbone of the country. I want to correct a view which was expressed here and which, in my opinion, is not correct. The view was expressed by Senator Baxter that the cattle population was greater in 1957 than it was in 1956. He indicated that that was due entirely to the former Minister for Agriculture and to the great work which he had done. That is the view I want to correct, because I think it is not the right one.

If you look back on the cattle population, you will see that, in 1956, we had more cattle than we had in 1955 and, in 1955, we had more cattle than in 1954. We are then coming to the root of the question. I think it was in 1953 that experiments were carried out in North Cork and in West Limerick in connection with white scour and aureomycin was discovered to be the remedy for the disease. We lost 250,000 calves annually throughout the country because of that disease and ever since these experiments the farmers have found that they need not lose any calves through white scour.

In my opinion, the increased cattle population is due to the experiments carried out in North Cork and West Limerick in 1953. I do not want to detract in any way from the eulogies passed to the former Minister for Agriculture. In fact, if some people attributed the good weather to him, I would not contradict them. In my opinion, that was the cause of the increased cattle population, and it is just as well that people should know about it.

Somebody asked why we were importing goods that could be made at home. A few days ago, it was brought to my notice that certain public bodies are installing Scotch ranges in their schemes. We have two very progressive people engaged here in the manufacture of ranges. At least, people think they are progressive, and it is surprising to me that we should import ranges when we are making good ranges here at an economic price. I am not quite sure if they are being made at an economic price, but that is one of the matters that should be examined. If our people here are not making ranges at an economic price, the Government ought to see to it that they do make them at an economic price. I understand that heavy tariffs are being put on the ranges which are imported and it is a mystery to me why they are being imported.

The farmers are being asked to send details of the earnings of their workers to the Revenue Commissioners. I do not think that is quite right. I think it is a damper on production and somebody pointed out that taxation hindered production. I believe this will tend to prevent workers from earning overtime and will lead to slackness generally. It is not a step in the right direction.

Some people are of opinion that a purchase tax should take the place of income-tax. I am not capable of offering any opinion on that, but I have heard it expressed by various people and there might be something in it.

First of all, I should like to say I am glad to have had this discussion here in the Seanad, and to have had the views of Senators generally. I have to agree with a great deal of what has been said, but I should like to deal with some of the points raised. Senator O'Donovan was the first speaker and he started off by saying that figures were elastic. They might be, for example, ten to-day and 15 to-morrow, and I think he demonstrated that theory very well as he went along. All I can say about the various figures produced by Senator O'Donovan is that I would prefer to follow the figures given by the Central Statistics Office, and I should feel much more secure in accepting their figures on national income, balance of payments, and so on, than the figures which were built up by Senator O'Donovan, quoting one economist here and another economist there.

When speaking and quoting these economists, Senator O'Donovan quoted my speech in the Dáil yesterday, in order to tell Senators what my views were on the balance of payments. If any Senator who is interested in the matter reads my speech when it is published in the Official Report, he will come to the conclusion that Senator O'Donovan gave an entirely wrong impression of my views on the balance of payments. It is always easy to do that by taking one sentence alone from a person's observations.

Talking about our liquid assets, our foreign assets, Senator O'Donovan said he agreed we must have a certain amount of liquid assets to look after our foreign business. Afterwards, he said we wanted a moderate amount of these assets, but the whole difficulty is to define what that moderate amount should be. At the present time, when the balance of payments is running fairly smoothly—and I hope will continue to run smoothly for years to come —the moderate amount would be really moderate, but we have had experience of the position in 1955 when we had a deficit of £37,000,000. If we go back to 1951, we had a deficit of £61,000,000 and in 1955, that deficit had to be met out of foreign assets. To provide for contingencies of that sort, the moderate amount would have to be fixed in the light of our experience of what these deficits could amount to and, taking that into account, the amount of assets that are there at the moment is not excessive.

In any case, what does Senator O'Donovan say we should do about these assets? If we come to the conclusion they are too much, there is no good in saying to the Bank of England: "Send us over the notes." It would be better to leave them there and get the benefit of the interest. We can bring these external assets in here only in the form of goods, whether they are consumer goods or capital goods. The previous Government made it difficult by their duties on consumer goods, known as import levies, to bring in consumer goods because they wanted to improve the balance of payments by making it more difficult to import. Since we came into office, we have removed many of these import duties. We thought we could make it easier for people here to import in order to improve the standard of living. We were justified, in that our balance of payments has remained quite good and, if we should continue to enjoy a good balance of payments, we can consider going further in that direction.

If anybody comes along here to start a factory and wants to bring in machinery and equipment for his factory, he can use these external assets to bring in that equipment and machinery, but that is the only way they can be brought back. Our difficulty, therefore, is not money, whether at home or abroad. Our difficulty is in getting projects for the use of the money. When people come along and say they want to start projects, we can say to them: "Good, we have got the money to start your projects." Our difficulty is not money, whether you look at it from the point of view of money at home or money in external assets. Our difficulty is to get the projects and that is what the Government are interested in at the moment.

Senator O'Donovan said that I had promised at the time of the Vote on Account that I would be able to say in my Budget statement that we had actually made an economy in the Civil Service in the financial year 1957-58, and he stated that I had not done that. I said I had. As a matter of fact, if the Senator reads the third paragraph of my speech introducing the Budget this year, he will find I said this:—

"Taken as a whole, the specific savings—on Food Subsidies, the Civil Service, Land Commission, Health Services and Defence—were realised, but this, of course, had the incidental effect of narrowing the field from which general savings could be drawn."

I said there that we did realise them. I not only said that but I also had tables issued of all the figures which I quoted in the Budget. The figures were quoted afterwards. On Table 1, it will be found that specific savings were given under the various heads which I have mentioned already and under Civil Service, there is £3 million. In other words, I promised in my Budget in 1957 that I would try to effect a saving of £250,000 on the Civil Service and I actually effected a saving of £300,000. Not only did we do as we promised, but we did even better. Senator O'Donovan is not here, but I am sure that he will be able to read and see that he is wrong in accusing me of not making the saving and not stating that I made it in my Budget speech.

Senator O'Brien thought that taxation should be simplified, both for foreign and domestic investors. We all think that the taxation code should be simplified. That was the principal reason, I take it, that my predecessor in the Ministry of Finance set up the Commission on Income-Tax. Their job, first of all, is to report whether income-tax is the best form of taxation. They may report that we should do away with it, but suppose they think that is impossible and that income-tax should be continued in any form, they will then make recommendations with regard to the income-tax code. I am sure that this question of simplifying the code will be one of the questions they will deal with.

Senator O'Brien also said taxation was too high and he went on to say that in many cases income-tax and super tax are higher here than in Great Britain. With all these things I agree. I agree that taxation is too high. I know that he is correct in saying that at certain points in our income-tax here and in England, a man with a wife and children in some cases will get off better in England in the ordinary income-tax than here, but only in a small range of cases. The same applies to super tax. Generally speaking, our income-tax is lower here and super tax is lower here also. I should like, indeed, to see taxation reduced and I should be only too delighted to see it reduced. If Senator O'Brien asks me why do I not do it, the only reply I can give him is that I have not got the money to do it. I cannot afford it.

One of the principles—in fact, the only principle—underlying this Finance Bill we are discussing is that of trying to see that everybody pays income-tax on a fair basis. As Senator Ó Ciosáin said, no one likes paying income-tax. We would all try to avoid it if we could, but it is a necessary evil. I feel that we should make everybody pay it on an equitable basis. There are many provisions in this Finance Bill before the House now designed to get after people who are avoiding or evading income-tax at the moment.

Senator O'Brien went on to make positive suggestions—and they are very welcome, indeed—that we should try to shift from unproductive to productive capital expenditure. I think that is the aim of every Minister for Finance. It is not my aim only. I am sure that every Minister for Finance would much prefer to have capital expenditure going into productive purposes because it makes it easier for him. He gets a return on his money; he is also more likely to get a national return in the way of more national income and more employment. For every reason, he would favour that, but again, unfortunately, a Minister for Finance is not all-powerful in these matters.

There is the position of unemployment. There is the position of trying to build up our industries, our houses and trying to improve our health services. A lot of our money goes into what would be regarded from the strictly financial point of view, as unproductive things. There is, of course, a national return from a lot of those things, but, as I say, from the strictly financial point of view, they are unproductive. I am afraid that there will always be an element of that necessary, no matter how our country progresses or however wealthy we may become.

Senator O'Brien went on to suggest that all waste should be cut out. I agree with that argument. I think all of us have endeavoured in our time also to cut out waste. I would certainly be very receptive of any suggestion that might be made to me by any Senator or anybody else on any part of the service where there might be wasteful expenditure at the moment. I am not denying that it might be there. If a constructive suggestion could be made to me by which waste could be avoided, I should be very glad indeed to have it considered to the very utmost limit.

Senator O'Brien also said that there should be no increase in social services, except what might be regarded as in line with increased national income. That is a good line to follow; it is a good rule. In fact, I think if we were to depart from that rule and give increased social benefits before the national income justified it, it would mean going into utter bankruptcy. We could not go on with the thing. It would be no good to anybody. It is a very fair rule to follow and I think every Senator, on consideration, will accept it.

Senator O'Brien also suggested cutting out all subsidies. It depends to a great extent on what one means by subsidies. There are certain subsidies which may have the effect of increasing production. Take, for example, the lime subsidy. If we can induce the farmers to use much more lime than they otherwise would by paying out this subsidy, it gives an enormous return in national production. A subsidy of that kind might be justified. Again, I agree with Senator O'Brien that at some stage or other, we should try to get rid of it.

I think Senator O'Brien wound up by making a very wise observation— that it is not so easy to cut out what is there already; that it was easier to stop any new service being created. I think he is perfectly right in that also.

He said he thought it was wrong to deal with the income-tax in such a big way as we have been doing while the Commission is sitting. In other words, we should have awaited the Commission's report before doing these things. We are not making any change in the income-tax code. We are merely, as I said already, doing our best to prevent avoidance and evasion of income-tax. We are only bringing everybody into line, as it were. People in the public service have to pay on every halfpenny they get. People not in the public service, may be in a position to conceal some of their expenditures. This Bill is an attempt, if you like, to bring everybody into line and to evolve a system as fair as possible as between one section and another.

Senator O'Brien drew an analogy and said it was like reiterating the Ten Commandments. The only difference is this. It is etiquette when a man is talking about the Ten Commandments to include himself as a sinner, but when Senators speak, they do not include themselves. I am the only sinner. That is why I feel so lonely in this whole matter.

Senator Ó Ciosáin said we would be all glad to get rid of income-tax. That is quite true. He went on to talk about employment and production. There has been a lot of talk about agriculture, but there has been an increase in the production of transportable goods. It was 8 per cent. higher in the last quarter of 1957 as compared with 1956; and again the March quarter this year was better than the corresponding quarter last year. The June figures are not out yet. If we quote a figure like that and try to give ourselves a certain amount of credit, the supporters of the Coalition Government say it is all due to the Coalition. At the same time, they attack us for not doing certain things. Even if we had succeeded in abolishing unemployment and emigration completely, I am quite sure they would say it was the Coalition that brought it about. Why do they attack us? They should attack themselves. If they were so powerful, why did they not lay the plans to abolish unemployment and emigration? Perhaps the Coalition, after all, were not so all-powerful as we were led to believe.

Senator Stanford raised three or four specific points. The first was in regard to Section 33, sub-section (1) (b). That deals with the case where certain people—part-time directors and proprietary employees—are excluded from this part of the Bill, if they have been in a scheme which we would not sanction now because it is framed in such a way that they do not pay income-tax when the money is either going in or coming out. As I explained introducing the Bill, what we are saying is: "You will have to pay either when the money is going into a superannuation scheme or when it is coming out. If it is paid out by way of annuity, it is all right."

Senator Stanford thinks that, where a scheme was in being, to say to the person now that we will not permit that scheme to continue is retrospective. I must say I cannot see that it is. If the Minister for Finance comes along on 5th April and puts sixpence on the income-tax rate of any of us here, whatever avocation we may be in outside, we could say: "My salary was so-and-so last year. I just made up my mind I could live on it, but you have taken sixpence more off me. My whole contract is gone now because I can no longer live on my salary." Income-tax always strikes at the time it is put on. As a matter of fact, in this case we are giving them 12 months to put things right.

If there is a scheme of superannuation where the company is paying in on behalf of each person, whether a director or proprietary employee, a certain amount every year, I think it is entirely unreasonable that, when they come to 65 or 70, they get a lump sum and we get no income-tax either when the money is going in or coming out. It would be very unfair to say that these people could continue for the next 20 or 25 years until they are 65. We are only saying that we will tax them from 5th April next year on the particular amount going in on their behalf, unless they change their scheme.

Of course, they can continue to have that money paid by the company and have tax chargeable on it, less what would be due to them by way of an insurance premium. We all have knowledge of that. Where we pay an insurance premium, we get a certain relief in income-tax or, alternatively, the man concerned can change his scheme under Part VI of the Act and get complete relief from income-tax on the amount paid on his behalf. Therefore, he has several alternatives. If it is with an insurance company, he can say: "I am going to allow you to close it down. I will ask for a free, paid-up policy to be paid over to me at 65 years of age." He has all these alternatives. I think we are not being unjust to them when we say: "We will give you 12 months to make up your mind which alternative you will choose. If you make up your mind to pay income-tax on it, it is all right. If you like to adopt any of the other alternatives, you can get certain exemption from income-tax in this scheme."

Senator Stanford raised a point on Section 40, sub-section (2), in regard to a person insuring himself for superannuation. He asked whether such a person could go to an insurance company and say to them: "What lump sum would I be entitled to at 65, or whatever it is, or what pension for life would I get against that lump sum?" He could say to them: "That is all right. I will go ahead." What we have in the Bill is that he must take the pension. He must not take a lump sum. If he takes a lump sum, there is no income-tax payable on it. If he takes a pension, it will be regarded as earned income and he will pay income-tax accordingly.

What Senator Stanford would like is that at that stage, when he is 65, he could say to the insurance company: "Give me my lump sum. I will go to another insurance company and get a pension scheme from them because I want to get better terms." The only objection we can raise to that is that we anticipate a great deal of trouble over all these schemes. The Revenue Commissioners will have much more work to do. That point was put to us already and we said he can go to the insurance companies now, ask them for quotations and see which of them will give him the best pension when he reaches 65, 70 or whatever it is.

Is the Minister taking into account the fact that this may come to fruition 30 years later?

Yes, certainly. Naturally, the man will go to all the insurance companies available, get their terms and see which insurance company, A, B, or C, he will choose. I must say that outside this House and the Dáil, where this point was also raised, I was approached by one person only, and he was a broker. I must say that maybe I am prejudiced because I said to myself that the only person who can make money on this is a broker, because when a person has his lump sum, the broker may come to him and say: "I will fix you up with another company," and he gets his slice off it also. It would be much better if the companies would give their best terms now and then let the thing be over and done with and not revived again.

Might I ask the Minister does he taken into account that there might be a definite advantage to the individual citizen if he is free to reinvest that lump sum with a different firm and not through a broker? I am concerned not with the broker but with the individual citizen.

I was going on to say further that we dealt with a lot of these questions of annuities, and one we had to leave out because we could not reach them all, that is, the question of the purchase annuity. I have looked at this in Canada, the United States and England, and I think that it is in England that they have dealt with it. This is the case of a man who has his annuity and the claim is made that part of it should be regarded as capital and part of it as interest, and that he should be asked to pay on the interest only. That is a thing I must deal with next year in the Finance Bill, if we are spared to do so, and I think that maybe the point raised by Senator Stanford can be partly met when we come to deal with it, though I should not like to say so definitely at this stage.

The other point raised by Senator Stanford was in connection with the publication of books. This provision is only to make it possible for a publisher to export books and to get the relief of income-tax on the profits of exports. A printer and publisher is, of course, already covered by the Act. There is no doubt about that, but I am informed by my colleague, the Minister for Industry and Commerce, that there is a possibility of good business being developed here of a publisher coming along and getting printers to do a job for them, and we put it in for that reason. There is a good case to be made for it, and it was put in. It does not, of course, at all refer to the case made by the Senator, which I think referred to a man here getting his book published in America. That person is entitled to the double income-tax benefit; that is, it is arranged that he gets credit here for the amount paid in America.

Senator Murphy drew attention to the fact that the amount provided for capital expenditure in this year's Budget was not actually as high as last year. I think it is about the same, but I am not going to dispute that point now. The point I want to make is that I am not the person to decide policy there—at least I do not attempt to. I accepted the case made by every other Department—Local Government, Education, Industry and Commerce and so on—which gave me estimates for the various bodies they speak for also. They gave me an estimate of what they thought would be required and I put it into the Tables in the Budget.

The Minister accepted everybody else's estimate?

After a little discussion.

After reduction, surely?

They were reduced so cruelly for the past three or four years that they were not reduced this year. Anyway, the figure of the total is not too high; and I want to say this: the Housing Bill which will be coming up in the Seanad to-morrow will no doubt provide more money for housing, because, as Senators are probably aware, there is more money being provided by way of credit for the purchase of and repairs to old houses. In many ways, the expenditure under the head of housing will be increased and we will have to provide the money. There may be other propositions during the year, for all I know.

A standstill Budget, of course, does not mean at all that there is a standstill in economic activity. I can well imagine bringing in a Budget where there is no extra taxation and no new relief, but at the same time there might be great economic activity under such a Budget. I must say that when I brought along a Budget with no tax or relief, I did not mean to imply, and hoped it would not result either, in no economic activity.

Senator Baxter said that Senator Ó Ciosáin attributed too much to the credit of his own Party. I think that Senator Baxter made that right. He just evened things up anyhow. I agree with Senator Baxter that we should pay our own way, and the best test of that is the balance of payments. If our payments are balanced, it means that we are paying our way as a country, just, as Senator Baxter very aptly put it, the same as in one's own house. If your payments out and inwards are about the same for a year, you have lived within your means.

He expressed the view that we should try to produce and export 1,000,000 cattle. I think we are on the way to that. Everything is pointing to a greater production of cattle. We have got more feed for cattle in the country and there may, I suppose, be as the biggest problem now, the question of credit, because the cost of the cattle is so high; but that of course will come in time also.

Senator Quinlan wants money spent on research. He spoke about the very big loss on the export of butter and thought that a small fraction of that money should be spent on research into the marketing of butter. I should like to remind him that last year I provided £250,000 for agricultural marketing. Subsequent to that, I admit there was a long delay, but that was due to unfortunate circumstances in the Department of Agriculture, owing to the change of Ministers. Eventually, a committee was set up to deal with and advise on agricultural marketing. So far as I am concerned, I have done my part in providing the money for that, and I hope now that though the marketing committee has not got much time yet to produce reports or results, it will be able to do something in time. One of our distinguished Senators is a member of that committee.

I meant marketing not only of butter, but of other dairy products.

I do not think that the committee would be prohibited from considering that. I am sure it could consider that problem, too.

The Senator also—I think he was quoting the late Father Coyne—suggested that if we dropped income-tax, surtax and death duties on a strip along the south coast, we might thereby attract people to live there and die there. These suggestions have to be given a great deal of thought to see if we can afford them. We must keep in mind the advice I quoted already from Senator O'Brien, that we should drop the subsidies as quickly as possible and I would regard that as a subsidy.

Senator Lenihan made it very plain beyond dispute that both national income and gross national expenditure were higher in 1956-57, both in quantity and in cash, and we may regard that question as closed. We need not go back on it any more. He did succeed in that way in putting the debate on sound lines again.

I agree with one thing Senator Lenihan said: greater agricultural production may not mean more employment. I quite agree with Senator Lenihan that there are many farmers who can do more with the help they have and I think in fact that greater production would in very rare cases mean more employment. It would, of course, be a big advantage to have more production because it would add to the national wealth. The money would be available both for consumption and eventually for investment for capital purposes. I think, as the Senator said, that the only sure means of increasing employment is by establishing industries other than agriculture.

The Senator went on to talk about income-tax. He thought we should examine very thoroughly the income-tax code including surtax and death duties and try to eliminate what he called disincentives. That is a thing which, I suppose, we should do, but the alternative is difficult, I am afraid. The Senator said it might mean £6,000,000 or £7,000,000 taken away and it would be extremely difficult to find that £6,000,000 or £7,000,000 from other sources, even by means of an expenditure tax or purchase tax. I think it would mean that very few items would escape if we tried to spread it over in that way.

Senator Burke thought that Senator Lenihan, in quoting Disraeli on statistics, should have talked about facets of truth. There is a better one which I read this morning, I think, in the Irish Press. I usually read the Irish Press.

That is news.

"You are not on your oath when writing an epitaph." It was the great Johnson who said that. That is really appropriate because this debate has centred about an epitaph on the Coalition. We can excuse those who defended it, like Senator O'Donovan and others on that side, because they are not on their oath in this debate.

Senator Burke went on to say that we should try to encourage the sort of industries that are pertinent to Ireland and in developing that argument, he thought that some parts of this Bill might mean, as he put it, more trouble than money for the companies and that we might exempt some of the private companies from parts of the Bill. I am afraid that we cannot. These parts which deal with expenses and so on are the best attempt we can make to give equity to all people under the income-tax code and you have in every class, whether private companies, public companies, partnerships or private individuals, some few unscrupulous people and it is because we have to deal with those unscrupulous people that we have to include the whole lot. I suppose that one reason is that we do not know who we could exempt.

I feel, however, that with a little experience the honest company that wants to pay its way, to pay what is due, will come to a working arrangement fairly quickly with the inspector of taxes. I do not think that they need anticipate any trouble whatever. I am fairly sure, from my examination of this thing, that most companies have been keeping the accounts and the information required under the Bill and that they will have no trouble whatever. People who have been evading income-tax will have trouble and they are the people we are trying to bring in under the provisions of this Bill.

Question put and agreed to.
Committee Stage ordered for Wednesday, July 23rd.
The Seanad adjourned at 10 p.m. until 3 p.m. on Thursday, July 17th, 1958.