I shall proceed until I am stopped and I hope that I shall not exceed the bounds of relevance. As I say, this corresponds to the Budget debate in the Dáil. The Dáil, on the Estimates, has ample opportunity of discussing expenditure in great detail for each Department and I accept the ruling of the Chair that that is a matter we discuss on the Appropriation Bill. The raising of taxation is, of course, what is discussed during the Budget debate and the Finance Bill implements the Budget policy and the raising of taxation really must be read, I think, against the general background of the economic position of the country.
In the Budget debate, policy was raised by every speaker on every side of the Dáil and until I am ruled out of order, I propose to try to relate this Budget to the general economic background against which it is framed. In doing so, I make no apology, apart from an apology for some technical breach of the rules of the Seanad, because in modern times, it is universally recognised that the Budget is not merely an income and expenditure account of the Exchequer, that it is something more than that. In modern times, a Budget is looked on as the means of affecting the general economic climate of the country in conjunction with the Central Bank. If the country is inclined to go too fast, if there are signs of inflation, the Budget can be used, in conjunction with the Central Bank, to put on the brake. If the country is showing signs of a recession, or a depression, the Budget, in conjunction with the Central Bank, can be used to try to improve economic activity.
This is particularly true of the Capital Budget, because the State capital expenditure and the borrowing which is necessary to finance it, can be more easily accelerated or postponed than the current expenditure. Therefore, the Budget nowadays, which is primarily concerned, of course, with the raising of taxation, does perform two purposes. First of all, it enables the Minister for Finance to balance his annual accounts; it enables the housekeeping of the country to be conducted on proper lines, that the country should pay its way; but it also aims at something much wider than that. It aims— to quote from memory the speech of the Minister in the Dáil—at providing full employment, subject to the avoidance of inflation.
Inflation in this country is shown, I think, by a disequilibrium in the balance of payments. I think that the balance of payments in Ireland is rather like a thermometer; it shows whether the patient is feverish or not. The Irish economy is a very open economy. In this respect, it is like the British economy. External transactions play a very large part in total activity. Therefore, the Irish economy is very sensitive to changes in world prices through imports and exports and to changes in the world economic climate, changes in the conditions of progress or regression in Europe and, indeed, in the United States.
An open economy of this kind must preserve equilibrium in the balance of payments. It is the first duty of the people who are in charge of the economic circumstances of a country of this kind—whether it be the Central Bank or the Minister for Finance—to preserve equilibrium in the balance of payments. I do not suggest that equilibrium must be preserved every year. I admit that there may be abnormal circumstances such as we encountered last year, bad harvests and things of that kind, that will allow payments to be unbalanced in the short period. I think that position is accepted by the Central Bank. In the latest Report of the Central Bank, page 21, it is stated:
On the basis of these assumptions, and if the recent underlying trends in external trade prevail, the balance of payments position would continue to move in the direction of a deficit larger than in 1958, and possibly equivalent to the surplus in 1957, thus resulting in a rough equilibrium over the three years.
I would be prepared to agree with that definition of a period for equilibrium in the balance of payments, that there may be seasonal or climatic factors, exceptional circumstances, that make it difficult to balance every year and that, therefore, a period of three years may be regarded as a reasonable period in which to preserve equilibrium. But if the country begins to exhibit a disequilibrium for a longer period than that, and a disequilibrium that does not contain within itself the seeds of its own correction, that is a position which, in an economy of this kind, should not be tolerated.
A prolonged disequilibrium in the balance of payments which does not show signs of self-correction within a reasonable period, leads in the first place to a depletion of our external reserves. That, in turn, necessarily leads to internal contractions of credit. That could easily lead to lack of confidence in the future of the currency or even to a depreciation of the currency, which has been so often undertaken in other countries which have had recurring deficits of payments in recent years.
The alternative is a painful correction and, if the process is allowed to go too far, the country may experience a painful correction such as this country experienced in 1955-1956, leading to unemployment, business losses, severe contractions of credit and, sooner or later, an economic crisis. It has been suggested, in the course of the discussion recently on this matter, that there could be tolerated in this country a disequilibrium in the balance of payments in order to import capital goods, that a disequilibrium caused by the import of consumption goods is admitted by everybody to be intolerable, but that during a period of time, there could be a disequilibrium tolerated for the import of capital goods. I do not accept that argument. I think it is a very dangerous argument.
In the first place, it is extremely difficult to define what are capital goods. The same article may become a capital good or a consumption good, according to the use to which it is put. If a motor car is brought into Ireland as a motor car to be used by an hotel for the tourist trade, it is a capital good; if it is to be used by a private individual for enjoyment, it is a consumption good. How can anyone say, at the time of importation, into which category it fits? Similarly, with mere consumption goods such as tea, wine and things of that kind—if dealers are stocking more rapidly than normal, a large amount of these imports, although they may appear as consumption goods, are capital goods in the sense that dealers are building up stocks. Therefore, the line between capital goods and consumption goods is not to be found merely by the nature of the import but by the use to which it is to be put, and that is a matter which is quite incapable of definition.
Even assuming that agreement could be found on such a definition, the administration of this distinction would involve something in the nature of an exchange control or an elaborate system of licensing and that, from the political point of view, is extremely undesirable. Furthermore, in this country, capital imports lead, certainly in the short period, to the necessity for further imports, because one of the underlying facts in the economy of this country, which we cannot get away from, whether we like it or not, is that every activity that is generated here sets up a demand for imports. Therefore, the importation of capital, assuming that it is put to immediate use, will set up a demand for imports of raw materials, for wage goods for the people employed, and will in itself generally create further imports.
Finally, even if capital goods can be distinguished and if the distinction can be administered, the invisible account of the country suffers by a disequilibrium in the balance of payments, even in respect of capital imports. Those imports must be paid for, either by the sale of external securities—in which case our external reserves and the earnings on them are reduced and, therefore, our invisible exports suffer— or by borrowing abroad, in which case we impose a burden on the invisible side of the account for future years.
There is one exception, I think, to what I am saying, that is, if capital goods are imported into this country by foreign investors who pay for them with their own foreign currency. Then, whatever the effect of that import of capital goods may be on the demand for further imports, at least it does not in itself deplete our external reserves or weaken our external position.
It is in the light of that attitude— which may be correct or not—that I should like to look at the balance of payments in this country. In 1958, the over-all balance was a deficit of £1 million, as compared with a surplus in 1957 of £9.2 million. These comparatively good results arose from the favourable movement in the terms of trade. If the terms of trade did not move in our favour in the past two years, the deficit in the balance of payments would have been very much greater than, in fact, it was. That can be accounted for also by certain abnormal influences. As a result of the bad harvest last year, imports of cereals and fuel were greater than they normally would be and there was a large number of recurring capital imports in relation to certain major investments in the South of Ireland.
When I come to look at the picture of the present year, what sort of balance of payments picture are we to have in our next year's Budget? On the import side, we are still suffering from the effect of last year's bad harvest. Imports of cereals and fuel are still higher than they normally would be, but that is something which will correct itself.
On the export side, as Senator O'Donovan said this evening, the picture is far more disquieting. The recent volume of Economic Statistics pointed to the existence of something in the nature of a rhythmic cycle movement in the export of cattle. The disquieting thing is that this is the time at which the upward phase of the cycle is due and yet it has not taken place. I know the reason for that, but that does not make the position any less serious. In the first place, over a short period, there has been a drought in Great Britain and the grass and pastures are bad. The British farmers are, therefore, delaying buying cattle. The prices of fat stock in Great Britain also have not been good and for that reason the farmers are reducing their purchases. A more disquieting feature is that, many British farmers are now very slow to purchase once-tested cattle. That is something which must be looked at by the Government with the greatest possible care—the necessity for accelerating the complete eradication of bovine tuberculosis.
On the Irish side, possibly a factor which, in the long run, may correct itself, but in the short run does not help our balance of payments, is the retention of more heifers by farmers for breeding purposes. The result of those factors together is that cattle exports this year have been less than was expected and, if there is no improvement in the cattle exports in the course of the year, the balance of payments in the present year could be quite unsatisfactory.
It is too much to hope for an improvement in the terms of trade. The terms of trade cannot go on for ever moving in the same direction and I believe we have reaped all the improvements that are to be found in the terms of trade. Therefore, I think I am correct in saying that, looking at the balance of payments, the drift is in the wrong direction and if the present trend is continued, without being reversed, measures of correction by the Central Bank and the Government will become imperatively necessary within the next 12 months.
The balance of payments, of course, is only one of the factors against which the Budget must be viewed. Before the Budget, the Government published a very valuable volume entitled Economic Statistics. I shall not weary the House with extracts from it, beyond just saying that the general picture is not particularly encouraging, The national income has diminished by two per cent. but that could largely be accounted for by the bad harvest. Savings are down; capital formation remains constant; although there has been an increase in industrial employment, the total number employed is down by 10,000; and emigration seems to have showed down. Some people believe that the Irish population has now reached a new stability and that we can hope for some years ahead that the amount of emigration will not be so large as to cause a further decrease in the size of the population.
Coming nearer to the Budget and to public finance, revenue last year was buoyant and the Minister was lucky that debt charges were lower. Owing to falls in the short rate of interest, the money market rates were lower and, therefore, the amount that had to be paid on Exchequer bills was lower than it might have been if the rates had not gone the way they did. The result was that there was a small surplus shown in the Budget. That being so, I think the Minister was justified in introducing what might be called his mildly expansionist Budget. By that I mean a Budget which contains incentives for the private investor and also proposes a certain amount of increase in public investment.
The provisions in the Budget were described by the Minister in the Dáil as calculated risks. I think those calculated risks were probably justified for their incentive effect. There was a certain amount of pessimism prevailing in the country which required to be corrected and therefore, psychologically, I think the Minister was justified in giving the country what he described in his Budget speech as a shot in the arm.
There are one or two features of the Budget which call for comment— not for adverse criticism, but it is no harm that the attention of the Seanad should be drawn to them. The balance in the Budget was obtained by a very generous allowance for what is now known as "errors of estimation". Speaking subject to correction from the Minister in his reply, I think that a subtle change of terminology has been introduced at this point, and that the errors of estimation now include optimism regarding expenditure falling short of what appears in the Estimates and revenue being more buoyant than what appears in the Estimates, but that may not be correct. I should like to know if it is true because apparently it introduces two elements of uncertainty instead of one and, as I say, whatever the interpretation may be, the terminology is unmistakeable, and what used to be called "errors of over-estimation" has now become "errors of estimation".
However, as I say, we all wish the Minister well in these calculated risks. He has taken two gambles and we in this House certainly hope they will both come off. His optimistic forecast has enabled him to abolish a certain amount of indirect taxation. The import levies which I mentioned a few moments ago as being part of the drastic remedy for the bad balance of payments in 1956 have now been worked out. They have either become customs duties or disappeared altogether.
The Minister has also succeeded in giving a slight increase to pensioners. Everybody, of course, would like that increase to be more but we must accept the fact that it just cannot be afforded at the present moment. The best way to help pensioners is to avoid inflation and a great deal of our inflation, of course, is imported. It is part of the price of living in an open economy, but, at the same time, we cannot avoid a certain amount of domestic inflation, so by far the best way to help the pensioners is to avoid inflation.
There have also been reliefs for certain industries suffering from undue competition and concessions have been given to dances, greyhound racing and boxing, but the most important concession in the Budget is the reduction in the standard rate of income tax. I should like to quote the Minister in order to express my agreement with him:—
I am convinced that the objective of economic expansion is better served by giving any tax reliefs we can afford this year mainly to ease direct taxation. This accords with the principle, enunciated both by this Government and the Opposition, that whatever taxation is necessary should in the circumstances of this country, fall more heavily on expenditure than on income.
In that expression of sentiments, the Minister has my entire agreement.
The raising of the beginning point for surtax is something that is long overdue. Surtax, owing to the change in the value of money, had become quite unreal and very unfair to a great many people. The whole tax code, of course, still needs a great deal of overhauling but, pending the publication of the Report of the Commission on Income Tax, I do not propose to deal with it any further. The increases in the wear and tear and obsolescence allowances are also welcome from the point of view of investment.
I should just like to mention that a reduction of death duties could have a very beneficial effect on the question of people coming to reside in this country. I do not wish to labour this point. The Minister quite fairly stated in his reply on the Budget speech that he cannot reduce everything at the same time and that he thought surtax this year would be a more useful reduction. I should like him to put his mind down to the question of death duties. They are higher here in many ranges than they are in the Six Counties. They particularly hit small family businesses. They act as a disincentive to people to come to reside in this country. The yield is comparatively small and the cost of collection is rather high. Therefore, it seems to me that there is a possibility there of further easement in direct taxation. We cannot expect the Minister to do everything the same year. We must welcome the reductions in income tax and surtax, while reminding him that other reductions could be made in death duties as well.
Having taken all these factors into account, the Budget emerges from the debate as balanced. There is a certain amount of what I might call tolerated manipulation in obtaining this balance. In the first place, I said this £2½ million of errors of estimation may not just go right. Also, there is always a certain amount—I do not like to use the word "juggling"— of manipulation in what goes over and above the line. These are orthodox methods in the game of balancing the Budget, so I think we can say that the Budget is balanced, even if on a narrow edge. After all, this is the centenary of the greatest balancing feat in history—the crossing of the Niagara Falls on a tight rope by Blondin. Possibly it is to celebrate that centenary that the Minister is balancing his Budget also on a very tight rope. I hope he will cross with the same success as Blondin had.
I think, on the whole, in view of the state of mind of the country, the Minister's optimistic assumptions and calculated risks are justified. I think the background is slightly deflationary and that, therefore, the shot in the arm is justified.
I have merely recorded, as its first function as the State housekeeping accounts, that the Budget is orthodox and sound and can be recorded as an incentive Budget. The capital programme which, I realise, is very much more expenditure than revenue, I shall barely mention. The capital programme is based on the White Paper. Actually, it provides for £3½ million more than the White Paper and £7.38 million more in Government capital expenditure than in the year 1958/59. It is mainly productive in the long run. I am prepared to agree that such things as fertilisers, the eradiction of bovine T.B., agricultural and industrial credit, are mainly productive but they involve £30 million for borrowing.
It must be remembered that although they may be productive in the long run, they may not be productive in the short run. It may be quite a long time before the assets created by this borrowing bring in a revenue. Therefore, there is no getting away from the conclusion that the Government capital programme in the short run will add to the amount and burden of the national debt. This is a matter which we have dealt with in the Seanad before and for returning to which I do not apologise.
One of the most dangerous symptoms in the Irish economic position is the growth of the national debt against a nearly stationary national income and a falling population. The Central Bank directs special attention to this matter in page 12 of the current report. It points out that from 1951 to 1959 the net liabilities of the Government grew from £80 million to £192 million and at the same time, the contingent liabilities grew from £63 million to £85 million and, as it points out in the footnote, extensive commitments had to be made in some of these guarantees both as regards interest and principal.
This growing debt has involved a growing interest charge. On the same page of the report of the Central Bank, figures are given showing that the amount of debt we have charged to taxation has grown from £5.3 million in 1951 to £16 million in 1959 and an estimated £16.6 million in 1960. These are disquieting figures for a country with a falling population. It seems to me that when one regards them, looking back over ten years, one rather gets out of the discussion of the Budget as a mere exercise in State bookkeeping for one year to the general question of the growth of the economic system in this country. I hope I am not becoming irrelevant. If so, I shall sit down immediately. However, I should like to call attention to the great changes of opinion coming about in this State. The book Economic Development and the White Paper Programme for Economic Expansion, are examples of the way in which people are now attending to the question of economic growth.
The fact of the matter is that an infra-structure of public services in this country has more or less been created and that now what is happening is that an increasing super-structure of debt is being superimposed on an infra-structural foundation which is not increasing equally fast. That is why this informed opinion at the present time is being directed to long-period rather than merely annual problems. On that, I should like to quote from the June issue of the Irish Banking Review, page 12, as follows:—
Perhaps it may be correct to say that the emphasis in Irish economic discussion should shift from the economics of equilibrium to the economics of growth. The mere attainment of balance in external payments and the Budget, however desirable in themselves, is not enough to generate the dynamism necessary for progress. In this connection, the following quotation from the address of Mr. Browaldh to the shareholders of the Swedish Bank of Commerce is relevant. "Searching for a single catchword to describe the aims of economic policy, people nowadays talk of ‘balanced growth'. If we assess recent economic developments in our country with this aim in view, we can say: In important respects the economic equilibrium has improved, but the second link in the chain of objectives, economic growth, has slowed down and judged by modern standards we are at present below the level of full employment."
That quotation regarding Sweden is precisely relevant to Irish conditions.
The discussion that has been taking place in recent years on the necessary for growth in Ireland has shown the acceptance of a number of assumptions and new ideas that would not have been accepted a few years ago. I should like to draw particular attention to a lecture given at the Conference of the Tuairim organisation by my colleague Mr. Lynch, which has now been published under the title The Economics of Independence. This is only one example of new thinking on this matter.
The articles in the Press and statements by Ministers, especially by the Taoiseach, some of which I shall quote, show that Irish opinion is moving and moving in the right direction. It is a hopeful sign, I think, that these questions are being very largely taken out of Party politics, that a good many of the old catch cries, slogans, shibboleths, are not being repeated any more.
One change is that it is now generally accepted that the cure for unemployment does not rest in greater self-sufficiency, that the home market has been largely satisfied. This does not condemn the protection programme of earlier Governments. It was inevitable and on the whole beneficial, but it has now exhausted its beneficial effects. Many of the social services catering for the home market have already been saturated. House building is slowing down and therefore people are beginning to realise that future growth depends more on exports than on satisfying a naturally limited home market.
This realisation that exports are important has coincided with an extremely important change in the nature of export markets. This is not the occasion to discuss the Free Trade Area, the Common Market, the Outer Seven or the Anglo-Danish agreement. All I want to draw attention to is that the export market environment is changing. However it is changing, it is changing in some direction and it will not be what it was. Changes of that kind may create new difficulties but they also create new opportunities. Therefore, the country must be very much alive, very flexible, in trying to take advantage of the opportunities presented by this new international situation. It is only fair in passing to pay a tribute to the work of Córas Tráchtála which has already done a great deal to increase Irish exports and, we hope, will do a great deal more in future.
One thing that has been emerging with great clarity quite recently is that this country does depend to a very large extent on the British market. It has been accepted more and more that the British and Irish economies are in many respects complementary, that indeed the two countries, the United Kingdom and Ireland, are a kind of common market. There are free movements of labour and capital; there are related currencies, free movements of funds, and preferential tariffs on trade in both directions. In other words, the political and economic frontiers in the area covered by the United Kingdom and Ireland are not the same. It is now being realised that recent political changes have not really got rid of some of the underlying economic realities, that we must make our future policy in the light of these realities and, having obtained independence, try to get some mutual benefit with the other people concerned. Every effort should be made for Irish farmers to share whatever benefits they can with the British farmers.
In order to show that what I am saying is not merely personal opinion and to clothe it with some political respectability, I should like to quote from the Taoiseach's speech in the Dáil, as reported at column 939, Volume 175, of the Dáil Debates of 3rd June, 1959, in which he says precisely what I have been trying to say:—
There can be no question that any prospect or possibility of expanding trade with Britain, particularly in agricultural products, and of obtaining reasonable security of markets and prices would be of very great interest. Geographical proximity has forced a degree of integration of the economies of both countries which has been strengthened by arrangements which permit of the free movement of men and money and provide a common currency basis between them. Indeed, it could be said that between this country and Britain there already exist many aspects of the type of economic community which the European countries who signed the Rome Treaty are trying to develop between themselves. In the world as it is developing the interests of both countries would appear to require arrangements for the continuous examination of possibilities of further association in developing trade opportunities.
Whatever our external markets may be, whether they are mainly British markets or other European markets, it is necessary that we should be able to export at competitive prices. No country has a duty to keep the people of this country alive and, if we want to trade with our neighbours, we must be able to sell to them on competitive terms. This, of course, is obvious but it needs stressing. It is emphasised in the Report of the Central Bank:
The position in 1958 should also be considered in relation to the expectation, which continued during that year, of the establishment of a European Free Trade Area of which this country would be a member, albeit on special terms. In the light of this possibility, it became clearer than ever before that our economic policies should be adapted to our situation as a virtually open economy, largely dependent on external trade. The fact that the prospect of a Free Trade Area embracing all or most of the countries of Western Europe appears to have receded should not be regarded as reducing the need or urgency of efforts to increase the competitive capacity of our agriculture and industry.
That cannot be sufficiently emphasised. The real trouble about our competing in external markets is really related to what I mentioned a moment ago, about our being to some extent already in a common market with the United Kingdom. The fact is that we find ourselves in a common market with a country with extremely high wage levels based on high productivity and it is very difficult for a country with lesser natural resources to produce at competitive prices inside an area of that kind, unless either wages can be reduced, which is impossible, or efficiency can be raised, which is very difficult.
In that connection, I should like to draw the attention of the Seanad to an article in Studies, Summer, 1959, by Dr. David O'Mahony of University College, Cork, where many of the difficulties of our economic situation are put very clearly. Everybody will agree that the time has come for plain speaking and clear thinking on these difficulties, that they are not to be conjured away by denying that they exist. I propose to quote two or three passages from this article but I should like Senators to read it because it does bring out our difficulties very clearly. Dr. O'Mahony says:—
Most of the problems of the Irish economy arise from its two most characteristic features—or peculiarities, as some might say. The first of these is its unusual openness, familiar to us by reason of our constant need for vigilance with regard to the balance of payments. The second, but more important, is the fact that——
Then there is a quotation from Economic Development.
——proximity to and ease of intercourse with Britain tend to set, at British levels, the expected standards for Irish wages and salaries, private consumption and services generally, irrespective of differences in natural resources and productivity.
Our economy is one of the most open in the world. Relatively speaking, we are far more dependent on the outside world than Britain is, although the British seem to be more conscious of the limitations imposed by an open economy on policy-making than we are.
Some of the consequences of that position are developed in this article:
Important as the openness of our economy is, it is very much overshadowed by the second matter already mentioned. The "ease of intercourse with Britain" is frequently referred to in discussions about emigration, but its nature and significance for the national economy have not yet received the attention they deserve.
The article then considers them at some length. I cannot delay the Seanad by quoting from the article at length but the point made is that this is a high cost economy, owing to lack of natural resources, with small scale industries, a small home market, and that, in addition to that, we have to deal with a very high level of wages, a level of wages dictated by a very efficient and prosperous economy. That is the position. It is because of that position that it is exceedingly difficult for profitable openings for investment to be found in Ireland by private enterprise. That is the position and we must face it. There is no use in not facing it. It is there. It is a high cost economy and we cannot expect to get wages down, even if we wish to do so. Therefore, the only way in which we can find profitable openings is by greatly increasing the efficiency of the individual worker.
One of the troubles about that is that increases of efficiency by individual workers nowadays are almost always the result of a great deal of mechanisation. The more increased output per head we get, the less labour we need. That is the fundamental dilemma facing the country. It has got to be faced. If we want to keep a large population, we can do so only at the level of wages which will enable us to export competitively. If we want to be really efficient by modern standards, we must have a type of labour saving device which leads to a lower labour content for our export industry.
That is not a very popular thing to say but we need to tell the truth. I think this analogy is very close to it. If there were the same openness and mobility between the United Kingdom and the United States as there is between the United Kingdom and Ireland, British industry would find itself in an extremely difficult position. If English wages had to be the same as American wages, owing to this complete mobility of labour, most of the British export industries would be completely priced out of the export market because American wages are much higher that British because American productivity is higher. If British industries had to pay American wages and compete with American exports, they would find it extremely difficult to do so, unless they were able to raise their output per head quite dramatically.
That is a fair analogy. That is the position. We are in relation to Great Britain in the same position as Great Britain would be in regard to the United States, if there were identity of wages levels in the two countries. The only hope we have of competing in foreign countries would be by dramatically increasing our efficiency and that means, not more labour, but less.
That is the point. Some people wonder nowadays whether private investment will solve our problems. I make no secret of the fact that I am all for private investment. I am completely individualist in that way. My whole mental bias is towards private investment and against every form of socialism. The Central Bank takes the same view. It says that the private sector must be regarded as the principal source of new productive projects. It goes on:
The fundamental importance of the private sector—or more simply of the individual farmer and manufacturer, shopkeeper, salary-earner and wage-earner—has often been stressed. In an economy such as ours the most useful rôle of the State is to encourage and stimulate private enterprise and, by suitable fiscal and financial policies and the provision of educational and other essential services, to create conditions in which economic advancement can be secured by the efforts of the members of the community themselves.
That is undoubtedly true. Private enterprise, other things being equal, is always preferable to State enterprise. The private investor invests his own resources. He pays the penalties of his own mistakes. He has to accept the acid test of profit or loss. He has to obey the verdict of that market. That makes for flexibility and adaptability for new projects.
Most of the most progressive countries, such as the United Kingdom and the United States, have progressed under private enterprise. We have had numerous very successful private enterprises in Ireland. I certainly think that most people in the Seanad would agree that if private enterprise could be stimulated, it would be most desirable but the regrettable fact, looking at the history of recent years, is that the amount of private investment in Ireland has been disappointingly small.
The Central Bank Report shows the total amount of new capital issues in the years 1954-58—a period of five years. Of a total amount of £111 million, only £3.2 million was raised by private enterprise, that is, by industry and commerce other than the Industrial Credit Company and the Agricultural Credit Corporation. That understates the fact because private business people invest their own savings and borrow a good deal from the bank, but even had they made full allowance for all that, the amount of new private investment in this country has been disappointing in recent years.
That is the result of the lack of profitable openings. That lack of profitable openings is largely the result of what I have already referred to, the high costs. If costs are lower, there would be more openings and if there were more openings, there would be more enterprise. Be that as it may, people who are wedded ideologically to private enterprise, are beginning to admit that more public enterprise in this country may be needed in the future. It is only fair, in passing, to pay a tribute to some of the successful State bodies and public utilities which have greatly developed the resources of the country in the past 35 years.
Again, I should like to quote from the Taoiseach's speech in the Dáil on 3rd June which shows that he has come to the point of view that additional public enterprise may be necessary, however ideologically one would prefer private enterprise. At column 934, the Taoiseach said:—
In so far as manufacturing industry is concerned, we have said that our main reliance is on private enterprise. I think that must continue to be so. Indeed, present indications are that private enterprise will produce significant developments which will contribute substantially to the country's economic progress. But looking at the results which we have achieved to date against the background of our needs it is not obvious that private enterprise alone will suffice to secure the maximum exploitation of the country's industrial potentialities. In these circumstances we have to think in terms of an expansion of State enterprise in the industrial field and that is what the Government are now doing.
I do not suggest for a moment that private enterprise cannot play a very important part but, if it is incapable of filling the whole gap necessary, the need for more public enterprise must be accepted. If there is to be public enterprise, there must be more conscious direction of investment—more planning. If the State or State-controlled bodies are to invest, there must be no overlapping. There must be a conscious direction of policy, so that the capital, which is scarce enough already, will be most intelligently applied.
One of the concluding recommendations of Economic Development is the setting up of an advisory committee for this purpose. The Taoiseach recently referred in the Dáil to the setting up of what he called a special planning board in the Department of Finance. I should like to remind the Minister that the Banking Commission in its report in 1938 made two recommendations. It recommended the establishment of a Central Bank and of a Debt and Investment Council. The Central Bank was set up in 1942. I suggest that the Debt and Investment Council recommended in the report should now be set up, possibly with enlarged functions, and that it could form the nucleus of some sort of commission for the planning of investment.
I want to make it perfectly clear that in making a recommendation of this kind, I am not arguing in favour of the so-called planned economy system. I still maintain my faith in individualism, but, in a society where a good deal of investment has to be initiated by the State, one must recognise realities, one must recognise that capital is scarce and that there must be some method of directing priorities. Possibly the most fruitful subject of inquiry would be the possibility of evolving new forms of investment in which public and private investment might to some extent be combined. This matter was referred to by the Taoiseach when he said:
In addition to such extensions of activity as may be undertaken by existing State-sponsored organisations under their own direction and from their own resources, we contemplate the possibility in some instances of partnership arrangements between these organisations and private enterprise. I think it is likely we will find, in practice, that additional State-participation in industrial development can best be effected through the medium of existing organisations, but if new organisations are required, they can of course be created.
When new industrial concerns are set up by State initiative, the possibility and indeed the desirability of translating them ultimately into public companies by the offer of shares on the stock exchanges should, I think, always be kept in mind.
That seems to me to be a fruitful line of development, that in these matters we must not be doctrinaire but must be empirical and must be pragmatic. We must rid ourselves of ideological preconceptions and we must deal with problems as they arise. The acceptance of a great deal of Government assistance and direction in the investment field is not inconsistent with the maintenance of private enterprise as the main mover, the motive, in the system. Other countries have to face up to this problem; it is not peculiar to us.
The newly appointed Chairman of Imperial Chemical Industries, which is one of the largest concerns in the world, has made some interesting suggestions in regard to England's economic policy—I am quoting from The Observer of Sunday, July 5th— which are worth quoting to illustrate that even what I might call one of the arch-priests of capitalism recognises the necessity today of a certain amount of Government interference in the economic field. The quotation is:—
The effort to mitigate Britain's natural commercial handicap on world trade should, Mr. Chambers suggests, be pursued along three lines. First we should grow more food and do it more cheaply; this means bigger farms and less sentimental emphasis on the small man. Secondly, we should try much more vigorously to foster the home market for our coal. Thirdly, we should concentrate on improving the national transport system and bring down our home costs that way.
These are the priorities, then, as seen by the new Chairman-elect of I.C.I. It is interesting to observe that all three depend ultimately on action by public authorities rather than on private enterprise. I pointed this out to Mr. Chambers, but he was entirely unperturbed by the notion that this was "planning". His belief is evidently that the country, like I.C.I., must plan a long way ahead and know where it is going, in order to survive and prosper.
One may argue that his view of Britain's vulnerability is exaggerated —I should do so myself—or question his particular choice of priorities. But it is salutary to hear it asserted plainly from this source that we must have a set of national priorities and consciously pursue them.
If that is true of England, it is equally true of Ireland and, as I said, we must be pragmatic and empirical in this matter. We must not allow ourselves to waste energy by political debates between right and left, between capitalism and socialism. We must take the facts as we find them and try to adopt an intelligent policy.
Finally—I apologise for delaying the Seanad overlong and perhaps exceeding the terms of reference of the debate—to come back to where I began. Whatever we do in this country—and this cannot be sufficiently emphasised—we must have regard to the balance of payments. Whatever form of investment we indulge in, private or public, we must not run into a permanent disequilibrium in the balance of payments. That may sound perhaps defeatist and pessimistic but this must be remembered. An open economy gives certain opportunities as well as certain difficulties. It is not entirely a bad thing to have an open economy. In a recent lecture by Sir Dennis Robertson, late Professor of Economics in Cambridge, it was stated that in regard to Great Britain an open economy has many advantages.
Now, that is very true of this country. It has been pointed out in the Central Bank Report, that this is an open economy and that we will benefit from the successes of our neighbours and that with an economy like ours which exports so much, we have everything to gain when other countries are pursuing expansionist policies. The report says that the improvement in the economic outlook abroad is generally encouraging as is also the emphasis placed in official quarters on the need for economically stronger countries to resume economic expansion.
That is particularly true in our case because the British Government, in recent years, have been very successfully pursuing an expansionist policy and that policy, it has been pointed out, made it so attractive to other agricultural countries. If other agricultural countries are clamouring to get into that market, they really should not discourage as much as encourage us because they have natural advantages with regard to the great expanding market and we must trim our sails according to prevailing winds and take the advantages of the open economy that already we have gained in the recent terms of trade. That is one of the signs of an open economy and now if we are intelligent we will gain more from the expansionist policies being pursued by European countries. We should direct our policy towards taking advantage of the prosperity of our neighbours. After all, every businessman likes his customers to be well off and we should benefit by the prosperity of our neighbours.
Finally, to end up this rather long speech, looking at the Budget from the point of view of the annual housekeeping account, we can say that it is balanced, balanced rather like Blondin. He got across; his optimism was justified; and we certainly hope the Minister's optimism is justified and that he will get across. It is an expansionist Budget and rightly so, always subject to the overriding position of the balance of payments. If the balance of payments in the second part of the year does not improve, some of the Budget assumptions may have to be revised. That however, is something about which we cannot prophesy. In the long period, the Budget perhaps is irrelevant and we shall have to try to get something more than a balance from year to year and take the longer view.
I shall quote from the Irish Banking Review for June where that point is well put:—
"In the short run the country's accounts are satisfactory.
Equilibrium has been attained— or at least nearly attained—in the balance of payments and in the Budget. The acceleration of the rate of growth of the national economy must next receive attention. For this, more than the ‘shot in the arm' as the Budget has been described, will be needed. Prolonged nourishment, exercise and possibly blood transfusions may be the essentials of healthy growth."
