Seanad Éireann debate -
Wednesday, 22 Mar 1961

Vol. 53 No. 14

Central Fund Bill, 1961—Second Stage.

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

Minister for Finance (Dr. Ryan)

The primary function of the Central Fund Bill is to give statutory effect to the Vote on Account for 1961/62 recently passed by Dáil Éireann. Section 3 of the Bill accordingly authorises the issue of £43,532,880 out of the Central Fund. Section 2 makes a similar provision in respect of the current financial year to cover the issue of £5,845,885. This sum is the total of the 1960/61 Supplementary Estimates not covered by the Appropriation Act, 1960, but passed in time to be included in the Bill.

Section 1 provides for the issue of £6,937 out of the Central Fund for the service of the financial year 1959/60. This sum represents the amount of the Excess Vote for External Affairs agreed by the Dáil on 23rd February last. Finally, Section 4 empowers the Minister for Finance to borrow up to £49,385,702, which is the total of the foregoing three sums.

The total estimated expenditure for 1961/62 is £131,715,000 which represents an increase of £8,255,000 on the original estimate for the current financial year. Non-capital items account for £4,861,000 of this increase and voted capital services for the balance of £3,394,000. If, however, allowance is made for this year's Supplementary Estimates which totalled £7,894,000 the total increase is reduced to £361,000, capital services being up by £866,000 and non-capital services down by £505,000.

Senators have been supplied with the usual summary of increases and decreases for the individual Supply Services as compared with the original 1960/61 Estimates so that I need outline only the major variations arising in 1961/62. These main changes occur in respect of agriculture, social insurance, social assistance and remuneration.

Turning to the Vote for Agriculture, we find that the provision of £16,145,000 exceeds the current year's original Estimate by £3,895,000, but this changes to a decrease of £752,000 when account is taken of the recent Supplementary Estimate. The most important project in this Vote is, of course, the Bovine Tuberculosis Eradication Scheme, the cost of which is expected to exceed the revised Estimate for 1960/61 by £568,000. Increased requirements for headage grants and herd bonus payments in the Southern Counties, for the guarantee payments for fat cattle and carcase beef exports, and for fees to private veterinary practitioners for herd tests, together with an anticipated reduction in receipts from sales of slaughtered animals, are the main causes of the additional net expenditure in 1961/62.

Next in order of magnitude is the provision of £3,060,000 for lime and fertilisers subsidies. This includes £430,000 for the new subsidy on potassic fertilisers which exceeds by £230,000 the amount shown in the recent Supplementary Estimate so as to allow for a substantial rise in the use of potash. There is also an additional £150,000 for phosphatic fertilisers to meet anticipated increase in demand.

A provision of £1 million has been made for the marketing of dairy produce in the coming year as against this year's revised estimate of £2,350,000. Of the requirements for 1961/62, £500,000 consists of a grant to An Bord Bainne towards such losses as may be incurred, or subsidies granted, by the Board in relation to the export of milk products The remaining £500,000 represents the anticipated liability of the Exchequer for butter losses and other dairy produce subsidies until the establishment of An Bord Bainne in mid-May. The £300,000 being set aside for losses on the disposal of wheat represents the recoupment to An Bord Gráin during 1961/62 in respect of losses arising from the purchase and resale of the 1960 crop. This year's Supplementary Estimate has already provided £800,000 towards such losses.

The Estimates for Social Insurance and Social Assistance are affected by a transfer of a number of non-contributory old age pensioners to the contributory scheme established under the Social Welfare (Amendment) Act, 1960. Mainly as a result of this, Social Insurance shows an increase of £2,103,000 whereas the subhead for old age pensions in the Vote for Social Assistance is reduced by £2,300,000. A reduction of £115,000 also occurs in the Social Assistance Vote because of an anticipated fall in the number of applicants for Unemployment Assistance.

The main increases in remuneration will have to be borne by the Votes I am now going to mention.

Salaries, Wages and Allowances.

	Increase over original Estimate, 1960/61
	£
Garda Síochána	678,000
Posts and Telegraphs (including Broadcasting)	247,000
Primary Education	237,000
Defence (Army)	221,000
Secondary Education	179,000
Houses of the Oireachtas	81,000
Central Statistics Office (Census of Population)	64,000
The total of these amounts is	£1,707,000

Practically all of the additional requirement of £678,000 for the Garda Síochána results from the Arbitration award increasing the pay of the Force with effect from 1 March, 1960, and from a recent conciliation settlement substituting a pensionable element in pay for rent allowances. The cessation of the former rent allowances brings about an offsetting saving of £168,000 under the head of Allowances.

Heavier telephone traffic and a larger scale of telephone maintenance and renewals necessitate extra staff for which an additional £197,000 is provided in the Posts and Telegraphs Vote. Primary Education bears an increase of £237,000 in respect of National Teachers in classification schools and grants to capitation national schools. This reflects the larger number of teachers and improvements effected in the appointment and retention averages for assistants. Because of the continued growth in the number of pupils and teachers, the Votes for Secondary Education and Technical Instruction are increased by £179,000 and £180,000 respectively. The additional requirement for Secondary Education arises under the head of incremental salary grant, while the larger grants to Vocational Education Committees also contain a substantial additional element in respect of remuneration.

Improved emoluments for officers and men of the Army, including the introduction of children's allowances for officers, account for an additional charge of £221,000 for pay and marriage allowances in the Estimate for Defence.

Pay increases also contribute to the rise of £230,000 shown in respect of grants to health authorities.

As the cost of superannuation depends to a large extent on levels of remuneration it is scarcely surprising that pensions show a similar upward trend reflected mainly in the following Votes:

Garda Síochána	£158,000
Army Pensions	£125,000
Superannuation and Retired Allowances	£110,000

To these extra commitments is added a cumulative increase of £116,000 covering compensation to staff of Córas Iompair Éireann who have become redundant as a result of internal reorganisation.

As most of the other major items to which I have not referred consist of capital services to be reviewed shortly in the next Progress Report on the Programme for Economic Expansion, I propose merely to mention them at this stage. More is being provided to enable An Foras Tionscal to perform their functions in relation to industrial development both inside and outside the undeveloped areas and to assist the Shannon Free Airport Development Company Limited in the promotion of industrial and commercial enterprises. Under the head of tourism, schemes for the development of major resorts and holiday accommodation qualify for grants on a larger scale. Building and construction, including housing, harbours and airports, as well as drainage and rural electrification, will also require more, as will also the development of the telephone system, but this will be offset by substantially increased appropriations-in-aid from the Telephone Capital Account. In the Votes for Forestry and Transport and Power there will be additional revenue from sales of timber and landing fees.

In framing the supply services of the past few years, I have endeavoured to strike a proper balance between productive projects and services of a welfare or redistributive character. Economic expansion has been served and the long-term interests of the community generally fostered by the additional outlay on agriculture, industry and education at all levels. Heavier expenditure on the postal and telephone services has shown a return in the form of larger revenue. Social services have been considerably improved, enabling those dependent on them to share in the benefits of general economic development. At the same time it has been found possible to increase the remuneration for the Army, Gardaí, teachers and other public servants following recommendations of conciliation councils and arbitration boards in the light of trends in outside employment and in the national income. That the Exchequer has so far been able to bear these additional charges without undue strain indicates the growing strength of the national economy.

Having outlined and justified the main changes in the Estimates for the coming year, I now seek the Seanad's approval for the Central Fund Bill.

Dr. O'Donovan

I do not want to blame the Minister for the nature of his brief. At the end of the brief, he attempted to put some kind of life into it. I heard it suggested in the lobbies that the nature of the debate in the other House was set by the form of his brief. The Minister complained about the tone of the debate when he was concluding but it is an annual complaint. If his brief had more life in it, the debate would have been different.

When we get rid of all the verbiage about capital expenditure and this expenditure and that expenditure and get down to reality, we find that, contrary to my hopes which I expressed here when the Minister first came into office, he has been no better from the point of view of expenditure than his predecessor of the Fianna Fáil Party.

The expenditure for his first year in office, 1957-58, when he still had a little of the food subsidies to meet was £111½ million. The expenditure he proposes for the coming year is £132 million. You could add to that the £9 million subsidies that are not paid. So, in fact, expenditure in 1956-57 when there were £9 million for food subsidies was about £100 million. Now expenditure has gone up to £132 million. In four years, the Minister has increased expenditure on the Estimates for Public Services by £32 million, not taking into account the inevitable Supplementary Estimates we shall have in the course of the coming year.

As usual, I want to get away to some extent from the mere figures in this matter. I remember, in 1952, a well-known politician saying to the people: "Pay your way." What he really meant was: "Pay our way." Again, in 1956, he said: "Do not eat the seed potatoes." We are not now just eating the seed potatoes. We are eating a chunk of next year's potato crop as well. I shall demonstrate that later. We are committing ourselves to the money changers for a large chunk of next year's national income.

When winding up the debate in the Dáil, the Minister did not seem to be in his usual felicitous humour. I thought one of his less felicitous remarks was that when he came into office, he did not know what the position was. Later, at rather more length, he made another remark of a somewhat similar kind. Either the Minister was being disingenuous or if he knew he would be Minister for Finance, he had not made much preparation for taking over his office.

A famous politician said: "We must see what is in the cupboard." That type of financial baby talk is not good enough for serious political discussion. When the Minister got into the cupboard on the day he went into office he found £5 million in cash out of the premium bonds. Instead of expressing any appreciation, he said, as reported at column 675 of Volume 187 of the Official Report of Dáil Éireann:

There was not a shilling credit to be got by anybody. People had been thrown out of work because the banks would not give the industries and other enterprises money with which to carry on. Everything was in a desperate mess when we came into power in 1957.

"Everything was in a desperate mess." Yet he found £5 million in cash on his desk the first morning he went into office.

Mr. Lahiffe

There were a lot of bills there, too.

Dr. O'Donovan

If I found £5 million in cash, I think I could deal with the bills all right. It was better than finding nothing and considerably better than Senator Lenihan's five million halfpence to which I propose to devote some attention later.

It is exactly four years since the Minister took office. What is the position now? A few people are going around the country saying: "Everything in the garden is rosy." I notice the chairman of the commercial banks this year, imitating the Central Bank last year, had not a word to say. I have a few words to say. The Central Bank in its quarterly bulletin, having had nothing to say for itself for ages, suddenly came out in the last number with practically a blank page except for figures in the middle of the blank page. The figures were something like the following: At the end of 1956, the total hire purchase debt in this country was £10 million. I remember the end of the year 1955 when the hire purchase debt was £11 million. I got sick listening to the squawks from the bankers about the extent of this disgraceful thing. I heard about it until my eardrums were deafened. Of course, it has become all right since then. The commercial banks have gone into it themselves, you know. At the end of 1957, the hire purchase debt was £11 million, an increase of £1 million; at the end of 1958, it was £14 million, an increase of £3 million over the year 1957; at the end of 1959, it was £19 million, an increase of £5 million on the year 1958.

I have not got the figures for the end of the year 1960 but the Central Bank bulletin gave the figures for September of £25 million. You can add £2 million to this for the other months of the year. At the end of 1960, it was £27 million.

Mr. L'Estrange

Fianna Fáil prosperity.

Dr. O'Donovan

It is an easy way to increase the national income. What interests me in regard to that set of figures is the geometric progression. It is not arithmetic progression; it is geometric progression. In 1956-57, there was an increase of £1 million; in 1957-58, there was an increase of £3 million; in 1958-59, the increase was £5 million; and in 1959-60, there was an increase of £8 million.

A somewhat similar pattern of progression is shown in relation to bank advances. They went down £5 million in 1956. These are bank advances within the State to our own people by the Irish banks. They went up by £5 million in 1957. There was no change in 1958. They went up by £12 million approximately in 1959 and they went up by £17 million in 1960.

If the inter-Party Government were in office and these figures came out, I can see the then Taoiseach and Deputy MacEntee saying: "This is dangerous ground; this is a dangerous position."

Mr. Donegan

Blessing themselves.

Dr. O'Donovan

As if they were passing a graveyard. Let us take the past two years alone. There is an increase in bank advances of £29 million and an increase in hire purchase debt of £13 million—a total of £42 million. The Minister had something to say at the end of his speech— I will come back to it in detail later; I propose to analyse it word for word about what Deputy Dillon said in the other House on this matter. The Minister or anybody else can say that the bank advances are not directly reflected in the national income. The operative words there are "directly reflected" but not even the Minister would have the hardihood to deny that the hire purchase debt is directly reflected in the national income.

I could make a further analysis of the general position of the Irish banks but I want to take the overall figures. This is the position by analysis as I see it, taking the figures as they appeared in the Irish Times a few weeks ago. Before the war, the total advances, as a percentage of total deposits and similar accounts, was about 48 per cent. At the end of 1945 —the end of the war—they were 26 per cent. We could not import anything during the war. There was, therefore, a great deal of money. If my recollection is right, the figure in regard to deposits was £319 million. The advances were only something like £79 million or £80 million. At the end of 1951—this was the time we heard the first very big squawk—they were 48 per cent.

That was followed, as everybody knows, by a credit squeeze in the autumn of 1952. In 1955, they reached 49 per cent of deposits, still just under 50 per cent. That was followed, as everybody also knows, by a credit squeeze in the autumn of 1956.

Mr. Carter

Too true.

Dr. O'Donovan

Senator Carter remembers that one all right.

Mr. Carter

And so do the taxpayers. It put a blister on them.

Dr. O'Donovan

At the end of the year 1960, the figure was 57 per cent. The Germans, as I said before in this House, have a proverb that everything goes in threes. I take it that the next credit squeeze will be probably delayed until after the election is over. It will come after the election.

Mr. Carter

Not at all.

Mr. Lahiffe

It all depends on how the election goes.

Dr. Sheehy Skeffington

From what Government?

Dr. O'Donovan

I have something I want to say about that. I am going to say something that bears directly on that.

An Cathaoirleach

Perhaps discussions will be carried on through the Chair.

Dr. O'Donovan

I intend to say something upon the subject in relation to which the Senator has asked me a question. Let us take one section of the advances. Indeed, I was one of the people—and it is only fair that I should say so—who advocated strongly an increase of capital for farmers. An amount has now been provided by the banks, which is very substantial. The Minister reminded us of it last year. Instead of depending on the Agricultural Credit Corporation, I gathered from him that the Government had more or less arranged that the commercial banks would look after the farmer. Indeed, they have, as far as credit is concerned. The figure is up from under £20 million to over £30 million in two years.

How much of it went into genuine production? I want to say that I am extremely doubtful about the suitability of commercial bank credit for agricultural purposes. But one must give credit where it is due. I think the new Chairman of the Agricultural Credit Corporation has put some life into that organisation. I believe that the bank advances to the farmers consisted in part of using up next year's income, that is to say, in this context, using up the rise in the price of cattle which I am glad to see has come about. Everybody in the community is pleased about it.

Mr. Carter

I doubt only Fine Gael.

Dr. O'Donovan

Will Senator Carter listen to me? What I fear is that many of the smaller farmers were not just able to wait that long. It is the better off farmers who have got the benefit of it.

About a fortnight or three weeks ago, the managing director of one of the banks went down to the Dublin Chamber of Commerce and addressed the assembled merchants of Dublin. He made two or three major points that were not very advanced banking. He said that the bulk of their deposits were, in fact, payable on demand. When I saw that in the newspapers, I said this was a fair warning to the merchants of Dublin that the Ice Age was about to descend upon them again—probably when the election is over.

I want to answer Senator Sheehy Skeffington's question. I believe that if the election should result in a change of Government——

Mr. Lahiffe

God bless us.

Mr. L'Estrange

As it will.

Dr. O'Donovan

——no incoming Government are going to commit political suicide for the second time in clearing up the financial mess——

Dr. Ryan

Oh, oh!

Dr. O'Donovan

——created by a Fianna Fáil Minister for Finance for the second time in a decade.

Mr. Carter

Goodness gracious me!

Dr. O'Donovan

Let me read the Minister's own words: "Everything was in a desperate mess when we came into power in 1957."

Dr. Ryan

Correctly reported.

Dr. O'Donovan

The civil servants may write their memoranda a foot thick—and they will—when the Fianna Fáil Government go out of office. They will—do not worry—tell the new Government what a lot of blighters the last fellows were.

Mr. Carter

This is in 1980.

Dr. O'Donovan

The Central Bank will urge on the new Government to do this, that or the other and the commercial banks will be tearing their hair out, but all of them will be in the position of the boy who cried "wolf" too often. But let me get back to lawyer Lenihan's five million halfpence.

An Cathaoirleach

Senators should be addressed by their proper title.

Mr. Carter

Especially by the Leas-Chathaoirleach.

Dr. O'Donovan

Senator Lenihan, who is a lawyer. Perhaps the most important statement apart from the general tenor of the Minister's rather jaundiced remarks came at the very end of his speech when he made what was intended, I take it, to be a serious point—or intended to appear to be a serious point. Personally, I think the Minister was being disingenuous. I am not sure that he was. Possibly he may not have thought about it, or possibly indeed he may have been displaying the same lack of capacity to consider the matter, to which he referred earlier, which prevented him from knowing what the position was before he became Minister: "I want to say that Deputy Dillon seems to have some misapprehension regarding the nature of the national income. If Deputy Dillon looked at the headings of these statistics..." and here, I take it, the Minister held up a copy of the Statistical Abstract—“he would see that the national income is defined as the total of all payments for productive services accruing to the permanent residents of this country. All wages come into it and all profits, salaries and so on, and farm income comes into this item.”

This is the point I want to make: "Deputy Dillon thought it might have been swollen by our borrowing. It is not true that credit would come into it. Just as a man makes up his own accounts at the end of the year, he does not take in any credit he got as an asset. Neither is it taken into the national income." The man does because he has it as a tractor on his farm or he has a debit in his bank account when he adds it up. A key statement is the simple sentence by the Minister—and I love simple things: "It is not true that credit would come into it." I do not think the Minister would repeat that here today—I do not think he would for one instant. So much for the more serious part of this.

I want to come back to the pushing round of figures which the Minister did with regard to emigration. The Minister and I had a discussion in this House a few years ago on emigration. The Minister said it all took place in 1956. We have had replies to Parliamentary Questions in the other House that went: "There are no figures. We do not know what the population is." It is a most extraordinary matter that not alone could the Minister give figures in Dáil Éireann but he could even give the months. He said that Fine Gael had the figure of 180,000 and rounded that up to 200,000 for good value.

Mr. Carter

Two hundred and fifty thousand. There were more later.

Dr. O'Donovan

I am glad that Senator Carter made that interruption. It is interesting to see whether looking at this thing in the abstract, one can get a more accurate impression than can the people with the calculating machines. I make it that between April, 1956 and April, 1961—unfortunately the next census will not be taken on April 9th and that will vitiate the figure—the figure will be 250,000. It was 200,000 from 1951 to 1956. There was a drop of 60,000 in the population in spite of a natural increase of 140,000. That is my own opinion but only time will tell whether I am correct. The great bulk of those 250,000 in the five years from 1956 to 1961 will have taken place from the beginning of 1957. The Minister makes a point, and I make him a present of it, that we, the inter-Party Government, were to blame for the year 1957. Since I make him a present, I wonder would he agree in equity to making me a present of the fact that the Fianna Fáil Government were responsible for 1955.

Dr. Ryan

No, for 1954.

Dr. O'Donovan

They went out in June, 1954.

Dr. Ryan

I will say six months. We went out at the same time in 1954.

Dr. O'Donovan

You did not.

Dr. Ryan

Oh, yes.

Dr. O'Donovan

At the end of June.

Dr. Ryan

All right. Make it nine months.

Dr. O'Donovan

I certainly got a certain amount of amusement from the Minister's statement: "If you take the monthly figures in 1957, you find that half the 60,000 emigrants went out in January and February and we are not going to take credit or responsibility for the people who went out in January or February." I could get at this thing analytically if I wanted to but there is no need to bother because it is all poppycock. Figures of unemployment in February, 1957, have often been thrown at this side of the House and that is enough answer to that. It is rather amusing to find the Minister at the end of the analysis bringing the figure for emigration down to 120,000. Take 150,000 for the period from March, 1957, to the end of September, 1960. I think he is doing pretty well in my analysis of the average over five years—and, mind you, I am giving him credit in that because there was very little emigration in the material period of 1956. "If you deduct from that, which is only fair, the 31,000 that were taken off the unemployment list"—why does one deduct them? They did emigrate, you know.

Dr. Ryan

Yes.

Dr. O'Donovan

So why deduct them?

Dr. Ryan

They did emigrate and were not unemployed here.

Dr. O'Donovan

The Minister commented that taking off that 31,000 "the figure then becomes 120,000".

Dr. Ryan

That is fair enough.

Dr. O'Donovan

If we are talking about something in an abstract way without regard to anything beyond the figures, you get that result, of course, but you are not going to tell me that if there are 30,000 fewer people on the unemployment register you should deduct them from the number who emigrated.

Dr. Ryan

Take emigration and unemployment together.

Dr. O'Donovan

You should add them together.

Dr. Ryan

Yes, that is what I mean.

Dr. O'Donovan

But you were doing it the other way. If there are no more people in employment here today than there were at that time—in fact, there are a lot less—you should add the figures because they are obviously people who emigrated. It is quite a simple proposition, sticking out a mile. I can see that the Minister is convinced and is making me a present of it.

Dr. Ryan

There is no use trying to put you right because you do not see it.

Dr. O'Donovan

This is obviously a very serious problem, this problem of emigration. I made some remarks about it three or four years ago and the Minister referred jocosely to my "quoting one economist here and another there". Indeed, I think I should have looked at what I said because at that time, I gave a great deal of thought to it, but perhaps I will give the Minister the benefit of repeating it on the Finance Bill. It is quite obvious from the part of the Minister's speech devoted to this that he is now convinced, as I was three and a half years ago, that this was a very serious matter, and that it is not to be got rid of by quoting figures about national income or that kind of thing. Again, I am concerned when I see the figure like the Minister produces at Column 674 when he said: "In those four years, the gross national product rose by 16.3 per cent. Actually we took only 10.9 per cent. for central government expenditure."

Whatever way you analyse those figures, they are wrong. I can understand how the Minister got his 16.3 per cent. and why he took the gross national product, too, but when he talks about 10.9 per cent. for central government expenditure, of course the Government did not take 10.9 per cent. They took a great deal more than that. What he is trying to convey is that the gross national product went up more as a percentage than the increase in Government expenditure. I do not believe that is true at all on the figures quoted earlier showing the increase from £100,000,000 to £130,000,000. That is an increase of 30 per cent. So far as those figures go, it is as good a way of looking at it as any.

I am exceedingly glad that the price of cattle is rising. It is going to help the Minister. I hope that perhaps with a bit of luck the prices might go up a bit more. That is one bright spot in the whole picture. Another bright spot, I am also glad to see, is provided by the export trade. One of the reasons for that is the quite illogical one that the commercial banks are quite happy so long as their cash in London is not being indented on— they are quite happy and you can go through the girths, to use an old-fashioned expression, or go through the roof, to use a more modern expression internally for all they care.

There are the two bright spots— the rise in the price of cattle and the increase last year in the export trade; but again, looking at it historically, the evidence is that this kind of increase in the export trade goes by jerks. It cannot be done continuously. Again, the Minister compared what he called the increase in our national income with France or some other country and showed that in one year we had increased by 2.9 per cent., Belgium by 2.4 per cent. and France by 2.1 per cent. and so on. That kind of thing is just worthless, taking a single year for increased national income. The increase in France has been enormous over the last five or six years, completely different from anything that happened here. It is also true that the Germans have been increasing their real national income.

There is perhaps one final point, and this is on a subject on which I feel in danger, like my colleague, Senator Donegan, when he referred some time back to something being a subject of fun.

Mr. Donegan

Fun and witticism.

Dr. O'Donovan

If I might attempt fun and witticism for a moment, though this is dangerous territory, the Minister said that the cost of living was going up all the time and the value of money was going down. He went on to say: "I think there was never such a long period of stability as from the end of 1956 to the end of 1960".

Dr. Ryan

I think it is a mistake.

Dr. O'Donovan

It does not really matter. I am not taking the Minister up on a year or two. What I want to say is that one would imagine that this was a kind of cyclical period similar to what occurred in the last century or something of that sort. In fact, without going into the figures, there was one good reason why the cost of living remained stable in this country for those few years, and some people would think it part of a very bad thing. Import prices were rising. They had sky-rocketed when the inter-Party Government were in office, and one distinguished economist, J. R. Hicks, maintains that wages and prices vary directly with import prices. Import prices went up 14 per cent. while we were in office from 1954 to 1957. They dropped 7 per cent. since then. In addition, there had been a serious drop of 6 per cent. in our export prices for part of that time.

That was the reason I mentioned that it would be unfair to claim all the benefit in that way. The Minister did benefit by it, but he did not show any of the benefit in his Estimates Volume from year to year. He did not reflect it at all. Let there be no doubt about it, internal agricultural prices went down, and that is the bad element I referred to, though it was a good reason why prices were stable. The farmers' incomes went down. The community as a whole other than the farmers, and, indeed, even the farmers, benefited by the very substantial fall in import prices.

One could make calculations as to the extent of this thing, but again it all depends on which way you work it. There is not the slightest doubt that it was a very substantial benefit and the Minister for Finance did have the good luck to be in office when it happened. The Minister and the Government to which he is attached had better continue to look to the export trade, because if they do not do so, they are not going to be able to carry this amount of expenditure very much longer. I know the habits of the commercial banks in this country extremely well and they have one scale.

I looked up the Radcliffe Committee Report, the committee that sat in Britain to consider the working of the monetary system. When I bought it I became so fed up after the first nine pages that I did not read any more, and I am glad that I did not, because all reviews of the report said that they baulked the main issues and dealt only in generalities. When I was looking at these figures I thought surely these fellows made some suggestion as to what the ratio between bank loans and deposits should be. When I looked it up, all I got out of it was that in certain circumstances, there was a case for a ceiling based on a percentage, that is to say, you would not, for example, go above 60 per cent. here. It would be better they suggested than the absolute ceiling fixed in Britain of £2,100 million a few years ago. As against an advances ceiling of millions, you would put a maximum percentage ratio between advances and deposits. But, regrettably, the Committee did not make any suggestion in that regard. In British conditions, it would, I take it, be 40 or 50 per cent. It would be lower in Britain than here because of the nature of our deposits. But they did not come down even so far. I was innocent enough to believe I would pick up a figure of, say, around 40 per cent., or, say, for Britain, a range of 40 per cent. to 45 per cent., but there was nothing of the sort. All they said was that in certain circumstances that kind of thing—a maximum ratio—would be better than an absolute ceiling. Such a ceiling in this country would be, say, £200 million or something of that sort.

One of the troubles about this kind of matter is that you find a committee of genuine experts like the Radcliffe Committee who have devoted their lives to the study of monetary theory reluctant to commit themselves to figures of that sort. It has always astonished me why the people in our commercial banks are prepared on occasion to speak as if they were biblical prophets or something of that sort. I regret the Minister has not done better than he has in office. I thought at one time he would do well. Quite frankly I do not think he has done well at all. As I said earlier, he has not just eaten all the seed potatoes for this year but he has eaten all of next year's crop as well.

Professor O'Brien

This debate is the first of many debates which we shall have for the rest of the year on the national finances, but the terms of reference for this debate are rather narrow. We can discuss only expenditure in general; we cannot discuss expenditure in particular Departments and we cannot discuss revenue at all. As expenditure in particular Departments is the thing which interests most people more than general expenditure, the debate tends to be rather academic and perhaps not as interesting as the later debates we shall have to deal with the Budget and taxation.

Of course one cannot deal with the national finances without some regard to the real economic background. The two are intimately connected. The Government Estimates represent their claim on the national resources, represent the share of the national income which they wish to take for public expenditure. On the other hand the size of the national resources is very largely determined in modern times by Government action. Government action can act—to use the well-known metaphor always used nowadays, looking at the economic system as a motor-car—as a brake if things are going too fast, as an accelerator if things are going too slow. Also, to some extent, it can act as a steering-wheel to get activities into the right direction.

We should, of course, try to make some reasonable forecast as to the prospects for the present year. It is extremely difficult to do so in view of the uncertainties of the situation. We do not know what sort of harvest there is going to be and the harvest has a vital effect on the balance of payments. We do not know what the condition of affairs will be in Great Britain and the United States of America, but luckily everything points in the direction of an improvement of trade in both countries. Finally, we do not know what sort of change is going to take place in external markets owing to the emergence of new trading groups.

In spite of that we must try to make a forecast. In 1960, the national income rose by four per cent. This is gratifying, but, of course, the prosperity was not equally shared. Every person in the community was not four per cent. better off. The agricultural community in particular did not receive its just share of the increase in the national income. Nonagricultural employment definitely rose although there is a certain amount of dispute about the exact amount. This was largely owing to the continued influx of foreign capital. There was also a good deal of improvement in constructional industries.

It must be admitted that the amount of new employment was not enough to absorb the labour which was unemployed. Therefore, it was not enough to put an end to emigration. I do not wish to enter into the question of emigration on this discussion. Everyone agrees that emigration is almost bound to continue within limits as long as British wages are higher than ours and there is no restriction on the movement of labour. It is fairly agreed by everybody nowadays that efforts should be made to reduce emigration, at least to the point where the population ceases to fall. If the population could be stabilised at some level near its present figure that would be an achievement and that achievement may possibly be in sight.

The trouble about the fall in population is that it has a depressing effect on all industries catering for the home market and it tends to increase the per capita burden of debt. The trouble in dealing with emigration nowadays is that a good deal of it is not created by economic causes. People are not really fleeing from unemployment— many of them—but from one sort of job to perhaps a better one in Britain. If emigration is to a large extent a voluntary movement of people seeking better jobs, it is very difficult to seek to stop it by providing employment here that may not be as well paid.

Government policy should aim at slowing down the rate of emigration. There seems some sign now that stabilisation of the size of the population is coming into sight. If it does, that will be a very good thing.

The balance of payments for 1960 appears to have resulted in a surplus of £2,000,000 or £3,000,000. This is satisfactory but it is doubtful if it can be repeated in the present year. The terms of trade are moving against us. Import prices are continuing to rise. There will be a large amount of imports caused by the bad harvest last year and also by the stocking necessary for the new industries which are gradually coming into being. Therefore, it is probable we shall have a deficit in the balance of payments for 1961, though how much it will be it is impossible to forecast.

In spite of the surplus in the balance of payments for 1960, the reserves of foreign currencies were down. This is remarkable considering there was a surplus on the balance of payments and we know there was a continued influx of foreign capital. It seems to be the result of the depletion of departmental sterling funds which was caused when the new loan was floated successfully and also to a certain amount of hot money moving to Britain to take advantage of the higher rates in the money market when Bank Rate in Britain was very high. Irish rates did not move to the same extent as British rates—it is very desirable they should not—but there seems to have been a certain amount of flow of funds seeking the higher rates. Now that the Bank Rate is down to a more normal level, the disparity between English and Irish rates has practically disappeared. Therefore, one factor causing an outflow of funds does not threaten to reappear in the present year.

It is very difficult to make a forecast in these matters but I venture to suggest that Bank Rate is not likely to go up again. There seems to be a change in the climate of opinion in the world as a whole regarding bank rates. There seems a general recognition internationally that high bank rates have not been working particularly well in recent years. It is a reasonable prophecy that the Bank of England rate will not go up in the near future. It is only when it is very high, when there is a disparity between British and Irish rates, that there are hot money movements of this kind. It is unlikely that the movements will reappear. If that analysis is correct, there does not seem to be any case for corrective action in view of the outflow of reserves.

The fall in reserves was slight. It is becoming more and more accepted today everywhere that the internal economy of a country should not be subjected to jolts simply to correct a small disequilibrium in the balance of payments. That is why high bank rates are beginning to go out of fashion. I think it is more and more accepted today that countries must not sacrifice their progress and their growth to correct a disequilibrium in the balance of payments that may be trivial, that may be self-correcting or that may be ephemeral. In view of the figures for this country, certainly there is no case for anything in the nature of deflation —monetary or fiscal action—at present because the outflow of money is very slight in relation to the volume of our reserves.

It is expected that, in order that countries should be able to pursue a policy of freedom of this kind, they should hold adequate reserves and, therefore, it must always be an object of national policy to maintain reserves sufficiently large enough to give elbow room so as to avoid corrective action for small deficits in the balance of payments. There is no more generally accepted principle in banking circles all over the world today than that of avoiding interference with the internal economies of countries because of drains in reserves. One of the great problems that will be attempted to be solved in the near future is the provision of more adequate liquid reserves so that these temporary jolts can be avoided. I do not believe there is anything in the situation here to suggest that any action of that kind is necessary, in view of the adequate reserves possessed and the comparatively trivial drain shown in them by the figures of last year.

When we come to the subject of this debate, the public financial field, the out-turn of the present financial year looks like being satisfactory. Revenue has expanded but expenditure, as very often happens, has expanded even more. Therefore, it looks as if the Minister will end the year with a deficit instead of a surplus. I do not find anything alarming in the Estimates for 1961/62. They show an increase on the original Estimates for 1960/61 but they about equal the actual expenditure in 1960/61. I have no doubt there will be a large number of Supplementary Estimates in the coming financial year. Probably the actual expenditure in the coming financial year will be about £8 million or £10 million in excess of the actual expenditure in the present year.

I do not find this figure alarming. As the Minister said, many of the increases in the Estimates are of a productive nature. In regard to agriculture, there is an increase in the subsidy for fertilisers; there is an increase in the amounts provided for arterial drainage, the Land Project, animal diseases, the eradication of tuberculosis, research and advisory services, grants for farm buildings, water supplies, poultry houses and bacon factories. These increases are compensated by quite substantial reductions in the subsidies on butter, wheat and bacon. Therefore, on the Estimate for the Department of Agriculture it seems to me that the increases are of a productive kind.

Other increases, as the Minister said, are inevitable. In a period when wages and salaries in Government service are largely fixed by arbitration, a good deal of the costs of services of that kind rises automatically. There has been an increase in the number of civil servants and wages have been rising, but that is inevitable in a modern healthy community. It is nothing which we should find dangerous.

One aspect of expenditure in this country is that a very large fraction is of the transfer kind. It effects a redistribution of the national income rather than a net claim on the resources by the Government. This may have a bad incentive effect on the people concerned who pay taxes and who receive services. It does not absorb resources in the same way as certain types of Government expenditure as, for example, expenditure on defence will do. The fraction of the national income taken by the Government has remained remarkably steady in recent years. The figure given recently in answer to a question in the Dáil was that the fraction taken by central Government taxation of the gross national product, has been less than 20 per cent. for a good many years. That is not a very alarming figure. As I said in relation to the increase in national income not being evenly spread, the burden of this increase in national expenditure is not equally spread. Certain classes of taxpayers pay more than their share.

Taking the overall picture in this discussion, it would be difficult to say that public expenditure was growing at anything like an alarming rate. At the same time, there is no ground for complacency. It is the duty of both Houses of Parliament always to watch Government expenditure. Like other people, Governments like to spend as much as they can get. Therefore, it is the duty of the Dáil and Seanad always to watch Government expenditure and to criticise it, if it seems to be becoming unreasonable. Although there is no ground for alarm, there is no ground for complacency. The national income, although it is increasing, is not increasing spectacularly. The terms of trade are moving against the country. Serious depression in Great Britain might upset our export trade. There is every need for caution in the public financial sphere.

The Estimates for the Supply Services, as far as I understand, are all we are discussing this evening and they do not really tell the whole story of the Government's claim on the national resources. The Government also claim something from the national resources in respect of the Central Fund Services which are not voted annually and for a large amount of capital expenditure described as "below the line."

I do not think that the Minister's reference to capital expenditure in his opening remarks referred to "below the line" expenditure. As far as I understand, the estimate for "below the line" expenditure is only revealed to the Dáil for the first time on the introduction of the Budget. It is well to call attention to the fact that the amount of the Supply Services Estimates does not tell the whole story. The Government, in addition to what they will be looking for in respect of Supply Services, will be looking for something for the Central Fund Services which have not got to be voted and also for "below the line" capital expenditure.

The capital needs of the Government in the coming financial year will, I suggest, be abnormally high. In the first place there will be, of course, the normal pattern of expenditure on the various projects of development most of which are completely justified. Nevertheless, they require capital. In addition to that in the coming year a large amount of outstanding floating debt will have to be funded. It has been growing rather rapidly in recent months. Finally, one of the National Security Loans will be due for redemption during the year.

The Government will be looking for a good deal in the coming year in the capital market. I always feel that the capital situation in the public finances here could become rather dangerous. It ought to be carefully watched. I know it is unfashionable to refer to the Banking Commission of 1938, but the chapters dealing with deadweight debt still seem to have a great deal of relevance to the present situation. I make no apology for repeating what I sad before. It is so important that it is no harm to repeat it.

The mere fact that capital expenditure is productive does not mean that it does not produce deadweight debt. A great deal of productive capital expenditure perfectly justified on such things as education, drainage and projects of that kind, does, in fact, produce deadweight debt. From the point of view of the Budget the Minister has to meet the interest and sinking fund on these loans. The mere fact that the loans have been productively applied does not help him to solve his budgetary problems. It cannot be sufficiently repeated that the distinction between the deadweight debt and the non-deadweight debt is not the same as that between productive and non-productive debt. That needs to be stated in this country over and over again. I do not apologise for repeating it.

Therefore, a good deal of new borrowing which seems inevitable in the coming financial year will result in deadweight debt. One reason why deadweight debt should be undertaken with great caution at the present time is the very high rate of interest. I ventured to suggest earlier that bank rates will not rise much, I think, in the future. I think we are coming into a period of low money rates. That is purely an opinion. It may be wrong. I also venture to suggest that we are coming into a period of high long interest rates. One reason for that is the vast demand for capital in undeveloped countries. Another is the hedge against inflation, people feeling that currencies are losing their value. They will not lend to the Government unless there is some form of insurance against inflation.

One of the most striking changes taking place in the financial world in the last year or two is the fact that nobody will buy giltedged securities unless they have to. They have gone completely out of fashion. They have become dirt cheap. Nobody wants them. That reflects the fact that long rates of interest are very high. People are not going to lend to Governments except at high rates of interest. The pattern of interest rates in the near future will be that bank rates will be low and long interest rates high.

It was always said, until about thirty years ago, that the long rate of interest tended to come back to 3½ per cent.; that there was some norm in the long rate of interest; that whenever the rate went over 3½ per cent. It tended to come back down and when it went below 3½ per cent. it tended to come up. The statistics and history of interest rates seem to bear that out until the last thirty years. That is no longer true. We have come to a new norm. I think the norm now for interest rates is more like 6 per cent. I see no reason for the belief that long period interest rates are going to go down in the near future. That is why the capital Budget should be framed with great care.

We are coming into a period of very dear capital. Funding will become increasingly dear if a period such as I suggested is coming where short money rates are going to be low and long money rates are going to be high. The temptation for Ministers is to borrow on floating debt and the cost of funding it may become very dangerous factors in the situation. It is a fact that ought to be watched.

There is another point I want to make and I do not apologise for making it again. Another reason why in this country debt should be incurred with great care is the falling population. The normal pattern in most progressive countries is that the national income is rising, the population is rising not so rapidly and the total amount of debt is rising but not so rapidly as either the national income or the population. In this country we have the very abnormal trend where the national income is rising, the debt is rising but the population is falling. Therefore, as long as the population tends to fall the per capita burden of deadweight debt automatically increases every year. It is quite an abnormal situation. It is one aspect of the problem of emigration that is not sufficiently recognised.

I urge the Minister to be very cautious in framing his capital Budget. This is really not quite relevant to this debate because we are dealing only with the Supply Services Estimates. We are coming into a period of high interest rates. The population is still falling and there is a great deal of debt which, although productive, is deadweight. Therefore, the Minister may find himself with increasing Central Fund Charges which may be embarrassing in future Budgets. Even if the national income grows and taxable capacity grows, the growing interest charge on the national debt limits the Minister's freedom in other directions. The charge for the National Debt is a first charge on the public finances every year. If that is mounting, it means that the Minister has less taxable capacity at his disposal for increasing desirable educational, health and other social services.

A country which is borrowing, especially a country with a falling population, is rather like a family which is spending too much on hire purchase. The monthly instalments on the hire purchase limit the capacity of the family to spend in other directions. Therefore, I think it is relevant to repeat what I said in this House on other occasions. Debt in this country should as far as possible be avoided because now, with high interest rates and a falling population, the Central Fund charges could easily leave the Minister short of resources for increases in other desirable directions. I should not like to see the country in the position of some of my friends who have too many goods on hire purchase and too many monthly instalments to pay before they can pay the current grocer's bill.

Mr. Lenihan

Certainly it is very interesting to hear Senator O'Brien's very lucid presentation of the economic state of the country and of the trends likely in world and national finance and economics. I was very interested in one particular figure which I think pinpoints many of the fallacies in Senator O'Donovan's speech. Senator O'Brien stated that public expenditure in this country over the last few years remained at a constant rate under 20 per cent. of the gross national product. That is the correct way to approach any statistical argument relating to trends: to take the percentage figure with the total figure.

An inherent fallacy of Senator O'Donovan's was merely to talk to us about the increase in the Book of Estimates without having any regard whatever to the increase in national product or the increase in national income. He has been long enough talking about economics to have regard to the truth of what Mr. Disraeli said of three kinds of lies: "lies, damn lies and statistics". There is nothing more fallacious than to lift a statistic figure out and say: "There is an increase in national expenditure; national expenditure is up since last year and last year it was up since the year before." There is nothing whatever alarming about that so long as the percentage is taken into consideration and related to gross national product. When the trend is right, no amount of statistics juggling can get around it.

The increase is reflected in the increase over the past two years of seven per cent. in national productivity and that is the most valid indicator of national income. In 1960, it increased by four per cent., that is, twice the target set out in the Programme for Economic Expansion.

A further fallacy in Senator O'Donovan's argument came when he took the statement showing the audited expenditure on public services during the past few years and took the gross sum of estimated expenditure in 1961-62. This, he stated, was in excess of the gross sum in 1956-57. Of course, that is the case but he did not go on to tell us that of the 60 odd items set out in that table, the biggest single increase was for agriculture. In 1956-57, the last year of the Coalition Government the figure for agriculture was £7,996,000 and the Estimate for the coming year is £16,145,000 an increase of approximately eight and a half million pounds. In the four years which Senator O'Donovan deplored, the Agricultural Estimate has more than doubled and I think that in itself is a concrete expression of how usefully the public expenditure has been increased. It has increased in the direction of more productive spending within the framework of growing national product and income. There is nothing wrong in increased expenditure, so long as it is within that framework and is productive.

Breaking down the Agriculture Estimate, you see that all increases are designed to improve production on the land. The bovine tuberculosis eradication scheme shows an increase of £1,700,000. The Government now propose to spend £7 million within the coming year on this very necessary work. Senator O'Donovan mentioned my reference in the recent by-election campaign to the fact that we estimated last year £5 million for that necessary national work, adding that I would not say that the previous Government would be able to find five million halfpence. I think the basis of that is true though the phraseology may be a little coloured or exaggerated. Basically, that is the picture. The national finances are now in a position to meet this very staggering bill of £7 million and the money will be found on the basis of a balanced budget and stable finances.

Other increases in the Agriculture Estimate are also designed to increase productivity. The amount for fertilisers is now £3 million and the major share of that is for phosphates and potash and the fertiliser subsidy introduced by the Government which has enabled farmers to obtain artificial manures at very reasonable cost. I think that is one of the best, if not the best, schemes adopted by the Department of Agriculture. It is going ahead and a further amount has been voted to it. There are other increases in that aspect of agriculture so dear to Fine Gael hearts, the land rehabilitation scheme. It has increased by £200,000 and £2,200,000 will be spent on it in the coming year.

Right through the Estimate there are increases in productive directions. Bord Bainne set up to ensure the proper marketing of creamery products gets a considerable sum, in the region of £1 million, an increase of £750,000. These increases are in the direction of increased production and increased marketing and this Government need not fear any criticism so long as the increase is in that direction. They can certainly hold their heads high and say that they are fully justified when they meet any criticism.

The other major increase after agriculture is in the various State industries under the control of the Department of Transport and Power. That again is a good sign. These public organisations such as the E.S.B., Bord na Móna and Aer Lingus have been a great creation of the administration here. These semi-State bodies have loomed very large in the development of our economy and we can be proud of them. They are a development that the State has encouraged over the years, and a very necessary development, in view of the undeveloped economy taken over when we obtained our freedom. There are increases under that heading for harbour construction, rural electrification and Aer Lingus. Any increases in that direction are to be welcomed as well.

Apart from these productive items, the only other increases in the Book of Estimates relate to the very reasonable awards recently given, largely by arbitration, to the Garda, the Defence Forces and others.

Mr. Carton

Do you say "reasonable" in regard to the Defence Forces?

Mr. Lenihan

I do not know how any speaker on the other side can have his cake and eat it. If you want the Book of Estimates increased, you can make a case on that. I am rebutting the case that the Estimates are too high. I do not think they are.

However, apart from the Book of Estimates, this is an occasion for a more general discussion on the economy and financial position of the country. We have various indicators of progress. First of all, there is the balance of payments position. Senator O'Brien mentioned that in respect of last year we shall have a credit balance of between £2,000,000 and £3,000,000. Over the previous three years, we balanced the books, taking one year with another. That situation has not obtained here since the formation of the State, a situation in which there was a state of equilibrium year in year out. Too often in the past, the pendulum has swung violently from one side to the other, from the ravages of inflation to the stagnant waters of deflation. We had a large deficit in the balance of payments one year, and the following year, a surplus; we imposed all sorts of controls to restrict imports and the result was high unemployment. That was the pattern we had in 1955-56.

It has been a real achievement by the Government that for the past four years that violent swing of the pendulum, so long a feature of the Irish economy, particularly in 1955-56, has not occurred, and we have had a pretty exact equilibrium in our external account.

That is to be welcomed, particularly when it is related to an increase in the national income, and when that balance of payments position is in equilibrium at a higher level. I would not regard it as anything achieved if we were balancing our payments at a low level, importing little and exporting little. The trend is the reverse of that, and we are balancing them at a growing level until in today's papers we have the full report with the publication of the final trade statistics for 1960. There is no need to go into details of that to any great extent beyond the fact that some figures are fairly pertinent. Last year, this country exported a record total, the highest figure ever in the history of the State, of £152.4 millions. That was the value of our volume of exports last year, and that figure is shown in its true context of being equated to what might be called the higher level of activity when one comes to the figure with regard to imports.

Last year imports showed an increase of £13.8 millions, to our highest import figure. That is real progress— high imports and high exports and the balance of payments at a high rather than a low level. When one considers that of the increase of imports of £13.8 millions, £11.1 millions, or practically the whole lot, was capital goods and materials for further production, one gets a true picture of what might be called the expanding economy. It is a picture of imports going up and exports going up, each balancing, and the increase in imports relating to capital goods and materials for further production. However, this is a political assembly so it might be no harm to relate those figures to the conditions which obtained some years ago.

Mr. Carton

You would disappoint us if you did not get on to that.

Mr. Lenihan

In 1955, total exports were £110,000,000 odd, and to show the trend which was taking place at that time the figure for 1956 shows a reduction. The 1955 figure was £110,800,000 and in 1956, it was £108,127,000, a reduction of practically three millions. Further, it is important in assessing statistics to imagine a graph recording trends rather than individual figures such as Senator O'Donovan picked out. The graph which was showing a downward trend in 1955 and 1956 has since then shown a consistently upward movement, so that from the £108,000,000 in 1956, we have gone up to £152,000,000 in 1960, an increase in four years of practically 50 per cent. in the value of our exports. That is a positive achievement.

Mr. Carton

Was the trend a natural one or was it caused?

Mr. Lenihan

I had better go into the causes of improvement, then, since I am prompted to go into it. The position is that the increases in exports ranged over the whole aspect of our national economy. They did not take place in any particular direction, but included manufactured articles, agricultural products, live and processed. Over the whole field, there is an increase, and again this is a healthy sign. It is not related to some one particular development which could go into recession next year, but covers the whole field of our economy, in which there has been improved production and increased exports.

What is the cause? It is quite plain —the ten years export taxation remission introduced by the Fianna Fáil Government, introduced by the Minister for Finance, the substantial grants made available first to industry by the Fianna Fáil Government in 1952 in the form of the Undeveloped Areas Act——

Mr. Carton

You can tell them without blinking.

Mr. Lenihan

——active encouragement towards the development of investment in this country in the form of relaxation in the Control of Manufactures Act, and, above all, the financial climate in which business people have confidence to plan ahead. That is probably the greatest single reason for the improvement, both in regard to industry and agriculture. We have a situation where national loans are fully subscribed compared with the situation during the last administration when two of those loans were not even half subscribed.

Mr. Carton

Four and a half per cent. over-subscribed and you had to give 6%.

Mr. Lenihan

Deputy Sweetman, when Minister for Finance, collected in 1955 something like £8,500,000 on a floatation of loans of £20,000,000. That situation does not obtain today. You have further the situation—and there are plenty of business men on that side of the House to bear me out—where bank credit is made available to industry on a much freer and easier scale and to a far greater extent than it was made available in 1955/56.

Going away from industry, you have the situation today where the farming community, once regarded with suspicion in banking circles, are now given money——

Mr. Carton

Regarded with suspicion by more than banking circles.

Mr. Lenihan

The farmers are certainly not regarded with suspicion by a Government which has doubled its expenditure on agriculture over four years and commercial bankers, moving in step with Government policy, have doubled their loans to the farmers. In the year 1957, the commercial banks had on loan to the farming community £16.58 millions and in 1960, three years later, the figure of credit on loan to the farmers was £31.16 millions. In other words——

Mr. Carton

In other words, the banks and not the Government caused the expansion.

Mr. Lenihan

In other words, loans through the commercial banking system doubled over three years. In that same three or four years period, as I said at the start, the Book of Estimates expenditure on agriculture doubled also. There you have practical development in that direction. However, the important trend, bringing these figures down to human terms, is the trend in regard to employment. It is in this respect that the greatest progress has been made in recent years. The exact figure for the corresponding week in 1957 for the number of people unemployed was 84,752; the figure to-day is 56,577. In other words, in this week, in March, 1961, there are 28,000 people, in round figures, in the Irish community fewer unemployed than there were in the corresponding week in 1957.

Mr. Donegan

In the Irish community is right. Where are they?

Mr. Lenihan

I am coming to that. I am glad the Senator rose to the bait.

Mr. Donegan

You will never hold me on that bait.

Mr. Lenihan

I knew I would not get away with it: this is why I came prepared. Senator O'Donovan and many Fine Gael speakers in their discourses on the economic state of the country tended to take figures from the year 1956. That was before the complete collapse of the economy, following the balance of payments crisis in 1955 and the failure of loans in 1955-56. The chickens had not come home to roost then, but they came home to roost early in 1957, when in January we had the highest number of people unemployed recorded in any table of the Statistical Abstract. There were 94,648 people unemployed in January, 1957, which was the year when the chickens came home to roost, when the bad financial policy of 1955-56 eventually showed its results.

I think I am right in saying that the pattern of any economic deterioration is that, first of all, you have a balance of payments crisis, then you have Budget deficit accounting; then you have unemployment; and then you have emigration. The pattern would roughly take that form. The balance of payments crisis would come first; then Budget deficit accounting; then a reduction in economic activity, resulting in unemployment and finally emigration. The credit squeeze was largely responsible for the fact that, in January, 1957, 94,500 people were unemployed. That was caused by the credit squeeze in 1956 (a) because of the balance of payments crisis in 1955 and (b) because national loans which were needed to provide the necessary capital failed miserably.

Mr. Carton

We have no credit squeeze now and what about the unemployed in the country and in the city of Dublin?

Mr. Lenihan

With regard to the city of Dublin, I think Senator Carton can say very little, because I can say without fear of contradiction that the unemployment position in the capital city was never better than it is now because of the fact that the economy has revived; there has been an increase in the building construction trade and an increase in the building and manufacturing industries and an increase all round in industrial employment.

Mr. Carton

And finally emigration.

Mr. Lenihan

I am coming to that. You caught the bait again.

Tomás Ó Maoláin

What about the commission which the Coalition Government set up? That was to solve——

Mr. Carton

They say there are lies, damn lies and statistics. Now he is on the statistics.

Mr. Lenihan

Early in 1957, the first chicken came home to roost when there were 94,000 unemployed. For every month through 1957 until August—January, February, March, April, May, June, July and August— the pattern is the same. Each monthly figure in the Statistical Abstract for unemployment is higher than the figure for the corresponding month in 1956. The unemployment which started catastrophically early in 1957 continued up to August, 1957. Nobody thought seriously that when the Fianna Fáil Government came in to repair the financial mess that overnight the unemployment situation would be remedied. It took six to eight months to do so.

In September, 1957, we see the trend reversed. For the first time, in September, 1957, more people were employed than in September, 1956. That is not a freak. The graph which is going down reached its nadir in August, 1957, and from there on, for every month from September, 1957, until March, 1961, there are fewer people unemployed for every single month than in the corresponding month in the previous year.

I challenge anybody to take any month from 1958, 1959 and 1960, and right through to 1961, and to deny that there were well over 10,000 fewer unemployed——

Mr. Carton

The Senator is doing exactly what he blamed the Leas-Chathaoirleach for doing.

Tomás Ó Maoláin

There was a Coalition Government in for six years and emigration rose in every year.

Mr. Lenihan

With regard to the emigration problem, which I deplore being bandied around in this fashion, it is a problem of long standing and has existed from before the time of the Famine. I do not give that as an excuse for the problem. I am again going to take 1957 and I am going to take the Fine Gael Party on its own figures as bandied about in the Dáil. We have not got final figures yet, so that we cannot have a scientific debate on it, but in so far as we have figures deducted from cross-channel traffic and people going abroad the Fine Gael Party produced them man after man in the Dáil on the discussion on the Vote on Account. The figure, and this is the Fine Gael figure, is 180,000 for the years 1957, 1958, 1959 and 1960.

But for the year 1957, on their own admission, 60,000 people emigrated. The average rate of emigration for the years 1958, 1959 and 1960 is 40,000. We do not deny that the emigration last year was probably 40,000.

I want to nail the Fine Gael Party to the year 1957. In that year, 20,000 more people emigrated than in 1960 or in 1959. That emigration followed the mass unemployment in January, 1957, the highest unemployment figure recorded in the Statistical Abstract— 94,000. It ran people out of the country. That catastrophic figure, coming on top of a balance of payments crisis, where the banks would not give out money and the Government had not money, simply ran the people out of the country. That trend has been arrested. The level of emigration is now 20,000 below the 1957 level and unemployment shows an improvement in the neighbourhood of 28,000.

There you have the complete refutation of the case that the reduction in our unemployment figures can entirely be related to emigration. It cannot, on a reduction of 20,000 in emigration in the years since 1957 and on a reduction of 28,000 in the figures of registered unemployed.

Looking through the contributions in the Dáil on this subject recently, I have come to admire the very sane contributions by Deputy Corish, Leader of the Labour Party. He appears to have a far saner grasp of the problems facing the country and a far more rational approach than many Opposition Deputies. He is less inclined to use the statistical line and more inclined to grapple with the problem.

As will be seen at column 218 of Volume 187, No. 2, of the Official Report, Deputy Corish dwells on the figures so often given by the Government. In regard to employment—not reduction in unemployment—in industry—in manufacturing, mining, construction and electricity—in 1958 and 1959 the figure remained around the same at 272,000 and 271,000. In 1960, it jumped to 279,000 and for 1961 it is estimated at 288,000. Deputy Corish rightly bears out what we say, namely, that, for the past two years, 1960-61 and 1959-60, industrial employment is increasing at the rate of 9,000 per year. That is our case. We say that is not enough. We think it should be more. Our policy and our Programme for Economic Expansion are designed to meet that. The trend is upward. For the past two years, industrial employment has been increasing at the rate of 9,000 per year, as Deputy Corish pointed out. We welcome that upward trend.

The first sign of recovery was in 1959. That was the key year of recovery. In 1957, we were still wallowing in the chaos left by the previous administration. In 1958, we began to climb out of it. In 1959, we had the first sign of recovery with the increase in employment in manufacturing industry from 151,000 to 156,000.

I claim that 1959 first showed fruition of the practical policy of the Fianna Fáil Government. With that increase in employment in 1959, we had the increase in the following two years of 9,000 people in each year, 18,000 over the two years, in the wider range of industry, namely, construction, mining and electricity which first showed itself in 1959. The result of that increase in employment, or because of it, was the dramatic increase in industrial exports which was the first green light in recovery we have had.

The point is being made that the improvement in the unemployment figures is related solely to emigration. That is the facile sort of false statistical line that is being bandied about. We are told: "You reduced the unemployment figures by nearly 30,000 but that is entirely due to the fact that the people emigrated." The answer is that 20,000 fewer people emigrated in the past two years than in 1957. The numbers employed in the total industrial sector have been running at 9,000 upwards each year or 18,000 in the past two years. There is the answer. It is irrefutable.

The Fine Gael Party wants to castigate Fianna Fáil with 1957 but they will not be permitted to do so. That is Fine Gael's year. The key month was August, 1957, when unemployment stopped rising. Starting in September, 1957, month by month since then, the unemployment figure has gone down compared with the corresponding month in the previous year. We stand over that record and we will stand over it in any public debate anywhere anytime.

That is not to deny that there are problems in the country that remain to be faced. The Taoiseach has made it plain that we are not resting on our oars. We are not regarding the practical achievements of the Government with complacency. The level of increase in industrial employment will have to be doubled, at least, on the 9,000 we have achieved over the past two years, if we are to make any indent on the emigration problem.

We still have the problem of people leaving the land. Deputy Corish goes on to discuss that in a very sensible contribution in the other House. That is a problem which is worrying people all over Europe. It is not purely an Irish problem, much as some political agitators seek to make out. It is a problem which is worrying probably the most prosperous economy in Western Europe, the Federal German Republic, where there is probably the highest flight from the land into industry. That problem will remain so long as people on the land feel there is a greater reward in industry. It is a matter of supply and demand.

The greatest challenge to this country is to ensure that the standard of living obtainable on the land will come as near as possible to the standard obtainable in industrial employment. Until that is achieved people will tend to leave the land. The best way to bring that about is to double expenditure on agriculture, as has been done over the past four years, and to ensure that a better type of farming is engaged in by the small valuation farmer.

I particularly welcome the efforts of the Irish Sugar Company in the past two years to go into the vegetable and fruit processing business on their own or in conjunction with major organisations abroad so as to develop the tremendous market adjacent to us in Great Britain. Intensive horticultural farming can be of real benefit to the farmer under £10 or £12 valuation. The fact that they are engaging in that enterprise shows the value of the public companies which we in Fianna Fáil can claim to have developed and encouraged to a greater degree than any other——

Mr. O'Quigley

The Senator has the impudence to say Fianna Fáil founded the Sugar Company.

Tomás Ó Maoláin

Fine Gael left a bankrupt sugar factory after them.

Mr. Donegan

Senator Lenihan will milk the neighbour's cow day after day.

Mr. Lenihan

Their development is largely the result of the enterprise and initiative of successive Fianna Fáil Governments. I think our friends in the Labour Party will welcome the development in that direction. We hope it may continue in the future.

Dr. Sheehy Skeffington

This is one of the few opportunities we get of having a look at Government policy as a whole. I think we are entitled to use it, and to ask what kind of a State have we been building since we had a Government of our own. We have tried various forms of Party programmes, but we have had the control of our destinies since 1922. I should like to look at the State we have built. As I look at it, I see a State of class distinction, vested interests and protected privilege. It seems to me that that stands as a betrayal of the sort of aim, objective and motivation which inspired our people to work for self-Government.

If we look at the material resources of the country and if we look at our resources of labour power, both manual and mental, I would say that neither of these sources of power and wealth is being developed and used to anything like the extent it should. The result of the failure to plan nationally, the result of the failure to plan, on a sound economic basis, for the community, has resulted, under both Governments—neither of them can conceal the fact—in none of the Governments we have had so far achieving full employment, including employment for nearly one million people who have been driven from this country since 1922. No Government has achieved full employment. We see instead an enormous human wastage, and what you might call an economic non-plan.

Furthermore, to our shame, many of our leading politicians seem to be proud of the fact that we leave everything to chance, or to private "enterprise," into the pockets of which they are prepared to pour money, but they are not prepared themselves to develop the country's resources in a major way. Frustration is the keynote of our economy, while there is immense work that still remains untackled under the profit system, which is the system we employ here. As James Connolly pointed out many years ago, no man, no matter what his virtue, talent, ability or training, can get employment at all under that system unless he can find an employer to make a profit out of his work. That is a mistaken basic concept that has bedevilled the whole question of employment and production and left our political parties fumbling for a solution, and boasting about "slightly improved unemployment figures," instead of telling us when they are really going to take the brake off and use all our resources of men and material.

What is our major source of wealth? I suggest that the answer is our people, and in particular our children. Our greatest potential source of wealth is in the young people of this country. What about Government policy in that connection? The Government policy ought to be to assess, plan and consult in relation to all that young ability, and all the material resources to which it could be applied. Their policy ought to be so to organise our economy as to develop those talents and apply them to the nationally useful production which would be possible under a really nationally planned economy.

If this were a desert island upon which we had all been washed up, I do not think we would wait to establish titles to ownership, or wait for a box of money to be washed up before we all started in with a will to develop all the resources of the island, without any preliminary concern for how much so-and-so is going to get out of it, or whether it would be to the advantage of a particular class, creed or clique. We ought, then, first to foster the latent talents of our children, and the Government's educational policy ought to be based on that. It is quite obvious, moreover, that the educational policy is linked even with our export successes or failures. If we could, like Switzerland and Germany, succeed in producing products which would have a very high skilled labour content, we could compete on far better terms with the world than at present.

Now, most Irish children spend seven years in a primary school and some Irish children spend another six years in a secondary school. There are 450,000 children in the primary schools and 50,000 children in the secondary schools. It will be recognised that secondary school children come from the better-off homes. I think we recognise, furthermore, that all education needs State subsidisation. We all agree on that. Education is a national responsibility, like everything else, that requires planning. I think we should also recognise that the child that is more in need of State aid in that connection is the child in the primary school. He or she is even more in need of that aid than the child in the secondary school. For clearly, on balance, the parents of the primary school children need this financial assistance in education even more than the parents of secondary school children. Yet we spend nationally per head per year on the secondary school children something in the neighbourhood of £56, which is not a quarter of what should be spent on secondary school children. I grant that, but what do we spend per head per year on our primary school children? The sum of £24. It is glaringly obvious that they ought to be helped more by the State. But in fact what the State does in this country is to fortify the class distinctions already existing.

Class distinctions by our educational system are fostered and crystallised. We have down in the hall a very fine copy of the Proclamation of the Irish Republic. It was hoped that, under a free Ireland, we would cherish all the children of the nation equally. In my contention, that would be an excellent thing to do, to be able to give an equal chance to every child. Do we do that? Do we cherish the children even of the workers, and the poor man's children? Can we say that we give them an equal chance to develop their talents to the full? Do we give every adult a chance to find full employment for those talents and, when they have been developed, to use those talents in tackling all the many tasks of agriculture, forestry, industry and education which are crying out to be tackled for the common good and the wider community of the world? The answer is an emphatic no.

All we do is to build up tariff walls year after year. The Taoiseach tells us that companies "will have to be more efficient" or the tariff barriers will be taken down, but he never takes any actual step in that direction.

What I should like to see, then, is a real national plan based on community need rather than on individual greed as a test of economic utility. The test question we should ask is: do we need it and how much? And not: can someone make a profit out of it, and how much? We should plan to assess our material resources; we should plan to develop our intellectual resources to the full and harness all our intellectual and manual power to all our material resources for the greater good of the community.

In that way we could sweep aside the existing stratification in our society of privilege and poverty, of talents and abilities crushed and stunted or else exported for use abroad—our society with its new ascendancy and its new coolie class. The jobs to be done would be tackled on the priority of need, not of greed, so that Ireland might at last become that Irish Republic towards which people in the past worked, looked forward and for which they sacrificed. No longer would we have as we have under the present régime and had under the previous Government, money-grubbing instead of community planning, head-shrinking instead of education, emigration instead of planned employment for all our people. We should have real planning with real powers, real courage, real service and real vision. We will not get it from this Government, and not from the next Government, but, in my opinion, the day will come when that is precisely what we will get, and then the Central Fund Bill will be, for me at least and indeed for the whole people of Ireland, an occasion of delight and pride.

The Seanad adjourned at 10 p.m. until 3 p.m. on Thursday, 23rd March, 1961.