Last night, I was dealing, briefly, with a rather curious statement by Senator Rooney about what he called the artificial and temporary prosperity created in 1964 by the Government. I was pointing out that this so-called artificial and temporary period of prosperity had already lasted six years. There were, I thought, slightly doubting comments from Senator FitzGerald, amongst others, so I should like to quote a statement by the OECD, a completely independent source outside this country, as a result of reviewing the progress of our economy during the period I was dealing with. On page 9 of the June, 1964, OECD Observer, we read:
The five years 1959 to 1963 witnessed the fastest growth in twentieth century Irish history. An economy that had been growing at the rate of only one per cent a year suddenly began to expand at an average rate of more than four per cent. At the same time unemployment fell and fewer people were forced to seek jobs abroad. Even more important, there was a remarkable transformation of public attitudes towards growth. Whereas in 1959 many people considered a two per cent growth rate too ambitious, today it would be difficult to persuade the public that the growth target for the next five years should be anything less than what has been achieved during the last five. Chief credit for this achievement is given by OECD's Economic and Development Review Committee to Ireland's first Programme for Economic Expansion, launched in 1959.
That quotation, I think, reflects fairly accurately the change which has come about since the expansion programme began in the general economic outlook for this country. The important thing, I think, about the recent difficulties that have affected the economy is that growth has, in fact, continued. Last year was, I think, generally accepted to be a disappointing year. Growth was slowed down. Many difficulties arose, but, at the same time, the estimates are that there was a rise in national income during 1965 of 2½ per cent. That is below what we had hoped but, ten years ago, if there had been a year with a growth rate of 2½ per cent, this would have been regarded as almost a miracle.
Over the ten years or so, up to 1958, the average growth rate was less than one per cent. Therefore, even in our present difficulties, I think we should accept that, at the present time, this country is making progress which, only a few years ago, would have been regarded as altogether unattainable. There is no comparison between the present situation and the crisis which arose in 1956. I do not want to try to make political propaganda at the expense of Fine Gael or of any other Party, but I think it is useful to make some brief comparison between the position now and the position that obtained then, in order to show how very different matters are.
We had the situation that between March, 1956, and March, 1957, industrial production dropped something like 7½ per cent—an enormous drop— with a consequent fall in employment in industry. When the change of Government came in 1957, the output of industry was well below the level of 1953. The country was simply going bankrupt. We had a rate of emigration around 60,000 a year. In January, 1956, the level of unemployment rose to around 97,000. In 12 months, it was an increase of 24,000. The national income was falling. None of these things exists today. We have some increase in unemployment but industrial production is still increasing, if slowly, and there is no reason to believe that the coming months should not see a continuing rise in the rate of increase.
The present Government, when faced with difficulties, did not panic, did not run away. They settled in to take the necessary steps to ensure that the difficulties would affect the country as little as possible and that they would be solved as soon as possible. They took the least measures needed. It is possible to say we now are in the position that the crisis has been essentially solved. There are difficulties, and I do not know when the Government will feel it is possible to do something to lighten the present credit squeeze, but it is perfectly obvious that within the next few months, there will be a big change in the general economic outlook.
In each of the past ten months, there has been an improvement in our external trade as compared with last year. There has been an improvement of something like £21 million in our adverse trade balance. During the past 12 months, our actual balance of payments deficit has been reduced from £42 million to £21 million. Senator FitzGerald said the estimate this year —he said this early in the year—was that during 1966 we should be able to reduce the deficit to £28 million. We have done considerably better than that and it would appear that the prospects are there may be some further improvement in the months to come.
It is obvious that imports will increase to some extent but the prospects are that our exports will go up. The Free Trade Agreement will mean that certain sections of industry will be able to expand their exports, particularly of man-made fibres and so on. I was rather surprised to hear Senator O'Quigley make this statement—I wrote down what he said: "I do not know of anything substantial the Government have done to help industries to meet the problems of the new free trade area". I do not know where the Senator has been during the past few years that he has not heard of the large-scale adaptation programme of the Government.
The latest figures I have—there may be later ones—are for last December. They show that 590 firms, under the Government's scheme of grants and loans for adaptation, had plans under way to meet the competition of free trade conditions. The total capital involved in these plans was more than £55 million. It is an enormous sum and I do not know what Senator O'Quigley calls "substantial". These firms comprise the majority of the larger firms in each sector of industry and the general picture is one of widespread investment in plant and equipment to enable Irish industries to deal with the problems of free trade. The scheme has now been extended to next year.
The immediate prospects in this year is that industrial exports are likely to increase. There is a considerable amount of capital in the country and we may expect a considerable increase at some stage in the next few months or early next year in cattle exports. These will be helped by the reduction of the waiting period under the Free Trade Agreement which comes into force today. There is also the prospect of the removal of the British import surcharge at the end of November which will be another encouragement to our exporters. These factors make it very clear that our main balance of payments problem is pretty nearly solved. In dealing with our difficulties, the Government have been able to avoid anything like the economic chaos which occurred on two previous occasions during the past 15 years. We had the appalling crises of 1951 and 1956-57. In both cases the Government of the day panicked and did not take sufficient steps in time. It was left to Fianna Fáil to try to remedy matters at a time when the economy was stagnant.
We heard a lot of remarks from Fine Gael Senators about foreign borrowing and they seemed to indicate that, to their minds, it is a sign of national bankruptcy to borrow money abroad. I cannot follow that argument. Both the First and Second Programmes for Economic Expansion set out quite definitely that in order to finance the heavy increase anticipated by the Government in capital expenditure, it might well become necessary to rely to some extent on foreign borrowing. At the time I do not think anybody denied the obvious possibility that the need might arise; yet when the Government embark on a small amount of borrowing, people seem to think it is a sign of national bankruptcy. In recent months a number of countries have borrowed on the international money market. Australia, Austria, Belgium, Denmark, Norway, Japan and New Zealand are among them. Are they bankrupt?
It comes very ill from Senators and Deputies to complain about foreign borrowing when they themselves, when in office, borrowed no less than £40 million by way of Marshall Aid. Not that I object to that at all, but the awful thought strikes one that of that £40 million, what, anywhere in the country, is there to show for it? I do not know. The money was borrowed and it was spent; yet to this day there does not appear to be any visible sign of what it was spent on. At the time it was being spent we had the most appalling financial crisis. There is a certain need for those who complain about present foreign borrowing to reconsider their thinking.
We have the problem each year at Budget time, when increased taxation is required, that Senators complain about increased taxes but never suggest what items of expenditure could be cut, though they constantly call during the year for more expenditure. When it comes along, they are never prepared to vote for it. A clear case of that arose this year in the Dáil. We had the second Budget, a very simple document designed to raise money for two purposes—an increase in the price of milk and certain subsidies for agriculture, all of which had been called for over and over again, and the other to pay the £1 a week to civil servants. Yet members of the Opposition voted against this taxation required for these purposes. That was a clear case of expenditure which everybody agreed was necessary, which had been called for for months by members of the Opposition and yet when the Government brought in a measure to provide for those increases, there was an outcry and they voted against the expenditure. We have this constantly. We have another example—Senator Murphy, who is not here at the moment, said yesterday that, in his view, the amount of direct taxation should be increased; in other words, income tax should be increased rather than indirect taxation. When income tax was increased this year, who voted against it? The Labour Deputies who called for direct taxation. There is no sort of consistency in this.
This Finance Bill marks the end of the Government's fight to deal with the financial difficulties of the past year or so. We have clear indications that from now on the economy will continue to prosper in the way it did from 1958 onwards. This Finance Bill is the last step needed to set the economy of the country aright. The Minister is to be congratulated on bringing in a Bill which is sound, designed to deal with the needs of the country and does not go any further than is needed. While taxation is never popular, at the same time, there is no doubt at all that by this time next year, or much earlier, it will be clearly evident that this and the other steps the Government have taken have succeeded in putting the country again on the road ahead.