Skip to main content
Normal View

Seanad Éireann debate -
Wednesday, 6 Jul 1966

Vol. 61 No. 16

Finance (No. 2) Bill, 1966 (Certified Money Bill): Second Stage (Resumed).

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

(Longford): Before business was suspended I was about to refer to another matter in our attitudes that we should think hard about. That is our attitude to taxation. I know that it has been raised by many Members of this House, and my comment would be that it is my experience that people who clamour and press for services from the State which cost money are very often the people who, when it comes to paying for those services, object to the particular item of taxation calculated to pay for them. If we are adult in these matters we have to think about them and behave in a rational and sane manner. Another matter that has been raised in this debate on the Finance Bills—and I am inclined to couple both of them—is the incidence of taxation direct or indirect. We must be adult enough to realise that taxation in any form, no matter how sugar-coated it may be, is not a very palatable thing to any of us, but it is necessary to maintain services if we want services and if we want the growth of services that our people press for or we regard as desirable. We must be prepared for them unless we want governments to run into the sorry mess of unbalanced budgets.

No matter what our views may be on political questions none of us with any sense of responsibility, I feel certain, would like to see the position where you would have a financial mess in the country as a result of improper budgeting or imbalance in budgeting on current accounts. It may be permissible to borrow for capital investment, but a Government that would be forced into the position, by pressure of people who do not like taxation, whereby they would borrow money for day-to-day running on current account I would regard as a very poor form of government.

In this question of attitude to taxation it is easy enough to argue that direct taxation, though it may not be as sugar-coated, is undesirable by contrast to indirect taxation. It is easy enough to argue in favour of higher levels of direct taxation if you had a large very wealthy class who could afford to stand a higher level of direct taxation. We have not in our society a large group of very well off people who could stand a higher level of direct taxation. It is the people who work whether in the factory, on the farm, in the workshop, or in business, who create wealth. It is the people of modest means who create wealth and pay taxes. There is not in our community a large group of well off people to whom we could turn to increase the level of direct taxation. The Minister and his Department have a number of experts to guide them in deciding the levels and trends of direct taxation in relation to indirect taxation. I do not think it can be seriously argued that we can do away with indirect taxation if we want to maintain our services and improve them. We must pay direct and indirect taxation.

I want to refer now to our attitude to work, and to the growth of professional associations, trade associations, farmers' associations, veterinary surgeons' associations, dentists' associations and workers' associations. It seems to me that the only real interest they have is to foster the interests of their own section. That was made clear to me yesterday evening when a Member of this House said he was not speaking objectively but from a particular point of view which he represented. I know other groups do the same thing and I suppose it is forgivable. Despite the fact that the Senator said he was not objective I think he was objective in many ways.

I remember reading a lecture by a person I regard as a fairly good social thinker. One of the gems of that lecture was the suggestion that if work was not a necessity it would have to be invented. The implication is that work is necessary to keep people out of trouble and that if they were not working they would dissipate their time. Work is good for people. It disciplines them, keeps their minds employed, and keeps them out of villainy. I do not see any virtue in the growing desire for shorter working hours and more and more money for less and less work. I do not see any virtue in a 40-hour week. I know people who are self-employed and who cannot work a 40-hour week. They are frustrated by the idea that other sections get a better standard of living while working shorter hours. This ultimately leads to the financial difficulties which seemed to recur.

I am not against workers whether organised or unorganised trying to get, or succeeding in getting, more remuneration and a higher standard of living. That is something we should all like to see, and it is necessary for the growth of our national income which I hope will continue to develop. That can only be achieved by the work of our people. I can see a danger to that growth and improvement in the standard of living of our people, and particularly those who are not well off, in shorter working hours.

I should like to see people working more efficiently and, within reasonable limits, working longer hours, getting a higher output and enjoying a higher standard of living. I see this from a rural point of view and I fully realise that it has become very annoying to young people in the rural areas that they cannot get a similar standard of living to that of the people in trade union employment, people in professional employment, or civil servants. The people on the land have to work much longer than a 40-hour week. If we want to have a higher standard of living for ourselves, or even for our grandchildren, we must work for it. There is no easy way and no easy solution.

People who are in a position to influence the thinking of other people should do a serious bit of thinking themselves in the hope that there will be more sanity in our relations with one another. The new Ministry is only another tool. A tool is as good as the person who uses it. If the new Ministry is not used skilfully it will not achieve what many of us hope it will achieve. Because I believe that if work were not necessary it would have to be invented, I think we should review our attitude to work. If we do that, many of our difficulties, financial and otherwise, will disappear.

I am assured by my colleagues who know him that the Minister is quite a decent fellow.

Take that for granted.

I am told that whereever possible he likes to dole out the cake as equally as he can when framing his Budget. It was, therefore, with the utmost disappointment and dismay that I found, when he introduced his Budget in March, that much maligned section of the community, the agricultural section, had been left out of the picture once again. One felt possibly that the Minister was aware the dose of medicine would be very large and that the easiest way to administer it would be in two doses, but the amount of taxation he imposed in the first Budget was such that one felt there would be something in it to meet the urgent need of the farming community.

Yet, all they got was the hope that their incomes would improve and that if they did not the Minister would come back later in the year looking for more money to meet the situation. I fail to believe that the Department of Finance were so badly advised they did not realise when the Budget was being framed that the situation in the country was as bad as it was. Having gone through the bad harvest of last year, when it was impossible to save the hay crop, facing into the winter period with demands for fodder for extra stock, it was not in the least surprising that farmers' losses were considerable. By March those fears had been borne out. The losses the farmers were suffering at that time must have been known to the various Departments and could have been conveyed to the Minister for Finance.

One was, therefore, inclined to believe that what Senator Murphy said earlier this afternoon was true— that the second pill would be left nearer the Presidential election so that the Minister could dole out a golden handshake to the farmers and reap the rewards on 1st June. Everybody understands that agriculture is the backbone of the economy and, that being the case, that the dairying industry is the backbone of agriculture. It was more than obvious in March that the dairying industry was crying out for further support.

While we welcome the help it received in the second Budget, it was too little and too late for a great many. Twopence per gallon for milk for a small farmer whose cows were already dead was very little consolation, and a great many small farmers were unable to meet the feed bill to maintain their cows. They kept the cows in the hope that the grass season would come suddenly, always waiting for something to happen. Unfortunately, they waited too long. I do not think the increase given in the Budget will meet the situation in the dairying industry. While I am not married to the two-tier price system—the Minister for Agriculture has undertaken to have a second look at it—I feel it is at the moment the only solution. The big farmers have greater expenses and they require further support to meet them; and the small farmer, in order to keep body and soul together, unless he can meet his commitments by increasing his stock and his production, cannot hope to survive. The blow which has been dealt him this year by the elements largely, by the Minister's failure to meet him sooner, will mean that he will find it very difficult to carry on.

I do not believe anybody can object to the taxes on the items on which the Minister imposed them in his first budget. I do not believe anybody can object to taxation when it is designed to meet a critical situation. What I object to is that the Government got themselves into a mess and the people now have to try to get them out of it. It was being built up over a long period. Its imminence has been pointed out to the Government yet even today they are not quite certain where they are going.

The taxes imposed on beer, tobacco and spirits, as the Minister remarked here last week, provide a certain amount of revenue occasionally. So do I. I do not believe anybody in the House provides the Minister with as much from tobacco as I do. I am not cribbing about that. I do not have to smoke, I do not have to drink, but I feel for the person, whether he be young or old, living in isolation on a farm. The only pleasure he may have is a smoke or, when he goes to town, an occasional half one or a bottle of stout. Other people living on small fixed incomes such as old age pensions will have an increase of 2/6d a week later in the year. Meanwhile they have to cut their cloth to the measure of the further taxation imposed by the Minister. These people receive our sympathy and, we hope, will receive further consideration from the Minister.

The selective wholesale tax in the second Budget will to my mind make bad worse. While it will bring in a considerable sum of money, it must be remembered it will also increase costs all round. Though it is not being imposed on the necessaries of life, it will nevertheless be felt in a great many spheres. The cost of building houses, the cost of transport, and the cost of the distribution of everything will build up. I am afraid that the Minister next year will find that the last situation is worse than the first. I am quite certain he has been worried about the loss of revenue during the last few months due to the trade disputes. I am afraid, too, that in the months to come he will be equally worried about the growth in unemployment as a result of the further taxation. The loss of revenue must be reflected next year and we will then have a situation in which fewer people will have to pay more. I do not claim to know the answer as to where we will finally land. This is something which will have to be faced up to at a very early date.

We had, to go back to the agricultural community, the unfortunate happening in regard to the manner in which the taxation in the second Budget was brought in. It was brought in to meet increased grants to farmers and others. The others seem to be just an afterthought. The impression was created whether deliberately or otherwise—I do not believe for a moment that the Minister did it deliberately—that the farmers were getting money for jam and that there was £52½ million there for them this year and what were they crying about? This is one of the things which turn country against city and it does not help for the better relations which should exist. I should like to remind the House—I am afraid this applies more to the Appropriation Bill but I should like to say this in passing—that if you examine the figures the actual amount of cash going into farmers' pockets directly from that huge amount of money is very small indeed. By and large, the figures relate to a very long-term process.

Land reclamation is just one item which you could take out of this. I forget the exact figures for this. It must be about £1½ million or is it £4 million? Whatever it is, land reclamation is carried out by a farmer in the expectation that the work done will last for generations. It also involves him in increased expenditure of one kind or another. If he reclaims a portion of land, if he decides to till that land it will call for increased mechanisation and if he decides to graze it, it calls for increased stock. Increased stock, on the other hand, calls for increased housing. While you may argue that there are grants for farm buildings they are a very small percentage of the amount of capital farmers have to invest in those items.

May I interrupt the Senator? The figure for this year is £2.5 million. It is £250,000 more than last year.

We are very grateful for it. Nevertheless, I still maintain that that £2.5 million is not going directly into the pockets of farmers any more than in the case of a city man who goes and builds a house for himself. He gets a site and he builds the house. If he qualifies for the various grants he gets them. He is not building the house for himself alone. If he decides to live in it he expects it will do his children, his grandchildren and their children afterwards. It is the same with land reclamation, farm buildings and improvements in regard to the eradication of disease. Those are all benefits but, while they are costly to the taxpayer, they will, nevertheless, eventually be of benefit to the State itself and not just to individual farmers. The farming community should be given some encouragement and not made to feel they are getting a handout. They should be made to feel that they are playing a part in the building up of the economy and helping to increase the country's prosperity.

There is one item which I should like to touch on and which was dealt with extensively in the other House. I think the Minister gave a fair reply to it. I refer to the allowance for education. The allowance, bearing in mind the increase in the cost of education over a number of years, is not in proportion. While there is an improvement, nevertheless, everything else, no matter what it is, should take second place to education. The education of the young people should come first. Those children wanting advanced education must receive more assistance than the Minister has been able to give them this year. I am quite sure the Minister will bear that in mind and that he will, whenever the money is available—I hope it is very soon— help those who are trying to help themselves and the nation.

I am not at all happy about what the position will be in a few months hence. The Minister told us last week that an improvement has already set in. That reminds me of the time when Deputy Sweetman was Minister for Finance. When things were at their worst somebody asked him when we would turn the corner. While the corner did not seem to be in sight he remarked: "We have already turned it". Maybe the Minister can see what Deputy Sweetman could see then. If the corner is turned I hope it is true and when the Minister comes back next year I hope he will be able to give some relief and please let him not forget the agricultural community.

I do not know how this Budget can be described as a mini-Budget. In my opinion when the full impact of this new Budget is felt it will deal a major blow to our cost of living and so create new problems. It is an extraordinary situation that only last week we were discussing the Finance (No. 1) Bill and we are discussing Finance (No. 2) Bill today. It is extraordinary that the Minister was not sufficiently advised, when framing Finance (No. 1) Bill, to include the taxation included in Finance (No. 2) Bill.

Various things have happened between the framing of Finance (No. 1) Bill and Finance (No. 2) Bill. We had an election in the offing, and we had people marching up and down outside the gate. Senator O'Reilly complained today that the poor farmers had no way to put on pressure but I can assure you that no one put on pressure as effectively as the farmers did prior to the Presidential election. They put on such pressure that they did very well as a result of it. Dairy farmers certainly have come out well. I would not say that the farmers who do not go in for dairying have gained nothing at all by what has been given to the farmers in the Finance (No. 2) Bill. It has not done anything for workers except to force them to pay from the first day it comes into operation 3d a pound more for butter. The Minister should be advised by people in his Department whose job it is to advise on long-term requirements. The Minister should have been advised at the time of the first Budget and not come along scourging the people within a few months with a second Budget.

If the new Budget solved our requirements, I would be inclined to support it fully. It does not solve our requirements as regards houses, hospitals or schools, for example. In my own county — Westmeath — our commitments up to the 19th January last were £134,000 for SDA loans and grants. The Minister gave us £92,000 and, while we have approached him again and again to see if more money would be made available to meet our commitments, we have been told we will get no further grants or loans from the Department this year. The same arises as regards schools. Schools are held up at the moment in various ways. You will not be told it is due to shortage of money but you will be told they are being held up as a result of a survey which is being made and which has been going on for quite a long time. While they have no result of that survey, and as long as that is the case, it will be an excuse to hold up the building of schools.

There is another matter which has prevented progress and the Government have not shown any worry about it; that is the bank strike. Every day in the week we are told that the loans will be sanctioned; they will tell you some loans are sanctioned but they cannot get them when the banks are closed and the Government do not seem to be interested in the least in the re-opening of the banks.

Does the Senator expect the Minister to go into the negotations now proceeding?

I saw the Minister go in on the ESB one——

What does the Senator suggest?

——when there was a deadlock and no one tried to bring about a settlement, or encourage a settlement in any way. The people of the country think that the Government were absolutely dishonest in introducing this second Budget; that they would not face up to their responsibilities when the first Budget was being framed. The Government knew this money was required for farmers and yet they would not face the issue when Finance (No. 1) Bill was being thought of. One of the provisions of the new Budget is the reversion to collection of money by turnover tax. I remember when Senator Dr. Ryan introduced the turnover tax—he said that beer and cigarettes had reached saturation point. I wonder what has happened since, because beer and cigarettes have been the chief source of revenue and the chief sources of new taxation since the introduction of the turnover tax.

We find now that the wholesalers and the retailers are both tax collectors. It is the new way to collect tax, having 5 per cent on certain goods and collecting it from the wholesalers. I understand there is not another country in Europe which collects a turnover tax both on retail and wholesale goods. When it was first introduced, we opposed the turnover tax bitterly but, when we were beaten with our backs to the wall, we did ask the Minister to take it from the whole community and not have every shopkeeper big and small plagued and worried about the collection of tax. Everyone knows how some small shopkeepers run their business; they have no help; they must go in and out to do other jobs and it is almost an impossibility to know what tax they should send off. They pick out a figure and apparently the Government are satisfied with it but I am quite sure that even they would be getting their money on a smaller turnover by taking it in tax from the suppliers; that it would have turned out a much more remunerative tax and there would, perhaps, be no reason at all why we should have this mini-Budget today.

We find, too, that the Government accepted guidelines from the Labour Court as regards the £1 a week. It is rather extraordinary that the various Ministers have failed to honour their obligations. For example, forestry workers have not got any offer of 20/-a week yet; the Board of Works have not got it and neither have the Land Commission workers got it. Is it not an extraordinary thing that the Government should turn round and support guidelines from the Labour Court and say: "We are in agreement with the £1 for everyone under £1,200" and, at the same time, leave their own employees without that £1? A start should be made by the Government, if they did accept the guidelines, to give the £1 a week to employees of State Departments and thereby give good example to other people.

I do not want to delay the House any longer on this Bill; it is not a good one; I do not agree with having tax collected from both the wholesalers and retailers and I know it will have a grave impact on the cost of living because you can take it from me that for every £100 worth of goods the wholesaler gets out he will have to give £5 to the Government but, when he is handing it across to the retailers, he will not be satisfied with his 5 per cent; he will have to collect the extra costs he will have incurred in connection with the sale of the goods. For that reason, I am opposed to the taxation and the manner in which it is collected under this particular Budget. I regret, too, that it does not solve our problems at all, except that it did appease a certain section of the community—the dairy farmers. They were the only people who seemed to be satisfied as a result of this Budget. I do not know anyone else who is satisfied.

It is very easy to oppose new tax measures. From the Labour benches, there seemed to be an echo of the same kind of opposition— that this taxation was necessitated by an announcement made to draw support in the Presidential election. Actually, I think the announcement was very badly timed; the announcement was not made at a good time at all, so you would not get a large measure of agreement on the timing of it at all. We have differences of opinion. Senator FitzGerald is all in favour of indirect taxation while Senator Murphy is totally opposed to it.

I think that the Minister is going a long way to meet both. He is going half way with each, so he is doing a pretty good job. What any Minister would tax is probably going to displease that particular section of the people who are actually going to make the contribution, but if one goes around the country these days and tries to find out the prices of two of the commodities mentioned here, petrol and spirits, you find a vast difference more than the difference in the tax imposed by the Minister in the case of petrol. The price of premium grade petrol ranges from ? to 5/10, so that there must be a margin here that is bound to catch the Minister's eye. If this kind of profit can vary even in a short distance from one town to another the Minister is bound to see that there is money there that can be taken.

I am very much surprised at Senator Murphy and the Labour Party opposing this Bill, because if the contribution to the farmers is coming late nevertheless it is a contribution that is going to the agricultural community and they are entitled to their share and to their increase. For that reason I find it very difficult to reconcile the Labour Party view on this. Certainly there are a lot of places where money can be spent. We need a lot more money for education and for various services, and we will never reach the day when we will not need in excess of the amount we have. I consider that the Minister is doing an excellent job, and that regardless of how they opposed him the public are becoming harder to mislead and see that though the Opposition have done a tremendous job in trying to mislead them the public are well aware of what is actually provided when he has got something to provide.

The Finance Bill is, of course, one of the rare opportunities we get in this House of agreeing with, or criticising where we think it necessary to criticise, the broad lines of Government policy. As one of those who offered to speak on the main Bill I take it that we are free to comment in general terms on that policy on this Bill. I should like to join with the Members of the House who have paid proper tribute to the Minister here for what he has tried to do in this particular task of his. It is not a very easy one. I fully appreciate that, and to a certain extent any Minister for Finance dealing with the affairs of any country passing through the phase we are passing through at the moment is entitled to expect a certain amount of sympathy or at least understanding on the part of most people in the community. I should like, therefore, to begin in all fairness by welcoming what the Minister is trying to do in one or two respects in this particular Bill, speaking now on the main Bill. As one of those who had the opportunity during the year of drawing the Minister's attention to certain anomalies that were in the 1965 Act in so far as it affected estate duty, I am glad to see that the Minister, on having his attention drawn to it, is very properly and appropriately making provisions in this Bill for removing certain anomalous impositions particularly at the upper limits of the new rates of estate duty, under which now there are certain marginal reliefs provided for in the new Bill. Again—I have made this comment already—it is in all fairness due to him to acknowledge that he has likewise faced up to his responsibilities in the improvements which he has effected in the increased rates of allowances for children over 11 years of age and within the category where education is so important, when education, naturally, in this country is such an additional burden on parents generally. These are some of the improvements that the Minister ought to get credit for when introducing this Bill, and it would be very unfair to him if we did not at least advert to them.

Having said that, I must, like most of the other speakers, I am afraid, say that regardless of what sympathy or understanding we may have for the Minister's predicament we have to look at this particular piece of legislation each year coldly, analytically and objectively if possible, but at all times we have to view it in the context or against the background of the economic scene as we find it generally throughout the country. One of the features of this debate has been the absence of any intensive comment on where we are, in fact, standing in such fields as employment or unemployment as the case may be, emigration, and so on. It is important, therefore, that we ought to bear in mind the facts in respect of our economic life when we are discussing this Bill. I want to refer to the latest statistics published by the statistics department over the past 12 or 15 months—I think the figures I am quoting are actually the latest available—to the 17th June, which incidentally only refer to the number of unemployment claims current. Unemployment has increased very sharply over the past 12 months. On the 17th June last the total number of registered unemployed was 42,462 of whom 34,269 were men, bread winners. Comparable figures for previous years are not available in that bracket, as the unemployment figures have been compiled on a new basis since the beginning of this year, so that accurate comparison is not possible. However, the number for unemployment benefits claims current on the 17th June last was 5,306 or an increase of one fourth in the corresponding figure a year ago. The unemployment rate among insured persons at mid-April was 6.6 compared with 6.3 last year. So much for unemployment.

Turning to the numbers in employment we find that the total number of people in employment fell last year for the first time since 1961. The number actually at work was 7,000 fewer than in 1964. The facts are that although we actually had an increase of some 4,000 people in industry and approximately another 3,000 in services generally, giving roughly 7,000 people all told, we actually have that figure offset by a drop of 14,000 in the number of people employed in agriculture, leaving us with 7,000 people fewer in employment in this country this year than we had in 1964.

The total number of people at work in April was 1,050,000, of whom some 330,000 were employed in agriculture, roughly about one-third. It might surprise some people to realise that the total number of people employed in industry, as compared with agriculture, was only 291,000. In addition, we have some 421,000 people employed in the various services, transport, communications, and so on.

We should bear these figures prominently in mind because the Finance Bill each year should be regarded as the exercise by which the Government of the day would endeavour to do something about these trends. Candidly, I do not think this Bill will go very far towards arresting those trends. We have additional taxation imposed which will add to some of the problems these figures reveal. Indeed, these figures do not give the whole picture because, as will be noted, over very much the same period there has been an increase of not less than 2.3 per cent in the consumer price index, an increase of 4.7 per cent in what might be described as import prices, and an increase of 1.0 per cent in wholesale prices. Finally, of course, you have to look at some of the real consequences of these trends.

We have to take into account the fact that these trends can only be arrested by a new and dynamic approach on the part of the responsible Ministry if, in fact, they are to be arrested at all. We had one or two disquieting experiences during the past year which I am sure have set quite a number of people seriously to think. One of the matters to which I should like to advert very briefly is the failure of the attempt on the part of the Government during the past year to secure any practical support in their effort to raise a fairly insignificant amount of money on the foreign currency markets. I think the loan which the Government sought to raise on the New York market some time during the year did not amount to more than £10 million. It must have come as a shock to some people to realise that we could not draw on our credit to the tune of that amount on the American market.

I have adverted more than once in the past in this House to one or two rather extraordinary features of our economy and administration. I have referred to the amount of money which leaves this country year after year by way of life assurance premiums. I will not bore the House by quoting the figures. They have been published and given widespread publicity from time to time. The fact is that the amount of money which is still leaving the country by way of life assurance premiums by Irish citizens with foreign companies is still increasing. It is at a higher rate than the rate at which we are expanding that business in the country. This is something the Government must sooner or later do something about.

While the Minister for Finance held another portfolio he endeavoured in response to some of our exhortations to do something about that. I think he came back to both Houses and reported that he had secured an agreement with some of the foreign companies operating here under which they had undertaken to provide investments here over a period of years that would be sufficient to cover the liabilities they were undertaking in this country. My grouse is that the Minister's approach to this matter was not what I thought it might have been and should have been. It is high time for the Government to realise that they have a responsibility and a duty to our own citizens.

I do not think the Minister should make that sort of approach to those people. His duty and responsibility is to tell those people plainly that if they want to operate in this country in life assurance, and to continue to expand their sales of life assurance, they will be permitted to do so only so long as they are prepared to maintain inside this country enough money by way of investment in Irish securities to cover the liabilities they are incurring through Irish policy holders. I do not think that is asking too much of them. In fact, I doubt if they would get away with as modest a restriction as that in any other country in the world.

I suggest that in the light of our experiences during the past year, in the light of the conditions which we are reviewing at the moment, and, above all, in the light of the Minister's obligation to our own people, it is time the Minister did something effective about those problems. Those are my observations on this Bill. I do not propose at this hour and at this stage to hold up the House any longer. I urge on the Minister that the time is now ripe for something effective to be done about the problems to which I have alluded.

In the circumstances of the time at our disposal I wish to make a very brief intervention in the debate on a very significant issue. On the last occasion when the Finance Bill was before the House I put this point in the form of a question to the Minister, and I would have been content if he had not ignored the question in his reply which, unfortunately, he did. Unfortunately also, we always seem to run short of time here, and perhaps some Senators are not as considerate as they might be in that regard.

I want to say a word on behalf of a very weak section of our community which to my mind has been entirely neglected in the budgetary provisions of the current year. I refer to the group of retired State servants who are striving to exist on pensions awarded to them some years ago on the basis of salaries which have since come to be regarded as entirely inadequate for the services from which they have retired. The group includes all categories of teachers, and civil servants, and personnel of other institutions paid from State funds. I proposed originally to restate their case, but I hardly think it is necessary because the Minister is fully aware of their deteriorating economic conditions. He is also aware of the justice of their claim. They met him by way of deputation and I am told he listened very sympathetically to them, as he is well capable of doing.

He told them then that he would consider the position. Unfortunately for them, they have no power beyond their vocal power to make their presence felt; as a pressure group they have no influence at all and are forced to rely exclusively on the social conscience and sense of fair play of the Minister. It is little consolation for them to be assured that there is no money in the kitty to meet their claim. They feel all the more aggrieved because they are the only section in the country least able to bear the increasing burden of taxation and rising costs. In these circumstances, will the Minister say in his reply what prospects he will hold out of alleviating their distress? I ask him to issue some message of hope to them. They are people who have served their country well in their time and they are waiting on the Minister's words and looking solely to him to relieve their distress.

I hope I shall not take too long. I concluded reasonably comprehensively on the first Finance Bill. While I expected some new speakers today, I did not expect them to be so numerous or some of them to be so comprehensive. I shall deal first with one who was not so comprehensive. I refer to the suggestion by Senator FitzGerald that the wholesale tax, if it was necessary, rendered the turnover tax unnecessary. I shall take up a few other points made by other Senators suggesting that the wholesale tax as now introduced would have sufficed at the time the turnover tax was introduced.

Many of the arguments made by Senators were based on the wrong premise in that the wholesale tax is a tax on sales of goods at a certain level. A turnover tax is a tax on retail turnover, including sales of goods and services. Therefore, they are not one and the same thing at all from that point of view and possibly from the point of view of getting a little from one or the other. It must be remembered that the turnover tax is almost of universal application. There have been some exceptions but its base is sufficiently wide to ensure that a low rate of tax brings in a reasonably adequate return.

A selective wholesale tax must of necessity be on a much more restricted base and, therefore, the amount of money on which taxation can be imposed is more strictly limited. In order to get a return comparable to that from the retail tax, the rate would have to be inordinately high. In this case it would have to be as high as 20 per cent—indeed I do not think 20 per cent would be high enough—in order to get a comparable return. I do not think anybody would suggest that we ought to impose a selective wholesale tax at that level.

Senator FitzGerald said that since we have a selective wholesale tax now we could eliminate the retail turnover tax by making the wholesaler bear all the burden and by making him also look after the accounts. He said there was no answer to that and he said that cascading of the tax should not occur because the power of the Minister for Industry and Commerce to restrict profits could be invoked. I can assure the Senator that it is very difficult to avoid a marking up by a wholesaler from his supplier or by a retailer from a wholesaler. That often amounts to 30 per cent, so if you impose a tax at an early stage the ultimate tax will have borne these various marked up prices and that would pass on to the consumer without a commensurate return to the Exchequer. The wholesale tax is not on all goods covered by the turnover tax, only on a selective range.

Many goods find their way to retail outlets that never pass through a wholesaler at all—goods bought in markets, perhaps, like agricultural produce bought for home consumption and things of that nature. The Senator has forgotten completely that the turnover tax covers services as well. It covers ordinary services like haircuts and things of that nature. I think the argument against Senator FitzGerald's contention in this respect is far too convincing.

Let me refer to what the impact of this tax will be. Senator Murphy said it would generate another demand for increased wages. This tax will be applied, as far as possible, to goods of a luxury character and of a less essential nature. The whole range of consumer expenditure in this country is of the order of £700 million a year. The selective nature of this tax will reduce the base of the tax to £100 million, in other words, one seventh of total consumer expenditure. In the current year we hope to get into the revenue by way of this tax £1½ million. If we take that figure as a fraction of total consumer expenditure of £700 million, we get a figure of imposition on the average person who buys goods of 3/14ths of one per cent for this year. It will take a lot of convincing for the unions to be able to argue that this is the basis for a widespread wage increase.

Let me take another example which might be a fairer one—the effect of the tax in a full year. I take £700 million total consumer expenditure and the tax base as £100 million. The yield in a full year is estimated at £5 million which is 0.7 of one per cent of the total consumer expenditure. If this level is averaged over everybody who buys goods and we take a man who earns £20 a week, as many people do, the impact on his £20 a week of this tax would be 2/9d, which is, indeed, a very limited impost. The person with £10 a week, if he spends on the same level, will only have to pay 1/4½d, and so on down the scale. Therefore, I suggest that Senator Murphy's argument in favour of another widespread wage increase demand is not very well based.

We will see how it works.

I want to come to a few of the general comments that were made in the course of the debate. When Senator McDonald was speaking I did some more sums. The Senator made reference to a decline in building and construction. I should like to refer the Senator to the booklet published with the 1966 Budget, and in particular to Table 7, and he will see that between 1961-62 and 1966-67 expenditure on building and construction increased from £15.2 million to £34.4 million, rather more than a 100 per cent increase.

That was increased costs. There was not an increase in living accommodation.

I will come to that in a second and the Senator will find that my figures will answer his interjection. Housing alone accounted for £9.67 million in 1960-61 and it increased to £21.84 million in the current year. That is an increase, in my estimation, of about 125 per cent. I now want to refer to schools. I am sorry Senator FitzGerald is not here or that Senator Quinlan is not here either. They made some comments on the extent to which school building was being neglected. We find from this Table that there was an expenditure for school building of £1.69 million in 1960-61 and almost £5 million in the current year. That is an increase of almost 200 per cent. The increase in hospital expenditure went from £0.86 million to £3.14 million in the same period, an increase of about 270 per cent.

It is not spent yet.

It is there and it will be provided in the current year. Senator FitzGerald made some references to the fact that we were getting more taxes but that this was not reflected in increased expenditure on social services or education. If you take even a shorter period—I will not take a longer period because the percentage increases might be too staggering for the Opposition members— we find that in 1963-64 we spent just short of £31 million on social services. That was social welfare payments. In the current year we are providing £42.2 million. In my working out, that represents an increase of about 40 per cent. In 1963-64 we spent £20.6 million on education and in 1966-67, the current year, we are spending £30.5 million. That is an increase of just under 50 per cent. In 1963-64 we spent £11.7 million on health and in the current year we are spending £16.4 million. That is an increase of 40 per cent. That indicates very clearly that Senator FitzGerald's suggestion that the increase in taxation over those years has not been reflected in the increased expenditure on education is not correct. Those figures show very clearly it has.

We will now come to the number of houses. Senator Rooney mentioned that the figures I have given did not reflect increased housing. In 1964 there were 8,064 houses built. In 1965 there were 10,900 odd houses completed. In the current year we will almost equal that figure. It will be between 10,700 and 10,900.

It is only one-third of the inter-Party figures.

Does that include local authority houses?

I can give the breakdown. In 1960-61 the total was 5,800, of which 1,500 were local authority houses. In 1965-66 out of the figure I gave, 10,900, we find that approximately 3,000 houses were provided by local authorities. The rest were private grant-built houses. That represents a virtual doubling of the number of houses built between 1960-61 and the current year.

You will never equal the 1956 level.

There were 93,000 unemployed then.

The Minister should be allowed to speak.

Substantial progress has obviously been made in the building programme. I can assure the House that roughly the same level of expenditure will be maintained next year. It will possibly be even higher than it was this year over last year. It is not unreasonable to suggest that we must wait for a further capital upsurge, and until the necessary capital resources become available to us. I want to deal briefly with some of the other points raised in the debate.

I should like to point out that when I was endeavouring to make my point I was not allowed to do so.

When the Senator was interrupted by the Chair he was dealing with those matters in much more detail. Both Senator McDonald and Senator McAuliffe were trying to develop their points on housing.

Acting Chairman

Housing is regarded as part of the Capital Budget and it is permitted in this debate. It was for another matter that the Senator was prevented from pursuing his point.

I want to develop my point in case I am accused, as Senator Ó Conalláin has already accused another Minister, of not dealing with the point. In 1965 a sum of £400,000 was provided for an increase in pensions to public servants who retired before the 15th December, 1959. That was done to compensate them for the rise in the cost of living between November, 1959 and February, 1964. That brought them up roughly to the eighth round increase in the cost of living. That increase was made available from 1st August, 1965. It costs at the present time £600,000 in a full year. That was the fourth consecutive budget increase granted by my predecessor to those pensioners. I said, when I was speaking on the television debate on the Budget the last time, that I was sorry I was unable in the prevailing circumstances because of difficulty in finding the necessary money to increase a lot of things and that I was not able to provide a little more for pensioners. I naturally had sympathy for their position and I do, naturally, as soon as circumstances permit, hope to continue as my predecessor did in giving them reasonable increases to account for the cost of living increases that will have occurred in the meantime. I know these pensioners have another problem in that there have been certain increases, not only cost of living increases, given to public servants at the present time. There are status increases as well and they complain that they were doing the same work as their successors or those who continued on working are doing now and that, especially, the status increases had not been taken into account.

It is an arguable point for the person who is enjoying a certain level of salary, and who gets a pension in proportion to that level of salary, whether he should continue to get status increases concomitant with those who are still working. It is an arguable point but, however, I want to assure the Senator that I am not shutting out of my mind the possibility of doing my share in due time for those pensioners.

I am glad to be assured that they are not forgotten.

I should like to come back to Senator Murphy. He referred to the cynical approach of introducing a Budget and then introducing another Budget, having given certain benefits before an election and introducing the necessary taxation after the election. In dealing with this point I hope to answer a few points made by other Senators also. First of all, I said in my March speech that I was covering known expenditure, expenditure that I knew would have to be provided for in the current year. At that time I knew there was a demand from the farmers for increased income. I knew there was a demand from workers generally for increases in their level of wages. I said publicly at the time, and I repeat again, that it was anticipated and agreed on with the farmers' organisations that farmers' incomes would increase by about £6 million in that year which would be roughly comparable with the increase in incomes from non-farming activities.

At that time, too, I readily admit the weather was not good. In fact, there was an improvement in the weather around the Budget time, in the week from the Budget to St. Patrick's Day but it deteriorated again.

Because of the Budget.

Well, the Budget brought in good weather. The week from the Budget to St. Patrick's Day was a glorious week. Speaking from an agricultural point of view, that kind of weather did not last and it became obvious because of the lack of growth in grass that the income, especially of the dairy farmers, would not be as high as we were entitled to anticipate. As well as that, and this is in answer to Senator McAuliffe's point, it is not the practice for the State to lead in fixing the levels of wages. It is the practice that the State, in dealing with their employees, follow what are described as the down-town rates. At that time the down-town rates had not been settled. I said, and I repeat, that what I said was right from the economic point of view, that assuming we had about 3½ per cent growth in our GNP, or in productivity, that would provide for an increase in wages of about 3 per cent. Otherwise, if wages increased more than the increase in productivity there would be a corresponding decline in the real value of wage increases.

Nevertheless, this was being fought out in the private sector and there were a number of negotiations going on and a number of strikes had already taken place. Eventually, the Labour Court in dealing with one or two of those strikes came out with a statement in which they set out their guideline, that there might be an increase of £1 for adults and 15/- for females and juvenile workers but it was possible that some employments might not be able to afford even that, and they suggested that workers claiming increases ought to act with restraint especially in dealing with employers whose business and profitability would not be able to carry the increases.

However, the £1 and 15/- had been granted more or less generally, and certainly to those who had been negotiating settlements. The Government expected that but it did not invalidate in any way what I had said, and what the Government endorsed, about the increase in wage rates being related to the projected increase in productivity. The Government accepted it because, in their judgement, as in the judgement of the Labour Court, they felt that less damage would be done to the economy by accepting that level of wage increases as against a succession of stoppages of work which would have depressed economic output and industrial output and which would have caused a worse decline in the economy than the grant of wage increases in excess of what would be appropriate according to the increase in productivity.

Going back to Senator McAuliffe's point, there are at present negotiations in train between the official side as it is called in the Civil Service conciliation and arbitration proceedings and the staff panel side. That is not a question of £1 and 15/- only. There are within the Civil Service other categories who are in not absolutely fulltime employment. There are differences and shades of differences that have to be taken into account. These are being worked out and I understand there will be another meeting between the staff side and the official side tomorrow at which I think the matter will be almost finally decided. I think the points at issue now are reduced to very few and I am confident——

I am very glad to hear that.

It is not so much £1 and 15/-. It is the minor points that have to be settled and I am sure Senator McAuliffe will know that the issue in an industrial dispute is not so straight that one can draw a line through it and say: "That is that". Of course, I am not suggesting there is an industrial dispute here; there are negotiations going on.

I have been speaking on economic points for so often and so long that I am beginning to get tied up in what I said before and I wonder if what I have said before is relevant to what I will say now. One thing is relevant to what I will say now and it is the repeated suggestion that we failed to get a loan in New York and the repeated allegation that it is disreputable in present circumstances for a Government to look for money abroad. I did not say that but I want to repeat what I did say and that is my difficulty in trying to disentangle what has been said in the debates to which I am referring. Almost all the progressive countries we know have gone into the foreign bond market to get capital to supplement their home resources for economic development and expansion and these countries include, and I shall spell them out again, New Zealand, Norway, Sweden, Japan and even the United States and Britain have been using this device of going outside their own country and encouraging or inducing voluntary investment of capital, and most of the others have been going out and negotiating bond issues. As far as this dollar loan is concerned, these are not dollars in the United States but dollars held in Europe called Euro-dollars by Europeans or by US citizens. US citizens might not want to repatriate dollars for one reason or another; European citizens might want to hold them in Europe for their own good reasons—possibly to support the strength of their own currencies. But at the time we went for that loan, the United States, having already imposed what is known as the interest-equalisation tax, brought Ireland within the ambit of that interest-equalisation tax; in other words it would have obliged us, if we went for a loan of dollars in New York, to pay one per cent more than if we got dollars outside. Therefore, we had no immediate interest and we did not apply at all for dollars in New York.

We went then for the Euro-dollars but, in addition to the imposition of the interest-equalisation tax, the United States Government decided to get after these Euro-dollars for their own development and encourage all their own big international trading and big international manufacturing companies to get after these dollars, and most of them did. Not only did they pay the going rates, which were probably 6½ per cent to 7 per cent at the time, but they gave the right at the end of a specified period to convert the loans into the equities of the company. No country could compete, number one, with giving more than the going rates and, secondly, certainly not with the prospect of converting the loan into equities which might bring in 20 per cent or 25 per cent to the lender. A lot of people, including ourselves, had to pull back from that market because this was too serious for us and amongst these was an international body of very sound standing —the European Coal and Steel Company—which was going after that money as we were to proceed with their economic development. Therefore, we did not go after the Euro-dollars; we went elsewhere. We got our £7 million Deutschemark sterling loan. We have got a £5 million loan from the Bank of Nova Scotia. I suggest that rather than in any way denigrating ourselves or our economy, that establishes our credit-worthiness in the world, establishes us as a forward-looking country. We are doing exactly what every other country in Europe and, indeed, in Australasia, is doing in order to expand their economies.

The important thing, of course, is to restrict that foreign borrowing to the minimum and to ensure that, to the extent to which we do borrow, we will apply the proceeds to the capital expenditure of the highest possible productive nature. That is what we propose to do.

We are paying very heavily for it.

Only the going rates; it is about 7 per cent.

Our own people do not get 7 per cent for a loan.

If our own people invest in foreign moneys they have to carry a certain risk.

The holders in the National Loans.——

The last National Loan was floated at 6¾ per cent. Now the rate has been moving to about 7 per cent. I am not going to suggest what the rate for the next National Loan will be but it will have to be the going rates. I went too far into that but it is difficult not to do so when one has a good answer.

The holders of the National Loans feel they have a grievance.

Senator Crowley also mentioned this idea of foreign insurance companies coming in here, getting their premiums and bringing them out of the country for investment abroad. Of course, we must remember we cannot live in a completely insular state. We have to realise that there has to be a flow of money between this country and, particularly, the United Kingdom. When it comes to capital investment from Ireland into the United Kingdom and from the United Kingdom into here, we come off the better. In the case of insurance policies effected here, of course, the premiums —in so far as they are paid to British companies—go out of the country. But, first of all, we must remember that we have certain built-in protection for Irish insurance companies, just as we have built-in protection for Irish industries. As well as that, we have an arrangement with the British companies that they will plough back an increasing percentage over the years of their premiums derived from Irish insurances back into our country. That was commenced—I am not claiming credit for it—when I was Minister for Industry and Commerce; it was put in train before that. But I am informed that the British companies are living well up to their bargain. They are doing their best to find increased outlets for investment in this country.

I do not want to go into any other points and, if I have not answered any Senators' particular points, it was not because I wanted to dodge them but they just do not occur to me at the moment.

Question put.
The Seanad divided : Tá, 26; Níl, 8.

  • Ahern, Liam.
  • Boland, Gerald.
  • Brosnahan, Seán.
  • Browne, Seán.
  • Cole, John C.
  • Dolan, Séamus.
  • Eachthéirn, Cáit Uí.
  • Egan, Kieran P.
  • Farrell, Joseph.
  • Fitzsimons, Patrick.
  • Flanagan, Thomas P.
  • Honan, Dermot P.
  • McGlinchey, Bernard.
  • McGowan, Patrick.
  • Ó Conalláin, Dónall.
  • Ó Donnabháin, Seán.
  • O'Kennedy, Michael.
  • O'Reilly, Patrick (Longford).
  • Quinlan, Patrick M.
  • Ryan, Eoin.
  • Ryan, James.
  • Ryan, Patrick W.
  • Ryan, William.
  • Sheldon, William A.W.
  • Teehan, Patrick J.
  • Yeats, Michael.

Níl

  • Crowley, Patrick.
  • Davidson, Mary F.
  • Fitzgerald, John.
  • McAuliffe, Timothy.
  • McDonald, Charles.
  • Malone, Patrick.
  • Murphy, Dominick F.
  • Rooney, Éamon.
Tellers: Tá, Senators Browne and Farrell; Níl, Senators J. Fitzgerald and Murphy.
Question declared carried.
Committee Stage ordered for Thursday, 7th July,1966.
The Seanad adjourned at 10 p.m. until 10.30 a.m. on Thursday, 7th July, 1966.
Top
Share