Seanad Éireann debate -
Friday, 12 Jul 1968

Vol. 65 No. 13

Finance Bill, 1968: Second Stage.

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

Minister for Finance (Mr. Haughey)

The Second Stage of the Finance Bill in the Seanad is intended to provide Members with the opportunity of debating the Budget. I propose, therefore, to outline the main features of this year's Budget and in the course of my remarks to mention the more important provisions of the Bill.

The fundamental aim of this year's Budget was to maintain the impetus of economic expansion and to do this without risking an excessive rise in domestic spending which would place an undue strain on the balance of payments in the present rather unsettled international financial situation. The Budget, therefore, put the emphasis on expansion in investment.

An additional £25 million was provided for the 1968-69 public capital programme and, with the co-operation of the banking system, we expect to be able to finance this substantial increase from our own resources without adversely affecting the amount of credit available to the private sector.

The stimulus to economic expansion provided by the capital budget was supplemented in the current budget by a number of new aids and incentives to agriculture and industry. In the agriculture sector, additional assistance, directed mainly at increasing production on the smaller farms, was given in the form of upward adjustments in guaranteed prices and improved grants and subsidies for selected activities. The published estimates already included many extra millions for higher production and exports of dairy produce, rates relief and other aids to farmers. For industry, the range of tax incentives was further enlarged through the extension of existing reliefs and the provision of new ones. This is reflected in the Bill before you. Section 2 clarifies the tax relief in respect of payments for the acquisition of industrial "know-how" while section 14 extends the scope of the relief in respect of expenditure by a trader on scientific research. In the same spirit of promoting industrial efficiency and modernisation, section 17 gives additional relief from surtax in the income range appropriate to the management class, the object being to enable Irish industry to attract and retain the talent which is so essential to our industrial development.

A further increase, from 50 per cent to 60 per cent, in the initial allowance for capital expenditure on new plant and machinery incurred in the period 1st April, 1968 to 31st March, 1971 is provided by section 38 while the increased initial allowance of 20 per cent for industrial buildings is continued for a further three years by section 39. Another desirable step in the sphere of capital allowances for industry is the provision in section 4 for reducing the number of wear and tear allowances from 18 to three for new plant and machinery provided after 1st April this year.

The scheme of exports tax relief has made a major contribution to the growth of our industrial sector and over the years successive Finance Bills have introduced extensions and adaptations of the scheme to improve its effectiveness. This year's Bill continues this policy. Under section 34 the exports tax relief is being extended to profits from certain services carried out in the State in connection with engineering works executed abroad. Apart from increasing the scope for exports earnings, this extension should provide extra employment opportunities at home for our engineers, architects and draughtsmen. Section 36 involves another extension of the scope of the exports tax relief and the "Shannon" relief. It provides for the application of the reliefs to sales between associated companies which are engaged solely in manufacture for export. The purpose of the extension is to remove what has been represented to me as an obstacle to the setting up here of subsidiaries of foreign companies.

Another impediment to foreign investment in Irish industry is countered by section 35 which provides a measure of double taxation relief, pending the completion of double taxation agreements, for companies in respect of earnings from investment in subsidiaries abroad of profits which have benefited from exports tax relief.

It will be agreed, I think, that these provisions constitute a significant extension of the policy of supplementing our direct aids to industrial development by tax incentives.

In the related field of savings, the Budget included measures designed to increase the resources available for investment. I am arranging for the issue of a new type of savings certificate which will carry a rate of interest closer to current yields on Government stocks. Furthermore, the trustee savings banks will be authorised to introduce a new type of account, to be known as an "investment account", with a higher rate of interest than that paid on ordinary deposits with these banks. Section 41 of the Bill gives me powers to determine the rate of interest on deposits in the new investment account.

Another inducement to saving and the provision of extra capital for investment here is contained in section 27 which gives relief from corporation profits tax to Irish investment companies.

The Budget made a further substantial improvement in our social welfare benefits, all of which are being increased by 7/6d a week. In addition, there will be an increase of 2/6d a week from January next for qualified children of old age, blind and widow pensioners and of recipients of unemployment assistance and of unemployment and disability benefit.

Encouraged by the success of the scheme of free electricity and free travel for old age pensioners, I introduced a scheme of free radio and television licences for those who are entitled to free electricity. The benefits of this scheme, as well as of the free electricity and free travel schemes, have been extended to those who served in the War of Independence.

There is no change this year in the rates of income tax and surtax but, in order to meet some of the cost of relief from surtax in certain income ranges which I have already mentioned, the highest rate of surtax, 9/- in the pound, will now begin to operate at a point £1,000 earlier. The necessary provision is contained in section 1 of the Bill which also contains the usual charging clause for income tax and surtax.

There is, of course, a constant demand for increased personal tax allowances. Unfortunately, any general increase in these allowances would be very costly and could only be considered in the context of a general review of the tax structure. However, I have found it possible to give some specific reliefs in this year's Budget. As provided for in section 12 of the Bill, a married man will get a special increase of £100 in his personal allowance in the year in which he gets married. The purpose of this relief is to help newly-married couples to meet the exceptional expenses they incur in their first year.

Houseowners and farmers will benefit from the decision to abolish tax under Schedules A and B. The abolition will have effect from next year but, in anticipation of the introduction of the necessary detailed legislation in the autumn, I have provided in section 5 of the Bill for the termination with effect from 6th April, 1969, of assessments under these Schedules. Apart from the welcome relief thus afforded to taxpayers, this measure is desirable in the interests of simplifying our tax structure.

I have also increased the abatements of estate duty for widows and dependent children. It has been shown to me that in certain cases hardship may arise under the existing laws, particularly where the estate includes the family home and a pension.

The cost to the Exchequer of the social welfare improvements, aids to farmers and tax reliefs provided in the Budget amounts to £5 million in the current year. This is being met by increases in the duties on tobacco, hydrocarbon oils, beer, imported spirits and wine. I chose this means of raising the extra revenue required because it has the least effect on the less well-off in the community. At the same time, I did not wish to increase other taxes, in particular income tax, because this would have an adverse effect on enterprise and economic initiative generally.

Finally, I would like to refer to the White Paper on added-value tax which I had published recently. This document describes, in a form which can be understood by all, the main features of this type of tax which is being adopted by all EEC countries. I hope that the publication of this document will generate informed discussion of the tax on which a good deal of interest has centred in recent times.

If Members should wish for further information on any points arising out of the provisions of the Bill, I shall be glad to supply it when we come to deal with the Bill on Committee Stage.

Mr. Garret FitzGerald

The Minister has introduced the Bill with commendable brevity. The debate will by no means be in brief. We should like to thank him for the explanatory memorandum to the Bill as passed in Dáil Éireann which was circulated today. Unfortunately, the fact that we received it only this morning means that it is impossible to make the fullest use of it now. The preparation and publication of this explanatory memorandum, after the debate in the Dáil, is a useful change for which we are grateful. However, in future years, if we could have it in advance of this debate, we could get more benefit from it.

One would like to welcome a number of features of the Bill. In section 1, there is provision for a change in the method of charging surtax which, I think, is desirable—shifting, once again, the weight from surtax on earned income to surtax on unearned income. Although I approve of the change, I wonder if we have now reached a position in which the maximum rate of surtax is reached rather soon. The fact that there is no higher rate of tax chargeable once an income gets to £6,500—subject to provisions for personal and earned income allowance— makes one wonder whether our tax policy is as progressive in the technical sense as well as in the general sense of the word as one would like.

It would seem appropriate that, at very high income levels, the tax rate should be somewhat higher. After £6,500, the tax rate does not rise any further but it reaches its maximum rate rather quickly. This is a consequence of reforms in the past two years which are welcome because they shift the balance from earned to unearned income but, nevertheless, one wonders whether our tax code is as progressive and as balanced as one would like.

In section 3, we have provision for a three-year spread for losses of remuneration. Would the Minister clarify that? We are talking here of a reduction in remuneration only and not of compensation for loss of office: is that correct? That is how I read it.

Mr. Haughey

There is another section dealing with redundancy payments.

Mr. Garret FitzGerald

No, that is later on. It concerns the relief of tax on the people who pay the redundancy payment—not the people who receive it.

Mr. Haughey

Both: the later section deals with redundancy payments.

Mr. Garret FitzGerald

That is section 37. Does it also give relief to the recipients? The Minister nods; I see. Therefore, section 3 is concerned only with reduction in remuneration if there is a change in the nature of employment.

We note the change in wear and tear allowances. The Minister referred to the rationalisation of these allowances. Does it, in fact, improve the position or is there any case where the position is disimproved by the change? I take it that the former is the position and that, in any case, where change is required in any particular type of equipment, the change is beneficial rather than otherwise?

Mr. Haughey

Yes. It will not affect existing machinery. Nobody will lose. But anybody buying a new machine will come under the new rates.

Mr. Garret FitzGerald

Yes. Perhaps the Minister will go into detail on the matter when he is replying. I have never been happy with the system of wear and tear allowances. They fail to make any provision for the increased cost of replacement equipment. Our whole system of financial administration is based on the extraordinary illusion that the value of money is unchanged and that if you called something £1 20 years ago, it is the same thing today and has the same value, whereas, in fact, in purchasing power, there have been kaleidoscopic changes in its value over time.

To pretend that the £ in depreciation funds which people have to use to buy new equipment in years to come is the same £ as was involved in the purchase of the original equipment is nonsense. We must face the fact not just in our tax code but our accountants also must realise that the value of the £ is changing. We must all get away from thinking that the value of the £ is static. Depreciation should be based on the replacement value of equipment. Otherwise the depreciation provision is inadequate and people are encouraged to put capital in real terms in dividends by virtue of the pretence that the £ has unchanged value. I would hope to move to a system of depreciation allowances based on cost of equipment for which there is a series available showing the changes in replacement cost.

In section 8 there is provision for the continued estimation of tax due and in section 9 there is provision for the postponement of appeals, a provision under which a request for the postponement of an appeal can be ruled out of order. I am not sure of the implications of these provisions under existing legislation, but I am perturbed considerably that the present administration of the revenue code imposes hardship on people and is a little too draconian. The system is that if people do not furnish details of their income as rapidly as the Revenue Commissioners would like, and, of course, technically they require details before people have earned the income, they slap on an assessment which is far in excess of what you have earned and which they know is far in excess. You are then required to pay on foot of this bill without being given adequate time to refute their allegations about your income and produce proof with the necessary documentation of what your income really is.

The system has been so tightened up because of the changes in legislation and the use of the computer that the pressure put on people is at times unfair, in that payment is requested on foot of an assessment which is deliberately erroneous and which is used to extract information and perhaps more information than people are able to furnish because of the complexity of the data required. This is at a time when the Revenue Commissioners are tightening up on business men and are requiring enormous details about every single transaction, no matter how small, and this has created problems. This process is being carried a bit too far and some alleviation of the pressure would be desirable. It is the cumulative effect of the tightening up on business people, the changes in legislation and the use of the computer which are imposing hardship on the people, and the Revenue authorities are being unreasonable when, on failing to get information which it is impossible to furnish, they look for the money. The whole system is pressing too hard and too quickly on people.

In section 23, we have the provisions in regard to wine duties. I have raised the question before of why these duties should be on the basis on which they are. They should be on an ad valorem basis and it seems wrong that we should have a relatively dear tax on cheaper wines and a lesser tax on dearer wines. There is an ad valorem tax for most types of affected goods and it is to be regretted that the wine duty continues to be on the basis of subsidising the rich and imposing a hardship on the less well-off. This of course is true generally of the liquor tax, but owing to the fact that the range of prices within beers and spirits is much less, the effect of the flat rate system on beers and spirits is much less drastic than in the case of wines where the price varies upwards from 6/- a bottle to £2 or £3 a bottle, and the flat rate tax involves a relatively small imposition on the dear wine but a fairly onerous one on the cheaper wine. The use of the flat rate system in the case of wines is inappropriate and inequitable because it tends to benefit the well-to-do and has an adverse effect on those who are less well-off. This is a reform that could be introduced relatively easily and I would draw it to the Minister's attention.

Section 25 contains provisions in relation to death duties which involve some alleviation of the hardship which followed on legislation introduced some years ago, which was resisted so strongly in this House and which has had to be amended two or three times since because of the excessive burden it imposed, particularly on widows and orphans. I remain unconvinced that the present system of death duties is the best way to deal with the problem of the accumulation of capital. The purpose of death duties is properly to prevent the accumulation of property in fewer and fewer hands. In so far as a capital tax is necessary, there should be no tax on property passing from man to wife.

The purpose of estate duty as introduced originally was to prevent the accumulation of property in fewer and fewer hands from one generation to another, but there is no question of this happening in regard to man and wife who should be treated as one and who normally belong to the same generation, and a transfer of property is not involved. There is no case for imposing estate duty on such transfers and they should be free of estate duty. The move has been in a more desirable direction and the position has been partly alleviated by this and previous Finance Bills but it is still in the wrong direction, and it is something we should reverse. I suggest that the Minister should consider seriously the removal of death duties where a man and wife are concerned.

On the general question of taxing capital moving from one generation to another, and of keeping capital from accumulating in fewer and fewer hands, it seems to me that the system which we now have, under which the tax falls on average every 29 years, although it could fall three times in one year or it could fall once in 86 years, is one which, of course, gives the maximum encouragement to avoidance. The tax which falls so haphazardly, and for which there are very great rewards for avoidance, is applied only to a minority and this creates a serious problem. It creates a revenue problem through a loss of revenue and it creates also a social problem for it means that the purpose for which the tax was introduced—it is not primarily a revenue-producing tax—is not in fact being fulfilled or achieved because it would appear that the bulk of the property which is passing is not taxed and therefore through avoidance there is an accumulation and more and more property is in fewer hands.

It seems to me that the solution must lie in some form of transit to a more regular and frequent application, to an annual capital tax. Whatever inconvenience it would cause could be overcome by the application of some ingenuity and it would be of such a character that avoidance would no longer pay off and for the same tax rate, the receipts could be two or three times as great. I read in The Economist some years ago that tax avoidance on estate duties was in the region of two-thirds but by the substitution of another system, the revenue could be trebled.

Mr. P. O'Reilly

(Longford): Perhaps the Senator would deal with the moral aspect.

Mr. Haughey

The Senator is an economist.

Mr. Garret FitzGerald

I believe that the technical difficulties which have so often been put forward as objections to this can easily be overcome by the application of some ingenuity and, with an annual capital tax, that small legacy passing to the wife or, possibly, to the next generation would meet the social needs and, at the same time, produce more revenue.

Mr. Haughey

Does the Senator suggest taxpayers' capital would be taxed every year?

Mr. Garret FitzGerald

Yes, and I know of accountants' objections, with respect to the Minister, to this, but I believe they could be overcome since this would be done only in respect of substantial estates.

Mr. Haughey

In other words, if the rate was ten per cent, after ten years all the capital would be gone.

Mr. Garret FitzGerald

But the rate would not be ten per cent.

Mr. Haughey

If it were?

Mr. Garret FitzGerald

It would not be.

Mr. Haughey

If it were five per cent.

Mr. Garret FitzGerald

It would not be. Perhaps if I might explain what I have in mind: it would be a tax at the rate of one per cent on capital in excess of £25,000, £30,000 or £35,000, rising to two per cent on larger estates. This would produce an income on estate duty, if you had a small legacy duty as well, and it would give the same return, even if there were no extra receipts because of diminishing returns. It could produce three times as much if the evidence is as great as it is said to be. The problems of valuing property could be overcome by accepting any valuation not more than five years old. There are only about 5,000 estates involved, 5,000 estates which would fall into the category I mention, and the number of valuations, therefore, would be only about 1,000 per annum. But the problem is by no means as great as that.

On section 34, there is a welcome relief on export and engineering services. Immediately the fact that there are other services we export which are not subject to tax reliefs comes to mind. These are services in which the application of tax reliefs could provide the incentive so necessary in relation to the export of goods and which will, presumably, be successful in relation to the export of engineering services. The tourist industry is one example in which a similar principle could be applied. Hotels and car hire provide services to people from outside the country, people who bring in here foreign currency, and there is a strong case for the application of similar tax reliefs in their case. The Minister has here a limited area of tax relief. There are areas, such as hotels and car hire, in which the application of a similar relief could provide an incentive and could ultimately yield, if carefully applied, increased revenue to the Exchequer.

I particularly welcome in section 35 the unilateral double tax arrangement. This is long overdue. It is just ten years since I, in conjunction with others, first raised the matter with the Revenue Commissioners. They gave all the reasons at that time why this could not and should not be done. I was quite unconvinced. The reasons seemed to be both narrow and unimaginative. They showed a failure to appreciate how, in fact, international business operates. Pressure was kept up by others, though not by me, over the past ten years and now they have agreed to this concession. This should have been done long ago. Possibly one reason why it was not done was the expectation that double tax agreements would be signed more rapidly than has been the case. The fact is that, for one reason or another, the process for signing such agreements has been quite extraordinarily slow. Whether blame rests with the Minister for Finance or the Minister for External Affairs I do not know, but so slow has the process been that it is essential we should not delay any longer in introducing this concession, a concession which can be a useful protection to foreign capital coming in here.

There is at the moment a strong deterrent—I think, perhaps, "deterrent" is not quite the right word; I shall come back to this later—to foreign investment here by reason of the fact that at the moment full benefit is not secured in regard to export tax relief. Investors cannot secure the benefits and there are many industries which would be attracted here if they could use the profits they make outside but they will not be attracted here if all the profits they make have to be reinvested in this country. In many cases it would not be practicable for them to reinvest such profits here. This is a useful move and it demonstrates that, no matter how often the Revenue Commissioners may turn down a proposal, one should never give up because eventually they will come round.

The tax relief in section 36 in regard to Shannon is also welcome as is that in respect of redundancy payments in section 37. I am glad the tax relief here applies to recipients as well as to donors. Again, the social reliefs in sections 42 and 43 in regard to TV and radio licences for old age pensioners and invalid carriages are also welcome.

There are one or two things one would have liked to have seen in the Bill. One that has come up frequently and has been persistently turned down is the provision of relief for evening students attending university. At the moment there is relief in regard to students who attend during the day. There is no relief for evening students who, at a later age, go to university and pay their own fees, at a time when it is particularly difficult, perhaps, to find money for this purpose. These students do not benefit from any similar tax relief. The amount involved would not, in fact, be great and I cannot understand why there is such resistance to this concession. It is quite contrary to the whole tenor of the Government's policy in regard to education at the present time and I hope that, as part of the reforms now being introduced, the Minister will find it possible to have another look at this particular matter. I raise it again because, even though the Revenue Commissioners may turn proposals down again and again, if one persists one may get somewhere.

Another point I raised some years ago, and about which nothing has been done, is the provision in regard to income policies for insurance purposes. It is now possible—it has been for some years past—to insure one's life in such a way that, if one dies, one's widow receives an income for a number of years. If one does not have the good luck to die one gets nothing. One can pay £100 a year for many years and end up getting no benefit. This is a pure insurance policy. There is no lump sum payment at the end of a particular period or on death. It is a pure income policy because one is entitled to receive the money only in the form of income. Technically, for reasons no doubt the insurance companies, the Minister for Finance and the Revenue Commissioners understand, these incomes policies are regarded as capital. One insures for a sum of £45,000 at a rate of £100 a year to produce an annual income of £1,500 a year. Because that is technically regarded as a lump sum estate duty has to be paid on it and a widow who, when her husband dies, should receive under the policy £1,000 or £1,500 a year finds herself with a net £750 a year, or something like that, because estate duty has had to be paid on the policy. As a rule the insurance companies pay the Revenue Commissioners and reduce the annual income to the widow. When I took out a policy like this some years ago I was horrified subsequently to discover what the position really was, the insurance company did not inform me as to what the position would be in certain eventualities. Indeed, I found I had got myself into the second highest estate duty bracket although, by normal standards, I was virtually a pauper. My net assets would then have been about £1,000.

Mr. Haughey

We would not be taking the Senator's intellectual capacity into account.

Mr. Garret FitzGerald

It is not easy to capitalise on that, though I have tried to do so. The position is ludicrous because here is a widow left with this income of £1,000 a year faced with a bill of £15,000 estate duty which she must pay in order to get the income. The insurance companies, of course, make arrangements with the Revenue Commissioners that they pay the £15,000 and her income is promptly reduced by one-third. The fact is that when one enters into a policy to give one £1,000 a year one gets only £650, or something like that, but the insurance companies do not mention this. As this is an incomes policy the widow should be required to pay tax on the income she gets but should not have to pay estate duty on a lump sum which she never received and cannot legally receive.

On a former occasion a previous Minister said that there were certain technical difficulties, that this form of insurance could be used by people to evade tax in some way. No doubt, that is true, although I am not entirely clear as to how it can be done but the Revenue Commissioners have many officials who are well able to devise means of ensuring avoidance of that kind will not happen and the Minister should direct his attention to this question and ensure that people are able to provide for their wives and families an income after their death on which income tax should be payable in the ordinary way but without having liability for estate duty on a lump sum which they never received and never can receive.

Turning now from the Bill to more general economic considerations, this seems an appropriate moment to consider where we stand in regard to the Second Programme for Economic Expansion. There has been published within the last couple of months the Government's review of the Second Programme for Economic Expansion— the mid-term review of progress, 1964-67. Last year, the debate on the Finance Bill occurred shortly after the announcement by the Taoiseach with regard to the Second Programme which was so couched as to give rise to the belief that not only was the Programme being abandoned, which, in fact, is more or less the case, but in fact, that it was not even to be adequately reviewed and this gave rise to a certain outcry, in which I played some small part myself. I must, therefore, say at this stage that whether or not there was ever any intention not to review the Programme adequately, the progress report produced by the Minister's Department is an extremely full progress report on the Second Programme, that it reviews progress towards virtually all the targets. It does not omit anything that is awkward. It does try to explain away certain things in certain areas but it does give a full account and in some respects in regard to the general position it offers a fairly uninhibited critical comment on the Programme and on what went wrong. I would not agree with all the comments or the balance of them. I would differ in some respects in my assessment but that is a difference of opinion which is legitimate and I do not think one can criticise this report as failing to face the facts.

There is one area in which it does fail in its interpretation of the facts and in the conclusions it draws but I suspect that the responsibility is not the Minister's because it will not surprise the House to learn that that area is in respect of agriculture. The contrast in tone between the very fair and full and critical account of progress and lack of progress in the rest of the report and the evasive and, I think it must be said, dishonest comments on the agricultural sector are very marked.

Professor Quinlan

Hear, hear.

Mr. Garret FitzGerald

I do not think the Minister's Department can have been responsible for both parts. If so, certainly it was the hands of different officials writing them but I suspect that the Minister, as usual, had to take what he was given by the Department of Agriculture, which continues to maintain its total independence.

Mr. P. O'Reilly

(Longford): Maybe the Minister can write with his left hand as well as his right.

Mr. Garret FitzGerald

Maybe he can but I do not see his hand in these paragraphs. Perhaps a couple of years ago I might have seen his hand in these paragraphs but not since he moved on to his present position.

What went wrong with the Second Programme for Economic Expansion? First of all, it could be said that it was not by any means as total a failure as is sometimes made out and as the failure of the Government to explain it to the country has led some people to believe but it has not succeeded in reaching some of its targets and we have to consider the reasons. The Government, after all, adopted these targets. They said they believed that with their policies these results could be achieved. If they are not achieved, we are entitled to ask, therefore, was it because the targets were defective; was it because of events that occurred outside the control of the Government; or was it because their policies were not adapted to the achievement of the results they sought to attain?

If one looks first at the output side —because, after all, our primary concern is with the output of goods and services in the community and, secondly, with what we do with these goods and services—unless they are produced, they are not available for expenditure—on the output side it is clear that the failure lies primarily, one is tempted to say almost solely, in the agricultural sector. The report itself identifies these failures in the section not written by the Department of Agriculture, when in a little table—Table 2 —it shows the shortfall in resources in the period 1964-67 and it shows a shortfall of resources of £100.6 million, that is to say, that in this period of four years—1964-67 inclusive—the volume of output of goods and services was, in 1960 money values, £100 million short of what the Government planned. In terms of current money values, in 1968, that could be well approaching £150 million. That is a measure of the failure to achieve the targets the Government set out to achieve.

Of this £100 million shortfall, expressed in 1960 money values, the report identifies agriculture as being primarily responsible for half of the shortfall; industry is responsible for one-quarter and other domestic sectors for another one-quarter. This, however, underestimates the true extent to which the total failure of the Government's agricultural policies is responsible for this situation because some of the industrial shortfall was in industries which are responsible for processing agricultural products but which did not have enough agricultural products to process because of the collapse of the Government's agricultural programmes; and some of the shortfall was in the services sector where the amount of services produced was less than the Government proposed because the incomes that people had in agriculture and outside agriculture were less than what was planned because, again, of the failure of agriculture. If one takes into account the indirect effects of the agricultural shortfall, the immediate indirect effects on not only processing industries and the further indirect effects through the multiplier, one is forced to the conclusion that something of three-quarters of the shortfall in output in this four-year period was accounted for by the agricultural sector. The rest is accounted for by two other factors, I think, in some small degree, the shortfall in the achievement of the target for tourism. We have had several disappointing tourist years, partly for reasons of strikes and other reasons outside our control, although I am not sure that that fully explains the problem. We hope this temporary difficulty in the tourist industry will come to an end and that in this year and future years we will catch up. This is not a major element in the problem.

The other element apart from agriculture is the short-term mismanagement of the economy in 1965 which forced the Government to adopt a deflationary policy, a deflationary policy which halved our growth rate of output in two successive years—1965 and 1966. That represents the great bulk of the remainder of the shortfall in output. If one leaves agriculture on one side, most of the remainder, apart from some small shortfall due to the weaknesses of our tourist progress in the last couple of years, the great bulk of the remainder is due to the Government's mismanagement of our short-term economic development in 1965.

We must turn then to the consequences of this. Given that we have to face this shortfall of £100 million in 1960 money values, perhaps £150 million in current money terms, what effects did this have on our ability to invest and to consume? First of all, it must be said that there was a bit of leeway as regards the expenditure because the Government had grossly miscalculated and overestimated for reasons that remain completely obscure the amount of resources that would be devoted to public consumption in the years ahead. The Second Programme had this extraordinary statement, that the most rapid increase in the volume of consumption would be in public consumption, the using up of goods and services by the public sector. As we are talking in volume terms and not in current money terms, this can only mean in practice a vast expansion of the number of public servants and of the goods they use—turf for fires, paper for their desks—and, of course, it would be impracticable and nobody ever really proposed this vast expansion of public servants. It was simply miscalculation. Totally excessive provision was made for the using up of goods and services by the public administration and a corresponding inadequate provision was made for subsidies and, more particularly, for transfer payments and social welfare, and by a happy coincidence these miscalculations cancelled out each other, and the total expenditure has been very close to that predicted.

How did we get this shortfall, then? It was, first of all, due to our not expanding the public services as rapidly as was mistakenly calculated in the Programme. Secondly, living standards rose more slowly than planned. Living standards rose about 30 per cent more slowly than planned, the volume of private consumption rising by 2½ per cent instead of the planned 3.6 per cent. Thirdly, our investment increase has been about a quarter less than planned, being at a rate of 3.2 per cent as against 4.4 per cent.

It is a matter of some concern that investment was cut back in this way and one of the lessons to be learned from the Programme, and from our public administration generally during the period, is that we do not give adequate priority to investment. During the crisis of 1965-66, though the growth in consumption slowed down, it still continued and the one thing which declined momentarily was investment. The Government cut back investment—they slowed down the growth in consumption but they cut back investment. Consequently, the building industry was badly hit and many worthwhile programmes were halted for several years because virtually the whole of the crisis was borne by investment. The slowing down of investment in circumstances of that kind is a much easier and more popular thing to do than cutting down on consumption, but it is a mistaken policy. It is a mistake to give priority to consumption and to cut down on investment. I do not think it was a thought-out policy by the Government. I think it was just a question of drifting in the face of difficulties as the easy and quick way out.

Our public administration was not geared to this problem and the Government, on the advice they got, were not given the opportunity of adopting the alternative policy of cutting consumption and maintaining investment. It is important that the public administration should have plans prepared for that sort of situation and the next time it will happen—let us hope it will not, but there will always be ups and downs in the economy and there will be planning mistakes made from time to time —priority must be given to maintaining the level of investment and it must be decided to cut consumption, not necessarily to reduce it but to cut it back more drastically than the last time. We should learn that lesson from the events of recent years.

Though the growth of public consumption has been a lot slower than planned—because the original plan was a miscalculation—the growth in public expenditure has been very much in line with the Programme. It might sound satisfactory to say that at least we can find something that is on target, but public expenditure, which has to be paid for by taxation, by the contributions of the consumers, must not be allowed to rise so rapidly as to allow the taking of the planned amount of money out of a less than planned for amount of output: if our Programme did not achieve the planned growth rate, there is a less amount of money with which to meet public expenditure. Therefore, during three years our taxation burden grew three times as fast as planned and here there is evidence of a defect in the planning mechanism, a failure to control the situation.

When output growth was cut back, chiefly because of long-term defects in agriculture and because of short-term mismanagement, there should have been some better provision made to cope with it. There should have been, first of all, some provision made to control the growth of public expenditure so that it did not go on rising, ignoring the failure of the economy to expand at the same time. If we had planned a growth of taxation, a matter which was accepted by all sides of political thought at the time—a slow but steady increase in the burden of taxation—that should be accepted, but if output does not rise as planned, we should not go on spending the same amount of money as planned: we should be prepared to adjust our rate of public expenditure. As a consequence of our disregarding these facts, the growth of taxation, instead of rising by one-third of one per cent, rose by about three per cent—from 23.7 per cent to 27 per cent—during the period, the effects being felt by all of us.

That is another lesson to be learned from this failure in the Programme. Another area in which the Programme went very wrong—the reasons for it are tangled—is the projected rise in employment, which went down instead of up, a matter which can be seen by people even if they are not economists, because it is easy to see the difference between things going up and things going down. The reasons for this failure, for this contraction in employment, are complex. There is the fact that output did not grow as fast as planned. That was an important factor. If output is not growing at the planned rate, employment must be affected. There is also the factor that the Programme underestimated the growth in labour productivity which was necessary in order to achieve the growth rate planned in the Programme. If productivity is not maintained and realised we have to run in order to keep up with the rest of the world, and if we cannot increase our productivity rapidly we will not achieve the expansion we need in our economy. It is an error which can readily be made but in future we must provide for a higher level of productivity and we must not assume that if we get a four per cent growth rate it will mean more employment. We must, in fact, aim at achieving a growth rate of from five to six per cent. Of course, these matters are unpredictable but we must not make the same error in future plans.

Thirdly, there was a miscalculation in the employment growth rate and if I were the Government I should be slightly annoyed at the fact that the growth rate in employment set by the Programme was one which was unobtainable. The Programme suggested that because unemployment would fall by one third and emigration would account for 10,000—would fall by that number—there would be 78,000 more jobs by 1970. If emigration fell to that level and if unemployment fell by that number, the people available in the country for those jobs would not be sufficient to fill them. We would achieve that employment and that fall in emigration but with a much smaller level of people at work than planned.

It gives those of us on this side of the House a chance to point a finger at the Government's planning errors, because if the Government make these errors and fail to detect these mistakes they have made in planning, they must take the blame. Finally, on this question, the employment target was not only incorrect but fundamentally dishonest. Everybody knew the target for agricultural employment was not properly based but the position is that nobody is prepared to say honestly what will happen in the case of agricultural employment in any of the given circumstances of the target put forward by the Government. The target was one which could not be attained with the policies the Government had and the fact that agricultural employment has fallen more rapidly is due in part to the failure of the Government's agricultural policy. Even if the agricultural policy had been successful the flight from the land would have contributed to the fall——

Professor Quinlan

Co-operatives would have achieved the target.

Mr. Garret FitzGerald

In any event, unemployment and emigration have been somewhat above the planned level, although the amount by which they are above the planned level is not very great and one would not exclude the possibility of coming quite close to these targets in 1970, despite the setback of recent years.

Another target which proved erroneous to some degree, and here again we have a lesson from it, is the target in regard to external trade. The original growth of external trade which was projected in the Programme was in fact increased substantially as a result of the consultations with industry. On this the experts were wrong and industry was right, and the growth in external trade and the growth in exports which we have achieved, the growth in imports required for this economy, has been much greater than was originally foreseen, and we have to watch this for the future. We have to accept the fact that our economy is externally orientated to a high degree and that we cannot achieve economic growth without a very rapid growth of exports because of the increase in imports which are needed for an expanding economy.

Debate adjourned.

Business suspended at 1 p.m. and resumed at 2.30 p.m.

Mr. Garret FitzGerald

I want now to consider the reasons why the Second Programme failed to achieve its targets and to consider the reasons put forward in this mid-term review which have a good deal of validity, although I would not entirely agree with the emphasis based on it. First of all, there is reference in the mid-term review to the effect of external conditions. While it is fair to say that these are not overstressed, there is no attempt to pretend that what went wrong was solely or even mainly due to things that happened outside our control in other countries. Nevertheless, I think perhaps too little emphasis is placed on this factor. It is true that during the period of the Second Programme one had the setback of the British import levy and this had some temporary effect on our exports, but due to the speed and the skill which the Government acted in that matter— and they are to be congratulated on it— the bad effects which might have come from the British import levy were greatly mitigated and the effect on our exports was by no means as great as had initially been feared. So much is this true, indeed, that over the whole period of the four years covered by this review our exports increased faster than the planned rate. The target originally set was exceeded despite the effects of the British import levy.

This being the case, one can hardly say that our failure to achieve the target of the Programme was due to the levy, and the levy did not, in fact, prevent us achieving the very target to which it was relevant, the export target. What actually happened was that industrial exports expanded much more rapidly than had been provided for in the Programme and agricultural exports lagged behind, stagnating completely for three years up to 1966, and then jumping ahead up to 1967, partly in response to higher price levels and, indeed, due to the increase in export revenue in that year affecting higher export prices, and partly because of an increased volume of exports, some at least of which reflected a running down of stocks and was necessarily temporary in character.

The great bulk of improvement in exports over this period was due to industrial exports which expanded steadily, unlike agricultural exports which stagnated for three years and then jumped ahead only in the last year. However, I do not think that in view of the overall performance, despite this lag in agricultural exports, one can attribute to the external environment much of the failure to achieve our targets. What is true, as is said in the Report and I think fairly, is the fact that these external difficulties coincided with the domestic mismanagement of our affairs in 1965—these are not the precise words used in the Report, of course—but the fact that the two coincided did mean that the Government had to take more drastic action at that moment than might otherwise have been necessary, and this did have some effect on the tempo of growth. It is, however, a minor element in the failure to achieve the targets.

I referred earlier to the major element as being agriculture. I want to dwell on this for a few minutes. The more I think about it, the more I am convinced that it is in this area of policy we can find the greater proportion of the difficulties that face us. I have had to calculate for myself what, in fact, is the shortfall in agriculture under each of the main headings. This review of progress gives a comparison for agriculture only up to 1966 and does not give the figures for 1967, although the basic data was available in provisional form at the time this was produced. The agricultural output figures which appeared in the past fortnight show, like all our statistics, the traditional form of totally ignoring the fact that any targets existed in the Second Programme, thus requiring the conversion of current statistics to 1960 money values.

To make a comparison with the targets set out in the Second Programme requires the conversion of current statistics to 1960 money values. The same old stuff is churned out, therefore, a good deal of calculation and a certain amount of economic expertise is required. The Government have a duty to produce statistics to allow us see where we stand in comparison with the target set. They are not justified in continuing to give production figures in the old form, bearing no comparison with the targets they have set up themselves, Therefore, I have done the calculations myself. If I have done them wrongly, the Minister and his advisers will correct me, but I do not think they are very wrong. On my calculation, the output of cattle in 1967 was eight per cent behind target. This is very important because cattle themselves, leaving aside milk, represent something like 30 per cent of the total output of our agriculture. A shortfall of eight per cent is, therefore, important.

Milk was on target. With the possible exception of horses—a pretty minor item—it was the only item in the whole list on target. Sheep and wool were 28½ per cent behind target. The value of output in 1960 money values was £13 million against £18.2 million. Far from going forward over this period, they have gone backwards. When the Programme started, output was £15 million in 1960 money values. The Programme succeeded in reducing this to £13 million instead of the £18.2 million in the Programme.

In regard to pigs we have the same picture. The plan was that the value of output should rise from £24.6 million to £27.9 million. In fact, it went down to £23.75 million. Here we have a shortfall of 15 per cent. Poultry and eggs—there was some growth in this area, mainly because of the expansion in the broiler chicken industry, but still it was 3½ per cent behind target.

Taking the whole livestock sector together, including milk, output, which was to have risen from £165 million to £196½ million over the four-year period of the Programme, increased only to £180½ million. In other words, only half of the progress planned was achieved in the livestock sector. The shortfall here is of almost £16 million or eight per cent behind target, dominated by the failure in the cattle sector. This was partly offset by the fact that milk was on target; but that was more than outweighed by the appalling shortfall in sheep and pigs, where output has actually fallen, so deficient have been the policies of the Department of Agriculture and Fisheries.

Tillage and crops: in tillage, there has been a slight increase. The whole of it was achieved in 1967. In 1966 it was lower than 1963. Yet tillage output was about six per cent behind target. Fruit, vegetables and other crops were about 24 per cent behind target. There was no increase whatever—a slight setback instead of the 30 per cent increase planned. Turf production was to have risen steadily by nearly 30 per cent; instead it was nearly 30 per cent behind target. Tillage and crops and turf together are running about 12 per cent behind target. The total output of agriculture, which was to have risen from £207 million to £244 million in 1960 money values, has risen only by £22 million, an increase of only 18 per cent. Gross output turned out a seven per cent increase in this period. Here we have a picture of a nine per cent shortfall in output in 1967. This is a miserable picture. Only one item, milk, was on target; nothing exceeded target; everything else was behind, with shortfalls of up to 30 per cent in some important products. The number of pigs and sheep actually declined over the period when a substantial increase was planned.

At the same time, the inputs into agriculture have risen more or less as planned. The increase in the inputs is very close to the planned amount. Consequently, if we have to put into agriculture almost as much as we have planned and if output falls short of what was planned, the increase in the value of agricultural products, the contribution of agriculture to the economy, is only negligible. Instead of an 18 per cent increase what we have got is an increase of 3½ per cent. Four-fifths of the increase in the contribution that agriculture was to make to the economy has not been achieved.

Surely this is a picture that demands some kind of action? If planning means anything, it means that those concerned with planning devote themselves to the achievement of certain results by the application of particular policies. The great contribution that planning can make to this country is that it pins us all down—Government, industry farmers, the lot—to some kind of commitment as to what we expect to achieve. In the first 50 years of the life of this State Government and civil servants have been able to get away with a lot by simply saying they are introducing new policies and hoping they will improve things. They do not commit themselves to what the improvement will be. Therefore, it can never be shown that their targets have not been fulfilled.

The contribution planning can make in this country is that, above all, it forces people to say what results they expect to flow from the policies they are pursuing. This means that when those results are not achieved they should and must come under pressure to justify those policies and, if they prove to be a failure, to change them. The notable cases where planning can really help the economy—and in which the target is not achieved—is agriculture. The one thing I had hoped to come from the Second Programme was that for the first time in 50 years, the deficiencies in the policies of the Department of Agriculture which have been pursued throughout successive Governments—with some improvements in some cases and setbacks in others—are being pinpointed and dealt with. For the first time, we can come to grips with the Department. We can put them on the spot. We have got them to say—and it was they who told the Department of Finance—what their targets would be. We have asked them to say what they thought would happen to Irish agriculture with their policies in this period. These were policies on which Ireland had drifted along decade after decade and nobody had done anything about it because at no point was anybody forced to say what they expected to achieve.

But when the Second Programme was produced, the Department of Finance forced the Department of Agriculture to say what policies they expected to produce. They insisted on producing their own targets when they were asked, as other Departments were. We can now see the results of this. They told us they would achieve a growth rate of almost 4 per cent and we see that four-fifths of what they expected has not been fulfilled. The policies which they said would produce these results have been shown to have failed. By the standards of those who drew them up, they have failed and they were drawn up by those who put forward these policies. It is not I who say their policies have failed; it is the Department that set the targets because these targets they set have not been achieved.

One of the things the Second Programme could do for this country, with all the weaknesses, deficiencies and some failures, would be to bring about total reform and revolution of agriculture, if this Programme is used in the way it should be used, if all of us on this side of the House and on the other side, all of us inside and outside the Government, turned on the Department of Agriculture and insisted that it justify its stand, compelled it to show what changes of policy it is going to undertake in order that targets of the Third Programme would be achieved. If that is done, I think we can forgive any deficiencies, weaknesses or failure in any other aspect of the Programme, because if for the first time agricultural policy could be changed and revolutionised, then the growth rate of this country could be totally transformed and the life of the country consequently transformed, and so many of the difficulties that we have faced for so long could be overcome.

That is why I stress this point, why I think this exposure of agricultural deficiencies comes at a good moment The Government who have drifted in regard to agricultural policy for some time past have faced a really severe shock. We see the first signs of reaction to it. We have seen the statements of the Minister for Agriculture and the Taoiseach in the past couple of days implying their willingness to reconsider the hard line about the National Agricultural Council and the NFA, the first recognition that this policy has not paid off and that something new has to be attempted, recognition that a fresh start has to be made and that it can be made only by co-operation with the farmers through an organisation which commands massive support from the Irish farmers as was shown in the recent election when they threw out all politicians, Fianna Fáil and Fine Gael. As Deputy Cosgrave said, they threw out both sides and said that they wanted to be a vocational organisation, playing their own part in the national life and not a political plaything of any Party, Fianna Fáil or Fine Gael.

That is a situation which should provide an opportunity for all of us on both sides to think again on agricultural policy. The policies that have been pursued in Irish agriculture have been popular policies, politically easy and acceptable policies, but they have damned Irish agriculture to stagnation. These policies have been continued up to now because politicians on all sides have not had the courage to stand up and say what needs to be done and advocate the policies of selectivity that are needed.

We have seen this in this year's Budget which did not have much to say on the subject of agriculture but which did introduce some useful changes. In last year's Budget, we saw this policy reaching its height. I hope it is the last time such a policy will be adopted in Irish agriculture. I hope we have reached the point when a fresh start can be made when, as was said in France during recent events, it will be agreed that as politicians we have a responsibility to do what we know to be right by devising and implementing life-giving agricultural policies along lines that will produce increased output and enhance the general welfare, genuinely based, and not simply a continuation of the policy of doles which we adopted on such an extensive scale hitherto.

So much for agriculture. That was a major cause of the failure of the Second Programme. It was built into it because the targets were unrealisable under the policies pursued. We look forward to an appraisal of the weaknesses and the failures and to having conclusions drawn from them. There were other weaknesses. The mid-term review points out that the lack of an incomes policy was a serious one and that nothing was done to develop such a policy. Consequently, we had a disproportionate growth of incomes to output. This slowed down growth and the Government must take some responsibility.

The tendency nowadays is to shuffle off responsibility but nobody is immune from blame. The trade unions are dragging their feet on this question. They do not want to enter into an incomes policy that might be only a wages policy. They want evidence that other incomes than wages would be restrained and they may have grounds for this foot-dragging, but up to now they have not been contributing to the formulation of an incomes policy. Since they signed the NIEC Report No. 11 the employers have given no indication that they would make any general contribution. They are afraid of anything that might affect the growth of profits or dividends. They have been as slow as the unions to accept the need for any restraint on their side as well as on the side of wages.

The Government have not accepted responsibility in this matter because the NIEC Report referred to a series of things that could be done by the Government which would change the atmosphere for an incomes policy, legislative and administrative action. The Government could then take advantage of that changed atmosphere to work a genuine incomes policy and direct changes in the attitudes of Government Departments that have been totally negative, so much so, that it has contributed to the general dragging of feet. The Government Department concerned must examine its conscience if a Government Department has a conscience, and consider the Report of the Council. We must make a fresh start on an incomes policy. The failure to control the growth of incomes during the Second Programme contributed, as this Report properly states, to failure to achieve the targets. If we are to achieve the targets set for the Third Programme, it will require some step forward in this field, of which there is, as yet, no sign.

Again, the point is made in the mid-term review—I think, properly—that there was failure to maintain a balance between consumption and savings and investment. This is certainly true. I have referred to this point already and I do not want to dwell on it here but we clearly need a new system of priorities directed towards investment and restraining the growth of consumption when things go wrong.

The next weakness I see—it is not brought out sufficiently here although it is implicit—is the lack of any adequate review process. One of the reasons the Second Programme did not succeed was that in only one sector was any attempt made to review progress during the currency of the Programme. That sector was industry and it was done in that case because the NIEC took on the job of carrying out the review. It was not left to any Government Department but was done by the Council itself. It has been handed over to the Department of Industry and Commerce but for three years it was carried out by the Council, and the industrial review is now well established, and I think will be continued by the Department of Industry and Commerce in the future.

It is only because the Council took on this task that we have had a review of the industrial sector out of which arose a whole series of problems which were then tackled. There are many still to be solved but some have been solved and some are being solved. Policies that held up progress were identified. In no other sector of government were policies subjected to review and examination of this kind. There is, of course, the lengthy statement which the Department of Agriculture produces and presents to the Dáil at the time of the Estimate. I discovered one reference at one point to one target for cattle, not repeated subsequently for any other product. It was in a year in which cattle was almost on target, and so the Department felt it might mention the fact. I could find no reference in any speech of the Minister for Agriculture, in any statement issued by the Department, in any agricultural statistics, up to the time of the publication of this document by the Department of Finance to any comparison between targets set and the progress achieved.

The Department of Finance itself in none of its publications—and goodness knows, this Department is responsible for enough of them — makes any reference to the targets set for public revenue and expenditure and the progress made towards or beyond those targets. There is no reference to that in any speech or in any financial document published by the Department until the mid-term review was published. The same is true in regard to the targets for tourism, forestry and fisheries. One would think that where the targets were being achieved there would be some reference——

Mr. Haughey

What the Senator is saying is not true in regard to tourism.

Mr. Garret FitzGerald

The Tourist Board itself set up its own detailed targets within the framework of the Second Programme and has compared the progress with those targets, but there is no reference in any Government publication to the tourist target, nor has the progress achieved been dealt with.

Mr. Haughey

I think it has been.

Mr. Garret FitzGerald

I am open to correction. Certainly Bord Fáilte has set its own detailed targets and compared performance with them, but I am not aware that Government Departments have shown any awareness of these targets. The picture has been dismal. It is essential that there is real commitment in the Third Programme to a continual review of progress, not four years later. The difficulties should be considered as they occur, so that these difficulties and bottlenecks may be overcome. Unless that is done, the exercise is a waste of time. It is in industry that most has been achieved. It is in industry that growth has been most rapid, that targets have been most nearly achieved and bottlenecks overcome because each year there was a review of progress, just as in other sectors failures occurred because the Second Programme was completely ignored.

The fifth problem that existed, the difficulty we faced was related to the failure of the Government in regard to short-term economic planning in 1965-66. It is a matter of historical record and I will not weary the House by going into the details. Part of the difficulty arose through the absence of adequate, up-to-date and accurate statistics. There are many deficiencies in our statistics and we are not making adequate progress in resolving them. The Central Statistics Office remains overburdened with work, understaffed and under-equipped to do the job. Many tasks have been increasingly placed on it by Government Departments which are becoming more and more statistically conscious. These tasks are not being carried out because they cannot be undertaken by the staff available. We must reconsider the whole statistical working in the public service. In Britain and in other countries every Department has its own statistical section. In this country we have a mere handful of statisticians. In one section of the Department of Education, I think, there is a statistician and there is something approaching a statistician in the Department of Labour. But in most Departments there is nobody statistically competent and the whole burden is placed on the Central Statistics Office which cannot cope for the simple reason that the salaries do not attract statisticians who are in great demand all over the world. They are also being attracted to private industry here.

There are many areas—and I will not weary the House with the details— where statistics are needed and where progress cannot be made because we have not got the facts, because we have not got the necessary statistical expertise available to do the job. If there is one bottleneck one could pinpoint in this country which most holds up progress within the public administration and which could be most easily resolved by putting enough people in, it is in the matter of statisticians. I hope the Minister, within whose competence this bottleneck comes particularly, will do something about it. I know the Central Statistics Office is in the Department of the Taoiseach but the question of the public service, its administration and staffing is within the Minister's competence. I exhort him to look at this problem, which has held up progress. Our policies have been inadequate for several years. It was necessary in 1966-67 to reflate the economy but this could have been done earlier if we had the information available which would have enabled us to do so with any confidence. The Minister should look at this whole question, because he has to take these decisions, but at the moment he has not got enough information on which to take the decisions.

I have criticised the Minister for his failure to reflate the economy sooner, but I recognise that had I been Minister during the same period I might have suffered from the same hesitation due to the conflict of views and the lack of up-to-date statistics on which to base them. While the Minister is the person responsible, it was not easy to take decisions when he had not the necessary details. It is his responsibility to provide himself with these details, and I hope he will do so.

Another criticism one could make of the Programme is that it covered too long a period. The Government terminated the programme after four years, and, perhaps, the emergence of the Third Programme is the clear recognition of the fact that the period was too long. It is not possible to forecast and project with sufficient accuracy for a period of seven years. A period of four or five years is as long as we should admit, and this should be done in the Third Programme.

There is a great danger that confidence in economic planning in Ireland has been severely shaken throughout the country, not alone in the private sector but in the entire public service itself, by the mistakes that have been made, by having too long a programme and, above all, by the way in which it was abruptly terminated last year, and the manner in which the Taoiseach in an ill-considered statement spoke about the programme as if it had to be dropped because it had been a failure. If he wished to terminate this programme and start the Third Programme, he could have done this in a manner that would not have so shaken confidence among the people who are not politically minded at all and who have no connection with political Parties. That was misunderstood. The problem of rebuilding confidence in economic planning after the failure to attain the targets in the Second Programme and after the way in which its termination was mishandled, is very great and any contribution I can make I will certainly make. Adequate economic planning is essential. It is most unfortunate that planning has been in some degree discredited by the way in which it has been mishandled by the Government. The way in which it can be recredited—if one can recredit something that has been discredited— will be by having special regard to agriculture, by drawing conclusions from the Second Programme and showing there is a real intention to learn the lessons from that Programme and to tackle the problems effectively in future.

We need a total review of the agricultural policy, starting with a complete reconstitution of the National Agricultural Council, with a completely new approach to the question of co-operation with the farming community, however difficult and demanding they may be. I am sure any Minister for Agriculture will find the farming community difficult to deal with. The farming community, because of the nature of the terms of trade as between agricultural products and other products, because of the nature of their situation in regard to marketing agricultural products, face great difficulties. Their incomes lie behind those of other sectors. No Minister for Agriculture will find them easy to deal with and the problem of securing cooperation with them while, at the same time, not caving in to all the demands they make, which could not possibly be accepted, is one which certainly will not be solved by means of the attitude adopted in the last two years. I hope that the speeches of the Taoiseach and the Minister for Agriculture in the past couple of days denote a real change of heart and that we are starting a new era of good relations between the Government and the farmers.

Secondly, we need better demand management in future, a better system of control of the economy than we have had, guided by better and more up-to-date statistics and we must apply to those statistics better judgment than was applied in 1965.

Thirdly, we need within the public service itself adequate financial control, a control system which will relate public expenditure to national output and will not permit the two to pursue courses deviating so far from output that the growth of the burden of taxation could be, as it was in this period, three times as great as had been planned.

Fourthly, we require an incomes policy which will not only get good will from management but a positive lead from the Government, who have shown themselves frightened of this problem and reluctant to give any lead.

Fifthly, we need a review mechanism, a mechanism we have not got except in the industrial sector. This must be introduced in the Third Programme. Sixthly, we need a social programme. We need it not alone because it is demanded for social reasons or because it is demanded by social justice but because it is one of the things which did, in some degree, disrupt the Second Programme, in a minor degree perhaps, but in some degree disruption was caused by the absence of any built-in social programme.

Had there been any thought-out social programme, had there been any thought at all given to the problem of social progress, the absurd assumption would not have been made that the growth of transfer payments, social security payments, and so on, would, in fact, be, if anything, slightly slower than the growth of national output and that the share of our resources devoted to this purpose would, if anything, decline over the period. Such an assumption could be made only by people totally unconscious of the sensitivity of politicians to this problem.

What happened here was that civil servants put down this figure clearly thinking that, as for some years past no progress had been made in social matters, this would be the pattern in the future. Had there been any thought given, had there even been an adequate liaison between the Civil Service and the politicians, who ultimately decide the amount of the resources to be provided for social purposes, this mistake would not have been made.

We must have in the Third Programme an adequate social programme in which is set out what it is proposed to do in the redistribution of wealth and we must build these plans into the Programme, something which was not done in the Second Programme. So much for the Second Programme. I have, perhaps, taken up too much time dwelling on it; it is a subject which could be discussed in a separate debate. This is not possible owing to pressure of business, but it is something one would like to see introduced into the Parliamentary mechanism.

I want to say one thing which relates to the Parliamentary mechanism. In other countries, France and Italy, for example, the economic programmes are debated in Parliament. There are problems about this and the reason perhaps it was not done with the First Programme and the Second Programme was a fear that the presentation of such a Programme to Parliament by a Government comprising one political Party would encourage, or induce, the Opposition Parties to oppose, as if they had to oppose everything put forward. The fear that the Programme would become a matter of Party divisions, not on the details but perhaps on the concept, has inhibited Parliamentary debate on the subject.

Mr. Haughey

Did the Senator mention Italy?

Mr. Garret FitzGerald

Yes.

Mr. Haughey

When I was in Italy Parliament was debating the Fifth Programme 18 months after it was supposed to have started.

Mr. Garret FitzGerald

Yes. I am aware that other Parliaments have timetable problems too, but at least they discussed it even after a time-lag. The French Parliament were not satisfied with the discussion and they are, in fact, thinking of modifying the system of Parliamentary debate, which is not working out in an entirely satisfactory manner. I am not saying there is any simple answer. These Programmes are presented here and they are never debated, or discussed, unless they come up incidentally when someone who is interested decides to say something about them. In the beginning, perhaps, with some reason, the Government feared that the Programme might become a matter of Party controversy. That reason is less valid now that planning and programming are accepted by all sides and I think we will get real political involvement and a real understanding of what is involved in economic planning amongst those of us who are engaged in politics. We should reconsider this and consider some form of Parliamentary debate. In other countries, in France, for example, they have attempted to put before Parliament alternatives and say : "Do you think we should aim at this growth rate? Do you think we should distribute so much for social welfare at the expense, perhaps, of so much economic progress, or the other way round?" It is a novel idea to present Parliament with any choice of anything or to give Parliament any power to decide anything. It is rather outside the political traditions we inherited from Britain. I am not sure that we should not begin to think in terms of changing that.

Mr. Haughey

How real is it in France?

Mr. Garret FitzGerald

I agree it is not very successful in France, but they are reconsidering it. There are problems. I am not suggesting it could be done easily. Perhaps the first thing to do is to get adequate debate going on Government programmes and then we could move from that to presenting Parliament eventually with a certain choice. I do not think we should move straight to it at this stage. Other countries have had difficulties; we would not find it easy. The exclusion of Parliamentary debate on programmes is not good for economic planning and it is not good for Parliament. It is not good for the country because it means the realities of the choice involved in economic policy planning are not presented to Parliament. Parliamentarians are not forced to face the issues involved and to face the bitter and difficult choices which Government have to make. These programmes are not properly debated in Parliament and Parliament is never fully informed on them.

Turning from that to the short-term economic prospects — and I will not dwell too long on this —the immediate economic situation facing us at the moment is reasonably good, but it contains dangers of which the Minister will be aware. We are at the moment in a period of accelerating economic growth, a difficult period for any country and one particularly difficult for us as, on any occasion in the past, except one, when our growth became rapid, we got into difficulties. We had this problem in the late Forties. We had it, although the growth was not that rapid, in the mid-Fifties. We had it in the early Sixties but, on that occasion, we got over it successfully without incurring inflationary pressures. Although there was a slowing down for a period afterwards we did not have an economic crisis. Again, in 1965, we attempted to move too fast and got into difficulties. We are at the moment in a period of accelerating economic growth. I think the Taoiseach said in the Dáil yesterday that our national output rose by 4½ per cent. That is about the eleventh revision of the figure since it was given to us six months ago. It has varied from between 3¾ per cent to 4½ per cent at irregular intervals.

Mr. Haughey

My recollection is that it has never been less than 4 per cent since September of last year.

Mr. Garret FitzGerald

Perhaps that was before September. Some time in the autumn it was 3¾ per cent. Generally, it is 4.2 or 4.3 per cent.

Mr. Haughey

That was before the year ended.

Mr. Garret FitzGerald

Admittedly these are forecasts. The figures for national growth are always forecasts and, about five years later, the statisticians stop revising them downwards or upwards. At any rate, 4½ per cent is the latest figure.

Mr. Haughey

The Senator can take it that 4½ per cent is final.

Mr. Garret FitzGerald

I am glad to hear that it is better than was foreseen. If our growth is accelerating this year this means there is a prospect of achieving an increase of 5 per cent in national output but there are dangers. When one examines the picture that lies before us today and compares it with 1964 one cannot help but be a little disturbed at the close resemblance between the two situations. They are not identical. We may get through this period of rapid growth without serious inflation, but we should be watchful at this point in time.

We have an increasing credit authorised by the Central Bank. I think the figure is 16 or 17 per cent. In 1964 it was 14 per cent. We have an increase in wages of the order of 10 per cent spread over two or three instalments and, therefore, less lethal to the economy than the increase of 12 per cent in 1964. Nevertheless the magnitude is the same even though it is spread properly and helpfully over a longer period. We have an increase of 10 per cent in the Government's current expenditure and 22 or 23 per cent in the Government's capital expenditure. These figures bear a close similarity to those of 1964. They are disturbing, but I do not think they are compelling. I do not think that the fact that there is an inflationary element and that the figures are similar to those in 1964 necessarily means that we have the same difficulties now. There are other factors in the situation. There is less of that extreme economic euphoria. I think we are less volatile, perhaps, than we were at that time and I think that the inflationary pressures are somewhat less strong. The staggering of the wage round instalments is certainly a feature. Our exports growth is continuing strong at present but one must be prepared for some difficulties in the period ahead.

The British economy is not expected to expand, as far as consumption and imports are concerned, for the next 12 months although an increase in output is expected. We must, therefore, secure, in the face of a stagnant British economy, from the point of view of our exports, a growth in our exports sufficient to offset the growth of imports in a rapidly expanding economic situation to get us through this period without an external deficit so large as to create a strain on our resources that we could not carry. I think it can be done but the situation will require careful watching. In the autumn and the winter of this year, we shall need to watch all the economic indicators very carefully. If there is a real suspicion that things are beginning to go wrong, then we must take action early. The mistake made by every Government in this country so far has been to wait too long and then to act too severely. I think that is a fair description of what happened in this country in 1947, in 1951, in 1955 and, indeed, in 1965. On each occasion, action was postponed too long and then the action required was correspondingly more severe and, in each case, the action was more severe than was needed. We know that now with hindsight. At the time it seemed right. However, each Government in this country has tended to make the same mistake.

If there is even a sign of inflationary pressures, if there is anything which begins to be worrying, I hope the Minister for Finance will not be afraid to cut back. If our growth rate is 5 per cent, or more, in the current year, it will not hurt us to have that slightly moderated. Indeed, it might save us from another economic crisis and another lost two years in growth and cutback. It is better to be wise in time and to take action in time than to let things go too far too long.

The Minister's attitude in regard to suggestions made in the Dáil—I think last year—worries me. He should adopt a more flexible attitude. I am referring now to suggestions that were made in the Dáil early this year or at the end of last year. This arose out of the Economic Research Institute's Report last September which criticised the Government's economic policy in rather severe and, perhaps, rather unfair terms over the past couple of years and their very wise suggestion that the Government must be prepared to act much more rapidly and frequently to reflate the economy at one moment and, perhaps, to moderate growth six months later. The Minister must not wait for each Budget to turn up in April. He must be prepared to cut back or to expand the economy in between times, where necessary.

When this point was put to the Minister in the Dáil by Deputy T.F. O'Higgins, the Minister responded in a negative way and described what Deputy O'Higgins said as nonsense. It is possible that the Minister may have misunderstood the purpose of the Deputy's remarks. I think he did not fully understand what Deputy T.F. O'Higgins was getting at and that what the Minister said on that occasion was not necessarily a considered view. However, I would press on him not to be tied down to this method of Budget but to be willing to expand or to contract the economy in between, as occasion requires. Many crises turn up in between times. If left too long, these crises could create far more difficulties than need happen. Whatever the reaction of the Minister on the occasion of Deputy T.F. O'Higgins's remarks in the Dáil, I think he should not adopt a rigid attitude to the matter but, rather, should be flexible.

The Minister is to be thanked for his blueprint—I think one might call it that—on the added value tax. It is a useful exercise in public relations to present this concept to us, with its pros and cons, and some idea of how it may work. It is a useful document. It does not indicate the Government policy. I think we shall have to move in the direction of an added value tax. The report published in the newspapers today about the partial substitution of the turnover tax gives additional point to this document.

The reason other countries have turned to the added value tax is that other types of taxes, such as a wholesale tax, which we have—this could also be true of the turnover tax—if they rise to too high a level give rise to difficulties such as the difficulty of evasion because a gain to the individual taxpayer becomes great if the tax is high. Such difficulties have, therefore, pushed other countries into adopting the added value tax which spreads the burden over as many stages of production as possible in the economy. Therefore, any proposals in relation to taxes would give added point to this document—apart altogether from the fact that if we become members of EEC we shall have to harmonise our taxation system perhaps even to levels similar to theirs.

I would remind the Minister of the banking system in this country. We have been promised legislation for the past three years to reform the banking system but, as it has been referred to, it seems to have been designed more to control the influx of new banks than to do anything about making the present banking system here more efficient. This may be unfair. We have had only scrappy references to the Government's intentions in this regard. More may be involved.

Our present banking system needs to be looked at again. It is 30 years since it was looked at and, in that period, a lot of things have changed. We have two groups now, together with the subsidiaries of two Northern Ireland banks, subsidiaries of British banks, and a handful of new foreign banks that have recently come in here.

The great bulk of banking in Ireland is controlled by two groups and they do not compete with each other. There is rigid control of rates. Even in Britain, where there is an attempt to maintain the same rate structure, you can get different rates in different banks if you shop around but you will not find that here. Only if you buy shares in the bank, apparently, will you get a discount in your interest rate.

Mr. Haughey

I never knew that.

Mr. Garret FitzGerald

I think I remember being informed on one occasion a few years ago that there is a different interest rate for shareholders: I shall not be too dogmatic about that.

Mr. O'Quigley

The Senator has not bought shares.

Mr. Garret FitzGerald

Short of that, there is no way of getting any reduction in the rate they charge. In any other aspect of Irish life, if a group of producers get together and fix prices then, if there is any dispute about the prices, there is the Fair Trade Commission to investigate. The Fair Trade Commission has not power to investigate banking. Why has it not power to investigate banking? Why should this sector be exempt? If, in another sector of the economy, you had an area of production controlled by four firms——

Mr. Haughey

There are very good arguments for preventing banks from competing by way of interest rates.

Mr. Garret FitzGerald

Yes, I do not ignore that fact but, on the other hand, something needs to be supervised. If, in another sector of production, there were four firms who fixed their prices amongst themselves to keep out other people, because they had powers which prevented other people from joining that particular group, and who did not publish their true profits and their true assets, one would regard it as a slightly odd and anachronistic circumstance in a modern country. Yet, this is the position with the banks.

I am not convinced that there is adequate supervision of our banks. For instance, does the Central Bank have full access to banking statistics? Does the Central Bank have full access and information in regard to the true profits and the balance sheets of the banks?

Mr. Haughey

Now, yes.

Mr. Garret FitzGerald

I have an impression that, a couple of years ago, they had not such access. I remember that, when I talked to somebody in the Central Bank in the hope that I might get some assistance in this respect, the reaction I got was that they would love to know themselves. I am glad to be informed by the Minister that that situation has now changed. I think this needs to be reconsidered. The arguments for not publishing banks' profits are anachronistic. Many bank directors here would not press them at all. The idea that, if people discovered, for example, that the banks' profits are twice as high as we are led to believe they are, they would lose confidence in the banks is difficult to sustain. The true profits are probably twice the profits they have published. In regard to the question of rates, certainly if these are to be fixed, they should not be fixed by the banks themselves. When they control clearing facilities as well and refuse access to any new member coming into the market and attempt to maintain their monopoly, that is objectionable.

Mr. Haughey

They have not got a completely free hand with regard to the fixing of interest rates. We do not permit them to fix their interest rates at any level they like.

Mr. Garret FitzGerald

I am aware that they are under some pressure in the matter but if the banks indicate that they could not accept rates at the level the Government want, they press the point and there have been occasions when the Government were swayed by the expert view of bankers who are not completely impartial. It is most objectionable that they should control clearing facilities and not permit access to new members because then they are operating as a cartel. These are matters which need to be looked into. I do not know what the solution is but it seems to me that there is a problem to be looked at and perhaps a need to have another banking commission not perhaps on the same scale or for the same purposes as before but as there has been in Britain in recent years. The system needs to be looked at again because things have changed so radically since the 1930s and the reasoning which then led to certain conclusions would be unlikely to be valid now.

Finally, I should turn to the Anglo-Irish Free Trade Agreement and I want to press the Minister a little on the question of what results it is expected to achieve. The more I have thought about this, the more I am concerned about it. If I regret one thing since I went into politics, it is that I did not oppose and press my Party to oppose this Agreement more strongly. My judgment and my hunch from the beginning when I spoke about the Agreement here within 48 hours of its announcement was that this was a bad and unwise Agreement. The view which my Party took in the other House was that they could not support the Agreement and they did not. In fact, they did not vote against it on the ground, legitimate at the time, and I supported them, but I now think we were wrong, that the Government went into this Agreement as a preparation for membership of the European Economic Community and that they were the only people who could know, with all the information available to them, what membership of the EEC entailed. We could not make a valid judgment without the information they had and as a preparation for an early membership of the European Economic Community, we thought the Agreement could be justified.

The Minister will recall that in his closing speech Deputy O'Higgins made the point that what they assumed might not be borne out and that in that event we would have to press for a revision of the Agreement which, on its own and independent of EEC membership, was onerous and inequitable and on balance against us.

Mr. Haughey

Surely the figures are against you?

Mr. Garret FitzGerald

I have gone into this in detail not for any political reason but because I was asked to do so by somebody outside the country, to carry out a study of what have been the results of the Agreement so far. Let us be clear that the Agreement does bring us short-term advantages but long-term losses. There are short-term advantages and I have investigated them. We have gained about £6 million worth of trade while Britain has gained about £2 million. For the second year we will be about £4 million better off. I base that on a careful study of each individual clause and its application and the export trends for knitted fabrics, nylons, women's clothing, men's clothing and the rest. From that I concluded that we have gained about £6 million for agriculture and industry while Britain so far has gained about £2 million.

That, however, is not the impression given by some Government speakers and here I would fault the Taoiseach who, generally speaking, is careful in what he says and does not attempt to claim too much. He leaves to some of his Ministers the extravagances and fantasies more appropriate perhaps to them. In this area the Taoiseach once or twice made a claim that the increase in exports was due to the Free Trade Agreement. However, the vast bulk of the increases in our exports have no relationship to any clause in the Agreement and the increases have come about entirely through products which are not affected by the Agreement. What worries me is that most of the benefits which are to be secured have been secured and we are now getting about £3½ million in agricultural benefits. If we could debate this in the detail it requires, I think the Minister would have great difficulty in showing that much more will be achieved for agriculture than that £3½ million. Despite all the talk about freedom of access and so on, it was all misleading or fraudulent or exaggerated and £3½ million is about all we can claim.

On the industrial side, gains will continue as far as one can judge the position. The rate of growth in industrial exports is about £2½ million and this should continue in the years ahead. I am prepared to concede that by 1975 we will have something approaching £15 million worth of industrial exports which would not in fact have accrued but for the Agreement and for the removal of duty on synthetic fibres.

The agricultural gains will remain at about £3½ million and it is not easy to see how they can increase but it is possible that with certain changes in the taxation level, it might be possible. The total gains to this country by 1975 can be assessed at £15 million to £20 million but the cost, on the other hand, will be in the region of £50 million. This we can assess because we have the Second Programme targets which tell us what increase in imports will follow from the freeing of trade. The view of the Federation of Irish Industries is that the effect of free trade with Britain would be the same as under full trade conditions. They expect that free trade with the EEC will be no worse than with Britain because the extra competition they will face will be offset by the fact that in those conditions Britain itself would be so busy dealing with the bigger markets that it would not worry about the Irish markets. Seven or eight large industries here arrived at that conclusion in 1965. We can take it that on the whole our increase in imports attributable to membership of the EEC will be of the order of £55 million.

Mr. Haughey

Is that imports substitute?

Mr. Garret FitzGerald

This is the increase in imports attributable to free trade.

Mr. Haughey

Of raw materials?

Mr. Garret FitzGerald

Over and above what would have occurred if the——

Mr. Haughey

It need not necessarily be a loss in the sense——

Mr. Garret FitzGerald

Direct substitution of some goods for Irish goods.

Mr. Haughey

It might be raw materials.

Mr. Garret FitzGerald

I am talking about competitive imports at the moment.

Mr. Haughey

I am talking of consumer goods.

Mr. Garret FitzGerald

I am talking about competitive goods. They need not be consumer goods, but they represent the substitution of imported goods for goods of Irish manufacture. That is to say, a good proportion of total Irish consumption, and not necessarily domestic consumption, will be absorbed by imports.

Mr. Haughey

How does the Senator arrive at the figure?

Mr. Garret FitzGerald

By an examination of calculations in reports in regard to the effects of free trade in EEC conditions and the consultations that industry carried out with the Department of Finance, the Department of Industry and Commerce and the NIEC. This shows that the import content of consumption for a number of Irish industries would increase by a certain amount as a result of the freeing of trade with the EEC by 1970.

Mr. Haughey

The Senator is now talking about imports of Irish industry.

Mr. Garret FitzGerald

No. I am talking about the import content of the consumption of goods whether consumed by industry or by Irish households. The Minister must be familiar with the NIEC Report drawn up in consultation with industry and the figures it shows. If he examines that, he will see that the result was expected to be that the proportion of the consumption of various industrial products is expected to rise in free trade conditions, naturally enough, and if we take the industries which the Anglo-Irish Free Trade Agreement affects what we get is £45 million worth. The full calculations are set out in, I think, the fifth of the articles I wrote in the Irish Times on the subject in January, 1966. If the Minister wishes to challenge them, he is welcome to do so. So far they have not been challenged by any Government spokesman. There may be defects in my calculations; I am always willing to be corrected.

Of that £50 million, a certain amount will be saved because, as the advantage of this three per cent clause on imports from Britain disappears in 1970, this will reduce the benefit from £55 million to £45 to £50 million; it may not be quite that, but it will be of that order of magnitude. In addition, Britain will gain at our expense a substantial volume of trade which we have at present with other countries because, as tariffs fall, there will be a diversion of trade to Britain. I have estimated this at £20 million. That figure is open to question but it is not, I think, far wrong. Therefore, what this Agreement ends up at is we gain £15 million by 1975 and Britain will gain £45 million to £50 million at our expense and possibly £25 million at the expense of other countries.

Mr. Haughey

Would the Senator admit there is a high degree of uncertainty and, perhaps, speculation about all this?

Mr. Garret FitzGerald

I do not agree. There is a high degree of speculation about the gain to other countries.

Mr. Haughey

The Senator is projecting to 1975.

Mr. Garret FitzGerald

Yes, on the basis of the Government's own figures.

Mr. Haughey

In things economic, that sort of projection must be subject to all sorts of qualifications, assumptions and presumptions.

Mr. Garret FitzGerald

Oh, certainly. I am quite prepared to accept it can be between £40 million to £60 million.

Mr. Haughey

Or it could be £100 million.

Mr. Garret FitzGerald

If that is the case, then there is no benefit in the publication of the NIEC and so on as to the possible effects.

Mr. Haughey

What I suggest is that there might not be that great degree of relevance in the Senator's calculations.

Mr. Garret FitzGerald

One has to make some assessment and the assessment I have made is based on the Government's own figures. If the Government have an alternative reasoned assessment, based on reasoned calculations, it is about time they published it because we have had this Agreement in force now for several years and the public have not been told what the Government expect to get from it.

Mr. Haughey

The Senator would admit that it has so far worked out wonderfully to our advantage.

Mr. Garret FitzGerald

It has worked out slightly to our advantage. The results so far have worked out rather less to our advantage than I forecast in these articles, if the Minister cares to re-read them.

Mr. Haughey

To read them.

Mr. Garret FitzGerald

To read them. I was a little misled by the slightly optimistic assessments on the agricultural side at that time. I took them more seriously than they deserved.

Mr. Haughey

I calculated only £10 a beast and it is now between £20 and £30.

Mr. Garret FitzGerald

The Minister's statement of £10 related to the increase in price due to the Agreement. The correct figure is, I understand, between £3 10s and £4.

Mr. Haughey

My next-door neighbour sold bullocks the other day for £110.

Mr. Garret FitzGerald

For reasons totally unconnected with the Agreement. I am talking about the effects of the Agreement. The Minister talked about £10 when he came back from London.

Mr. Haughey

I was hopelessly underestimating. I am always modest. I should have said £30 or £40.

Mr. Garret FitzGerald

There were official assessments by responsible people not unconnected with the Minister and their figure was £3 10s to £4 10s. We have an Agreement which is, on any assessment, likely to prove extremely unbalanced, an Agreement which ties us more closely still to Britain.

Mr. Haughey

One final interruption, and I will not interrupt again. Is it not significant that the British Opposition Parties are also demanding that the Agreement should be revised in Britain's interests?

Mr. Garret FitzGerald

It is in no way significant. This simply proves that farmers in every country grouse all the time, whether things are to their benefit or not.

Mr. Haughey

Would the Senator repeat that? I want to get it exactly.

Mr. Garret FitzGerald

Willingly. This Agreement is an unbalanced one. There may have been a case for entry into an agreement with Britain, which was balanced in our favour, despite the effect such an agreement would have in tying us more closely to Britain, but not an agreement unbalanced to the tune of 2½ or three to one. Our external policy up to about ten years ago was based on the principle that we should endeavour to weaken the links that tied us so tightly to Britain and endeavour to secure our total economic independence. This was the policy of the first Government and of the second Government. There was not such a divergence in policy between the two Governments in that regard as some would have us believe. It was a policy pursued so long as the President was Taoiseach. As Taoiseach, he was not, perhaps, a great economist and his effect on the internal economic affairs of the country, particularly in later years, was almost uniformly adverse and his departure from that office and his replacement by Deputy Lemass did lead to great improvements in Fianna Fáil internal economic policy. But where the President, as Taoiseach, showed wisdom was in his assessment of the right way to approach relations with Britain and, so long as he was there, there was always the aim to secure our economic independence of Britain so far as possible and to secure that economic independence of Britain, which is the most harmful feature of our whole external relations, would be so far as possible the main objective of external policy. It is regrettable, I think, that since his departure, the present Government have shaped their policy in the opposite direction and we have been told time and time again in recent years that we must now line up with Britain. We even have to have the same time as Britain, even though, before the Treaty, we did not have the same time as Britain, as the older Members of this House will remember.

(Interruptions.)

An Leas-Chathaoirleach

Senator FitzGerald should be allowed to speak without interruption from either side of the House.

Mr. Garret FitzGerald

We are now told we will have to have identical decimal coinage with Britain. Certain industries here made different submissions on that. The Federation of Irish Industries submitted that a coinage of small individual units would be more in our domestic interests from the point of view of preventing prices being jacked up all the time, but the Minister has insisted, in accordance with his Government's policy, that we must line up with Britain, that we must have the same currency as Britain and we must adopt the smallest currency unit of 2.4d. First, they break the unit of the decimal system by taking a half unit at the bottom, and this is five times as big as the smallest unit we now have and 2½ times as big as our second smallest unit. This is something that will bedevil the economy of the country for decades to come until inflation finally solves the problem.

In regard to devaluation, there should have been no question about our having a different value for our £ from that of British currency. We had to devalue precisely with Britain. Whether the correct value of our currency may be a bit more or a bit less, we must stay side by side with Britain and we have the Anglo-Irish Free Trade Agreement tying us to Britain.

The first principle of our foreign policy should be as far as possible to reduce our dependence on Britain. It could be——

Mr. Haughey

Would the Senator not accept the rule of the balance of advantage?

Mr. Garret FitzGerald

The balance of advantage lies in our reducing our dependence on Britain.

Mr. Haughey

Simpliciter?

Mr. Garret FitzGerald

If the Minister would allow me to finish the sentence I had started. It could be that in certain circumstances one could accept that if an agreement could be signed with Britain so advantageous on balance to us as to make it worth reconsidering that principle, it might be worth while departing from the principle of reducing our dependence on Britain for a short-term advantage if one could be sure that there would not be excessive long-term disadvantages. What cannot be justified is that we should devalue to Britain's advantage of from two and a half or three to one, thereby tying us firmly and totally to the British economy for the future.

It is an interesting fact that it is only really since Britain's policies have become such as to make Irish association with her undesirable that we have adopted this trend. It is only since the 1950s that the British economy has been stagnant and Britain's agricultural policy of deficiency payments has left her free to enforce her cheap food policy without serious repercussions at home to her disadvantage. We have reentered a period since 1950 like the 18th century period of British exploitation of Ireland. In the 19th century, there was neglect but not exploitation. Now we are in a period very similar to the 18th century in economic effects.

Instead of meeting that challenge and that difficulty and accelerating all these efforts to reduce the links that tie us to Britain as quickly as possible, Fianna Fáil have betrayed their own tradition, a valid tradition, which gave this country a good deal in its own way in its own time—although I say it from these benches. It has not done what one would expect Fianna Fáil to do in these circumstances. Fianna Fáil in years to come will have to examine their conscience on that issue.

Professor Quinlan

I do not propose to travel as widely as Senator FitzGerald did but I think we are all indebted to him for his very valuable review of the Second Programme for Economic Expansion and the progress report that has been made on that to date, especially for his underlining of the deficiencies in that programme and the great failure that has been produced in the agricultural sector of that programme. I am in complete agreement with his diagnosis but when it comes to proposing remedies, we might find it much more difficult to agree.

The targets as proposed are the sole responsibility of the Department of Agriculture. Therefore, the country has to hold that Department responsible for the great failure to reach these targets. Of course, the primary fault is in the fact that economic planning in this country is largely in the hands of the National Industrial Economic Council and that our major industry, agriculture, is not represented on that council. Time and time again in this House, we have pointed out the necessity to remedy that position. Nothing has happened. It is intolerable that that state of affairs should continue to exist. For the last year we have been treated to the farce of having a rival council, the National Agricultural Council, as a substitute for that. Fortunately, as a result of a recent demonstration by the agricultural community of their steadfastness behind the National Farmers Association and their confidence in that body, at last realism is about to prevail and, if we are to judge from the recent references by the Taoiseach and the Minister for Agriculture, we have seen the last of this tragi-comedy of the NAC and will probably be able to face the autumn with the emergence of the Third Programme for Economic Expansion and with a National Industrial and Economic Council enlarged to ensure that agricultural thought is properly represented on that body.

As an agricultural country with enormous potential, it is very sad to have to admit our failures year in, year out. There is no real excuse for this because our rivals have achieved success and all the necessary pilot studies are now available in this country. In all parts of the country there are spectacular examples of increased production through the initiative and business skill of young and progressive farmers. This is backed up by the very progressive work done by the Agricultural Institute and the spectacular figures they produce to show what can really be produced from Irish land. With that as our guide, any Government should be able to face the task of modernising agriculture and I might suggest that the first step the Government might make in that direction is that they could persuade the Minister for Finance to go back to the Department of Agriculture.

An Leas-Chathaoirleach

The Chair has been rather lenient in allowing the Senator to have time in order to show the relationship between his remarks and the Bill.

Mr. Haughey

I think the Chair should allow the Senator to repeat that last remark.

Professor Quinlan

Yes, but the financial policy of the Government has been generally gone into by Senator FitzGerald.

Sean Ó Donnabháin

This is repetition. We heard it yesterday.

Professor Quinlan

I am only following Senator FitzGerald who was given the right to go into aspects of policy in so far as they affect the financial foundations of the State and in so far as they affect the provisions outlined in the Bill.

An Leas-Chathaoirleach

I would feel happier if the Senator had in the course of his remarks done what he has told us he was trying to do.

Professor Quinlan

That is the general pattern which I hope to take very quickly because I do not intend to detain the House. I think the Minister for Finance, with his great responsibilities, will have to see to it that agriculture does make a proper contribution to the economy. He should see that reforms are got under three heads. First of all, as outlined by Senator FitzGerald, there is the need for active and positive co-operation with the organised farmers and to give them every encouragement and facility to do the job in agriculture which the trade union movement is doing for its members. It is harnessed to the positive and dynamic leadership that is available throughout the agricultural community. I do not think the Government could assume in any way that this is either anti-Government or pro any other party; it is an effort by a vocational group to express themselves. I think they will respond to the hand of friendship and encouragement.

The second point is, of course, that the failure of the Programme underlies the absolute necessity for full-scale reform of the Department of Agriculture. This is something to which the Minister and the Government can lend their great weight, to seeing that this gets under way. The Minister previously suggested the necessity for development corporations within the various Departments. Nowhere are these called for more than in the reorganisation of the Department of Agriculture. The dead hand of administrators must be removed from our main industry if it is to prosper. Full use must be made of the many outstanding individuals who are working in county services and elsewhere, perhaps on a temporary basis, for a few years to enable us to carry out a progressive agriculture and to give a new look to various facets of the work. If this is done between the Department of Agriculture, the technical staff, the universities and the various county agricultural organisations we might get the dynamism that is necessary in relation to Irish agricultural potential.

Turning to the modernisation of conditions on the land, the co-operative movement has a great role to play in that. The Minister is responsible, through the Government, for getting action on the reports on co-operation that have been issued during the past three or four years. There are very valuable reports lying gathering dust on shelves over many years. It is necessary that these be acted on in a very dynamic fashion. I should like to see much more discussion on the role of co-operation and of the co-operative movement which have solved so many of the problems of agriculture in rival countries. Pilot studies are not lacking. The Minister and the Government need only look down through the country to certain very progressive agricultural groups or co-operative creameries where they are providing all-over services to their members. This is the type of overall co-operative development necessary to modernise agricultural conditions.

The fourth point is the question of manpower. I find myself in distinct disagreement with Senator FitzGerald on this question of manpower in agriculture and the responsibility of the Programme for it. I believe, first of all, we have no accurate figures on what is the real manpower in agriculture. Our present figures are grossly inflated and the drain that is claimed, 14,000 per annum out of agriculture at present, is inflated. Many are going out in coffins, and the statistics are, therefore, distorting the true position in agriculture. In the statistics, many are included as working on the land who are not contributing units to the agricultural labour force. They are either farmers or relatives well beyond the age of productive employment, or else supernumeraries at home doing little due to inertia or to ill health or otherwise. I agree with Senator FitzGerald's suggestion on the necessity for statistical accuracy. For any planning in agriculture, we need much better statistics, and we need them urgently, on the structure of our agricultural labour force. Accurate statistics would show that we may have been mistaken in thinking that employment on the land may not be as great as it looks. Irrespective of what it is, the considered view of all who are concerned with progressive development in agriculture and the expansion of its facilities is that all recognise there is a national shortage of labour on the land and of the right type needed for full scale scientific development. The Government might well concentrate in the next Programme on seeing if they can recruit people into some of the positions and openings that are available in agriculture if only the men are trained for it and the proper co-operative development takes place. I think the Government could look for a great slice of the increased employment to be provided in the next Programme for Economic Expansion in the agricultural sector. Far from being defeated and taking fright at the reduced numbers on the land shown in the Second Programme, they should look boldly to agriculture as a source of employment.

An Cathaoirleach

The Chair is unhappy that the Senator should do more than make passing reference to the manpower policy, which would be more appropriate on the Appropriation Bill.

Professor Quinlan

The main difficulty is that we rarely get any opportunity here of general debate. Things happen long before we get a chance of commenting on them. Lying on the Order Paper of the Seanad, as a permanent adornment, there are a number of motions. One of them is a discussion on the Programme for Full Employment. It has been there for a year and by present indications it may be there for at least another year. It is a pity that we cannot get time and arrange debates on these subjects. Committees set up to go into these matters would be better than debates. They would be far more productive than working by the old 19th-century method of floor debate. Turning to the details of the Bill itself——

Mr. E. Ryan

Well done.

Professor Quinlan

——we welcome especially the continued improvement in the question of estate duties. We find now that the limits have been increased very considerably — from £350 to £1,000 for a widow and form £250 to £500 for dependent children. This is very desirable. It is something we have advocated very strongly in this House. Four years ago, when the allowances for widows and dependants were introduced for the first time, we had a long debate on it here. We appealed for many of the reforms that have come in now. It is encouraging to feel, even if we do not at first achieve what we wish for, that we may see what we have advocated taken into account in subsequent legislation framed in subsequent Finance Bills.

Mr. Haughey

Constant dripping will wear away a stone.

Professor Quinlan

That is it. I should like to return to one other part of the estate duty provision—the question of what we call the pay-as-you-live scheme. At present if an estate includes an annuity to the dependants —to a widow—that annuity is then accumulated and its present worth is estimated. It might take 15 years of the annuity, depending on the age of the widow — the younger she is the more the estate has accumulated—and then the widow is faced with the complete bill for the whole estate in that period. We have suggested before to the Minister, and I should like to suggest again, that, perhaps, it may be possible to treat annuities on a different basis, to try to segregate them from the estate duty and if the State wishes and desires to get a certain amount from those let it take it year by year as the annuity comes along. I know with the present allowances it is not quite as urgent as it was in the past because most of the estates now will have relatively low death duties and, consequently, the impact is not likely to be so great. Still, if something could be done, it would be in keeping with a modern humane approach to this matter.

The other point is the question of the raising of the surtax relief for earned income from £1,250 to £2,000. This really affects only the higher salaries from £4,000 up but it is necessary to try to ensure that we get the very best personnel in those top jobs. I do not quarrel with this but it is a very distinct contribution to people in that bracket. Now that we have all the other schemes which have come in recently under £1,200 and under £1,500, such as health and otherwise, which people are entitled to and also the educational grants which affect incomes of under £1,500, I want to make a plea at this point for the middlemen, those between £1,500 and £2,500 because those are the people who are hardest hit in our community today. Their income is too high to avail of the benefits of the many free schemes but yet nothing has been done in this Finance Bill, or in any recent Finance Bill, to help that group.

Mr. O'Kennedy

People like Senators.

Professor Quinlan

I do not know whether they come in under it or not.

Mr. Murphy

Certainly not professors.

Professor Quinlan

I refer specially to teachers and most junior professors. In fact, it goes right up to engineers. They are all in this group and they are expected to meet all the costs, contribute through direct taxation and otherwise, to provide all the welfare and assistance necessary for the lower income group but there is very little provision for them. Those are the citizens who are the real backbone of any democracy but there is nothing for them in this Finance Bill. I would appeal to the Minister to do something for them in the next Finance Bill.

This, of course, could be done by increasing the income tax allowance for children from the present £150. That would be the best possible help which could be given to this group. While on this, it is right and proper in this House to nail again that economic fallacy which really angers me, this one thrown out in an article in the Irish Times last week by Professor O'Donoghue, that in giving children's allowances to a person in some way or other the child is being put in a privileged position. In the case of a student attending school or university a certain relief of income tax is given because that child belongs to that particular family. The amount at present is £150 which means a relief of £40 or £50 at the standard rate. The argument is that this is unfair because the person whose parents are not paying income tax gets no similar allowance at all. That completely confuses the issue. What is at issue is not an allowance to children but a recognition that a parent with dependent children is less well able to pay tax than a person without children. It is as simple as that, and it is about time that some of the economists writing in our papers recognised that very elementary fact. I appeal to the Minister in the next Finance Bill to do something to aid that group.

I want to appeal to the Minister to try to speed up the task he has undertaken for Civil Service reform. I am worried by the fact that it was announced recently that the Devlin Commission will not report until some time next year. I hope it is not going to drag out on the pattern of the Commission on Higher Education because it involves reforms which are long overdue and that are self-evident to many people here. Those are reforms we have called for many times in this House and they are very similar to what the Commission in England reported on recently; the necessity for giving professional people much more of a standing in the Civil Service organisation, much more say in the laying down of policy, much more responsibility, and encouraging mobility in and out to achieve freshness and originality of thought and expression, and in general the creation of life and the recognition that conditions today are very different from those which faced the Civil Service in the last century.

I hate to think that our reforms would have to await the publication of the Devlin Report. I should like to see the Minister trying to anticipate some of those and getting ahead with some of the more urgent ones. I do not wish to take up the time of the House further. I think this Bill is going in the right direction and I hope next year we will be able to report further progress in that regard.

Mr. Murphy

As usual, I will be very brief I hope and, perhaps, much of what I have to say could more appropriately be raised on the various sections when we come to Committee Stage. However, I think it would be helpful to the House if in the meantime I dealt with some of them now.

Mr. Haughey

Providing you do not deal with them again.

Mr. Murphy

No. I do not want to spend time repeating my plea of last year and the year before in regard to the desirability for an examination of the incidence of all taxation on the various sections of the community, the total burden of income tax and indirect taxation, turnover tax, local authority rates on the various groups such as wage and salary earners, self-employed, professional people, traders and farmers. Perhaps it is more important now that that examination should be made in view of the proposals that local authorities should be given some additional ways to collect the revenue additional to the local rates. I briefly repeat the plea and I shall not go any further.

The main point with which I want to deal is income tax, which is in the Bill, and to again urge on the Minister the need to review the personal allowances. I think we will all agree that it is ridiculous that a single person earning £6 a week should be brought within the income tax system. I agree with the Minister that across the board reliefs would cost a lot of money but, in equity, I think people who earn less than is necessary to feed, house and clothe themselves should have their income tax reduced.

In this same measure which provides for income tax in the coming year and deals with personal allowances, we have for the second time running relief to surtax payers. Here we are providing relief for a relatively small number of taxpayers at a cost of some hundreds of thousands of pounds. The Minister said it was to help Irish enterprise in attracting and retaining persons in managerial and technological spheres, but the relief, as we all appreciate, is being given to the most inept people in that income limit. It is not simply related to enterprising and efficient people.

Mr. Haughey

We must assume that a company or organisation will not pay people that much money unless they are competent.

Mr. Murphy

The argument is that we should not have higher tax at that level of income than applies in Britain. I would say that the Minister should take this argument with a grain of salt. It is true that, size for size, Irish management have higher incomes than their British counterparts. There is more in this than simply an income limit. There are many people who could go to England and maybe get £1,000 or £2,000 more in their pay simply by doing that, but they are more content and, I think, sensible in accepting the situation here. We are living in our own economy. There are certain advantages, I think, in living in Ireland in our own civilisation. Simply to accept an argument that they should not have to pay higher taxation at that particular income limit is not good enough. We are, as I have said, and this is the whole point, making provision again in this Finance Bill for the second time for relief for these people at a cost of hundreds of thousands of pounds—for a relatively small group of people.

I mentioned the fact that a single person earning about £6 per week is subject to income tax while the employer of the worker subject to income tax at that level, if engaged in agriculture, will not have to pay income tax even if his income may be £60 a week or above it. Indeed, in this Bill the Minister is providing a further relief for wealthy agriculturalists and landowners by abolishing Schedule B income tax in respect of ownership of land. We all know, but it is no harm to stress this, that most farmers are badly off and in need of all the assistance, sympathy and support we can give but, equally, we know that many of them are quite wealthy.

It is quite inequitable that workers on a very low income should be subject to income tax when people in the same economy, simply because they own some land, are exempt from paying income tax at all. I suppose to refer to these people as farmers is possibly not correct. A more correct description would be wealthy landowners who spend most of their time attending race meetings, dog tracks, festivals and all the social events around the country. It is, indeed, very difficult for the ordinary worker who sees this happening to accept the situation or understand it, that he has to pay income tax above £6 a week while this person, much better able to share in the costs of the housekeeping of the State, is altogether exempt from income tax.

The Income Taxation Commission some years ago argued that farmers should be liable for tax on their net income and that a start should be made on farms of a poor law valuation of £100 and over. I would not be very clear as to what sort of farm would have a poor law valuation of £100 and over but I am told that it would be pretty extensive and a pretty wealthy organisation of farming. The point I want to make is that if those big farmers were brought within the income tax scheme, it would be necessary for them to keep accounts. These accounts need not be very elaborate, but I think it is worth stressing that the keeping of accounts would of itself be a step towards the improvement of efficiency in agriculture.

We can all imagine what the efficiency of an ordinary business would be if it did not keep accounts. With a farm of that valuation as a business, it should be operated in the nation's interest as a business. To simply describe it, as some people describe it, as a way of life and leave it at that is not good enough. The trade unions find it very difficult to explain to their members why they should have to pay income tax and share in the burden of supporting the State and share in the burden of providing social welfare benefits on incomes of £6 a week when such wealthy people are left scot free. This is a crime against justice and it will have to be tackled sooner or later.

Mr. Haughey

Is it Labour Party policy that farmers should pay income tax?

Mr. Murphy

That is an oversimplification of the fact. I am making the point that the Income Taxation Commission recommended that farmers of poor law valuation of £100 and over should be obliged to keep accounts of their net income and pay income tax on that net income. As a member of the Trade Union Congress, I find it very difficult to understand the situation where the ordinary wage-earner has to pay income tax at a level of £6 while this situation to which I have referred obtains.

I welcome what the Minister is doing in abolishing Schedule A tax. We have pleaded for that for a long time and I should like to thank the Minister for it.

Section 6 obliges traders and professional people to keep records so as to make a true return of their incomes. It is about time this was done. The Income Taxation Commission recommended this about eight years ago and it was underlined in the NIEC report, No. 11, about three years ago. I welcome the fact that this provision has been made in the Bill and hope that it will be vigorously enforced without fear or favour.

I have a crib about section 13. Up to now the banks were obliged to make a return of interest payments of £50 and over on all deposits. The level is now being raised to £70 per annum. In Britain the level is £15 per annum. At an interest rate of 4¼ per cent, the deposit would have to be above £1,650 to earn an interest of £70 per annum. I cannot quite appreciate why the Minister has lifted the level from £50 to £70 when in Britain it is £15 per annum. Those are all the points I have to make.

Mr. O'Quigley

Because of the lateness of the hour, I shall be brief, and particularly because of the magnificent speech of Senator FitzGerald which leaves little for anyone else to say. However, I should like to say a few words in general about the way the country is shaping at present. With Senator Murphy and others, I am glad to see that this anomaly of requiring income tax under Schedule A is being abolished. For a long time people have been pressing for its abolition. It is an absurd and obsolete notion that the possession of a house, with a valuation which involves an increasing expenditure every year because of the increasing rates burden, was in any sense an income. There might be some kind of theoretical argument for saying it is an income. But to the ordinary ratepayer the possession of a house, in respect of which he has to spend so much money and on which he has to pay such heavy rates each year, it is absurd to say that it represents an income to anybody.

The whole concept of valuation was originally for the purpose of relieving the poor in what was formerly called the poor law valuation—for the purpose of raising the poor rate. In modern times that has been changed over to rateable valuation. It is ironic that rates, which were originally devised to help the afflicted poor, now afflict the helpless poor more than anybody else. I regret that the report published by the Interdepartmental Committee on Local Finance and Taxation, out this morning, fails to realise that rates are a very heavy burden on the poorer sections of the community. They fail to appreciate that there are whole sectors of the community, and many individual cases, where the imposition of rates is a highly unjust social exercise.

The report sets out that it is not feasible to abolish the system of rates because a sum of £33 million is raised for the public service in this way every year. We have had in relation to health charges an undertaking to freeze the contribution from the rates at a particular level. That has not been realised. Recently, in the Scholarships Bill, we have a contribution still being demanded of the rates. All of these arise from the failure of the Government in particular to take a good comprehensive look at the system of financing local authorities and to make the appropriate changes in the system of financing which would diminish and possibly ultimately eliminate rates, instead of keeping them on in the present kind of patched up way adumbrated in the recommendations of this Committee.

In his Budget speech in the Dáil, the Minister for Finance said he was examining the feasibility of introducing a health scheme based on insurance. That is the stage it has reached in 1968. We all know that the Minister for Health in 1961, Deputy MacEntee, realising that the health services were quite inadequate, set up a Committee of the Dáil, representative of all Parties, to investigate them. He was presented with a feasible and practicable scheme of health insurance and the whole thing has lain there ever since. Nothing has been done. It is another of the suggestions made by a constructive Opposition for the betterment of the community which the Government sneer at in the first place and, having sneered at it, condemn it so much in the eyes of the public that they find it difficult then to persuade members of the public that there is, after all, on closer examination something in the scheme.

When this means of relieving local taxation and, at the same time, providing improved health services was first adumbrated by the Fine Gael Party— I believe the Labour Party have a similar scheme in mind—the Minister for Health at the time, Deputy MacEntee, sneered at it and said it was quite impracticable. Deputy Lemass referred to it as a poll tax and said it would find no place in the Fianna Fáil system of taxation. Now, at this late stage, we find the Minister for Finance setting up a committee to investigate the feasibility of doing something we all know ultimately will be done.

Mr. Haughey

Tempora mutantur.

Mr. O'Quigley

It is a great pity that Fianna Fáil cannot foresee in the way that we foresee that times are going to change.

Mr. Dolan

We can foresee you are going to sell out your Party to Labour.

Mr. O'Quigley

Perhaps, because of the lateness of the hour or the fact that we are sitting a three day week, the Senator is not feeling himself? Perhaps he is affected by whatever caused the snores from over there a while ago? A health service based upon insurance would provide at once——

An Leas-Chathaoirleach

The Senator is wandering a little far from the Finance Bill now.

Mr. O'Quigley

——a much better health service to the community and would, at the same time, relieve both the Exchequer and certainly the rates of a considerable proportion of taxation.

I am glad that the Minister in this Bill has faced up to something that should have been faced up to some time ago, that is, to make it obligatory on all persons to keep records of professional earnings and produce these records to the inspector of taxes. This concerns people liable to income tax under Schedule D and all those engaged in trade. That is a good thing from the point of view of the revenue and, let me say as a practising barrister, equally good from the point of view of those people who do not keep proper accounts in the stress and strain and hurly-burly of work and are consequently in arrear because proper accounts are not kept and a large amount of fees are never collected. While we may pay more income tax now that we are obliged to keep proper accounts we should also get more money——

Mr. Murphy

The Bill does not cover that.

Mr. O'Quigley

It does. It says:

...keep such records as will enable true returns to be made, for the purposes of income tax and surtax...

Mr. Murphy

It does not compel the people to pay you.

Mr. O'Quigley

No, but once you keep accounts you know what is owed.

Mr. Haughey

It is only recently that they gave up having the little purse behind the back so that you could not see what you were getting.

Mr. O'Quigley

I am certain that a great many people will benefit from this provision which, at first glance, would appear to be a restrictive provision.

I notice that this is to come into operation on 1st September, 1968, and I would ask the Minister to make sure that, as that is the holiday season for a great many people, the Revenue Commissioners will take appropriate steps to bring to the notice of all concerned that there is this necessity to comply with this requirement which, in fact, will then be law.

A very substantial benefit is being conferred in the Bill regarding the abatement of death duty to widows and children. I think this provision was first introduced by the present Taoiseach in the 1965 Act and amended with retrospective effect in the 1966 Act. Now the Minister has enlarged the range of benefit and the range of estate very drastically, I would have thought, in this Bill. It is not at all wrong that he should have done what he did. I rather think that the £100,000 is probably designed to deal with the kind of property passing on the death of the deceased person where a widow or children might take no benefit on the death.

I am extremely disappointed with the performance of the Government in relation to the development of the economy, particularly in rural Ireland. It does not matter what statistics the Government can produce regarding increases in production of transportable goods, increases in exports and improvements in the balance of payments position or anything else, the plain truth is that once you leave the eastern part of the country and go into rural Ireland you see nothing but decay all around. There seems to me to be an air of despondency and despair in rural Ireland at present.

Seán Ó Donnabháin

That is not so.

Mr. O'Quigley

That is my view.

Mr. O'Kennedy

I am looking forward to going down there this evening. I do not see any despair or despondency. I find it very refreshing.

Mr. Rooney

Go to some of your neighbours.

Mr. O'Quigley

Take a place that we all combed intensively in recent months, East Limerick, or West Limerick, which we visited in the previous two months. One can see the lack of any kind of industry in that county.

Mr. Haughey

The Galway man talks about the big farmers down in Limerick.

Mr. O'Quigley

We shall deal with that in a moment. There is lack of opportunity in that county. People see no prospect of jobs for their children and one cannot but be depressed. If people like Senator O'Kennedy are happy with that state of things it is a very sad business for the people living in these areas. The same thing applies to Galway, Mayo, Sligo, Leitrim, Cavan, Monaghan and so on. I see nothing in this Finance Bill or in the Budget, or in Government thinking, to change that situation in the foreseeable future.

It is all right to talk about having the youngest Government in Europe and having a Government with the slogan "Let Lynch Lead On". That was the one used in Limerick. We are not getting anywhere in regard to rural Ireland. What I am saying is not alone my view but also the view of the NIEC which commented on the report of the committee on development centres and industrial estates which was published in July, 1965. They thought it was all right to talk about the establishment of industrial estates in selected areas. They could see only about six such places qualifying for the establishment of industrial estates but they pointed out that while this might be useful in improving the balance of payments and the general economic development within the community, other approaches to development might be more effective. They highlighted counties some of which I have referred to, Cavan, Donegal, Leitrim, Monaghan, Longford, Mayo and Roscommon. They pointed out that in recent years emigration was highest and the rate of economic expansion slowest in these western counties. They thought the problem so urgent in relation to such counties that three or four years should not be lost investigating sites that would be suitable for large industrial estates. As they said on page 6:

The possibility of introducing special policies to encourage economic development in a number of the larger existing towns in all the north-western counties should be considered by the County Development Teams and the other bodies concerned. If such policies can be framed and introduced they will help to raise these counties to the level now reached in the rest of the country and stop the decline in population which, if it continues for much longer, will become irreversible.

Let anybody on the Government benches tell me and tell the people of Cavan, Donegal, Leitrim, Longford, Mayo, Monaghan, Roscommon and Sligo what are the plans. Where are they to be found for the economic development of these counties?

There is nothing in the Budget to deal with that situation and nothing that I know of in any White Paper to deal with it. In my view the Fianna Fáil Party accepts that there is no hope for these counties because, while the NIEC wrote this in 1965, in 1967 the Fianna Fáil Government introduced its tolerance Bill to provide, not economic help for these counties, but greater representation in the Dáil and they do it upon the basis that the decline in population in these counties is going to continue. It is because of that decline they say we must introduce this measure of the tolerance for the purpose of giving them the same representation they have at the present time. If the Government and the Minister for Finance can tell me that any county development by the various bodies concerned has done anything of a significant character since 1965 to arrest the decline in population and to provide more jobs, whether on farms or in factories, in these counties, I shall be glad to hear of it. As a person who frequently travels from here to Mayo and who knows Mayo fairly well, I see no hope of any outlet for the population in these counties. The people are leaving Mayo county not because they do not like it; they are prepared to come from Brooklyn where they have been bar managers, or from England where they have good employment and a higher standard of living, and live in Mayo. We see every six months in the Land Commission Court people, whose lands have been taken over by the Land Commission, coming back and pleading before the lay commissioners to be given an opportunity of returning. The commissioners normally give them, depending upon the proposals they have to make, and on the feasibility of the arrangements, financial and other, suggested, a period of two years. One just wonders are they really going to come back from America or London where they have been earning between £20 and £25 a week, to settle down in Mayo, build a house and rear a family. One sees virtually a constant stream of these people coming over every six months, and the majority of them have settled down on small farms because in Mayo they can have a better life and a better environment in which to raise their children for whose sake they are prepared to forgo all the amenities they had in America or in England.

All the statistics that can be produced by the Central Statistics Office and by the Minister's Department will not lead me to believe that there is any real intention on the part of this Government to do anything about the people in the West. The very fact that we have invited these people in these counties to sign their death warrant by accepting the Third Amendment of the Constitution Bill is an indication of the indifference of Fianna Fáil.

Fianna Fáil do not care what is happening in the West or in other rural parts of the country. They think rural Ireland is beyond redemption.

Mr. Honan

If all the people that Senator O'Quigley said are coming back from England do, in fact, come back, the population will increase.

Mr. O'Quigley

That is a very smart answer, and it is like Deputy Boland saying that Deputy O'Higgins got £11,000 for his Presidential election fund.

An Leas-Chathaoirleach

That is a financial matter, but it is hardly relevant to the Finance Bill.

Mr. O'Quigley

It is the same kind of twist of the facts to which we are accustomed. I was speaking about the people living in rural Ireland.

Mr. Haughey

The Senator will not mind my interrupting to remind him he said "finally" some time ago.

Mr. O'Quigley

I am on the final point about the Government's attitude towards rural Ireland. The Minister should not be too anxious; I do not intend to spend any longer than the small amount of time available to me. There is nothing being done for rural Ireland, and may I say this to the Minister: there are other attractions for the Tourist Board, in particular, than the spit and polish of the nickel-plated bars, and so on, in Dublin.

Mr. Haughey

The Senator does not have to persuade me of that.

Mr. O'Quigley

I know that, but there are whole areas in the west of Ireland where hardly a human foot has trod for years. Of course, Senator Honan or Senator O'Kennedy would know nothing about this. That is one activity which it is not too difficult to initiate in western Ireland, but, of course, like a lot of other things it will not be done. It will not be done by a Government who think that the only solution for the west of Ireland is to give them the same number of Deputies for a declining population.

An Leas-Chathaoirleach

Roimh thosnú don Aire, ba mhaith liom a chur i gcuimhne dhó gur socraíodh go gcríochnófaí an díospóireacht ar a chúig a chlog.

Mr. Haughey

Tá go maith.

Mr. O'Quigley

Ba mhaith linn aga níos faide ná sin a thuírt don Aire.

Mr. Haughey

I am grateful to the Seanad for the reception they have given this year's Finance Bill, and I hope I do not sound patronising when I say that, on the whole, the contributions have been constructive. I can say that Senator FitzGerald made as good a speech this evening as I have heard here for a long time. I hasten to add that I do not agree with everything he said. Perhaps I disagree with most of what he said, but it was a most useful contribution. Contrary to what some of our political opponents say, and some pundits write about us, we in this Government are very receptive indeed to constructive criticism. Modern government and management of a modern economy is a difficult and complex business. It is very helpful for individual Ministers like myself and for the Government as a whole to get sound, analytical and critical assessments of our policies. That is what Senator FitzGerald and other Senators set out to do here today.

I do not intend to reply at all to the arguments which have been put forward by Senators on different aspects of the economy, because we have had a great deal of economic debate over the last few weeks. However, I want to assure the House that the points that have been made have been noted and will be given due consideration in our thinking and in our planning. I think anybody reading Senator FitzGerald's speech afterwards will find a dichotomy between the beginning and the end of it. Senator FitzGerald is a very good analytical economist, but he is less meritorious as a politician. Towards the end of his speech I am afraid he became political in regard to the Anglo-Irish Free Trade Agreement, and the balance and objectivity which was so apparent in the earlier part of his speech deserted him towards the end, but perhaps that is only to be expected. As I said, I do not intend to reply in detail to the various arguments put forward, but I think it is not quite legitimate for Senator Garret FitzGerald to suggest that the Anglo-Irish Free Trade Agreement is anything but a success, and indeed he admits—I think that would be a reasonable interpretation of his words —that so far it has been successful. He admits that so far it has been successful, that so far we have derived considerable advantage from it, but he is afraid that by 1975 it will work to our disadvantage. I think that fear is a bit unrealistic. In all economic matters, in all matters of planning and programming, one has to make forecasts with a great deal of care, surround any forecasts one makes with a great deal of qualification, and point out that all these forecasts or projections are usually based on assumptions. I think it would be wrong for Senator FitzGerald, and I think he would be injuring his own reputation, if he were to set out to put forward as definitely established that this was going to happen to our economy in 1974 or 1975. I think it is a quite unsustainable argument.

Various other questions of detail were raised by Senator FitzGerald which I will deal with specifically when we come to Committee Stage and are going through the Bill section by section. At this stage, in reply to Senator Murphy, and Senator O'Quigley in particular, I should like to say that we in the Government are committed to economic expansion and development. We accept this as a basic obligation. We have a variety of national objectives of all sorts, social, cultural, and others but we do put a very high priority indeed on economic expansion and development, because we know that it is only through the progress we make in the economic sphere that we can get a great deal of the other things we want. We may make mistakes, and I am sure we do, but I should like to think we are progressive-minded and flexible. If our economic policies can be shown to have defects in them, we are quite willing and ready to accept valid criticism of them, and indeed change them, if change can be shown to be necessary.

Over all, by and large, I think no one outside or inside this House can deny that we are achieving a substantial measure of progress and success. It is our aim to continue to do that, and that is one of the primary objectives of this Budget. I believe this Budget will make a substantial contribution in this direction. If during the year before the next Budget comes along anything further can be done, we will not hesitate to do that also, but I think the Budget, which is given effect to in this Finance Bill, is framed and designed to meet the needs of the current situation and to carry us a step further along the road of economic progress.

Question put and agreed to.

Committee Stage ordered for Tuesday 23rd July, 1968.

The Seanad adjourned at 5.5 p.m. until 3 p.m. on Tuesday, 16th July, 1968.