I thank the Parliamentary Secretary. I am afraid I have very few comments other than those related to the Minister for Finance so his ears will just have to burn until such time as he arrives. I can assure the Parliamentary Secretary and Senators that my remarks about the Minister being absent are in no sense personal. I appreciate that he is heavily involved in financial business in the other House, but I think one is entitled to make the point that the business in which he is involved is quite irrelevant to the present financial situation. These capital Bills in which he is involved—and I can assure the Chair that I had no intention of embarking on a discussion of them in advance of whatever time they may reach us—do nothing to reduce inflation, increase employment, reduce the balance of payments or to ease the Minister's budgetary problems. Every minute spent on these pieces of legislation is really wasted so far as the really important matters in hand are concerned.
We must consider in the light of what we read in our newspapers this morning what the effect on us will be of the proposal of the British Chancellor of the Exchequer. He proposes that in order to meet an effective price rise of 25 per cent the maximum average wage rise to be permitted in Britain should be 10 per cent. Of course, the British Chancellor of the Exchequer may not succeed: it may be that union and worker opposition would be so great that he does not succeed in bringing in this proposal. I think he is in a stronger position than Mr. Health, the former British Prime Minister, in that in trying to put across his proposal he has the support, not only of the majority of his own Government but also of the main Opposition Party. It is likely that it will go through. Indeed, in the event of this initiative which has at last been taken by the British Government failing, the immediate and inevitable result would be a complete crash of sterling. From our point of view, I hope he does not fail because sterling would instantly go to the floor in the event of it becoming clear that he was unable to undertake this initiative.
The effect of the new British proposal inevitably, in British terms, would be that by the end of 1976, inflation which is now running as it is here at around 25 per cent will be in single figures: I expect around 8 or 9 per cent. I doubt if it will be as high as 10 per cent. There will be a very rapid fall in inflationary pressures. In the meantime, of course, there will be a very severe drop in purchasing power. This is an extremely deflationary measure. Where you are asking workers to meet a 25 per cent price rise with a 10 per cent wage rise, it is obvious that their purchasing power will be very severly reduced. For the same reason one can expect that in the next year or so in Britain there will be a correspondingly large increase in unemployment.
Obviously, these factors will have an effect on us. We in Ireland must achieve in the next 18 months an equivalent fall in prices. If I am right in suggesting— and I think I am—by the end of next year in Britain as a result of this new plan of the Chancellor of the Exchequer, prices will be rising in the single figure level rather than double figures, we must achieve the same result. Even the Minister for Finance has admitted in recent speeches that our rate of inflation is two or three times that which exists on the Continent of Europe. Until now we have been saved from economic disaster by the fact that our very high rate of inflation has been approximately on a level with that in Britain. Since 50 per cent of our exports go to Britain it has meant that we have been able to remain relatively competitive. Now, however, we have the situation that because of this heavy cut in wage rises and consequent rapid fall in the rate of inflation in Britain and if we continue, as is the Minister's expectation, to have wages essentially indexed to the cost of living—I do not think he expects to do much better than if he cuts prices by 4 per cent to have a 4 per cent corresponding fall in wages—the only result there can be is that we will continue to have a much higher rate of inflation than they have in England.
This matter was dealt with by the Irish Independent which is not a newspaper that I normally quote with any particular approval. Their leading article this morning is one which is merely a statement of self-evident facts: I do not think anyone from any party or with any political views could deny it. They say:
We just cannot afford to contemplate any significant difference between rates of income increases with Britain over the coming year. This would be a blueprint for complete economic destruction.
That is self-evident and I think the Minister must accept that it is self-evident and that is the reason just before the Minister arrived I was saying that he really ought to withdraw last week's budget altogether. It is now out of date and completely irrelevant to the problems that will face us in the next 12 or 18 months. We export some 50 per cent of our total exports to Britain. How are we to continue to export in the event of prices rising more slowly in Britain than here? Already we have been facing problems because of the recently uncompetitive nature of our economy here. We will have to export to Britain at a time when our costs are very high and their costs are falling. We will have to export to Britain at a time when very severe deflation which is now about to begin there will cut their purchasing power. It will be very difficult to sell anything in Britain, leaving aside any question of competitive pricing. We will have to sell in third countries in competition with British industry at a time when our costs are likely to be considerably higher than those of British industry. We will also have the situation in which British exports to us will be cheaper and will be selling here in competition with our own industrial products. It will be increasingly difficult for us to compete. The fact that British industry is quite clearly going to have trouble on the home market will be an incentive to them to dump everything they can on foreign markets, including Ireland.
The Minister will also face the problem that in regard to these enormous sums of money that he proposes to borrow abroad, the question will arise as to whether, and to what extent people abroad will be willing to lend to us at a time when along with all other countries you have severely deflationary policies in Britain resulting in rapid falls in inflation while here we continue and apparently intend to continue to live in the happy situation that although we are, as everyone agrees, in a state of crisis no one is apparently going to suffer by this. We are to try to live at our existing standards of living Between State and public bodies the Minister envisages borrowing this year something in the region of £300 million. One wonders in these circumstances whether he has any chance of getting them.
The budget of last week, with its enormous deficit, doubled since last January, with borrowing requirements both at home and abroad, depends on there being a fairly early improvement in the entire economic environment. The British move effectively ends this prospect. Whatever its results, it may be that it does not bring about as rapid an end to inflation as anyone expects it will. It is quite clear that in a situation where you have a 25 per cent increase in the cost of living and the average wage rise to be allowed is 10 per cent, there will be a vast fall in purchasing power which can only be reflected in our own internal conditions. In these circumstances it seems that whatever prospects the Minister had last Thursday—and I do not think they were any good—there is no prospect at all of continuing his existing budgetary practices. We are in the situation that between now and the end of 1976, or perhaps even later, the British market is going to be a very depressed one. As I mentioned, British exports to us will be more competitive and our exports to the United Kingdom less competitive. There will be very little buying power in what is still our main market.
The budget of last week was described by the Minister as "one of the most significant ever produced by a Minister for Finance of this State". I am afraid this budget turns out to be irrelevant, insignificant and positively harmful to our future prospects in that it attempts to convey the impression that we can beat inflation and unemployment without any need for sacrifices on our part. Now that the United Kingdom has at last taken some action, I do not think it need concern us here whether it is the right action of some kind to deal with inflation. We are in the position that every other country in Europe, for practical purposes, is taking drastic steps to deal with the crisis.
The Government must understand that we cannot stand alone in this respect. The Government must understand that they cannot allow their positive mania for political popularity effectively to bankrupt the country. One is justified at this stage in reminding the Minister and Senators that we are now in the position, to all appearances, that this present Coalition are going to be the third Coalition to have ruined the finances of this country. We all know only too well of the first Coalition Government of 1948 to 1951 and the second in 1954 to 1957. In each case, because of the inherent problems that non-viable coalitions of this kind have in taking decisions and in framing policies, they were unable in each case to take the necessary decisions and they left behind them a trail of financial problems which took years in each case to solve. The problem with this Coalition, perhaps even more so than with their predecessors, has been that ever since they attained office in March of 1973 they have been totally dedicated to the concept that above all else they must win the next general election.
We had the budget of 1973 which was referred to today by Senator Markey. He wanted to know if Fianna Fáil had been returned in that election would we have had a severely deflationary budget. The answer of course is that we would not. It was not necessary. But 1973, which everybody accepts as a boom year, was at the same time a year which presented certain obvious problems facing us in the future. Senator Harte referred during his interesting speech to the very rapid rise in raw material costs which took place from 1972 to 1973, This was taking place at the time of the budget of May, 1973. It is fair to say that if a Fianna Fáil Government had been returned, while they would not obviously bring in a deflationary budget they would at least have had a neutral budget, one which would have held the balance between inflation and deflation, bearing in mind that while there was essentially a situation of economic boom, there were these dangers hovering on the horizon.
Unfortunately the present Government and the present Minister came into office at this stage and we had the beginning of what has been a slump, a pattern of budgets since then of the universal handout, the effort to persuade the people of Ireland, in particular the supporters of the Government, that it was possible to govern a country handing out large sums of money for such purposes as social welfare, health and so on—one likes to see this being done—that it was possible to increase spending on these services without taking in a comparable amount of revenue: in other words, that it was possible to use more of the national cake for these purposes without doing any harm to the overall economic situation.
Then we had the budget of May 1974 which was rather like this recent budget of last January except in so far as the various prognostications of the Minister, which were almost entirely wrong, did not prove to be wrong quite so rapidly. During the various debates on that budget he said constantly, and insisted in face of some barracking from the Opposition in this House and the other House, that the balance of payments deficit would be some £140 million. As we know, last year it turned out to be a balance of payments deficit of £310 million. He insisted that price rises were not really an important factor, that while they existed they were not worse than anywhere else and certainly they would not exceed 14 per cent. They turned out to be 20 per cent by the end of last November. He claimed that the budget deficit, which was by traditional Irish standards a very high one, would be £72 million. It turned out to be £92 million.
The problem in that budget and indeed in the entire financial policy of this Government has been that consistently, while recognising that an international crisis existed largely as a result of the energy problem, that they would rely on other countries to do what was needed, rely on other countries and other Governments to take the politically unpopular measures that were needed in order to bring down inflation and cure the other economic ills, and that other countries and other Governments, having faced this political unpopularity, the resulting improvement in international economic affairs would wash off on us and our Government therefore would be able to bask in this new atmosphere without themselves having taken any practical steps to deal with the situation.
The problem has been that the international revival which is supposed to come to our aid has been delayed beyond the original hopes and expectations of the Government. In the budget of last January the Government and the Minister, in seeking political popularity, added wrecklessly to the inflationary forces which already existed in this country. We had a series of indirect taxes, including the enormous increase in tax on petrol which took place before the official budget of the year and, allowing for the effects of the national pay agreement and so on, the Minister added 4 per cent to prices. It would be ludicrous, if it were not so tragic, that six months after he had added by his own deliberate action 4 per cent to our rate of inflation, he comes along now to try to take off 4 per cent in another budget. He provided in this budget, for similar reasons, for a huge current deficit which he estimated at that time at £125 million. He describes this whole edifice as a carefully planned expansionary budget. It may be expansionary but it cannot have been carefully planned.
We had, about one-and-a-half months or two months after the introduction of the January budget, the negotiations finally culminating in the national pay agreement. The Minister knew at the time he framed the budget that negotiations were about to begin. He knew, obviously, that the amount of the pay award would be to say the least connected with the degree of inflation, and yet he added these indirect taxes at 15th February. The index figure was obviously to be influenced from the point of view of the negotiations, yet he arranged by his own deliberate activities that 3 per cent would be added to VAT, which worked out at 4 per cent when one considers the effect of the pay award on it. He called for restraint and he said in vague terms that he hoped no one would take undue advantage of the position, and so on. But he did nothing practical to exert an influence, and in his own budget proposals he made restraint far less likely. He said last week, in the course of his budget speech, at page 8:
It is now clear that the current national pay agreement gives increases in pay, including increases reflecting taxes on alcoholic drink and tobacco, which cannot be paid in present economic circumstances without doing serious economic and social damage.
He knew this when he framed his budget. He knew that inevitably the increases, whatever they were, would reflect taxes on alcoholic drink and tobacco or, indeed, on petrol. Therefore, his budget made the restraint he asked for far less likely. It is not unfair to say that the actual amount agreed to in the national pay agreement was perhaps the minimum that could reasonably have been expected. I do not think that anyone, considering the matter, whether in trade unions or outside them, would reasonably have expected that both sides would agree on anything less than what was agreed to. It could have been more but I do not think anyone reasonably studying these matters could have thought it would be less.
We are told by the Minister that his budget of January, 1975, has collapsed and he told the other House in the course of his budget speech of the huge increases in spending he had authorised since January last. Remember, this is not a matter of a year or two, it is a matter of five-and-a-half months. He told us that he had allowed an increase in current expenditure on health of £18.8 million; on social welfare of £8.1 million; an extra £8 million for CIE subsidies—that is an interesting figure. In this House last December when we were dealing with the Transport (No. 2) Bill I crossexamined the Minister for Transport and Power on this matter. I pointed out to him that the sum the Minister had allotted to CIE, £17 million in the annual Estimate, was totally inadequate. Judging by the way in which costs have been increasing in CIE over the years, judging by the constant increase year by year in the subsidy required for CIE, it was obvious that £17 million was not enough. Of course the Minister for Transport and Power said he did not know about this but it was always open to Senator Yeats to make an intelligent guess. Whatever about Senator Yeats making intelligent guesses, it should not be beyond the wit of the Minister for Finance to make more intelligent guesses than the one had made when he fixed that figure at £17 million.
As a result we now have about £8 million extra for CIE. Education grants since January, 1975, are up by £6.6 million; Justice up £3.3 million; Agriculture up £3 million; Defence up by £2.9 million. The Minister of course will say that there are extra costs for defence and so on because of the Border situation, but he knew about the bulk of these things in January. He knew, for example, about the defence problem and matters have not really grown more difficult since then. They may even have grown somewhat easier.
Posts and Telegraphs is up by £2 million. There is an enormous sum of £20.1 million which has been sanctioned since last January for public service pay. I am not sure where the Minister gets this figure because in answer to a question of mine on the Finance Bill last May the Minister told me that in this financial year, that is up to 31st December next, he was going to have to produce £29 million for public service pay. One wonders, therefore, whether on top of this £20 million he mentioned last week in the Dáil there is another £9 million coming later which would inflate his budget deficit still more. There is £10 million for public debt service. I would have thought that was a figure that was relatively easy to assess from one year to the next. I take it the Minister knows how much he is going to borrow. I find it difficult to understand why he could suddenly find there was £10 million extra required. Even more incredible than this vast list of increases in expenditure which the Minister has sanctioned, on foot of his carefully considered budget, we find that on page 5 of the Minister's speech he said:
Since the publication of the current budget on 15th January last, the Government have had to approve additional current expenditure by Departments totalling £76 million——
That list appears on page 6 and I took the trouble of adding them up and they total £82.8 million. There is an extra £7 million there. Apparently the financial administration of this country appears to be in such a slip-shod condition that a basic error of that kind creeps in. I do not know which is right, whether he has sanctioned £76 million since the January budget or whether he sanctioned £83 million. I suppose one might say that when the deficits and the borrowings were so enormous what is another £7 million or £8 million between friends? That is no way to be running the finances of the country. On page 6 the Minister said:
We are tightening the control of public expenditure so as to avoid any further increases during the remainder of the year, apart from those I will be announcing later in the statement.
Why did he not do this last January? I should have thought that at the time when the Minister was catering for an enormous budget deficit, which last January was fixed at £125 million, the least he would do was to tell everyone that there simply could not be any further increases. He has now done this, but why did he not do it in January? I would have thought it was an essential part of any budget. He could have done it in 1973 or 1974. In the first half of the year he allowed £76 million or £83 million, depending on which page you read, extra expenditure, and he now says that for the second half of the year he will not allow any more.
Along with this vast increase in expenditure we have a fall in revenue. The Minister says that because of economic conditions which prevent people from buying, they have lower incomes and so on, there will be a fall in revenue of £11 million in 1975. This seems to be incredible. We have before us now the Exchequer returns for the first six months of this year to the end of June. The Minister budgeted on 15th January for a 28.5 per cent rise in current revenue. Up to 30th June the rise compared with the first six months of the previous year was only 18.5 per cent. There is a shortfall of £32.5 million. That is the amount extra he would have got if he had reached his 28.5 per cent as he estimated. The shortfall, which he says is £11 million for the entire year, is already in the first six months of this year £32.5 million. On the basis of this continuing during the rest of the year there would be a shortfall of £65 million.
The Minister may say—I do not know what his justification would be—that economic conditions will improve in the second part of the year and revenue will go up and so on. If it goes up by £5 million, £10 million or so, it certainly will not go up anything like enough to reduce the shortfall in revenue anywhere near £11 million. It will be at least £65 million or if the Minister is very lucky it might be £50 million or £55 million.
Expenditure, on the other hand—and this one would expect in inflationary conditions and particularly in conditions where the Minister has been sanctioning additional expenditure holus-bolus, right, left and centre to either £76 million or £82 million—is up by £168 million in the first six months of this year. That is an increase of 37.6 per cent, although it was only planned to rise at the rate of 30 per cent. You have therefore this incredible rise since the January budget. The Minister made a comment on this topic in page 5 of his budget speech last week. He said:
Inflation is, therefore, a powerful engine inexorably pushing Government outlays to intolerable levels. Even before account is taken of the limitless demands for further and further moneys for expansion and extension of public services and subsidies.
He speaks of inflation in this regard as if it were some kind of disease that came upon people and there was nothing you could do about it. You came out in spots and went to hospital. But the Minister for Finance is there to deal with this kind of situation.
Surely he has a responsibility to refuse to sanction expenditure on this scale. In any year in any Government there are always certain items of expenditure which in all equity and justice a Minister has to sanction, but there are others he can refuse to sanction. If the Minister feels that some items of expenditure had to be agreed to, he has a duty to ensure that in other respects there are corresponding falls in expenditure in order that the budget would come out at least approximately as envisaged at the beginning of the year.
Such items as health and social welfare increases due in next October are not included in the figures for prospective expenditure. These items may be somewhat less than envisaged because of the potential fall in the rate of inflation as a result of the Minister's budget last week. Nonetheless, they will be considerable. Since last February you have had the 15th May index figure which showed an increase of 6 per cent. If you add another 2 per cent or so in next August it will be a considerable amount to be paid out in social welfare and health. There is also the problem of the public service. I have asked the Minister about this and whether there is not another £9 million or so coming along. There is no mention in his figures of what he has to pay the public service in respect of the national pay agreement. There is no explanation for the overspending which has taken place since last January. On page 7 of his speech he says:
As a result of double digit inflation public expenditure has risen enormously.
All I can say is that that is mere rubbish. Expenditure has risen as a result of decisions by the Minister for Finance. We have an Exchequer system which does not enable money to be spent automatically. Every item of expenditure beyond what is contained in the budget and the Estimates must be sanctioned before it can be spent. Inflation does not do it. It is done by ministerial decision.
As a result of the fall in revenue, coupled with increases on a very large scale in expenditure, there is a current deficit which from £125 million on January 15th last is now to be £242 million. Of that, £20 million is due to subsidies, and so on, that the Minister brought in last week. The greater part of it is due to what I have been discussing. All the evidence is that the deficit will be much more than £242 million. The revenue shortfall is certain to be a great deal more than £11 million. There are certain items of additional expenditure that the Minister has not provided for. My personal estimate is that the deficit by December 31st next will be nearer £300 million than £242 million.
One problem with this Minister is that in a flamboyant way he says the right things, but having said them he does not do them. On the Finance Bill debate in May last, at column 1207 the Minister said:
Senator Yeats said the budget was irrelevant to current needs. I do not think it is. What option had we? What else could we have done that we have not done?
He continued:
We could have gone for a bigger deficit, but a bigger deficit would have been more inflationary. It would also have meant that the State would have to borrow more, therefore taking more money away from the private sector that needed it.
The sentiments are unexceptionable. One can agree with them. But he says this about a deficit of £135 million. He said it could not be any bigger because it would be still more inflationary, that he would have to borrow more and therefore he would be taking more money away from the private sector that needed it. He is saying the right thing. Then what does he do? Within five or six weeks after this, he says the deficit is not £135 million, it is £242 million and is likely to be a great deal more than that. How will this deficit be financed?
First, obviously, it will be financed essentially by way of foreign borrowing. The Minister's estimate is approximately £276 million. The January estimate for foreign borrowing was £225 million. Here again we have an extra £50 million or so. The figure would have been even higher were it not for the fact that because of the expectation by certain moneyed interests in Britain that there might be a break away by the Irish £ from the £ sterling, they thought the £ might depreciate and therefore there might be profit to be made, so large and unexpected sums of money have come into Government stocks which the Minister could not have anticipated. Were it not for that, his figure for foreign borrowing would be even more than it is. Nonetheless, the Minister says he is to borrow about £276 million, another £50 million in addition to what he mentioned in January. We must add State bodies to this. The figure in this respect was given in January at £50 million. This brings us to a figure of more than £300 million to beborrowed abroad this year.
This type of borrowing, equivalent almost to the printing of currency, is highly inflationary and is also expensive and dangerous. During the past six months there has been a fall in the value of sterling as against foreign currencies of approximately 10 per cent. To that extent, all foreign borrowings—the £500 million or so that we owe—have increased in value by some 10 per cent and it will be that much more difficult to pay back. The Minister said in the Dáil on 16th April as reported at column 1873 of the Dáil Official Report:
The Exchequer has no source of money other than taxation or foreign borrowing and foreign borrowing has already reached its limits. We cannot compel the rest of the world to give money to Ireland to service Irish industry and Irish comforts.
Last week he increased by some £50 million the amount he proposes to borrow abroad. This increased deficit of some £117 million has occurred suddenly since last January. Supposing this sum had been used for purposes other than the highly inflationary one of balancing the budget—if, for instance, it had been used for the provision of jobs and supposing the Minister had adhered to his budget decision of last January, had refused to allow additional expenditure on the scale that he did and was able to come to us today and to the Dáil last week with a budget aiming at a budget deficit of £125 million, without in any way increasing the amount of foreign borrowing that he aims at now he could have used this £117 million for the direct provision of employment. This would have gone a long way towards solving our unemployment problem but he has not done so. That enormous sum of money has to be borrowed simply to balance the budget. It will have no direct effect in providing employment. It will add still further to the inflation problem and, perhaps, irretrievably to the almost insoluble problem facing the Minister in repaying these sums and bringing about some kind of order into State finances.
To what extent has the Minister been able to arrange this external borrowing? I should be interested to learn from him, when he is replying, how much borrowing has been arranged so far. Perhaps he can give us some information about the prospects for borrowing the rest of it in this year. The total borrowing, as set out by the Minister in the document he issued last week, called Summary of Revised Capital Budget including Current Budget Deficit, is now to be some £824 million. It was big enough last January at £649 million but it now represents some 25 to 30 per cent of our entire national income.
In the absence of any real indication from the Minister, one wonders what has changed since January? What has changed to necessitate the doubling of the imbalance in the budget, the deficit in the current budget? There has been a vast increase in expenditure and in foreign borrowing. The only real explanation, if explanation it is, given by the Minister is when he said in the Dáil last week that the upturn in international economic conditions, particularly in what he calls the lead economies of Germany and the United States, has been expected to take place in the second half of 1975 but that full resumption of economic activity was not probable until the middle of 1976. The puzzling thing is that until comparatively recently there was a quite different story being told by the Minister and by others. For example, in a speech on the Final Stage of the Finance Bill in the Dáil on 6th May, as reported at column 1250 of the Official Report, the Minister said in referring to the budget:
What we have produced is a budget that is carefully expansionary in a most difficult situation and if the forecasters are right and the end of 1975 sees an improvement in the economic performance of the industrial countries with which we are associated in OECD then it will be seen that our budgetary policy is the right one and that the incentives and the reliefs and the taxations in this budget were the right ones in that difficult situation.
At that time, therefore, we still expected the upturn in the economies of the industrial countries this year. We still had confidence that the reliefs and the incentives and the taxations in this budget were the right provisions in the situation.
The following day the Minister came into the Seanad and said, as reported at column 1203 of the Official Report:
We hope that in the second half of this year, in common with the rest of the world, confidence will be again exuded and that the situation will significantly improve.
In the publication, Economic Review of 1974 and Present Outlook, which the Minister and his Department issued coinciding with the budget of last week, there was reference to the anticipated upturn in world economic activity which they hoped would take place in the second half of 1975, but even in this event, they said, it was unlikely that there would be an improvement in the unemployment situation before the first half of 1976. They state, too, that industrial exports should benefit from an improvement in world trade towards the end of 1975.
As recently as last week, while the Minister was suggesting that everything has changed since January and, in particular, that there is no longer any prospect of a full resumption of economic activities in the United States and Germany until near the middle of 1976, his own Department were issuing a review of 1974 and the present outlook which says, in effect, the exact opposite.
The Minister for Labour said in the Dáil on 27th June, which was the day after the budget, that the latest consumer price index showed an easing off in our rate of inflation and that the Government had chosen this time when the major international economies were experiencing upturns as an opportune time to strike at price increases and inflation. So the Minister for Labour speaks of an upturn in the major international economies whereas the day before the Minister is saying that, of course, all these budgetary disasters were due to the amazing change in international prospects since January.
Incidentally, while I am quoting the Minister for Labour, it might be well to point out that it is rubbish to say that the latest consumer price index showed an easing off in our rate of inflation. If one considers that the 8 per cent figure for February included 3 per cent that the Minister provided himself whereas the 6 per cent figure for May 16th was, fortunately, unaided by the Minister, one can only conclude that the underlying rate of inflation, at least up till now, has been up rather than down.
The truth is that nothing really outstanding has happened since January. World conditions are essentially as were expected. Perhaps there has been a somewhat slower resumption of activity in certain countries but no sudden change of the kind the Minister has referred to. Inflation has been very much as expected. Nobody, last January, would have said that inflation in this country was likely to be much less than 25 per cent this year. It was 20 per cent at the end of the 12 months up to November last and steadily increasing. The figures we have seen since are about what one would expect particularly with the Minister's 3 per cent that he kindly provided in his budget of January last. The pay award, as he said, was just about the minimum that any reasonable person could have expected to emerge from the negotiations. All I can say is that, for whatever reason, the Minister at last came to realise that in his budget of January he made a disastrous miscalculation. It was not a carefully considered budget which went astray because of sudden disastrous and rapid changes on the international scene. It is quite clear that that is not so.
To sum up, the Minister in his January budget increased prices by 4 per cent effectively in advance of the pay negotiations. He poured scorn on the Opposition for suggesting that subsidies could be used to cut prices by 4 per cent. If he had taken the advice of Fianna Fáil in time and had introduced subsidies in his budget and had he failed to increase prices deliberately, as he did by means of indirect taxation, prices would now be 8 per cent lower than they are. He would have saved the 4 per cent he added and he would have taken the 4 per cent off as he is now doing. An 8 per cent lower price rise would have had an immense and beneficial effect on the entire economy of this country.
Quite clearly, the wage agreement with all it involved and with all in which it involved the Minister by way of the cost of paying into the public sector would have been at least 8 per cent lower. At last, the Government have taken some kind of action. I have suggested already that this action is too late, too little and in the light of the recent events of the last day or so in Britain, is completely irrelevant. The Minister ought to withdraw his budget and think again. However, one must take it as it comes and discuss it fairly briefly as it stands. The Minister has gambled and, judging by the remarks of Senator Harte, one can hope that the gamble will succeed to a limited extent. He has taken this gamble that, even after the wage agreement has been signed and agreed, there will be agreement to change it.
The premium scheme, obviously, is to be welcomed, although I have some worries about this. I wonder whether the Minister has considered the effect this will have on school-leavers. School-leavers here, as we know, are unique in Europe in that they do not appear on the unemployment register. It would seem unreasonable to expect employers to employ school-leavers, if by employing people who are on the unemployment register they can get £12 per week. The Minister should consider the fact that the premium benefits employers who have sacked their workers as against those who, in the interest of their workers, have kept them on part time. I do not know if the Minister intends to deal with this situation but it seems unjust that an employer who, not having the interest of his workers at heart, has sacked them and closed the factory in order to save money should benefit, whereas an employer who has kept his workers on a two- or three-day week in order to provide them with some employment does not benefit.
The budget provides also for £27 million extra for capital expenditure. This is a very disappointing figure both because of its size, which barely seems adequate, and because of the nature of the expenditure which is involved. One point that occurs to me is the £10 million provided for telephones. We all know that the telephone system is diabolical and could certainly do with improvement. I would hesitate to criticise anyone for spending money on improving this system. Nonetheless, this sum of £27 million that the Minister has provided is supposed to be creating employment. Will there be one man put to work as a result of providing telephone equipment? The Minister nods. I do not know if it will be a dozen, two dozen but the number is, quite obviously minute, when one considers the cost of telephone equipment and when one assumes that the equipment is already on order. There was a shortfall in expenditure on telephones last year, presumably due to delays in delivering equipment. I take it that the sum of £10 million is essentially designed to make up this. Quite obviously, whatever employment is created will be very small.
There is also £5.2 million for industry, of which most goes to Fóir Teoranta. One welcomes this but it is fair to point out that the Minister, some months ago in this House, said that whatever money was needed for Fóir Teoranta would be made available. There is no additional activity involved in this.
Gaeltarra Éireann are to get £1.2 million. One welcomes this, too, but again it seems that it is continuing activity and nothing new.
The only substantial amount for the creation of employment is the £10.5 million for housing and this is in the form of loans just as the help from the banks which the Minister announced last week is also in the form of loans.
We in this party have said that if a rapid increase in employment is sought there should be direct expenditure on building and construction rather than the much slower process of making money available by way of loans, particularly when the Minister, as part of the package, has increased the cost of borrowing by 10 per cent. One wonders to what extent people who wish to buy houses will be in a position, under existing economic circumstances, to finance them.
One of the problems with the Minister's package last week was that, while to a considerable extent he followed the recommendations of the National Economic and Social Council and to some extent the recommendations of Fianna Fáil of the past six or nine months, he did not follow other recommendations of the Economic and Social Council. He withdrew VAT from clothing and footwear. Obviously, this is a welcome move but one wonders to what extent this will help the position in these industries. It may make it easier for people to buy clothing and footwear but equally it applies to both imports and Irish produced goods. Therefore, since competition from abroad is the real problem facing the country, it does nothing to help.
The National Economic and Social Council recommended that, along with other assistance, import licences should be introduced for the control of imports of footwear and clothing. They pointed out that this could be done within the rules of the EEC but the Minister has not done this. There has been complete Government inaction in this respect for more than a year.
Everyone has known for a year or more past that there was a very serious situation in the textile and footwear industries. There are various reasons for this. Old-established factories have been closing week after week. Workers have been put out of employment but the Government have done nothing. Even now, when they have a recommendation from the National Economic and Social Council that import licences should be introduced, they do nothing.
The Minister for Finance told the Dáil last week that an approach has recently been made to the EEC Commission with a view to the adoption of immediate arrangements which will enable the flow of imports of footwear to be regulated in the interests of employment in the industry. How recently? I wonder do Senators opposite know? This is a problem that has existed for a year or more but nothing has been done about it despite constant efforts, not simply by Members of the Opposition but by trade unionists and others interested in this matter to urge upon the Government that some action should be taken. It was only last Thursday that we were given the information that an approach has been made to the EEC. I doubt if an approach is needed in this matter. One can accept that the National Economic and Social Council have reasons for suggesting that the controls be brought in without sanction by the EEC. How have the Government decided to seek sanction for some unspecified concession to be given?
Yesterday, in the Evening Herald there was a report of a press conference with the EEC Commissioner who is concerned with this matter. He is reported as having said that he talked about the matter with the Minister for Industry and Commerce. The Commissioner is reported as saying that the EEC have examined possible solutions. The paper goes on to say that he pointed out that, as the EEC Commission had only looked at the problem for the first time on Wednesday last, he could not say at this stage when a final decision would be reached. Therefore, when the Minister says that an approach has recently been made to the EEC Commission with regard to the problems presented by unemployment and short-time in the Irish textile and shoe industries, he meant very recently indeed. He meant that the day before he spoke the matter had for the first time been considered by the Commission. What kind of Government and Administration is this? What kind of Government is this that, even allowing for the well-known inability of the Minister for Industry and Commerce to take decisions, in a time when everybody knows, that there is very serious unemployment in these industries, with long-established firms closing down week after week, they do nothing until the Minister is finally driven into the Dáil by the collapse of his January budget and then he says “recently”, meaning the day before, the matter has been brought up before the EEC Commission.
It is good to see some kind of Government action, even though on the whole the budget can only be described as a big gamble. There is the question whether the parties to the national pay agreement will agree to change it; they probably will. There is the question, which is a great deal more doubtful, whether we will get all the foreign loans that are required. There is the question to what extent, it at all, the rate of inflation and unemployment will be affected. There is the question, overshadowing all this, what the effect on the country will be of the recently-announced British policy.
I can only conclude that, from every point of view, the financial administration of the present Government has failed lamentably. The so-called decisions announced last week are already shown, after six days, to be completely and utterly inadequate. Once again, I can only call on the Minister for Finance to withdraw this budget and bring in something sensible.
