Looking at the present state of the Irish economy, and having regard to the EMS negotiations which are still continuing, one of the main preoccupations of this country at present is the extent of the Government's indebtedness. We have lived through a period of massive spending and boosts to the consumer demand in the economy but we are reaching the point where certain chickens are coming home to roost and where a party must be paid for at a not too distant date. Entirely independent of the EMS issue and the loans which we will get, which in turn will lead to a certain subsidy, and apart altogether from an indebtedness which that may lead to if we enter, it is sobering to look at the extent of indebtedness in this country at present. Our foreign borrowing total is higher than that of any other EEC country and the extent of our foreign indebtedness presently runs at the extent of 30 per cent of our GNP. That is an alarming percentage of our GNP. I was a witness recently outside this country to some disparaging remarks made by people in other Governments about the level of Irish indebtedness and the problems that would be created for this country on entry into the EMS because of the further extent of indebtedness that is envisaged, should we enter.
The difference between the present Government and the last Government, of which I was a backbench member, is that this Government tended to be critical when the Coalition were in power. There was certainly a large level of borrowing but it was borrowing that took place during the oil crisis which hit every country in Europe, and without which the economy could not have been sustained. It was not simply borrowing for the sake of borrowing, for a false type of fuelling of the economy. Around the middle of last year we were beginning to get things right in the sense that the deficit was declining, foreign currency reserves were rising and things were coming back on an even keel. At the present time, the colossal extent of borrowing and the boost to consumer demand have set events in motion which are very alarming.
To start with, the fact that the money supply has loosened in the economy in the last 18 months has led to a massive consumer boom. One of stated aims of Irish Government policy has been the Buy Irish Campaign. We had speeches from the Minister for Industry, Commerce and Energy about a year ago with projections that we would get a 3 per cent swing over from imported goods to Irish manufactured goods, which in turn would lead to the creation of so many thousand jobs. But that is not happening. What is happening is that the consumer boom is leading to a massive amount of purchasing of imported goods. It is worth reflecting on the extent to which this is happening, and the extent to which we are running into serious financial difficulty. If we talk about our exports and imports and what is termed the import excess, meaning the numbers of millions of pounds, in a particular month or year, our imports exceed our exports, we begin to see the root of the problem. In the latest statistics for October this year, the import excess was £73.9 million, approximately £74 million. Even more alarming for the September figure the import excess was £27.7 million. This meant that in the most recent month for which we have statistics, there was an increase of £46 million. In comparison with the same month last year, there was an increase of £36.2 million. This is the clearest possible evidence of the train of events and of the extent to which the spending that is happening in this country is of benefit to jobs. To a large extent about half the spending at the present time is leading to the creation of jobs in Japan, Germany, Britain, France and the United States. This is absolutely true.
Again the import excess in the ten months from January to October this year was £672 million. For the ten months in 1977 the import excess was £523 million. That means there has been an increase in the ten months of £149 million. The total import figure in February this year was £266 million. Imports for October were £338.8 million, an increase of about £80 million.
This very grave disimprovement in the balance of payments has got to lead to a crucial decision for the Government which they must tackle by either increased taxation or reduced purchasing of foreign goods. The import figure for July 1977 was £262.5 million, an import excess of £17 million; in October 1978 the figure was £338.8, which I mentioned, and the increase in that period from July 1977 to October 1978, in terms of imports is £80 million. The increase of the excess amounts to 225 per cent. This is an alarming indication of the present trend.
While the initial reaction of the general public to the budget of last year might have been one of pleasure at the extent to which one's pocket was helped, through car tax and total relief from rates on housing and such matters, the long-term effects of that budget are implicit in the statistics which I quoted and which means that in the long-term the Government have to face up to these issues, this will result in a period of deflation that can be very much worse than the inflationary period during which these events happened.
What it means is that the tax increases which were needed were not used for productive purposes but to pay off the bills implied in the promises made before the last general election. In the Dáil last June the Taoiseach commented on the Green Paper and on the balance of payments deficits. He said that the accentuation of the consumer goods coming into this country could aggravate the balance of payments to a point where corrective measures would be necessary and that these corrective measures would affect the prospects for employment.
It would be fair comment to ask the Taoiseach what corrective measures he now suggests are necessary in view of the deficit he is talking about and to what extent does he see them as affecting the prospects for employment. In essence what I am saying is what type of policy which at first sight might have been acceptable to the general public, on a closer look by economists and people who understood what economics is about, had very alarming prospects in the longer term which were pointed to at that time. We are presently at the stage where the Government will have to face up to these issues with very hard decisions that will be anything but palatable. The Government, in agreement with the EEC, agreed to reduce over two years the extent of foreign indebtedness from 13 per cent to 8 per cent.
If we take the Government's word at face value and if we give them good faith in what their objective is, this reduction in the borrowing level from 13 per cent of GNP to 8 per cent in a two-year period means the Government will have to raise about £400 million which must come by one of two methods, either by increased taxation or reduced expenditure. We cannot have it both ways. We either run with this huge level of foreign indebtedness and allow future generations to pay for the party, or, alternatively, we come to grips with this indebtedness and attempt to reduce it. In addition the Government will also find it necessary to raise £200 million to pay for borrowing in 1978 and 1979, that is, the compiling of repayment and interest, which is a total of £600 million.
There are people without a grasp of these items who believe this country is in a very healthy state and do not realise the immense problems there are incorporated in this whole issue of indebtedness. When we go from that to the EMS we begin to realise the seriousness of the problem. While joining the EMS might well be the lesser of two evils for this country it is no panacea for the future of the country.
The first crucial fact about the EMS issue is the fact that what we have been offered by the wealthier countries of Europe has not been non-repayable cash grants; what we have been offered are loans. Reverting to the extent of the indebtedness which I have described and the Government's commitment to the reduction of that level of indebtedness, entry into the EMS would certainly help our economy in the short-term by giving us a boost of loans from other countries. But loans simply mean further indebtedness, and loans mean repayments of loans. Commentators have been talking about net cash grants to this country if we join the EMS. There has been a great deal of confusion in this regard because of the Taoiseach's initial press conference and subsequent statements. The Taoiseach said initially that this country would be getting £45 million a year in loans whereas the £45 million was not a loan but an estimate of the grant to his country through an interest subsidy. What we are getting is an offer from the EEC of a soft loan of £1,125 million over five years, which is £225 million per year. It is called a soft loan because we get an interest subsidy which amounts to about 3 per cent. A 3 per cent interest subsidy on the principle sum means a grant equivalent to about £45 million a year, but that is very different from saying it is £45 million into our pockets every year because again we are reverting to the loan situation.
The borrowing of £1,125 million over five years can of course lead to substantial developments and infrastructure which will be beneficial. In the first three or four years we will not be under any intense pressure for repayments due to the fact that there will be a moratorium. After the period of the moratorium we will run into the period of repayment of both principal and interest which, at the present level of indebtedness and before going into EMS, means that for at least the next decade successive Governments will have to come to grips with these issues. In the next few months we will have to face these problems.
As I said, EMS loans are not grants, and loans have to be repaid. That is an essential point. There was a great deal of muddling which was not the work of the Opposition but of the Government. There was an attempt by the Minister, Deputy O'Donoghue, to blame the press. They had their notes and had got it absolutely right. There were recent attempts to suggest that when Mr. Chirac came to Cork the Press were wrong when they reported what he said about the European Parliament. The journalists collectively issued a statement referring to the fact that they were absolutely correct in what they had reported as apparently was the reporter whose notes were available after the Minister's speech in Clontarf. This motion of attempting to criticise the Press for all of these issues is wearing a bit thin.
Another point that should be dealt with is a political point relating to the EMS issue, our involvement within the EEC and the links which Irish parties have there. I note from reading reports of the EMS negotiations the marked reluctance of France to help the Irish position. There may have been rapport initially when the Taoiseach visited Giscard D'Estaing in Paris, but obviously subsequently there seems to have been a great deal of reluctance and digging in of heels by the French. From the comments in the international Press I see that the principal agent at work to pressure the French Government into adopting a very hard attitude where Ireland is concerned and not to yield any concession in the regional fund area, without France getting its share—the regional fund could have been used as an instrument for what is termed the net transfer of resources—was the same Mr. Chirac, the Leader of the Gaullist Party which is a party in Government in France at present. So far as the European Parliament is concerned, and where various parties in this country have links with parties in the mainstream of Europe, the link between Fianna Fáil and the Gaullist Party becomes more and more fascinating every week.
Mr. Chirac made a speech in Cork in which he expressed the view that he was sorry European elections were taking place, and that even if they were taking place, they would be working within the Gaullist Party to limit severely the extent of its powers. This was said by the leader of a party which is aligned with the largest political party in this State. In this State there is a consensus that a strong European Parliament is in the interests of the smaller nations, and possibly detrimental to the interests of the larger nations. The link between Fianna Fáil and the Gaullists becomes less logical every day of this week. I believe that Fianna Fáil should face up to this issue by breaking loose from the Gaullist Party which is acting in a manner totally detrimental to any question of European co-operation, European unity or the type of Europe which those of us in Ireland and some other countries are keen on building.
Under the Appropriation Bill we are talking in the largest sense about the economy and the wellbeing of the country. If we are talking about the EMS issue and the negotiations that were involved in that it is relevant to talk about the French position and the attitude within France to those negotiations which, in turn, influence this.
One of the principal issues here is the level of indebtness, the commitment of the Government to reduce borrowing from 13 per cent to 8 per cent of GNP over a ten year period. This in turn means the raising of £400 million by increased taxation or reduced expenditure. In addition, there is £200 million which is necessary to pay for the borrowings related to 1978-79, and the repayment of principal and interest on that. This will lead to a crunch we have to get to grips with. It can well lead to a deflationary policy which need not have happened had policy for the past 18 months been on a more even keel with a more even type of development, without this massive boost, some of the effects of which are extremely undesirable.
The principal undesirable affect will be the extraordinary level of imports. There was an increase from £27 million in September 1978 to £74 million in October 1978. The huge proportion of the jobs being created by this consumer boom are being created in countries outside Ireland—in Japan, Germany, Britain, France and in Eastern Europe. It is a very difficult situation.
I should now like to deal with the EMS. The gross interest payable on the loan we will get will amount to more than £1 billion, which will be mitigated by the interest subsidies, the 3 per cent interest subsidies equivalent to £45 million a year, or a total of £225 million. This means that the interest outflow over the term of the EMS loan will amount to more than £800 million. That is in addition to the present enormous level of indebtness which is unacceptable.
We welcome the subvention from the EEC concerning drainage in western areas. The administrative problems being experienced at present will probably be sorted out but the subvention is welcome. However, there are areas in the west to which EEC funds could flow. That is not happening. On the question of roads Mayo has the largest proportion of untarred county roads at present and there is an enormous backlog of schemes for the tarring of roads leading to farm houses. The same could be said about counties from Donegal down to Cork. In the past few months an EEC policy has been adopted under which Italy and France are getting EEC loans for this purpose. There is a huge anomaly in that the governments of France and Italy can negotiate successfully with the EEC to get grants for their farm roads, rural electrification schemes and other schemes that have to do with farm life in underdeveloped areas such as the south of Italy. When they talk about undeveloped areas of France there are none there that could compare with the lesser developed parts of this country.
If these are schemes under which roads are being tarred in Italy and France under EEC subventions there is no reason why roads here, particularly in the west, should not be funded from the same source. I urge the Government to make immediate representation to find out why there is this anomaly and why these two countries are getting these grants for purposes for which we need money to an extraordinary extent. They should ask why this scheme cannot be extended to the west of Ireland.
There is lack of Government policy concerning parts of the west which are not in Gaeltacht areas. I regret that the Government chose to scrap the decision of the previous administration to establish a Western Development Board. I questioned the Minister for Economic Planning and Development, Deputy O'Donoghue, on this and I was pleased to learn that the Government are looking at this issue of regional development and possible decentralisation in certain areas. I am not concerned about titles of such boards and whatever the Government choose to call it is acceptable if we get the type of structures required. One of the biggest anomalies in western development is that we are seeing a policy under which there is a special type of economic plan for Gaeltacht areas. However, in those parts of the west which are equally impoverished, but which are English speaking, there is a totally different structure. We all respect our language and traditions and see the need for a special policy for the language, culture and heritage but we see this as being necessary in the cultural and educational area. However, when we see this spilling over to special incentives in the economic field, special grants in certain areas, while areas beside them that are English speaking do not get a fraction of those incentives we see positive discrimination and a lack of human rights. It is reaching the stage in some parts, such as the difference between north Connemara and south Connemara, in which there are remarkable developments in south Connemara on the fringe of Galway city which is Gaeltacht, but north Connemara is starved of the same type of development because of this problem. In Mayo we see even greater anomalies. We see part of Achill in the Gaeltacht with special benefits, parts that are not. We see Ballycroy, between there and Erris, is very badly off for developments but does not get the same level of grant. This is unacceptable.
There is an island policy under which there are special incentives for those people who live on Aran and those who live off Aranmore. We see discrimination against the people who live on Clare Island or who live on Inisturk, off the Mayo coastline, or Inisbofin, off the Galway coastline. About one year ago we were told that policies would emerge under which the islanders on Clare Island, Inisbofin and Inisturk would get the same deal. That did not happen. It has reached the stage on Clare Island where a committee there are seeking to make the case legally that under the Constitution they are entitled to similar treatment which, in fact, they are not getting. It was because of those backgrounds, and illogical and one-handed development that we sought to establish the type of structure in the west under which a board would be established with autonomy, made responsible to a Minister in Government, and responsible for all aspects of western development in agriculture, industry, commerce and tourism. It meant that in that part of the country which is uniquely different from any other part we established a special type of policy run by people in that province who understood it. In view of our involvement in the EEC and the fact that for the European Parliament there is a special constituency entitled Connacht-Ulster it would have proved to be a catalyst which could be illustrated by this State to show that part of the country in that organisational area which needed special help and assistance. I hope that the Minister, Deputy O'Donoghue, who answered me favourably some months ago when he said that the Government were investigating this sub-national need will be able to tell us that a structure similar to that which we have been talking about will emerge.
In so far as SFADCo is concerned, the Government were ill-advised in taking away the promotional facility which they had because it tended to make it much more a province of the IDA's national office in Dublin and took away the small independence which they had before that. The substituting of that for a policy in which they say that in future SFADCo will deal with small industries in a special way in that region can only be described as a gimmick. We had a very sensible policy for small industries before this under the county development team programme. I compliment the Fianna Fáil Government on establishing that county development team programme. It worked well and meant that in western counties we had a structure under which a county development officer worked in liaison with the county manager, the chairman of the county council and the various heads in the different areas of vocational education and agriculture and other areas. We had sensible development at the most local level. SFADCo, in moving into the small industries scheme in some counties are moving in to do a job that was being tackled adequately. There is no reason why they should have a function in counties in Connacht where that function is already being serviced within the county council structural unit which is a local unit for development and all that goes with that. This move was ill-advised and somewhat gimmicky.
Another western issue about which I have a view relates to the question of air services development. We had a discussion last week on air services and some Members sought cheaper travel in and out of the country. Members also referred to Aer Lingus's performance. I agree with the whole question of cheap travel because it can generate for an island country such as ours a great deal of traffic which would otherwise not happen. The experiences in Britain under Freddie Laker's plan whereby the amount of traffic across the Atlantic through cheap fares has dramatically increased should be a lesson to us. Earlier this year, those going to the United States at short notice without pre-booking tickets found it was cheaper to fly from here to London and from there to New York than it was to fly directly from Shannon to New York. That is the type of anomaly which should not be happening. It is something which should be looked into.
In so far as the west is concerned there is a serious issue which has not got much publicity but which is very important. We are in an age of subsidised transport. We have the transport services of CIE subsidised up to the hilt because we are told that it is a part of a social pattern and to an extent air travel is subsidised. In Britain there are air services going to Inverness, to the outer Hebrides, to Benbecula, to the islands of Harris and Lewis. What is happening there is that the more lucrative fares from London to Birmingham, Liverpool, Manchester and Continental routes are helping to subsidise what they term a social service which is necessary in the interests of those more outlying areas in parts of the north of England, north of Scotland and the islands off the Scottish coast.
There is a great weakness in public transport policy here in regard to air transport. While Dublin Airport is an international airport serving a certain radius and Cork Airport again serves a certain radius working around from the south-east to the south-west, and Shannon Airport, an international airport, serves a radius from Cork across to Tipperary and up to Galway city, when one gets to the north-west there is no air service. I am talking about the area which would service Mayo, Roscommon, Sligo, Donegal, West Longford and Cavan. There is no such thing as a decent airport in that area. There are severe problems because of that lack. For example, at present some of the larger manufacturing companies operating in the west when they fly their executives in they arrange that they fly from Shannon or Dublin in special small aircraft into the smaller airports. That shows the significance of air travel. If we are trying to attract a higher rate of industrial development, if we are to encourage people to establish industries in our more remote counties in the west and in the north-west, we are at a grave disadvantage if we do not have a decent airport within about an hour or an hour-and-a-half's drive.
Additionally, there is the question of the mass movements in tourism. If one looks at international air travel and international tourism one will see an enormous growth in tourism in regions which are within an hour of an international airport. One of the reasons for the high level of tourist development in Cork-Kerry at present in contrast with the level of development in the Mayo-Sligo-Roscommon-Donegal areas is the fact that this air link exists and that people from other countries can fly to within about one hour of those resorts. The remoteness of the north-west from airports is a limiting factor. It is probably not recognised as much by the public as it should be for the reason that many people do not grasp the significance of something until they have it and then lose it. They then know what they have lost.
The Government should make a study of this issue and, without being parochial, whether it is in Mayo, Sligo, Roscommon or North Galway would not worry me too much. It may require subsidy, but subsidy is, apparently, an accepted part of transport whether it is ground or air transport. There is a need for an airport development. The limitations on the small airfields are very grave. They are limited in length. They are limited by the fact that they do not have lighting systems which confines them to daylight hours. That means that they are practically out of the question in the winter months, except for a few hours. The airport in Castlebar in Mayo has the most severe limitation because it has a short runway between the main railway line and the main road from Castlebar to Dublin. The airport people have not got permission to cut that main road. In my view two things should happen: they should get permission to extend that runway, if that is feasible, or, alternatively, if that cannot happen a decent airport should be built somewhere in the broad interests of the public of these counties.
Another point has been made, that no Government have got to grips with what is loosely described as the services sector, the services sector being the type of employment provided in offices and stores. It is interesting that in many other countries where they seek to get developments going in the more outlying areas, in addition to giving grants and special incentives for the development of pure industry as we are doing they also give grants for the development of the service sector. That means that per worker employed, per unit, or per square foot, a special grant is given. There has not been any development of that type here. There is an imbalance here because we have a huge proportion of jobs in the service sector in Dublin which is outgrowing its facilities, its road structure and ability to cope with the increased population. Additionally, in this service sector socially we have a great many girls working in Dublin who could be much happier in many cases working in that part of the country from which they came initially. If there is not some special type of Government policy, and a special incentive to try to get the services sector out of Dublin and into other towns we will not see it happen to the extent it should. It would be socially and economically desirable that that should happen.
On EEC enlargement the Government need to cast a jaundiced eye. We know that within the protocol it has been established—it was put on record initially by Deputy Garrett FitzGerald and, subsequently, the Taoiseach—that Ireland welcomes EEC enlargement to include Portugal, Spain and Greece, for reasons to do with democracy and the broadening of Europe. At the same time we do not want to see the enlargement of Europe take place at the expense of Ireland's national aspiration in line with Treaty of Rome and what is implicit in that in areas such as the common agricultural policy and areas that have to do with regional policy. We have to take a fairly jaundiced look at this after the EMS negotiations in which we ran into the crudity of certain power blocs, where at the end of the day the expected commitment to us did not exist. We need to be extremely wary on this issue of enlargement. As the population expands to include those three very underdeveloped countries within the EEC and if we do not have a commitment by the governments of the EEC to increase, proportionately, the funds they are prepared to put into areas such as the common agricultural policy and regional policy, we will be in for a very rude awakening. Rather than having a situation where we would be getting an increased proportion of funds into those areas, the cake will become smaller and, proportionately, we will get much less unless we are extremely wary and diligent in tackling this issue at every stage of the enlargement debate.