I accept the Chair's ruling, but it is a little difficult to talk about the state of the country as many of us will want to, and about our economic predicament without having guidance from the current office holder as to his views which will obviously inform the debate from the point of view of the rest of us. To some extent the debate is now pointless.
It is common case with everybody, including Members of the Government, that the economy is in difficult straits. While some of the difficulties have their origin in external factors it is also common case that many have arisen from a mixture of policies that were fundamentally unsound and policies which were alright but where there was not sufficient political courage or ability to take corrective action when those policies conflicted with trends that were not foreseen or trends of a magnitude that was not foreseen. We have in essence overspent and we have over-borrowed and, like a firm, a country that engages in exercises like that is engaging in a reckless policy.
The deficit on current account is alarmingly high and one has to recall that doubt was expressed at the time of this year's budget as to the validity of the figures projected on that occasion. Those doubts were pooh-poohed and when the leader of our party expressed those doubts, he was accused of indulging in a pointless numbers game. When dealing with the economy of a country one must deal in figures and must make sure that the figures or numbers are accurate and reasonable. The outturn of the year's operations has proved beyond any doubt, that this year's budget was startlingly wrong. As a result, we are left with a huge gap in current account. In addition, the general economic strategy in so far as it released a large amount of money into our economy as predicted by the manifesto, has had the effect of throwing our balance of payments into disarray. This was foreseen, though it was not in any of the economic documents published in the last 18 months or so. It was not sufficiently highlighted nor was our attention drawn to the dangers of it.
There was a hope that the "Buy-Irish" campaign would have a much greater effect than it actually had. This is an instance of the policy beginning to run off the rails because certain predictions were not being fulfilled and of an inability to tack to take account of that. The "Buy-Irish" campaign was commendable and it is regrettable that there was not the level of response that it should have evoked from a patriotic population. There are many reasons for this. An explanation might be found in the fact that we were for so long a tariff-protected economy and the range of goods was limited and to some extent of lower quality than foreign made goods, and the novelty of having a wide range of foreign goods has not worn off. That was a big factor in the failure of the "Buy-Irish" campaign. I assume that the "Buy-Irish" campaign has failed but I am interested to hear the views of the Minister on how useful or otherwise that campaign was. I am also interested to hear if it is intended to continue with that campaign. It seems to have lost its impetus in the last number of months. There seems to be an unspoken recognition that a dead horse is being flogged.
If that is so we should be told. If the public learned that the appeal to basic patriotism has been unsuccessful, it might possibly have the effect of shocking them into a realisation of the way they have failed in what was a national duty. Like so many other things in modern Irish life we as individuals felt that it did not apply to us, it applied to the other fellow. Its failure was a substantial contributing factor to the balance of payments difficulty that we now find ourselves in.
I see three major problems facing the economy in the year ahead. The first is to correct the balance of payments imbalance; the second is to improve the revenue to the Exchequer; the third is to cut back on Government spending. Each of these is politically difficult because it will involve measures that will not be popular with the electorate. It will involve measures that might cause actual hardship to many people. One wonders just how much room for manoeuvre the Government have in correcting each of those headings. When one considers that the PAYE people are up in arms about their burden, have taken to the streets, and their spokesmen have threatened all sorts of dire consequences if their burden is not eased, it is inconceivable to think that the budget in February will be able to levy more tax on that sector. If that is attempted we will be coming to a stage where the country might well be ungovernable because of the reaction of the people in that category. The tax situation at present is becoming oppressive in that there is an air of menace about tax collection. We hear nothing but talk of sanctions, prosecutions and people going to jail. To try to enforce the tax regime like that seems oppressive. There is talk of recruiting hundreds of more functionaires into the Revenue section. The country will be over-run with functionaires. In every aspect of Government they are on the increase.
As far as the PAYE payer is concerned, I cannot see how there is any more room to increase his contribution to the Exchequer. He has a very live expectation of having his contribution decreased and he can see no reason why it should not be decreased. He feels it should be decreased because other sectors are not paying their share and he points his finger at the farmers. The question then arises, can the farmer next year be looked to as the person who will bring in the much needed extra funds to the Exchequer to try to close that horrifying gap? I do not think he can. The time for catching the farmer is gone because the boom in agricultural incomes is gone. Agricultural income this year will show a drop in real terms and the outlook for next year is no brighter. Consequently, if the income increases are not there and if the level of income is dropping, it is difficult to see how the Exchequer will be able to manipulate extra revenue out of that sector.
We had the suggestion that they would pay the levy, the special taxation applicable only to themselves. Resources tax was mentioned and we all know the reaction that these proposals produced. If they are proceeded with next year that reaction will be there again and even more violence because the economic scene in the agricultural sector has disimproved since they were originall made.
It will be difficult to devise and implement a taxation regime for farmers that will have their confidence. They are entitled to be satisfied about what is proposed for them. They are entitled to have a tax regime that is no better or no worse, but the same as for any other citizen engaged in business. That, for self-employed farmers engaged in the agriculture business, will be a form of accounts. They will be entitled in their accounting practices to the same allowances and the same techniques and practices that are applicable to any other self-employed businessman. All of us know that if that is to be the tax regime for agriculture the yield, particularly having regard to the fall in incomes, will not go anywhere near meeting what the Exchequer needs. I cannot see that the farming incomes, if farmers are to be treated in the same way as any other citizen, will come in and help the Exchequer in its hour of need. From my knowledge of that community if there is any attempt to impose a resource tax, which is a new name for rates, or if there is any attempt to continue the levy, the reaction will be as unsympathetic and possibly just as hostile as the reaction from the PAYE payers. We know from past experience, and the present Taoiseach has reason to know it more painfully than anybody else, that the farmers are prepared to go a long way in making their case. They are prepared to go to jail. They have done it in the past and there is an air of dissatisfaction and disillusionment among that sector of the community at present. If there is any attempt to impose taxation on them that is different or oppressive or that they see as harsh in relation to any other section of the community, they will react in possibly extreme measure.
The self-employed are also being mentioned as another area where there is a lot of cream to be gathered for the Exchequer, the imputation being that there is evasion and avoidance on a very wide scale. If there are loopholes through which tax is being lawfully avoided they can be legitimately closed in the budget legislation. I am not saying there is not evasion. It is the ambition of everybody paying tax to try to evade as much as he safely thinks he can. Nobody has ever quantified and I do not think anybody can ever quantify accurately—estimates have been made but at best they are only gestimates—the extent of tax evasion by the self-employed sector. Having regard to their numerical proportion within the community and to the magnitude of income into the Exchequer, I do not think that the amount being evaded would be of significance in meeting the gap that has to be met.
There is the factor, with serious social consequences, that in curbing that evasion extreme sanctions may have to be applied. If they have to be applied in an extreme or widespread fashion to curb evasion totally, in turn they may have a disincentive effect. They can foil investment; they can have a disturbing social effect. If a law is not obeyed voluntarily almost unanimously by those it effects, it is well-nigh unenforceable. There is talk of outlawing unofficial strikes. We would all like to see them outlawed. If a Bill is passed outlawing unofficial strikes and 1,000 workers take unofficial action, how can the law put 1,000 workers into jail? That is the harsh reality of it. Unless a law is obeyed voluntarily, it becomes impossible to enforce. If we reach the stage with the self-employed that they are being harried and chivvied by the imposition of criminal sanctions, we are in a very wrong and bad social area.
The outlook for the Exchequer from the point of view of getting in extra taxation is extremely bleak. In think the Taoiseach is on record as saying it is not intended to increase the tax burden, but I am subject to correction by the Minister. Many citizens will be listening with anxiety to what he has to say on that matter. I was surprised that such a specific statement should have been made by the Taoiseach at this stage before his Minister for Finance and his other Cabinet colleagues have got down to framing their Budget and seeing how their sums are working out. I certainly read his statement as a commitment that there would be no further tax burdens.
He may have to go back on that statement or, perhaps, he is just recognising the reality of the situation as I have been outlining it, and the difficulty, or rather the impossibility, of getting any significant amount of extra taxation from any of the three broad groups in our society. We have, of course, the old reliables, but taxing beer, cigarettes, and so on, or increasing the rate of VAT is very much a double-edged weapon. These items all figure in the consumer price index and any taxation imposed on them—and I cannot see a situation where taxation increases will be excluded—will push up the consumer price index and this, in turn, will have a spin-off in demands for wages, and off goes the spiral again.
As I see it—and I am only an amateur economist—the other two alternatives left to the Minister are to look at the expenditure side of his sums and see what he can do there and, when he has looked at that, to look at his borrowing possibilities. It seems that we will now have to employ here much of the policy being operated in the United Kingdom by the Tory Government. There will be severe and in some areas quite savage cuts in public expenditure and, as a result, many of the services to which citizens have become accustomed will be curtailed in scope and in quality. The question that arises is: in what areas will these cuts be made?
The question also arises: what will be the reaction of the citizens who will suffer from the effects of these cuts? It is not for me to offer to the Minister for Finance any advice as to the areas in which he should make his cuts. I have no doubt that his colleagues in Government, when they debate the departmental estimates, are offering him excellent reasons why their estimates should not be cut. The only person who can argue that with confidence and get his own way is the Minister for Justice, and I speak from experience. I will deal with the Minister for Justice in more detail later on.
With regard to the cutting back of expenditure, it will be an interesting exercise particularly by the present Government, when one considers the spending Departments and the personnel in them, and when one considers all that in the context of the political trauma of the past couple of weeks. It will be a very interesting exercise and if one could capture one of the flies on the walls of the Cabinet room, it would be an enthralling exercise to hear what he would have to say and particularly what he would have to say with regard to whether we now have a Government with a presidential style or a Government with "collective" responsibility in the real sense of that word.
To use the phrase some political commentator used in a book, is the Taoiseach chairman or chief? It will be very interesting to see if there are any clues following the settling of the Departmental Estimates and the production of the budget figures next year as to whether our new Taoiseach is chairman or chief.
The style of the man would indicate that "chief" will be the role that he will seek for himself, and "chief" is the role that he would like to play. Whether he is allowed do that very much depends on the mettle of the people he has appointed to share Cabinet responsibility with him. Time will tell, and we will have to wait and see what happens. It appears as if the thrust of the budget strategy will be a severe cutback in expenditure. That will be forced on the Government because the options for bringing their books into balance are so limited, and that is possibly the only way in which they can do it. That way is fraught with political and social difficulty.
Much of the political difficulty is eased because of the size of the majority in the Dáil. There is no political difficulty in putting through even harsh measures. There would be possibly a long-term political difficulty in the sense that the Government who would do so would have to face the electorate eventually. Undoubtedly the thoughts in the minds of the Taoiseach and his colleagues will be that something will turn up before that happy day arrives. Consequently, the political difficulties of a cut-back in public expenditure may be in the future and because that is so, we can look with a fair amount of certainty to cut-backs. I do not know where they will come. I am apprehensive that they will be geared to affect the sections of our society who do not have a lobbying power, and that includes the more helpless persons in our society. The social welfare classes are not organised in strong and militant lobbies where they can command publicity, where they can raise political scares. They are a soft target when it comes to cutting back. There is nothing whatever in the philosophy of the Fianna Fáil Party to show that they have a real concern for the under-privileged in our society. On the contrary. They have not been neglected, but they have never got as much of the cake as they were entitled to. That is in the tradition of the Fianna Fáil Party, and I am afraid that tradition will reassert itself now in this time of budgetary stringency. We will have to wait and see.
