I move:—
That it is expedient to amend the law relating to Customs and Inland Revenue (including Excise) and to make further provision in connection with Finance.
This motion is not an operative one. As I have already said, it is a motion that is proposed when we have other motions before the Dáil proposing Customs and Excise duties, and it is put down for the purpose of enabling a wider discussion to take place than it might be possible to have on one of the motions proposing a tax. I might say, in reference to this particular motion, that the policy that has been pursued by the Government in regard to tariffs is a policy of caution. There are many ways by which industries may be promoted, and those methods have been used. I need hardly refer to them on the present occasion. There is the provision of additional credit facilities, there is the provision of technical information about markets outside, and other assistance of that nature. Deputies on the opposite side of the House have suggested that some scheme of prohibition and licence of imports would be a more satisfactory way of assisting the industries of this country than any system of tariffs. I do not find it possible to agree with that. It may be that, in certain circumstances, a prohibition would be a satisfactory way of helping a particular industry, just as a subsidy may be a more satisfactory way of helping another particular industry. We have ourselves adopted the subsidy method of establishing the sugar beet industry. We did that because it was not possible to get such an industry established by means of the imposition of tariffs. It would have been necessary to put such a high tax on sugar as would have caused grave hardship to large numbers of people. We did not desire to have the beet sugar industry spring up behind the protection of a tariff. The tariff required to get the industry started would be so high that we had to fall back on the subsidy method. But we believe that a subsidy is not as satisfactory as a tariff, for this reason: When you impose a tariff you require merely to set up the administrative machinery necessary for collecting the tax. When it is the case of a subsidy you have the expenses of collecting the taxes, and you have also to set up machinery for the inspection and supervision that are necessary, in order to have the subsidy paid, so that the administrative expenses are doubled. The administrative expenses of either collecting revenue or expending revenue are, after all, considerable. Generally, we think the subsidy method is not as good as the imposition of a tariff.
With regard to prohibition, it seems to me that a general system of prohibition would be almost unworkable unless the State were actually entering into industry themselves. So long as the State is not actively entering into industry on a somewhat large scale, I do not know how prohibition could work. Undoubtedly we have found prohibitions being imposed in war time, and other tariffs that were not purely economic, that were, in fact, only partially economic and that had little or nothing to do with the actual creation of industries in the country that was imposing them. They were imposed for the purpose of saving shipping tonnage or something like that. If you have prohibition the effect in some ways is the same as that of prohibitive tariffs. Let us look at what the effects of a prohibitive tariff are. If such a tariff is imposed it will mean undoubtedly that a great number of people will rush into setting up factories to manufacture the article on which the prohibitive tariff is imposed. If, for instance, you had a tariff of 200 per cent. on boots, boot factories would spring up all over the country. People would rush in to get sites and put up factory buildings; they would adapt existing buildings and instal machinery. A great number of those factories would undoubtedly be inefficient. They would, as I have said, in some cases, be in existing buildings in which the industry could never be carried on on an economic basis. They would be perhaps in towns far away from transport and where labour would be difficult to obtain and where that kind of industry could never be carried on. High prices would probably be paid for sites and perhaps high prices for machinery. All sorts of machinery would be obtained in a hurry to get the industry going and to get the share of the profitable markets. Skilled employees would have to be brought into the country at perhaps a very high rate of wages and the industry would have to burden itself with special housing expenses in respect of them. And then there will be no need to settle down to the work of organising the whole factory as well as it could be organised. There would be profits for anybody who turned out any sort of a boot at almost any price, and it would be a task of the greatest possible difficulty to get down to an economic basis afterwards. There would be appeals for the factory that was badly designed, badly situated and labouring under every sort of a difficulty not to take away the protection of a tariff from it for the reason that it would fall to pieces or that people would be thrown out of employment. The net result of it would be that the country at large would be bearing an enormous cost and paying an enormous price because of the inefficiency of those conducting the industry.
It should be borne in mind that tariffs in general do tend to increase the cost of living. You may select individual tariffs that have not that effect at all, but in general tariffs cause an actual increase in the cost of living and become a heavy burden on the people as they begin to operate. I have seen a good deal of ill-informed and unthinking criticism of the boot tariff duties in the newspapers. The boot tariff is not at present throwing any great burden on the people of the country simply because so far it has only been to a limited extent successful, but as it becomes successful a point will be reached where it will throw a substantial burden on the people. Let us assume, for the sake of argument, and it is proximate enough, that 15 per cent of the value of the boots used in the country would be about £300,000, and let us assume further that in the course of three or four years the tariff has been so successful that practically all the boots used in the country are manufactured here, and we will get a position where that particular tax will bring in no revenue to the Exchequer. When we imposed the boot tax we reckoned that it would bring in revenue, for some time at any rate, equivalent to 3d. in the pound on tea. When we imposed a boot tax we lowered the tax on tea by 3d. in the pound, and eventually abolished it. If the boot tax reached the point that I indicated and that we would get no revenue from it, the £250,000 to £300,000 which it was bringing in would have to be brought in from some other sources and the people of the country at that point would be buying their boots at approximately 15 per cent. more than they would have to pay if there was no boot tax. As a matter of fact it is just possible for manufacturers of boots to sell their goods with the advantage of the 15 per cent., but in a few years, even although more factories were started, it might certainly be taken that they would sell their goods at approximately 15 per cent. over the British price if the 15 per cent. value of boots used is £300,000. It will mean that the consumers of the country as a whole will be paying £300,000 of a subsidy in an indirect way to the boot industry.
I do not know exactly how many employees would be required to supply the whole of the boot requirements of the country, but probably it would be between 7,500 and 10,000. If the number be 10,000, which, I think, is on the high side, then the country would be paying a subsidy of £30 a year in respect of every man, woman and child employed in the boot industry. It might well be that in time efficiency would be increased here and that still further factories would be put up. Competition would arise and the manufacturers would be able to lower their prices to something like the level that would obtain if we had no tax, and the burden on the consumer would decrease. I think, to take that particular tax as an example—and it will apply to most taxes—the tariff as it becomes successful imposes a burden on the people, and that burden will only be got rid of when competition and increased efficiency in the industry enable the manufacturers to sell at less than the margin of advantage that the tariff gives them. Prohibition would mean that when the industry became successful the burden would be far heavier.
If our tariff on boots is 15 per cent., and that 15 per cent. suffices to give the Irish boot manufacturer control of the market, then the utmost subsidy that the people of the country at any time will have to pay the industry will be £300,000. If we make it 45 per cent., then, instead of £300,000, it will be £900,000, or nearly £1,000,000. There is no doubt that if you give a subsidy so that plenty of money can be made by inefficient methods the factories will be carried on in an inefficient way. They will be more recklessly organised, recklessly constructed and recklessly machined, if you like, in such a way that they will have to charge very high prices, and it will be a very long time indeed before it is possible to get them to come down.
It is not possible, unless we want to set up a tremendous amount of supervisory machinery, to control prices or profits. You cannot control prices, because you must fix your prices at a figure that will enable the less efficient factories to carry on. You cannot have one price for an article by one factory and a different price for an identical article by another factory. If you fix prices at all you will have to fix them at rates that will be far too high to enable the more efficient factories to carry on. You cannot control profits because you cannot limit profits. Profits can be disposed of in all sorts of ways. Relatives can be employed at excessive salaries although they have got no work to do. You can really do nothing except to allow people in an industry which is over protected to make enormous profits out of the ordinary consumers. Prohibition would have all the defects of a prohibitive tariff, and additional defects, because during the period when you could not, at any price, produce enough of the article required in the country, you would have to license certain firms in the country to import specific quantities. You would have to have expensive machinery for determining who was to be licensed to import the article and what quantities they were to be licensed to import. You would have charges of corruption and favouritism which would tend to shake confidence in the administration of the Government. Generally, it seems to me that the proposal to prohibit goods and to license the importation of certain quantities can come only from people who have not tried to see how it could be worked, but who have only seized at it as an idea and have not troubled to spend the time necessary to examine it.
A good number of tariffs have been imposed. Some of them were imposed in a mechanical and almost automatic way; for instance, the protection which has caused the cigarette factories to be put up here. There was a differential tax in Great Britain between manufactured and unmanufactured tobacco. In our first financial year, 1923, we simply took over the existing British tariff, with the result that cigarettes became a protected article here, and before very long a certain number of cigarette factories were set up. In that case the protection and employment which have been given have cost the people nothing. The article is supplied at an identical price. You will sometimes find it possible to get employment given by means of protection without any cost to the consumer. That will be generally where some big trust will come in from outside and manufacture the standard article at practically a standard price. We then imposed tariffs in 1924 on such articles as candles, boots and shoes, glass bottles and soap. The most important of them was the tariff on boots and shoes. Deputies who look for very speedy results from tariffs will very often be disappointed. I understand that a new soap factory is now being put up to supply the greater portion of the requirements of the Saorstát by home manufacture, but the tariff was actually imposed in April, 1924.
