In the course of the Budget statement last year I ventured to estimate that the revenue for the year 1934/35, after allowing for substantial tax reductions, would be about £28,232,000; and that the expenditure, after making due allowance for the factor of over-estimation and for all contingencies in the way of new and additional services and unforeseen expenditure, would be about £35,442,000, of which we proposed to borrow, if necessary, on account of capital expenditure, local loans and other advances, and export bounties and subsidies, £7,212,750. The revenue, tax and non-tax, actually collected for the year amounted to £28,770,688, exceeding our expectations by over £538,000, while expenditure at £31,203,499 was less than we had apprehended by over £4,238,000. As a consequence the amount which we were called upon to borrow for capital works, for export bounties and subsidies, and for local loans and other advances was £2,432,811, as against the prospective figure of £7,212,750, to which I have already referred. These are striking figures and show clearly that last year's Budget was a sound Budget. The country may therefore congratulate itself upon a year in which revenue was greater, borrowing lighter, and expenditure less than there was reason to anticipate.
I should like to emphasise that the satisfactory results obtained were not due to any unjustifiable deferment of expenditure on the part of the Government. It is true that the introduction of the Widows' and Orphans' Pension Bill was delayed and that the outlay which we anticipated in connection with it did not arise, but that was due solely to difficulties which were experienced in drafting the measure and in working out its complicated financial provisions. On the other hand, any saving which accrued because of the delay was off-set more than threefold by the increase of £893,000 which we were able to make in the original provision for export bounties and subsidies. The whole of this additional sum was provided out of taxation.
It may be opportune at this stage to refer briefly to the more significant features of the tax yield. As the Dáil is aware, the principal sources of tax revenue may be divided into three categories. Of these the first in order of magnitude is Customs Duties, from which we derived £9,438,000, that is £251,000 less than the preceding year, but nevertheless £587,000 more than we had estimated for. On the other hand, the second great category comprising the Excise Duties at £5,555,000 fell short of the estimate by £21,000, but this was compensated for by the yield from the Inland Revenue, consisting mainly of taxes upon income and property, which at £7,611,000 exceeded the estimate by £27,000.
In connection with the Inland Revenue figures, however, I should mention that two notable short-falls in the yield from the Income Taxes and Estate and similar duties were only partially compensated for by the prolific yield from Stamp Duties, and that it is ultimately to a substantial increase in the returns from Excess Profits Duty and Corporation Profits Tax that the good showing on this side is due.
Continuing our examination of the tax yield, we find that the total revenue derived from the consumption of spirits, though it was almost £98,000 more than was estimated for was, nevertheless, almost £78,000 below the previous year's figure at £2,148,000. The same dwindling tendency continued to manifest itself in the Beer Duty, which at £2,855,468 gave us some £25,000 less than the previous year and was £70,000 short of our expectations. The Wine Duty gave us £172,281, which was £4,586 less than in 1933-34.
The reflection that these liquor taxes produced about £108,000 less than the previous year is a sobering one for the Minister for Finance. Perhaps that is why I am not unduly intoxicated by the fact that the duties on table waters and cider were more productive by almost £1,000 than had been anticipated and at £29,959 yielded £445 more than in the preceding year. In view of the decreased yield from the spirits duty it may occur to some people to remark that an amount of good soda water went to waste. Others may take a different view, but I must confess that as Minister for Finance I cannot altogether withhold admiration from a beverage which continues —if I may say so—to stagger along under an imposition of 72/6 per proof gallon, and while I do not think that I, or any successor, will ever propose to lighten the burden. I shall at least give its due meed of applause to a performance which must leave the most effervescent products of the grape flat with envy.
There is an old song which tells us how on the other side of the Border whiskey and tea sometimes have been blended. I will bring them together now by remarking that last year was a good year for tea drinkers. Thanks to the almost total remission of the duty which was granted in last year's Budget, the yield from tea-drinking was reduced by almost exactly £400,000, so that we collected from it a trifle less than £72,000. In the case of sugar, owing to the fact that less home manufactured sugar than we had expected was marketed during the financial year, and that what was sold required a greater margin of protection than had been estimated for, the total yield from Customs and Excise duty exceeded the Estimate by £15,000. A somewhat disquieting position in regard to the sugar duty, however, was disclosed in the course of the year, and as it has an important bearing on the Budget for this and future years I must refer to it at length.
When the Government decided to develop the sugar beet industry here on a scale to provide our full requirements of sugar, it had certain fundamental costs in mind. Beet containing an average of 17.5 per cent. of sugar, it was reckoned, would be available at 35/- per ton, and on this basis the total field and factory cost of producing sugar was estimated not to exceed 20/8 per cwt. On these figures, after allowing for the cost of distribution to the consumer and for an ultimate increase of about ¾d. or so per lb. in the cost of sugar to the consumer, it was assumed there would remain such a taxable margin as would enable the Exchequer to secure a revenue of about £800,000 or £900,000 from the consumption of sugar; so that without any undue increase to the consumer the commodity would have been able to bear an Excise duty of ¾d. or, if necessary, 1d. per lb. These hopes so far have not been realised. The price of beet has been driven up to a flat price of 37/6 per ton, and the factory costs of production were higher than had been anticipated—due undoubtedly in a large measure to the fact that the greater part of the factory staffs had to be trained during the actual working campaign, and that time did not afford an opportunity of tuning up and finally adjusting the new factory plants before they went into production. The combined effect in any case has been to so increase the production costs of sugar that instead of being taxable to the possible figure of 1d. per lb. Excise, the native commodity so far has been able to bear only one-fourth of that duty. This circumstance has had a most important reaction on the Budget for this year. For it has meant that the total yield from sugar duties will be over £500,000 less than for last year, so that unless there is to be a very serious curtailment in the services which the State provides for the community this deficiency must be made good otherwise. It is clear, therefore, that the establishment of the new sugar beet industry has created a very serious problem for the Exchequer, a problem for which a satisfactory solution will be found only when all those concerned in the industry co-operate effectively to bring the costs of producing sugar down to such a figure that something of its old revenue-producing capacity will be restored to it. If this be not done, continued heavier taxation of other commodities will be unavoidable and the future of the beet sugar manufacturing industry will, to that extent, be uncertain and insecure.
Tobacco duties again made a good showing. At £3,682,000 odd they exceeded the estimate by £156,000, and were better than the previous year by over £102,000.
Matches, imported and home-made, were expected to bring in £135,000 and at £134,829 have just failed to do that by £171. It is interesting to note in this connection that the collection from home-made matches was £137 more than was estimated and represented an increase of £6,600 on the preceding year. The duty on playing cards, which yielded £2,600 in 1933-34, gave us only £398 last year. In this case the fall in the receipts was due mainly to the action of one large firm which early last year commenced to purchase Saorstát made playing-cards instead of the imported article. When one speaks of cards, on thinks of Culbertson, but I do not think that the most careful study of his works would avail to help the Exchequer out in such a situation.
The duties on cinematograph films and clocks and watches continue to give increased yields, so that the return from films was up by £5,000 and from clocks and watches by over £1,500. With an increased yield from cinematograph films, one may look without disappointment for an increased yield from the entertainments duty, which last year at more than £210,000 beat all records by over £14,000, and was in fact some £16,000 better than we figured. The yield from Betting Duty, which after the abolition of the duty on course betting in August, 1931, fell from £201,000 for the year 1930-31 to £144,000 for 1932-33, last year reached £164,000, which was £4,000 more than for 1933-34.
Some people might deplore the tendency which is manifested by the fact that while the yield from the customs duty on musical instruments, which of course covers saxophones as well as church organs, declined from £25,000 in 1933-34 to £15,500 last year, the duty on wireless telegraphy apparatus, at just under £88,000 showed an increase of £16,900 on the previous year's figures. I am sure it will be agreed that as Minister for Finance I have reason to honour the memory of the great mathematician who first propounded the fundamental theory upon which the achievements of wireless telegraphy, telephoning and broadcasting are based.
Notwithstanding that the development of the heavy-oil engine for road vehicles is beginning to have its effect upon it, another duty from which the yield continues to increase is the duty on mineral hydro-carbon light oils. Last year it brought in £1,139,000, or almost £50,000 more than the preceding year and £39,000 more than was anticipated. I wish I had the same to say of the duty on motor cars and parts. That is a duty which ought to appeal to the members of Deputy Belton's Party, which from its public pronouncements, I gather, as a Party relishes the sporting aspect of the uncertain return in all the transactions of life, and is not above a gamble even in pigs or pork. Well, when the Party comes to form its Government the motor car duty will satisfy that gambling instinct to the full. In 1930/31 it brought in £509,000; in 1931/32 £393,000; in 1932/33 £245,000; in 1933/34 £375,000; and last year, when we had backed it to bring in about the same amount as in the preceding year, it gave us only £319,000. On this in-and-out form, and in order to give the new motor-assembling industry a chance to establish itself firmly, we do not feel justified in counting on it for more than £230,000 this year. As in the case of the sugar duties, it is obvious, however, that while the deficiency in the yield must for the immediate present be made up from other sources, nevertheless the costs in the new industry must be so adjusted that, at a date not too remote, it will yield to the Exchequer, either directly or indirectly, a commensurate return for the revenue which we have had to forego in developing it.
As a further illustration of the effect which the successful development of our industries is having on the Exchequer position, I may also mention that last year the aggregate yield from a number of protective duties, including those on boots and shoes, clothing and apparel, packages etc., fell by £190,000, and this year as a matter of course may be expected to fall still more.
One other return which calls for special mention is the receipt from the motor vehicle duty. The yield last year from this duty, which, as the Dáil is aware, is appropriated to the purposes of the Road Fund, was £942,000, representing an increase of £26,000 on the year preceding and bringing the total tax revenue up to £23,546,000.
To the tax revenue we have to add what is known as the non-tax revenue, consisting of a number of miscellaneous items such as Post Office receipts, land annuities, surplus income of the Currency Commission, Interest on Exchequer advances, etc. It was estimated that the receipts under these and other heads would amount to £5,301,000. However, due particularly to a reduction in the rate of interest charged on Electricity Supply Board advances, only £5,224,688 or £76,312 less than the Estimate was realised.
The total Exchequer revenue, that is the sum of the tax and non-tax revenue, for the year, was, as I have already said £28,770,688, and the total expenditure amounted to £31,203,499, and the balance in the Exchequer which at the beginning of the year amounted to £5,350,348, was reduced to £2,746,037. Apart from that which was due to the borrowings for specific central fund and supply services, to which I will refer later, I may say that to the extent of nearly £500,000 the reduction was accounted for by repayable advances made under the various Shannon Acts and the Telephone Capital Acts.
In the light of the foregoing figures the question which naturally occurs to one is: "And did last year's Budget balance?" The answer depends on the standard which one chooses to set. There are some, for instance, who hold that all expenditure, whether for capital purposes or otherwise, should be defrayed directly and immediately out of revenue. I do not think that any who hold that view have ever been responsible for the management of the public finances. In any event it is an extreme view, and I am afraid that nowhere in the world at the present day shall we find its requirements fulfilled. There is another school which would be content if all types of expenditures which may be expected to recur year after year under the same or varying forms were met out of revenue, leaving, if need be, all substantial expenditures for capital purposes and a reasonable share of expenses of an exceptional amount, incurred in special and transitory circumstances, to be defrayed out of borrowing, provided that the expenditures were unavoidable and that adequate and proper provision, by way of sinking fund and otherwise, were made for the ultimate repayment of the debt. There is an even laxer school which would not cavil so long as interest was paid on the outstanding debt, and the provision for debt redemption left dependent upon the chance out-turn of the budgetary year. That is a view which recently has found great favour elsewhere, and which, if one may judge by the favourable comments which Irish newspapers have passed on certain latter-day budgets, has been generally adopted here also. If our critics are prepared to judge us by the standards which they apply to others, I have no doubt that we shall pass the test.
Let us now refer to the figure of £31,203,499 which represented our total outlay for the year. That figure includes the following amounts:—
|
Transferred to the Local Loans Fund |
£400,000 |
|
Paid under Damage to Property (Compensation) Acts |
27,000 |
|
In repayment of Dáil Eireann (External) Loan |
78,254 |
|
Repayable advance to the Guarantee Fund |
550,000 |
|
For Export Bounties and Subsidies |
3,079,172 |
Let us consider each of these items.
The first item of £400,000 formed part of the Exchequer assets, valued at not less than £11,500,000, which have been transferred to the Local Loans Fund that has been established under the Act recently passed by the Oireachtas. The money, in accordance with the general purposes of the fund, will be put out at interest, in the form of fully secured and definitely repayable loans, while the fund, in respect of this and the other assets transferred to it, will pay interest to the Exchequer at a rate not less than the Exchequer can borrow at. Clearly the Exchequer in this case is acting merely as an agent of the fund and, more remotely, as the agent of the local authorities, who are the principal borrowers from the fund. It is therefore entitled to raise the money by borrowing on behalf of the Local Loans Fund, and this is the procedure which henceforward will be followed. It is reasonable, therefore, to regard this £400,000 as an outgoing which need not be met out of revenue, and which if we borrow for does not disturb the balance of the Budget.
Then there is the item of £550,000 issued as repayable advance to the Guarantee Fund in order to secure release to the Local Authorities of a corresponding amount therefrom. This advance must be regarded as a first charge upon the unremitted balance of Land Annuity arrears, which accrued prior to the May-June gale of 1932, which in turn are fully secured upon the lands in respect of which they are charged. That they should ever become uncollectible is not to be thought of, for if they did, all security of tenure and of private right and title in land would vanish in this country, and we should have a position in regard to it comparable only with what exists in Communist Russia. I do not think that those who have been responsible for withholding those annuity payments in respect of which the Guarantee Fund has had to borrow, wish to bring matters to that pass, but in any event the Government is determined, for the sake of the general credit of the State, to enforce payment of these moneys. There is, therefore, no reasonable ground to doubt that the Advance will ultimately be repaid to the Exchequer, and accordingly with full justification it is to be regarded as a capital asset against which we may borrow.
We come now to the £78,254 which has been repaid on account of the Dáil Eireann External Loan. That is a debt which was contracted by the Irish people almost fifteen years ago. The bonds covering it—which are held mainly in the United States of America—have been accepted by the Oireachtas as an interest-bearing obligation of the State. In redeeming them out of moneys borrowed here we are not creating new debt, but are merely converting an external into an internal loan. There can be no question but that we are entitled to borrow for that purpose.
The expenditure under the Damage to Property (Compensation) Acts is an expenditure occasioned by the circumstances under which the State came into being and has always been regarded as a capital item.
There remains the sum of £3,079,172 which was expended last year in the payment of export bounties and subsidies. That this charge is exceptional in magnitude is undeniable. That it has been incurred in circumstances that are special and transitory we all hope and believe. In so far as we proposed last year to borrow £1,500,000 towards it, we have provided for the ultimate repayment of that amount by the creation of an adequate Sinking Fund in respect of the loan. We have also as additional security for its repayment an Exchequer asset in the shape of the funded annuities due in respect of the three half-yearly gales which accrued prior to January, 1934, all of which, of course, will be eventually collected by the Exchequer. Again, therefore, according to the normal canon we are entitled, if need be, to borrow that £1,500,000 to meet a fair part of the cost of the export bounties and subsidies, so long as a provision for these services is necessitated by the very exceptional circumstances in which we find ourselves.
The items to which I have referred amount in the aggregate to £2,555,254. Deducting this sum from the gross expenditure of £31,203,499 we have left £28,648,245, against which we have a revenue of £28,770,688, leaving a surplus of £122,443.
Some may say, however, that too much reliance cannot be placed upon the results of one year and that it is the long run tendency which is important. Let us examine the position from that point of view. Between the 1st April, 1932, and the 31st March, 1935, the Fourth National Loan was floated for £6,000,000. But against that we paid off the short-term deot amounting to £1,000,000, reducing the net borrowing to £5,000,000. In the same period the amount transferred to the Local Loans Account and subsequently to the Local Loans Fund was increased by £3,100,000. After writing off losses in the Industrial Trust Company of Ireland and in connection with the Dairy Disposals Board, the State's investments, excluding Local Loans, have increased by £2,905,000, due mainly to participation in the Industrial Credit Company and the Irish Sugar Company and additional advances to the Electricity Supply Board for electrical development. Furthermore, the Exchequer balance at the 31st March last stood at £2,746,037, an increase of £1,006,312 on the balance at the 31st March, 1932. Thus the position is that while within the past three years the net borrowings of the State have amounted to £5,000,000, there is held against that sum, either in cash or in sound investments, £7,011,000, and all our obligations in respect of Sinking Funds and interest, including all interest which, up to the 31st March last, had accrued due in respect of Saving Certificates, have been fully covered. A consideration of these facts must convince balanced and unprejudiced minds that over the past three years the Budget has been balanced—and by referring to that specific period I do not wish to imply that the contrary holds true in regard to the preceding years.
It would be idle to maintain that this accomplishment has not demanded sacrifices. But they were sacrifices, however, which were necessary if the whole purpose of the National endeavour was not to be frustrated. We have embarked upon a reorganisation of our industrial and agricultural economy which would be difficult enough to carry through even in the most favourable circumstances, but would be impossible if the people once lost faith in the integrity of the Government, as they might well do if they saw us piling debt on debt and assuming obligations which we did not take adequate steps to discharge. There have been too many examples in Europe and elsewhere of what such easy finance leads to for them not to become alarmed. As it is, the majority of our investors are much too timorous about native issues, whether launched under Government auspices or otherwise. The bulk of their capital is invested abroad, and will not be brought back until its owners are convinced that they are secure against the risk of de-valuation and ultimate loss. It is incumbent on us all, therefore, to inspire them with confidence in the financial stability of the State.
I have referred to the fact that we, that is the people of Saorstát Eireann, have made full provision for all our Sinking Fund and Interest obligations; even in respect of Saving Certificates. In Great Britain it has not been the practice to make anything like full provision for the interest accruing on Saving Certificates otherwise than by borrowing; while if the Sinking Fund there were served on the scale to which we and our predecessors have bound ourselves, it would require about £100,000,000 each year. So far from providing this amount the British Sinking Fund contributions, after reaching a maximum of £67,000,000 in 1930/31, last year were just under £20,000,000, that is to say, since 1931 there has been what the Times in a recent editorial described as “the virtual suspension of the Sinking Fund.” And yet if we examine the Dublin Stock Exchange quotations for the comparable stocks of the two Governments we find that whereas the British 3½ per cent. Conversion Loan stands consistently at between 102 and 112, Irish 3½ per cent. National Loan rarely tops 98. By every criterion of value and soundness the Irish stock cannot be regarded as inferior to that of Great Britain and yet our own people value it lower than the British people value thems. The reason, I think, is clear. All sections in Great Britain vie with each other in inculcating confidence in the public finances. There, everyone realises that to impair the public faith in the credit of the State is not good patriotism nor even good politics, and there would be short shrift for the politician or the Party which acted in the contrary spirit.
Our neighbours have had long experience in financial administration. They are proud of their achievements in that domain. They hold their reputation in that regard as a great asset of their people, and when, three and a half years ago, they were overtaken by adversity they turned, not to ascribe the blame to one another, but to join with each other in a united effort to retrieve lost ground.
