If I would be wrong, the Taoiseach had an opportunity of demonstrating on this occasion that we were wrong. I am entitled to draw the inference—as I believe it will be drawn throughout the country—that that information was available. It was given by me objectively last year in the course of a survey I made of the economic position of the country, apart from the indications I gave of the then Government's policy. It was available to the Taoiseach and it could have been given. I have no doubt that if it had demonstrated some of the things which he and his Ministers have been saying about our policy during the past few months and even over the years when we were in office, that information would have been available and stated by the Taoiseach to-day. We are, therefore, justified in concluding that that policy which we carried into effect in the three years we were in office was a policy which had brought success and prosperity to every section of the people.
I demonstrated last year by statistics that the result of the policy which was in operation during two and a half years was to bring to every section of our people an increased standard of living, increased agricultural production, more employment than ever before in industry, more employment in rural Ireland than ever before to the point where there was practically full-scale and full employment in rural Ireland. The national income had greatly increased. The figures given by me at that time of the national income were estimated figures, but they were proved to be accurate and even to be an understatement of the figures of national income that were produced subsequently by the Director of Statistics. I assert to-day that the policy pursued by the last Government was fully justified in its results and that the only way in which any Government policy can really be tested is by reference to the objective, responsible and independent office of the Director of Statistics which is attached to the Taoiseach's Department.
I should like to comment upon remarks that were made during the course of the last 12 months upon the work of that section of the Taoiseach's Department, the Office of the Director of Statistics. I do so because I feel that it is the merest justice to those responsible officials who man the Statistics Department of the Taoiseach's office, that they should be justified in this House in the face of the irresponsible and ill-informed criticism that was made upon them and upon their office and work by certain Deputies of this House and by certain other influential parties throughout the country. Ill-informed, irresponsible and unfounded criticism was directed against the Director and his staff in reference to the compilation of the cost-of-living index figure. I want to put myself on record as having supreme confidence in the complete responsibility and independence of the officials, from the Director down to the lowest official in that Department, in the compilation of all official statistics.
The figures were called a farce. Deputies, I suppose, who used that expression in this House hardly realised the implication of what they were saying. Certainly they demonstrated that they did not know what they were talking about. I think it is only right that I, on my own behalf and on behalf of my colleagues on this side of the House, should pay the tribute which is due in justice to the Director and his staff in reference to their compilation of official statistics, and above all to their independence in doing so, and give the lie to that irresponsible and ill-informed and ignorant criticism that was so rife and rampant in the months before Christmas last year.
We have had no indication from the Taoiseach as to what the activities of the statistics branch of his Department were during the past 12 months. Accordingly, I pass from that. In the course of the remarks made during the Taoiseach's speech, the only thing I could pick out as being any criticism by him or by his Government upon the policy pursued by my colleagues and myself in the last Administration was a reference to the policy of productive capital expenditure which we initiated and carried through with supreme success in the short time we had while in office.
I propose, therefore, to address my remarks to-day mainly towards justification of that policy and to demonstrating the real nature and the fundamental character of that policy, a policy which has been so frequently misrepresented and so frequently distorted by members of the present Government when they were in opposition and by them to-day as Ministers of the Government since they came into office. Before I go into that aspect I shall have to examine in some detail the circumstances surrounding the whole matter, because the country is being deluded as to the character of that policy and as to the approach we made in the implementation of that policy by the suggestions that have been so frequently made in the past and were repeated here last night by the Minister for Finance and hinted at to-day by the Taoiseach that we, in devising and framing our policy and carrying it into effect, were unmindful of the dangers attendant upon it.
I want to show here and to demonstrate to the House and, through the House, to the people the falsity of the criticisms that have been levelled against that policy and I want to give some indication to the people of the real character of that policy and the fruitful results that were accruing and would still further have accrued from it had we remained in office. During the course of the general election campaign I endeavoured in speech after speech to prise forth from any of the then Opposition speakers what their attitude was in reference to our policy of productive capital expenditure. I failed to find out what it was. Up to the present moment notwithstanding the speech made by the Minister for Finance last night and taking into account the very short references made to-day by the Taoiseach and his implied criticisms of that policy, I still have no idea what the attitude of the present Government is in relation to our policy of productive capital expenditure.
We were told to-day by the Taoiseach that he objected to that policy because we did not have sufficient regard to the speed at which we were spending our external assets or to the fact that savings were not sufficient to finance the projects comprised within our policy of productive capital expenditure. The Minister for Finance last night referred to what he called "the rapid dissipation of our external assets", and he purported to give what he described as the truth at long last about the last discreditable three years. If it is discreditable in a period of three years, and three years is a very short period indeed within which a policy had to be initiated, devised and carried into execution in very difficult times, and in a period of great international stress and financial and economic dislocation throughout the world, to do what we did, and if it be discreditable that we are able to point out at the end of that short period that there was no unemployment in rural Ireland, that the national income had increased to a level it had never reached before, that our agricultural exports had doubled and our industrial exports quadrupled, while at the same time we were able to put into operation a hospitalisation programme, social services and increased old age pensions, and all without increasing taxation, if it be discreditable, then I take great credit in being discreditable.
I think it is gravely wrong that a Minister for State, and particularly a Minister for Finance, in a speech such as that made by the Minister last night, and without any reasons stated and without giving any adequate examination or any adequate facts or arguments on which to base his conclusions, should suggest to the country that the Minister for Finance in the last Government was so unmindful of his duties as to neglect the advices he got from competent Finance officials that he was heading the country towards financial ruin and disaster. That action of the present Minister for Finance is one that must be gravely deprecated as being contrary to the best national interests of the country.
In considering this Estimate it would have been our duty, had we been able to do so or had we been given any facts on which to base a considered opinion, to ascertain if there were any fundamental principles underlying and directing general Government policy and thereby informing and guiding departmental policy. The Taoiseach said to-day that had he done what he was asked to do by Deputy Corish he would have been merely repeating what should have been stated by his colleagues in the Government when speaking upon their various departmental Estimates. That statement alone demonstrates the fact that the Taoiseach does not understand the fundamental character of this debate whereunder we deal with general Government policy and not the details or particulars of departmental policy.
When we were in Government we set out with certain principles to guide us. The first of those was that we should take every possible advantage of every moment of peace, uneasy though it was, in order to build up our national economy, to strengthen and develop our resources and to create conditions in this country where emigration and unemployment would be stopped and stopped forever. We felt that we should not allow ourselves to be frustrated; we felt our efforts were not to be frustrated by the fact that the international situation was menacing and the financial position here was weak. We felt the best way of building up the country or defending the country against possible disaster from international friction and disturbance was to build up our economic and financial structure, to strengthen it and thereby provide a real defence against attack or disaster accruing from the menacing international situation.
I would like to know now if that policy will be pursued by the present Government during the period in which they remain in office, be it short or be it long. I urge the Government to take advantage of every moment of peace to build up our financial and economic strength. We set ourselves the headline—and I think we followed the headline—that we should not allow political considerations to impinge upon our economic problems. I have a suspicion, more than a suspicion, that political considerations are impregnating all the thought and all the considerations that the Government is giving or will give to the very serious and difficult financial, economic and social problems that confront them in the framing of their policy. In framing any Government policy, any Government can only avoid the traps and pitfalls set by the impact of these political considerations by remembering always the basic principle that Government is the trustee for all sections of the people and that, unless the general international interest requires it, and urgently requires it, no particular section of the community should be allowed to take an undue advantage at the expense of any other section.
Political considerations have forced this Government to-day to break that very fundamental and basic rule. There is a long queue of interests clamantly demanding from the Government, as they demanded from us, considerations at the expense of the taxpayer. Farmers, or any section of the farming community, who demand that their claims, just though they may be thought to be, should be given priority over other sections of the community, whether it is the poor or the worker in the towns and cities, should remember that queue and before they get their demands satisfied they should pause and consider the injustice that is being done, or that may be done, by putting other sections of the community out of their proper place in that queue.
We had—and I am sure the present Government will have—to face another very grave difficulty, the difficulty of reconciling what seemed almost irreconcilable. I think Deputy Dillon in a speech made recently in this House drew attention to that very great difficulty of the reconciliation of different interests. You have the industrial interests in active conflict, at least with the agricultural interests; you have the pull and tug between the Department of Industry and Commerce and the Department of Agriculture. You have the conflict between town and country, the conflict between the consumer and the producer; the conflict between all sections of the people and the just rights of the taxpayer. You have as an example of that problem, to which general Government policy must be directed, the question as to whether the raw materials of agriculture should be taxed or whether it is better policy to try to reduce the cost of production for our farmers rather than to give the benefit of tariffs and quotas to fertiliser rings or to people who want to set up industries here which will have the effect of increasing the cost of raw materials for the agricultural industry.
These are matters on which we should get some enlightenment from the Government. As an instance of the difficulty of reconciling the number of conflicting interests of various sections of the community, we had the question of hides and the price of hides. On the one hand it is clear that the producers of hides were suffering an injustice from not getting the world market price but the Department of Industry and Commerce put up the case, and very properly put up the case, that if the farmers got a just price for their hides, then the price of boots and shoes would go up for the working sections of the community in the cities and towns. I want to know if the Government have given any consideration to matters of that kind.
The really fundamental principle underlying all the policy of the last Government was large-scale productive capital investment by the State. That was criticised over the period since it came into operation, by members of the present Government and their followers, when they were over here on these benches. It was criticised last night by the Minister for Finance and to-day by the Taoiseach. The significant feature of all these criticisms is that they are merely destructive. They overlook the tangible results that were obtained by the operation of that policy for every section of our people. They criticise it without giving any reasons for their criticism. If there is anything wrong with the policy, if there are any items included in the capital programme which was devised and put into operation by us, then let us be told what these items are, the objections that are taken to them, the nature of these objections, and let us have them examined by argument and by reason so that a just conclusion can be come to on the facts and the arguments. I do, however, object, and I am entitled strongly to object, to the ill-informed and vague criticisms that have been made by the Minister for Finance and some of his colleagues in the present Government without giving us, in the first place, any indication of what items of that capital programme they object to or without saying where we should call a halt or why we should call a halt to any particular item.
We have had a reference by the Minister for Finance to what he calls the discreditable period of the last three years. Let him tell us why it was discreditable, why and where this capital development is wrong, and then we shall deal with and answer those charges. We set out with a full realisation of the problem we had to solve. Emigration, unemployment and underemployment of our men, the nondevelopment and under-development of our natural resources were endemic in this country for many years. This country suffered from the lack of full employment for our men and of our material resources. We set out, as a Government, to see that whatever could be done would be done to provide more employment and opportunities for stopping emigration, to increase the standard of living of our people and, above all, to bring about the productive use of our resources in men and materials. Having studied the problem, we believed we found a solution. The Minister for Finance said or purported to say last night that much of the expenditure included in Deputy McGilligan's capital Budget could not be relied upon to add in any material degree to the income of the nation. That is a mere statement without proof. It is a mere statement without any advertence to the fact that the results of the policy of productive capital investment, and the development of the resources of the State, cannot be obtained in a month, a year or even in two or three years. The work done by Deputy Dillon will inure to posterity for centuries to come. The fields that he caused to be fertilised, the stock that he caused to be improved and the schemes for the development of agriculture that he initiated were only beginning and the test and the results of that policy, even within a few short months or a few short years, have demonstrated, not the ill-success of the policy but the falsity of the arguments upon which the criticism of that policy is based.
The Taoiseach to-day said that the general Government policy was to encourage private enterprise and to supplement it, where necessary, by State activity. That was our policy. He could have stated that policy and taken it, as it was taken, from speeches that I have made and that several of my colleagues have made. That was our policy—State investment supplementing private investment, private investment based as far as possible on the development of our resources: but we felt that it was not possible to develop our resources or to increase the standard of living for our people, unless private investment and private savings were supplemented to a very considerable degree by State expenditure.
Can we have agreement on that principle, because that was the principle on which we based our capital expenditure policy? We set out to achieve and secure a more buoyant expanding national income, and the achievement of that expanding national income, which was well on its way when we left office, would have secured an automatic increase in the revenue of the State, in the annual money available for the housekeeping expenditure of the State and even in capital expenditure. It would also have done far more; it would have gone a long way towards increasing the standard of living of our people and solving the problems of emigration and unemployment that menaced us. We knew that the task that we had to fulfil was to increase that national income. The way we increased it was by the projects which we initiated and were carrying on when we left office, and which were included in the capital Budget that was put before the House and the country in two successive Budgets by Deputy McGilligan, the then Minister for Finance. Every relevant factor was stated by him, and by us all, to enable the country to judge as to what we were doing.
We exercised the urbe me fides with our people, and we were justified as a Government by the people themselves last year when got the biggest loan subscribed to here in this State by the people of this country since the inception of the State in 1922. The Minister for Finance now must needs state that a discreditable period of financial malpractice was carried on by Deputy McGilligan, when he was Minister for Finance, and by his colleagues who supported him in the inter-Party Government. What are the facts that can justify a remark of that kind, which does not damage us because the people know what the value of our policy has been to them, but which does damage to the people of the country? It demonstrates a fact, or it seems to me at all events to justify a suspicion to which I referred earlier in my remarks, that Government policy is largely actuated by political consideration, and that there is merely an endeavour to show the people that the general Government policy of the present Government is somehow, and in some way, different from that which was carried on by the last Government.
We knew that, in order to increase the national income and to secure greater buoyancy in the national income it was necessary, in the first place and above all things, to secure greater productivity. Day in and day out in this House and outside it, we expounded general Government policy, and when I or my colleagues were speaking of it, we emphasised, in the first place, the absolute necessity for increased production, particularly agricultural and industrial production. Every effort was made and every help given to the agricultural community and to those engaged in industry to achieve that greater production. We bent our energies, our policies and our actions towards securing increased productivity and a greater export trade, not for the purpose of the home market alone. Our eyes were not bounded, in devising our policy, by looking for its results in the future merely in the home market; we looked to a greatly increased export trade, because we knew that unless there was increased productivity, particularly in agriculture, that unless agriculture was organised so as to create a surplus for export, it would be impossible to increase the national income, to stop emigration, to give employment and, above all things, to rectify the depreciation in the adverse balance of trade between this country and the people abroad from whom we purchase.
We knew that productivity was necessary and that an export trade was necessary. We knew that the only way to secure that increased productivity and that increased export trade was by the initiation of those various schemes of capital expenditure financed, as far as possible, from the savings of our people. We emphasised again and again the necessity for saving. You would think, from the speech of the Minister for Finance last night, that he had just discovered the real solution for all our economic ills, for all the distress and misery caused by all the malpractices of Deputy McGilligan, as Minister for Finance, and the last Government when they were increasing employment, increasing production, aiding industry and agriculture, increasing the national income. You would think he had found the real solution when he appealed for savings and laid down a series of propositions and asked general consent for them. He took those from our policy. Those general propositions, in so far as they are tenable, were taken direct from the policy of the inter-Party Government and were the foundation for our policy of capital expenditure, productive capital investment of the savings of the people in their own country and for their own people.
We knew that it was necessary to have those savings, that it was necessary in a period when inflation was threatening—and when, may I say, in parentheses, inflation never really overtook us all during a period of at least two and a half years while we were in office—that there should be savings. We believed that our people should be encouraged in habits of thrift, that those savings were necessary in order that our people should get out of the habit of dissipating them in what are known in economics as consumer goods. We appealed for those savings last year, and when introducing the Budget Deputy McGilligan, as Minister for Finance, again made an appeal for those savings and spoke about the necessity for them. Now it would appear from last night's speech that the present Minister for Finance is the only person who ever thought of it.
At column 1884 of the Dáil Debates of 2nd May, 1951, Volume 125, the then Minister for Finance, Deputy McGilligan, stated:—
"Making all allowance for the exceptional conditions now obtaining it is to be feared that we are not producing and earning enough to pay our way. The implication is obvious. We cannot have both consumption and capital development on the present scale unless we save more and produce more. Additional saving would ease the congestion that now exists and causes consumer demand to seek an outlet in imports. It would relieve the pressure on the balance of payments and help to confine external disinvestment—or surplus imports—to what is needed for home development or stockpiling."
Further on in his speech, at column 1906 of the same Volume of Dail Debates, he again referred to the necessity for savings, and said:—
"I must, therefore, sound again the note struck at the beginning of my speech by emphasising the critical importance at the present time of increased savings. They are essential for national development on lines on which there is a general agreement. No one interested in the improvement of our social and economic conditions would suggest that the State capital programme should be abandoned. While some may advocate curtailment, many will share the view that it should be pressed forward with all possible speed because of the uncertainties of the future. To make room for State spending on the present scale, however, the public must be prepared to abstain to a greater extent from spending. Over-spending by the nation as a whole could only increase the rate of external disinvestment for unproductive purposes. In other countries where private savings are deficient, it is necessary to impose taxes to make up for the saving that the public ought to do. I feel that we are not yet constrained to adopt this expedient. It is preferable that means of stimulating voluntary savings should first be fully tried. The Government have, therefore, decided to organise an intensive campaign to promote savings, especially amongst those of the younger generation who have not yet been properly initiated in the habit of thrift. It is hoped to enlist the support and enthusiasm of educational bodies, trade unions and other voluntary organisations in this campaign."
There was an indication of Government policy in reference to this capital expenditure and the necessity for saving and the utilisation of savings. We were about to initiate an intensive campaign and ask the assistance of trade unions and organisations such as Muintir na Tíre, Farmers' Clubs, the Countrywomen's Association and other bodies of that kind to weigh in behind that campaign for thrift and savings.
You would think from the Minister for Finance's speech last night that he was the only person who thought about savings for the first time when the present Government came into office. Not merely did we know and emphasise again and again the importance of saving, but we emphasised the importance of putting those savings into proper investments. We emphasised the proper nature of these investments and the kind of investments that were proper to be adopted on sound economic principles if our programme of productive capital investment was to be a success. We pointed out the dangers that were inherent in the programme and in the policy. We directed attention to the fact that a very large amount of the moneys which we were expending and proposed to expend on the capital projects was to be devoted to housing and to the provision of schools, and we emphasised that in order to get proper returns for these capital moneys that we were expending, the nature of the investment should be such as either to give a direct productive return in the strict economic sense of the term or to give a return socially or on human improvement principles.
We pointed out that we were spending and proposed to spend a large amount of money on housing. The Taoiseach referred this morning to his housing policy. We are justifiably proud of our achievements in connection with housing. We were building houses at the rate of 1,000 a month before we left office. We said that no unreasonable financial considerations would hamper us in our determination to solve the housing problem throughout the length and breadth of the country within the shortest space of time. We pointed out the danger of that policy because, judged by strict economic principles, judged by those principles of Victorian economics which apparently have impregnated the present Minister for Finance, that policy was an unsound policy; spending our resources and savings on houses was unsound. We felt it was sound policy socially and we determined to proceed with it.
The same thing applied to schools. We pointed out that while we were convinced of the necessity for spending the savings of our people and investing the moneys available from State sources on housing above all things, the very fact that there was no immediate productive return, although there would be a very sound return in the years to come in a social way and in the stability of the country and the comfort of the people, imposed on us the liability to see that every investment of the moneys which were necessary and which we employed in our schemes of capital development projects should be employed in projects which would produce productive returns in the strict economic sense of the term. We knew, as I have said, that there were dangers inherent in all this and we pointed them out and kept them in our minds all the time.
The Taoiseach said that he joined issue with us on our capital development programme because we did not have sufficient regard to the speed at which we were spending our sterling assets. Again and again, in speeches to which I will refer, I directed attention to what was happening. I directed attention to the fact that we regarded as implicit in the capital development programme the repatriation of such part of the sterling or external assets as was necessary to carry out that programme. We knew well that this increased investment would lead to sterling disinvestment, but we knew also and I stated it and it will be found on the records of this House, in my opening speech on the Taoiseach's Estimate last year that there were occasions when it was proper finance, sound economics and good social policy to create a deficit or that disinvestment in our sterling assets for the purpose of financing schemes for the provision of houses for our people and for the development of our resources in order to end emigration, to remove poverty and secure employment for all sections of our people.
We knew also of and directed attention to the danger deriving from an unsatisfactory disequilibrium in our balance of payments. We knew, and I pointed out last year, that the mere repatriation of our external assets was no panacea for all our ills. We knew that the problem of the balance of payments was one which required to be carefully watched and measures taken to bring about a proper balance between them. In the circumstances with which we are faced—I make no apology to the House or to the Fianna Fáil Government or Party for this—we knew well that the national interest then required that there should be a conscious creation of a deficit in the balance of payments for the purpose of financing our capital schemes.
I shall deal before I finish with the suggestions made by the Minister for Finance last night, and repeated to-day by the Taoiseach, that we were going too fast, that we did not know where we were going, that we did not realise that there were not enough savings from our people's resources to finance these schemes. I will demonstrate from the speeches I made either in this House or throughout the country the principles upon which we acted all the time, and I want to put these speeches upon the records of this House so that they will be available for people who are interested in the truth of this matter and so that it can be seen how unjust, how false, how unsound are the arguments, or the alleged arguments, produced by the Minister for Finance and his colleagues and that were stated last night in the House on this matter by the Minister for Finance.
We knew the dangers. We directed attention to the dangers and we took measures to obviate those dangers. Right through every speech that I made expounding Government policy on this there will be seen a consistent line of principle and of warning of the dangers of the application of these principles and of full advertence to the problems that we had to solve, the difficulties that faced us and the real, proper methods that should be taken and were taken to solve these problems and which brought us a very large measure of success in the short time in which we were in office.
I spoke at the Chamber of Commerce on 26th May, 1948, within a very few months of assuming office as Taoiseach and Head of the Government. On that occasion I made these observations. Firstly, I said—I quote from the speech:—
"The two main long-term economic problems confronting this country are the necessity for greatly increased agricultural and industrial output and the rectification of the unhealthy condition of our balance of international payments. The first of these problems is the more important. If we can solve it we will have gone a long way towards improving the balance of payments position as well."
Later, I said in my speech:—
"Inflationary tendencies can, to some extent, be counteracted by direct Government measures but by far the most effective instrument is in the hands of every citizen in the State—increased voluntary savings."
I quoted last year on this Estimate a further passage from that speech—at column 1807. It bears repetition, even at the risk of boring Deputies because, as I say, I wish to have it on the records of the House so that there may be an answer to these spurious arguments and unjust suggestions that have been made by members of the Government, particularly the Minister for Industry and Commerce and the Minister for Finance. This is what I said:—
"I have stressed the necessity for saving but having done so it is necessary to give equal emphasis to the necessity for productive investment of savings. It will be generally agreed that this country has for many decades been suffering from chronic under-investment... It can scarcely be questioned that our national income per head is far too low for a country so rich as ours which has the potential to be very much richer. Unless national capital is increased, there is no hope for any real increase in the national income.... There is no reason why this country, which is comparatively under-developed, should be satisfied with a normal rate of increase in national income. We should aim at a rate of increase much above the normal, and the Government is determined to use every effort to secure the acceptance of that which must be regarded as a fundamental truth of Irish economics."
I made an observation in that speech which I did not quote last year but which I want to quote here and put upon the records of the House because it is very important and very relevant in view of what we anticipate may be, and probably will be, the policy of the Government in reference to this so-called discreditable financial condition in which they find themselves now—a policy of greatly increased taxation. In reference to this matter, I said:—
"The Government realises what too many are inclined to forget, that taxation is a very important factor in the cost of living."
I want Deputies to pause and contemplate that proposition which is forgotten, and which, if forgotten by the present Minister for Finance, will have very grave results upon the initiative and enterprise of our people and the cost of living of our people.
I want to refer to some passages from the speech that I made at the Institute of Bankers in Ireland on 19th November, 1949. There I said:—
"Public finance in the past has been mainly preoccupied with the annual Budget, although this covered no more than a fifth or a quarter of a country's economic activity. To-day, however, it is generally recognised that to discharge fully its economic responsibilities the Government must budget not primarily to allocate a certain part of the nation's finances to public purposes, but must also ensure that the resources of the nation are utilised in the way which can best advance the interests of the community. The community has to be considered not merely as taxpayers but as producers and consumers as well, and the level of national income may be regarded as the best indicator of economic progress. The Government can best influence the community's prosperity by a sound budgetary policy and by investment. As long ago as 1936, the late Lord Keynes declared ‘that the duty of ordering the current volume of investment cannot safely be left in private hands.'"
I went on to say about the then Government's view:—
"The present Government regard it as the responsibility of the State to create economic conditions within which it will be possible to provide a high level of employment and regard it as the duty of the State so to arrange our economic affairs that no resources of land or labour which can be usefully employed should be allowed avoidably to remain idle.
I have said before and I say again that the root cause of the low level of Irish national wealth and the incapacity of the Irish economy to absorb workers into employment has been due to the inadequacy of capital investment, particularly in agriculture."
Later on, I proceeded to develop that point by saying:—
"Only by large-scale investment can we increase the national wealth of the country or absorb the resources of land and labour which are at present idle. Some of our capital investment will be capable directly of earning revenue. Other kinds, such as housing, will bring social and economic benefits which cannot be measured directly in terms of money, but which are, at present, just as indispensable to the national wellbeing as directly revenue earning assets."
Then I proceeded further:—
"It would scarcely be possible to finance such capital expenditure entirely from the current resources of the community. The Government are satisfied, however, that the need for this investment is so great and the social and economic advantages it will bring so obvious that they are fully justified in drawing, in part, on past national savings to finance it."
Then I proceeded to deal with the balance of payments:—
"A temporary disequilibrium in the balance of payments is inevitable according as repatriation of capital takes place. There are greater evils, however, than a temporary deficit in the balance of payments. This Government believe that impoverished and unnecessarily infertile land, lack of housing and shortage of hospital accommodation are far worse evils, evils which we are determined to extirpate, and which would even justify short-term economic loss for the sake of social and long-term economic gain.
It is necessary to ensure, however, that the deficit in the balance of payments is a reflection of increased capital investment at home rather than increased consumption. It is also necessary that the new State investment must be in addition to and not in substitution for private investment which would have taken place anyway. Indeed, the Government would prefer if as much as possible of the new investment were undertaken by private persons because it would be more likely to be productive of a proper economic balance.
Some of the proposed capital investment will be directly revenue earning, such as telephone development. The test of its soundness will be whether it yields a return in revenue at least sufficient to service the loan charges. Other forms of capital investment will yield revenue indirectly. They will improve the level of employment and living standards at home. They will increase the productivity of the land and so ensure a higher national income and a higher exportable surplus of agricultural produce in years to come, to compensate for the reduced income resulting from repatriation of part of the sterling assets. Capital investment in housing is in a special category. It will not directly earn revenue."
Then I went on to say:—
"While recognising the defects in our economy and sparing no effort to remedy them, we must, of course, beware of making a fetish of capital investment. There is both good domestic investment and bad domestic investment justifiable neither by its economic return nor by its social fruits. We must turn our faces sharply against anything that savours of the mere visionary. Even foreign investment is better than bad domestic investment and certainly better than anything remotely approaching dissipative expenditure. The more our social necessities compel us into forms of capital investment showing a social return alone, the more carefully must we select schemes which can survive vigorous financial examination. If we build houses which are a necessity, we must so augment agricultural and industrial productivity that the people who live in those houses have real incomes to maintain them. We must tilt the balance on outlay in a genuinely productive direction.
The more we invest, the more we must save. If the evil of inflation and all its consequent waste, on the one hand, is to be avoided and an unnecessary deficit in the balance of payments, on the other, it is essential that savings be increased. The degree of expansion possible is limited by the availability for expenditure of current savings and accumulated resources."
Speaking at Clonmel Chamber of Commerce on the 24th April, 1950, I again developed the principles underlying this policy and directed attention to its dangers. I said:—
"Unlike many other countries, Ireland's economy has never been marked by recurring cycles of employment and unemployment. The inherent defect has not been extreme fluctuations in economic activity, but rather what is technically called a tendency towards economic equilibrium at an unduly low level. The result has been that a large part of Ireland's natural resources has remained undeveloped and that there has been altogether insufficient economic activity to provide employment for all the population. Ireland's economic ills have, accordingly, been chronic. For generations before the recent war, lack of work has compelled some of the most active and energetic Irish workers to emigrate. Others who remained at home lived an unproductive existence by unemployment assistance or by casual periods of work on unproductive employment or relief schemes. There was a shortage of work because the capital resources of the country were not being used to create work. In addition, particularly in agriculture, under-capitalised projects in private hands were not giving rewards commensurate with the effort employed on them. Many attempts were made to apply patchwork treatment for these unhealthy symptoms, but most of the money spent was wasted because it was spent unproductively. The fundamental trouble was the failure to recognise that the basic defect in the country's economy was the absence of sufficient capital investment to ensure that the maximum of national resources in labour and land would be productively employed."
Further on I said:—
"The capital expenditure which is now proposed may be divided generally into two kinds. Some of the expenditure will lead to the creation of additional productive capital assets for the community, which will add directly to national wealth. The remainder of the expenditure is to be spent on what might be described as human improvement projects, these being assets which are unproductive in so far as they increase national wealth only indirectly, but which, when selected with wisdom and foresight, directly advance national welfare. Such expenditure, when prudently undertaken, can yield a return in greater productive powers of the community and in greater health and happiness."
Later, I said:—
"The aim of the two-Budget system is to expand economic activity nationally. Rigid tests must be applied to ensure that the items included in the capital Budget are genuine assets of either a revenue earning character or are human improvement projects. In no sense must the capital Budget be regarded as a device to disguise with respectability a deficit in the current Budget. Any projects which fail to pass strict tests, projects which are neither productive of direct revenue nor add to the real welfare of the nation must, if they are to be undertaken at all, be charged against the current Budget and so paid for from taxation. The capital Budget must be examined constantly by the Government just as the revenue Budget must be examined constantly by the Department of Finance, but both Budgets must be examined on different principles. Large-scale public investment has to be coordinated with private investment, and this presupposes careful planning. It is necessary, accordingly, for the Government to establish social and economic priorities for its capital projects. Many capital projects may be desirable, but all cannot be undertaken at the same time. To maintain an even and smooth level of national investment must be an important feature of Government policy. It is desirable that a programme of capital projects should be prepared as a long-term objective. Some of these projects can, so to speak, be kept on the shelf until the time is opportune for putting them into effect. In this way capital exlis penditure on a national scale can be so directed as to avoid the extremes of inflation on the one hand and unemployment of men and other resources on the other."
I want to quote and put on the records a statement made by the then Minister for Finance, Deputy McGilligan, in an article which he wrote for the "Economic Survey of the Republic of Ireland" in the Statist in February of this year, where he said:—
"The State investment programme rests on the principle that repatriation of sterling assets is desirable where it is clearly shown to be in the interests of domestic development. The underlying assumption is that the increased outlay of the State, in so far as room is not made for it by additional current savings, i.e., by private abstention from spending, will spill over into purchases from abroad, thus causing a realisation of sterling assets. While a moderate deficit in the balance of payments attributable to genuine realisation of external assets for domestic development is acceptable, any heavy realisation due merely to a widening of the gap between export and import values or to excessive imports of consumer goods would be cause for serious concern. The gross value of the holdings of external assets in Irish ownership was estimated some years ago at approximately £400,000,000, which is less than the present annual rate of use of goods and services. External holdings in Ireland were estimated at £175,000,000, so that Ireland's creditor position was of the order of £225,000,000. The economic advantages of possessing net external resources are too substantial to enable a light view to be taken of their use merely for consumption, as distinct from productive purposes."
I have quoted at some length from these speeches and statements for the purpose of putting on the records that the principles upon which the last Government operated were principles that cannot be attacked on any sound economic grounds or on any economic theory other than the outworn theories of the early Victorian era. The Minister for Finance was injected last night, when speaking on his Estimates, with all the virus of conservative finance. He was poisoned by his outlook on his political opponents on the opposite benches. He wanted to try and get something out to show that there was something discreditable in the policy which we adopted and carried into effect. I have placed at some length on the records of the House the principles which guided and directed both the formulation and the application of the policy of capital expenditure for productive purposes in this country in order to show those people who listened to the poisoned and venomous outpourings of the Minister for Finance and of his colleague, the Minister for Industry and Commerce, when they criticised, or purported to criticise, Deputy McGilligan as Minister for Finance, and make the serious charge against him that he was guilty of discreditable financial tactics, that those arguments are due merely to a poisonous hatred of political opponents, and have no justification in truth and no foundation whatever.
I asked earlier in my observations what is the alternative policy of the Government. The Taoiseach to-day mentioned capital expenditure. He was unable to give an account in his opening statement of general Government policy, because apparently the Government have no general policy at the present moment, but are hoping to devise it in the months that lie ahead during the vacation they have fixed for themselves of three or four months, hoping to filch more of our policy, the policy we devised and which they did not think of in the 16 years they were in office, and hoping then to suggest to the people, through these poisonous outpourings of the Minister for Finance, that they have something new, something different.