These speeches began because the Government set out to make the country believe that whatever economic difficulties were there were in some way or other created by the inter-Party Government and that whatever problems and difficulties they had to face, these problems and difficulties were a legacy bequeathed to them by their predecessors.
They began by one of the early speeches of the Minister for Industry and Commerce in which he dealt with prices. He excused himself by saying that he was left a foot-high pile of recommendations, that he had inherited these, and that whatever responsibility for these increases was to be apportioned should be laid on his predecessors. I will come to that later. Having succeeded in that technique in the first fortnight or month the Government apparently came to the conclusion that it was good political tactics to create a panic and scare, and, having created that panic and that scare, to attempt to apportion responsibility to the previous Government and to seek to lay the responsibility for the situation which has resulted at the feet of the previous Government.
In company with the other Deputies who have spoken during the course of this debate, I want to refute these worthless allegations, and to refute them by the recitation of a few simple facts. This Government took office at a time when, during the preceding month, prices had been rising. That situation started, according to Fianna Fáil, in August or September last year. It was caused by two factors, by devaluation and by the stockpiling which had occurred as a result of the Korean war. I remember, this time last year, saying the same thing. Fianna Fáil then denied it, but it may be that contact with the facts and realisation that what I said then was the truth has made them alter their opinion. That situation was tackled by the Government in the only way in which it could be tackled. It may be that our efforts were not as successful as we imagined. We thought that it would have been possible by controls to influence prices. Faced with that situation we set out to do two things, to have available here sufficient supplies of goods, so that if the supply position deteriorated we would be capable of meeting whatever difficulties the country might have to face, and, in addition, to control as effectively as possible within the limits of price control machinery, and to offset in whatever way it was possible to do it, the effect of rising prices.
This Government inherited conditions in which the rise had to a considerable extent exhausted itself, or certainly, over a wide range of commodities, was at any rate on the point of exhaustion and the earlier steep rise had lessened in most of the other commodities. When the Government came in the policy, as announced by the Minister for Industry and Commerce and followed by the Minister for Finance, was to create a scare and a panic. The result of that scare and panic was not foreseen by the Government because if it were foreseen they must have realised that the scare and crisis atmosphere which had been fomented by their speeches would react unfavourably if they were to seek to float a public loan. It is obvious from the policy that had been announced by the inter-Party Government that in order to finance the capital development programme another loan would have been required in the autumn of this year. It was the intention of the previous Minister for Finance to float such a loan but the present Minister for Finance initiated a campaign designed to create an atmosphere of crisis. The result of these speeches, if not foreseen by him at the time, was to create circumstances in which the Government could not go to the public and ask for a public subscription, and instead of that they drew on the Counterpart Fund.
We have heard a great deal about the money that has been wasted by the inter-Party Government. Last week I asked a question to find out the total proceeds of the Counterpart Fund and Deputy Declan Costello asked a more detailed question inquiring the date on which the proceeds of dollars allocated to Ireland under Marshall Aid were first received: (b) the amount of expenditure out of such funds up to the 13th June, 1951; and (c) the amount of such expenditure from 13th June, 1951, to 25th October, 1951. The Minister, in reply, said:
"(b) Of the proceeds of dollar borrowings from the United States Government £18.1 million had been expended at 13th June, 1951.
(c) Further expenditure in the period from 14th June, 1951, to 25th October, 1951, amounted to £18.5 million."
So that in the short space of four months the present Government spent more out of Marshall Aid than the previous Government had spent since the fund was first opened in January, 1949. We had better have less talk about the dissipation of our American assets, because this Government created a panic and a crisis which precluded them from going to the public to borrow money, and which would, as was announced by the Minister for Finance in his Budget, have been used to finance the Counterpart Fund but which would also have had the very valuable function of lessening the inflationary effect.
The Central Bank Report has commented at length on the inflationary effect in relation to a number of commodities. One of the methods of dealing with an inflationary situation and of lessening its incidence is to siphon off excessive money in the hands of the community. That can be done, as has been done in Britain, by imposing a very high rate of taxation or it can be done by a combination of taxation and of asking the people to lend to the Government for productive purposes. We endeavoured to achieve, and succeeded in achieving, that result by borrowing and by keeping the burden of taxation as light as possible, but the present Government, instead of withdrawing this money, which was available, by floating a loan, damaged the credit of the country and the prospect of securing a loan. Faced, however, with the need of funds to carry on the various development schemes that were in progress, they borrowed from the Counterpart Fund, thereby themselves participating in creating, and in making more acute, the inflationary position which had already been commented upon by the Central Bank. Not merely was that situation dangerous and bad from the point of view of public finance, but an even more serious aspect of it has been the noticeable deterioration in trade. It may be that this recession, as it is euphemistically called, is not peculiar to this country, but however we may be affected by outside influences, the present Government, with a number of speeches calculated to frighten the public and to create financial uneasiness, succeeded in influencing the banks to restrict credit. The result has been that, despite a somewhat higher level of advances, as is shown from the banking returns—and that is only up to September and is not an actual criterion—a whole variety of smaller operators have found themselves restricted in credit.
The position has now deteriorated to the extent that, for the first time since the end of the war, certainly for the first time in the last three or four years, there is evidence of rising unemployment. That position is one which should not have arisen, and that would not have arisen, if the Government had acted in the way in which the previous Minister for Finance had announced it was proposed to finance the capital development programme and if, instead of seeking to damage public credit for political purposes, they had gone to the public and said that they believed in the capital development programme, in an expansion of the resources of the country, and that they favoured the utilisation of national credit to the maximum extent and were prepared to initiate, and ask the public to subscribe to, a development loan for the purpose.
Instead of that, the position was allowed to deteriorate and the Government, faced with that situation, then decided to blame the inter-Party Government for the position in order to divert attention from their own inability to deal with the problem and to provide the solution which they asserted they had before the change of Government.
I think nobody who has spoken in this debate has attempted to deny that the present balance of payments position is one which requires some attention and that the gap should be closed or reduced. Deputies must, however, throw their minds back to the position as it obtained say in June, 1950, and particularly between June and December of last year. At that time, when the Korean war broke out, it was obvious that every country in the world was engaged either in an armaments race or in trying to stockpile raw materials. The previous Government in these circumstances decided in the national interest that it was essential to stockpile against that situation. At that time, day in and day out, during the autumn and winter sessions of the Dáil, and on every possible occasion, we had the then Opposition criticising the then Government because we were alleged not to be guarding against the position that was likely to arise, and urging us to stockpile and to buy up materials, whenever and wherever possible.
The Government recognised its responsibility in that regard and succeeded in importing large quantities of goods. It may be that we did not get all the goods we required or that in the course of that operation somewhat minor quantities of non-essentials were imported but, in the main, the goods that we imported were goods that were essential either for capital development or in order to guard against any deterioration in the supply position. I invite Deputies to examine the import list given in Table V of the paper on the trend of external trade and payments. With the possible exception of a few items—we are all familiar with the circumstances which required the importation of butter—there is scarcely a single item on that list that could be deleted. Most of them refer to equipment or machinery or goods for capital use, or essential supplies such as tea, tobacco and coal. I do not think there has been any suggestion in the course of the debate that it is proposed to limit the importation of these goods. It is on that aspect that I want to try to find out what Government policy is and what they propose to do.
The Central Bank Report is very critical of the present high rate of consumption and it says on page 14, dealing with subsidies:
"It is true that removal of subsidy might tend somewhat to increase the cost of living but some inconvenience in this respect must be weighed against the compensating gains, including especially the reduction of consumption."
I do not know what the Central Bank meant by that statement. Nobody with any degree of regard for the necessity of providing our people with a high standard of living would suggest that we should restrict consumption only to commodities that are subsidised.
People reading that might not be aware that the four items that are subsidised are butter, tea, bread and sugar—in the case of sugar the subsidy is no longer applicable. These are essential foodstuffs. I do not think that anybody with any sense would suggest that the subsidy should be removed or that any steps should be taken, as long as the goods are available, either from home production or imports, that would reduce the amount which is available at the present time for consumption.
The Minister for Industry and Commerce, at column 302, Volume 127, said:
"The Central Bank says the solution is to cut down consumption. The Government believe that the solution is to increase the level of production."
With that statement everybody will agree, but will the Government point out any practical step which will achieve a substantial rise in production or any rise that is capable in the immediate future of reducing the gap in our balance of payments? It is quite obvious that there is not any immediate step that can be taken, and that the only steps capable of expanding our production were the steps that had been taken by the previous Government to develop our resources, to put land that was not in production or was not up to the optimum fertility into that condition, to expand industry, to develop our power resources, to provide increased opportunities for employment, to drain rivers, and so forth.
One of the most significant features of our economy has been the static output from agriculture. It may be that the measures which we took in recent years had not an opportunity of showing results. It is a reasonable assumption that the steps which were taken, the incentives that were provided, the opportunities that were made available to farmers for increased production could not show results in the short space of three years. Some of them had already shown results. Our exports of live stock—the increased numbers under a number of headings—were showing the proper trend but, taking it over the years, the most disappointing feature of our economy has been the static condition of agricultural output.
In recent years there has been a very remarkable expansion of industrial output and, despite that substantial rise, it is obvious that if we are to make any headway in reducing the gap between imports and exports, the only real solution lies in a substantial increase in agricultural output. It is true that our agricultural and industrial exports showed satisfactory rises in recent years, but there is not any indication that the tendency which was there will increase sufficiently rapidly to enable the gap to be closed. Therefore, we are entitled to ask the Government what remedies they propose, and what steps they contemplate.
There is, of course, the other aspect of the gap that we had under consideration and which could show, and I believe would show, a reasonable result if the proper methods were applied, that is, the development of tourism and the development of exports to the dollar area but, in order to export, we must first produce.
The previous Government invited to this country a team of experts from the United States to advise on tourism. Having got their report, we prepared legislation. When the change of Government took place, that legislation was ready, and the Bill had actually been introduced. The Bill lapsed at the dissolution, and the present Minister reintroduced it. I cannot understand the reason for the delay in the introduction or circulation of the Tourist Traffic (Amendment) Bill. The only step taken in connection with tourism has been the establishment of a third body to deal with the tourist policy.
I do not want to enlarge to-night on any question dealing with tourism except to say that it does not appear to be the line likely to achieve the most rapid results merely to set up a third body instead of proceeding with the implementation of the recommendations that have been based on expert examination, acknowledged by all who came in contact either with the report or the investigators to be an examination of competent persons. The present Government has not announced any policy to bridge the gap.
It is true that we have heard from the Ministry for Industry and Commerce that it is proposed to increase taxation, proposed to raise, by means of additional taxation, additional revenue in order to bridge some of the gap, part of which was created by the present Government. I do not know whether Deputies realise that one of the most effective methods of increasing the cost of living is higher taxation. We all remember that Fianna Fáil in the past believed in a policy of high taxation. They brought in a Budget in the autumn of 1947 and imposed additional taxation amounting to £7,000,000 in order to increase the subsidy on certain commodities and in order to prevent deterioration in the situation which then confronted them. In the short space of a few months after the change of Government that taxation had been remitted without any reduction in subsidy and at the same time an increase was granted in respect of social services for old age pensioners, widows and orphans and blind pensioners.
Now, with the return of the Fianna Fáil Government, we have been told that it is the policy to increase taxation. I do not know how they expect to get the increase in output or the expansion in industrial development, which are accepted as being necessary, if taxation is increased, because, as most Deputies realise, there are only a few sources from which additional revenue can readily be got. We endeavoured to lighten the burden as much as possible, and in the course of our period of office we reduced taxation on a number of occasions. The present Government has announced that it proposes to increase it.
There were, of course, two objects of their tax policy in the past, tobacco and beer and spirits. It is true that additional revenue can be got by raising the tax on these two commodities. It is possible that some small addition could be got from an increase in income-tax but it is nothing in comparison with a tax on these other commodities and it would have the additional disadvantage of reducing the incentive to business, of imposing additional burdens on industrialists, and of limiting the expansionist policy which is essential if the present situation is to be tackled effectively.
Almost every Minister for Industry and Commerce and every Minister for Finance in recent years has been subjected to a good deal of criticism and comment from various bodies of industrialists, manufacturers and traders in general. They have been complaining about the high level of taxation, criticising the burdens that have been placed upon them, commenting on the method of taxation. From that point of view there is a good deal to be said because the present tax system is to a considerable extent outmoded but, up to the present, they have failed to convince the Ministers dealing with it that the problem was one which merited any substantial alteration. It may be that pressure of other business prevented Ministers from devoting time to a full examination of the position. However that may be, the one predominant feature which characterised all these reports and all the representations made to the Ministers for Finance and Industry and Commerce was the burden which taxation placed on any possibility of an expansion in business.
Apparently, the present Government propose to increase taxation. In the whole course of this debate we have not heard a single instance of any remedy which the Government proposed to adopt—with the exception of the references by the Minister for Industry and Commerce to increased taxation. There has been no suggestion that it is proposed to cut down imports. There has been no suggestion that there is any immediate method by which we can expand substantially exports or increase our other earnings either by an expansion of the tourist business or by an increase in emigrants' remittances. The Government has attempted to create a crisis —although the Minister for Industry and Commerce said last week that we have no crisis yet.
They have attempted to create a crisis and—as they themselves must recognise—the result is that for the first time in three years there is rising unemployment and an absolute stagnation in trade. To meet that situation which was created by themselves, the Government have offered no suggestion of any step which should be taken or which they believe they must take except the prospect of higher taxation next year. Because of this situation that has been created, the Government seek to put the blame on the inter-Party Government. In order to prevent the public from recognising that the deterioration that has occurred has been created and fomented by themselves, the present Government seek to confuse the public, and the atmosphere of crisis which has persisted over the last two or three months was designed to damage the record of the inter-Party Government. But the Government fails to recognise that their policy would engulf themselves in difficulties which they now seek to evade.
I do not propose to go over the ground which Deputies on this side of the House have already covered. Time and again, we have expressed the view that as import prices rise the increase must be reflected in the cost of commodities here. That position has been recognised only recently by the present Government. I want to deal with three commodities whose price has been increased as a result of deliberate Government action and which was uninfluenced by any outside consideration. The price of butter was increased. When the inter-Party Government increased the price of butter by 2d. a lb. earlier this year we recognised that it was right and proper that that increase should be met by the consumer and that it would be wrong, with the high level of subsidies, to raise the subsidies still further. The present Government increased the price of butter by 2d. a lb. but they omitted to say that they added an additional burden of £400,000 to the subsidy as well. It was obvious that that increase could be compared with the increase granted by the inter-Party Government and it was easy for them to say: "We did no worse than our predecessor." They omitted to tell the public that there is a burden that will have to be met and paid for before the end of the financial year.