During the last few weeks the figures which have been made available to us demonstrate what has been occurring in the Irish economy over the last year and portion of this year. An examination of the statistics which are now available is necessary in order to understand what has been happening, firstly, over the last 18 months since the change of Government, and, secondly, as an indication of the future line of policy which has to be taken in order to remedy the very difficult situation that presents itself to the Dáil at the present time.
These figures show that since the change of Government there has been a 15 per cent. reduction in industrial employment, that there has been an increase of 10,000 in the number unemployed and an increase of 13 per cent. in the cost of living. We had hoped that the Minister for Finance, when introducing this Supplementary Estimate, would have given us some idea of Government policy for dealing with the very serious matters which the country is facing at the present time. We hope that, when he is replying, we will get some indication of how the Government proposes to raise the employment level in the country, of how it proposes to deal with the trade recession and so bring back industrial production to what it was last year, and how it proposes, if it proposes at all, to maintain and, if possible, reduce the cost of living.
I think that these figures demonstrate that there has been a remarkable change in the economy since last year. I think it is more than a coincidence that the deterioration in our economy took place with the change of Government last year. I believe that the cause of the marked deterioration in our economy was due, firstly, to the violent attacks which the Minister and his colleagues made in the autumn of last year on the credit position of this State, and, secondly, that it is due to the restrictions which were put on that economy, due to the Minister's Budget in the spring of this year.
I think it is important to remember what the Minister and his colleagues were saying in the autumn of last year. I do not intend to weary the House with quotations, but the House and country are now well aware of how members of the Government were declaring that this State was on the verge of a great financial crisis. The work "bankruptcy" and the words "the country was in pawn" had been used previously. The whole credit position of the State, as well as confidence in the financial structure of the State, were being attacked by the Minister and his colleagues. The country was being informed that very urgent measures were required in order to remedy the situation.
Those speeches were made in the early autumn of last year. They were continued throughout the winter and into the spring, and so it is well to look at the figures which demonstrate what was happening in the Irish economy last year. Last year in the Irish economy and over 1950, unemployment decreased; there was a 30 per cent. increase in gross domestic capital formation and there was a 7.2 per cent. increase in industrial production. It would appear from these figures that there was no need for any great concern as the country appeared to be developing very favourably. Unemployment was going down and industrial production was going up. The figures which seemed to give most concern to the Minister and his colleagues were those relating to the balance of payments. In giving an estimate of the deficit in that year the Minister merely gave the dark side of the picture and failed to give the picture which I have given now—a developed economy, increased domestic capital formation and reduced unemployment.
We said last year that there would be a very great deficit in the balance of payments. We said that it would be an extraordinary deficit, but that it was nothing to worry about because it would be unusual. We pointed to three facts which we repeated time and again and which were denied time and again by the Minister and his colleagues. We said, first of all, that the deficit in the balance of payments last year was being inflated, firstly, because the terms of trade had moved against this country, and that, due to the post-Korean inflation, there was a very great rise in import prices. We pointed to the fact that the decline was already commencing when we spoke in the autumn of last year. We said that the decline would continue and that it was unnecessary to panic about it. Secondly, we attributed the large deficit, which we all knew would occur in the balance of payments, to the fact that there was large scale stockpiling last year. We were laughed at and told that there was no such thing as stockpiling going on last year. The third matter we pointed to was the fact that agricultural exports would expand, given time, and that there was no urgency in the situation—that the circumstances of the situation last year were exceptional and would right themselves in the course of time.
What is happening? The figures are now available and they are incontrovertible. These figures show that last year there was in increase in import prices by no less than 22 per cent. There was an increase in export prices of only 14 per cent. In other words, the terms of trade moved heavily against us last year. The figures now available show that the trend is now reversing itself and there is a marked decline in import prices.
We also said last year that there was a certain amount of stockpiling going on which would inflate the import requirements of this country last year. It is interesting to look at page 13 of the Irish Statistical Survey which bears out what we said. At the bottom of the page it says:—
"The upward trend in import prices continued in 1951 and was the chief factor responsible for the increase of £123,000,000 in the trade deficit."
I should have said that this particular quotation demonstrates the first argument we made, that the rise in import prices last year was the chief reason for the large trade deficit in our balance of payments, and that is borne out in what the statistical survey says. We also said that there was stockpiling, and even the Central Bank Report, at page ten of the recent report, grudgingly admits that it went on to a significant extent to the spring and summer of 1951.
Deputies will recall that one particular line which the Government took in the autumn of last year was that the country was going on a consumer spree, that the country was living too well, that it was living beyond its means. The figures now show that, in spite of the great increase in imports last year of £123,000,000, that great increase was due primarily to import prices. There was only, in fact, 4.9 per cent. increase in imports last year over the year before. In view of the fact that the Government said that this country was living too well and consuming too much, it is interesting to see the figures for consumption last year, which show that it went up by 2 per cent. and no more over 1950.
Probably the most interesting and important figures, however, have been made available to us in the capital account of the balance of payments, for there we see how the deficit of £61.6 million was made up. The Minister has been accused, and I think rightly, and certainly it is right to level the accusation at many of his colleagues and many back benchers of his Party, of equating the deficit in the balance of payments with a reduction of our external assets. We have had many speeches from the Government Benches pointing to the great deficits in the balance of payments over a number of years, equating these deficits with a drop in our external holdings, when, in fact, nothing of the sort occurred. The Minister, in his Budget speech, at column 1123, Volume 130, says as follows:—
"This deficit is no isolated phenomenon. We have had deficits every year since 1947, and the cumulative total is now roughly £150,000,000, thus virtually offsetting the external assets built up during the war years. We cannot say, however, that having, in effect, used up our war-time accumulation, and reduced our gross external reserves to less than two year's purchase of imports on the present scale, we shall now automatically settle down to living within our means. There is, unfortunately, no reason to think so, nor for believing that the balance of payments will right itself spontaneously. The opening months of this year showed virtually no improvement. Therefore, the necessary corrective measures for dealing with this urgent situation cannot be postponed..."
The charge that we make against the Government is that they did take urgent measures in their Budget and did ensure that the deficit in the balance of payments would be corrected as much as it was possible by Government policy to correct it by reducing the purchasing power of the State; that they did take these measures in their Budget, but that they were unnecessary and that they brought about a great deal of hardship and the decline in our economy that I have indicated. The Minister appears at any rate by his remarks to be equating that £150,000,000 deficit in our balance of payments which he estimated to take place over those four years with the drop in our external holdings of that amount and the figures demonstrate quite clearly that that is not correct.
It is rather interesting to see the recent report of the American experts who would appear to have accepted the Government's line in this particular aspect of our balance of payments, because at page 17 of that report, after dealing with the amount of investments available for what they call repatriation, they go on to say:—
"The remaining £150,000,000 that might be considered as available for repatriation threatens to be soon exhausted at anything like the current rates of withdrawal which are estimated at over £30,000,000 in 1950 and at almost £70,000,000 for 1951."
In fact, there was no withdrawal of £30,000,000 in 1950 and no withdrawal of £70,000,000 last year. It is clear that there have been deficits in the balance of payments for 1947, 1948, 1949 and 1950. They amounted in all to £88.9 million. Let me repeat that those deficits were not financed by a drawing down of our external holdings. In fact, these deficits were financed as to £36.9 million by drawing on the American Loan account, and as to £51,000,000 by the inflow of foreign funds into this State and the total reduction of our external assets, that is to say the external assets of the banking system, of private individuals and of the Government, were only reduced at most by £1,000,000 in these four years.
Last year this deficit of £61.6 million was not financed by a drawing down of our external reserve by £61.6 million. It was financed as to £8.7 million of it by American Aid, as to £15,000,000 of it through the inflow of foreign funds into this country, and the drop in our external holdings of the banking system, private individuals and the Government amounted to £37.9 million.
Some time ago the total amount of our external assets was estimated at about £400,000,000. That estimate is from an authoritative source, from an authoritative spokesman of the Department of Finance. The only criticism I have seen of that estimate of £400,000,000 which was then the estimate for external holdings in 1947, was that it was too low and various estimates have been given that our holdings were as much as £450,000,000 in 1947 and maybe £500,000,000. The interesting thing is that they certainly were not below £400,000,000, inasmuch as the experts to a certain extent got a rough idea of what these external holdings were. That was the position in 1947. Since then there have been deficits in the balance of payments which, from 1947 to 1951, amounted to £150.5 million. On the Minister's arguments, as stated in his Budget, on his arguments as stated in the House last year and throughout the country, he appeared to state and I think believed erroneously that because there were these deficits our external holdings were down by £150.5 million and, therefore, this country appeared to be on the verge of losing all its external assets. In fact, the capital account of the balance of payments showed that these deficits for five years were financed as to £45.6 million by American Aid, as to £66,000,000 through the inflow of capital into this country, and there was a total drop in our external holdings for these five years of £38.9 million.
Therefore, as far as we can judge, our external holdings are now certainly over £350,000,000 and probably well over £400,000,000. That is the country that is facing bankruptcy; that is the country that has to take drastic steps to reduce consumption; that is the country that is living beyond its means. That was the interpretation of the figures erroneously made by the Minister and the reason for the fierce impositions that he put on in his recent Budget.
It is quite clear from the Minister's statements, inasmuch as there is any logic in the Government's case, that the last Budget was aimed at reducing the balance of payments. If the Minister believed, as he appeared to believe, that this country was in this parlous state, he would have had a duty to do something by means of the fiscal machinery under his control to bring about a lesser deficit if possible this year. Our complaint with the Minister and his policy is that he has carried out a financial policy aimed to reduce consumption in this State so as to relieve the balance of payments situation which we believed did not require the drastic attention which the Minister's policy gave it in his Budget.
I believe that the difference between the policy of the present Government and the policy of the Opposition is the different values it puts on the problems which face the State. We have, at the present time, a very urgent unemployment and emigration problem; we have a grave long-term problem of endeavouring to raise agricultural and industrial production; we have the grave problem of trying to develop and increase the capital assets of this State; and we also have—and we have always admitted it—a balance of payments problem. But we have not subordinated all these problems to endeavouring to right our balance of payments.
We believe that the increasing of capital formation in this State, the reduction of unemployment, the cessation of emigration, were things which should primarily be aimed at before the balance of payments required any urgent attention. We believed that we could afford to run deficits in the balance of payments for many years because we had this very large accumulation of external assets which we were entitled to use up to develop our country, having been forced to save these assets during the scarcity of the war years.
It does seem to me that the Minister and his Party have treated the deficits on the balance of payments as the visitation of an evil god whose wrath can only be appeased by bringing offerings of more unemployed, a greater number of emigrants, lower production and higher costs. I think we can say to the Minister that no matter how much the high priests of this strange new cult may rend their garments and tell the populace they are endeavouring to keep them from further sacrifices in appeasing the further wrath of the gods, the populace now sign for a new dispensation and the high priests will soon be looking for a job.
I said that I believe that the trade recession, unemployment, increased emigration, the drop in industrial production and the other symptoms of the decline in our economy have been the result of the Government's policy over the last 18 months. I should have said they were only partly the result of Government policy or largely the result of Government policy. Another factor has played an important part in bringing about the trade recession which this country is now experiencing. It is interesting to see the magnitude of that trade recession which has shown itself in the drop in agricultural production, which has shown itself in the drop in the number of employed persons and which now has shown itself, more strikingly, perhaps, in the figures which have recently been published by the Central Bank. Those figures show a decline in loans and advances over the last few months and whereas loans and advances from the commercial banks in this State stood at £120.9 million on the 31st December last year, they declined to £118.6 million on the 15th July this year; they declined further to £115.7 million on the 19th August of this year; and they declined still further to £113.8 million on 16th September this year. I do not think it would be wrong to say that the decline will continue and will show itself in the figures when they are published of the loans and advances in the last few months.
As I say, the attack on the credit position of the State, the attack on the confidence in our whole financial structure which the Government made last year, and the Budget which was introduced this year played a large part in creating the circumstances which these figures demonstrate exist. Another factor which must be taken into account was the rise in the bank rate which occurred in the last few months. It does appear to me not to be unreasonable to suggest that an item such as credit should be every bit as much subject to the vigilance of the Prices Advisory Board as, say, an item such as motor insurance. I would like to see the rise in the bank rate demonstrated before this advisory board as being necessary in the circumstances of this country.
I agree fully with Deputy McGilligan in his remarks on this Estimate of a few weeks ago when he commented on the role that the Central Bank must play in helping to develop the capital formation of this State. I believe also that the commercial banks themselves should assist in developing capital formation in Ireland and that the holdings in Irish Government securities should be greatly increased in order to help us to develop our land, our industries and to give employment in the manner which this country requires.
We, I think, have made it quite clear to this House and to the country that we are opposed to the restrictionist policy of the present Government, that we believe in the expansionist policy which was carried on over the three and a half years of the inter-Party Government. We believe we should have the co-operation of the banking system in the development of our country and that the private sector of this community should be encouraged as much as possible, if necessary by amending our tax code, to develop the capital assets of this State.
We also believe that our requirements are so great and so urgent that that private sector of our community is not sufficient in itself to give us the capital formation that the country requires. We believe the State itself should undertake, in a manner in which it has done so during the last three or four years, large-scale capital formation. It must be appreciated that with that policy goes the necessity for a large-scale campaign to increase savings. It must be appreciated that the only way in which that large-scale policy of capital formation can be carried out is either through current savings or through disinvestment abroad.
If we embark on a policy, as I believe we should, of large-scale capital development, and if our home savings prove to be insufficient for that purpose, then the only way by which that large-scale capital investment can be financed is by disinvestment abroad. We are prepared to face that. We are prepared to face deficits in the balance of payments in order to develop the capital assets of the State at home.
In my opinion these are the matters urgently requiring our attention. These are the matters to which the attention of the Government should be directed. The stress that has been put on the deficits in the balance of payments has, in fact, blinded the Government to our real and urgent problems. It is the problems of unemployment, of low production and emigration that are of graver urgency than that of merely balancing our external payments.
Deputy Hickey adverted to the situation that exists in Limerick in regard to housing. It is advisable very frequently to get the clear picture that lies behind the cold figures given in the statistical statements available to us. It is important to realise what a 15 per cent. reduction in industrial production means. It is important to realise what a 10 per cent. increase in unemployment means. We who have had to deal with many people—young men and middle-aged men and young girls who were in good employment up to last year and who are now because of the deterioration in our economy out of employment—feel that the unemployment situation calls for drastic remedies. We can but hope that the Minister and his colleagues will realise that these are the really urgent matters requiring Government attention.
I believe these problems call for courage and foresight; above all they call for an understanding of the economic affairs of the country, qualities that I believe are sadly lacking in the present occupants of the ministerial benches.
