In the course of his speech yesterday, the Minister expressed his appreciation of the services which the members of the Committee on Industrial Taxation had rendered to the country. I should like to join with him in that tribute to those who have given so earnestly and so continuously, and, I think, at great cost to their own private concerns, signal service to the State in this matter.
I should also like to begin by saying that I should personally like to congratulate the Minister on the pains which he has taken to make the country aware of the very grave position in which it finds itself. As spokesman of the Government, we listened to his speech yesterday and we will readily agree that he had not an easy task. If we on this side do not agree with him in regard to the fundamental policy on which the Budget is based, that in no way detracts from our appreciation of the factual account which he gave yesterday of the grave state of our national economy. It was really an alarming picture which he presented and I think nothing will be lost by recalling to the House what the Minister, in fact, did say about the position in which we in this little part of Ireland find ourselves.
He said that the increase in consumption and the decline in savings had combined to cause a grave balance of payments problem, the financing of which resulted in a scarcity of capital for development purposes. I am not going to hark back to what the Minister said in 1948 or in 1954, during the general election. I will not recall the fanfare of trumpets with which the new policy was enunciated in 1948. I am merely going to point out that in this Budget the Minister is continuing to subsidise consumption and increase expenditure, as well, of course, as substantially increasing taxation. The Minister has diagnosed the disease, but has lamentably failed to apply the remedy.
In his review the Minister went on to tell us then about the failure of the Dublin Corporation issue and the most signally unfortunate thing this State has experienced since it was established, the failure of the National Savings Bond issue—an issue at 5 per cent. made at the discount price of 98.
It is not to be wondered that, with this general overall picture before us, the Minister had to refer to the static —one might say, the stagnant—position of our economy nor that he had to warn our people of the threats to our political and economic freedom which have begun to emerge. He went on then to point out another most disquieting feature, the realisation on a substantial scale of external assets by the commercial banks, a realisation carried to the extent that, in the single year of 1955, in the course of last year, the first full year of the second Coalition Government in this country, the decline in these assets roughly equalled that for the whole of the preceding eight years.
The Minister proceeded then to refer to the unfavourable trading position in which we find ourselves. Touching on that, he pointed out—very emphatically, I think, having regard to the fact that he was making a case for a number of his colleagues behind him, who, I am sure, are not in agreement with this Budget—that there is no cause for optimism in relation to our trading position and that, so far from matters being likely to improve in the course of this year, terms of trading are likely to deteriorate and turn against us still further. He stressed then that there was a positive fall last year in the volume of agricultural output, provisionally estimated by him at 2 per cent. The figure at which a person looking at the position with a cold, objective eye might fix this decline in the volume of agricultural output is one that the House may be left to guess; but certainly the Minister, no doubt with every desire to put the best face he could on it without doing grave violence to the truth, had to confess that the estimated that there was a positive fall in the volume of agricultural output of about 2 per cent. last year. Again, he reminded the House that he could not look forward optimistically to any rapid improvement in the position and he stressed the reason why.
The Minister has told us that there was an increase of about 1,700 people in industrial employment, but that this increase in industrial employment was more than counterbalanced by a decrease of 3,000 employees in agriculture. Taking it, by and large, therefore, there was, so far as the whole of our economy is concerned, in fact a decrease in employment in this country. He also told us that consumer prices were still rising steadily. Now, nobody wants to flog a dead horse but let the Deputies opposite, who are supporting the Government in the policy which this Budget expresses, think of that in the light of their election promises.
Now I appreciate that this Budget is the lesser of two evils. This Budget is like the curate's egg; it is good in parts and it is bad in parts. It is a Budget which represents the lesser evil. The worst thing that could befall the country would be that we should have a repetition of the policy which was forced upon Deputy McGilligan, when he was Minister for Finance, by the Leader of Clann na Poblachta in the late 1949 and in 1950—that policy of deliberately unbalancing the Budget. The Minister, I think, has endeavoured to balance this Budget by increasing taxation. That is why I describe it as a Budget of the lesser evil. It is not so bad as an unbalanced Budget, but it is a long way from being as effective for the Minister's purpose and for the needs of the people as would be a Budget based on a reduction in expenditure and a reduction in taxation. Therefore, I say that, while we are not going to criticise the Minister for the fact that he has produced a balanced Budget, we are going to criticise him for the procedure he has adopted to bring that balance about.
I was saying that consumer prices are rising steadily. I have also said I was not going to flog a dead horse. But do not let any Deputy sitting in this House, who is going to vote in support of the Minister when the division is taken on this General Resoution, fool himself into the belief that the people have forgotten that the present Coalition was returned on a pledge to reduce prices—not merely; mark you, to keep the prices stable, as the Fianna Fáil Government had succeeded in doing in 1952 and in 1954, but to give to the people the benefit of a positive reduction, a positive fall in the general price level. The Minister has admitted that it has not been possible for him to fulfil that undertaking and, indeed, he has indicated that so far as he and his colleagues in the Government can foresee it will not be possible for them to do that even in the near future.
One might ask, why? The answer would be because they are steadily inflating the economy and it is the Government's policy which is the source, the most powerful source, of the general inflation in this country which is tending to send prices higher and higher. The Minister has indicated in his Budget that, so far as he is concerned, he is not powerful enough and he is not strong enough in the counsels of the Government to take the positive steps necessary to stabilise prices, first of all, and ultimately to reduce them—to stabilise prices and ultimately to reduce them, as it was quite clear we were ultimately going to be able to do as a result of our 1954 Budget.
When I was speaking last year in the debate on the Budget here, I pointed out that, if it had not been for the increase in expenditure deliberately incurred by the Coalition Government, the Budget of 1954 would have balanced after a remission of about £1,800,000 had been given in that Budget to the people. Whatever Minister was in office, provided he followed out the policy of that Budget, would have found himself in a position to reduce taxation and thereby enable the people to employ, in the way which they thought most prudent and most profitable, whatever savings would have accrued to them as a result of the policy of the 1954 Budget. I will not say that the Minister would not have had a grave problem in regard to our capital expenditure if that Budget had been allowed to operate, but, at any rate, that problem would have been made appreciably easier of solution, and I am perfectly certain that the money would have been more wisely spent.
Let us pass now from this question of prices to the position of the banks— the position of our commercial banking system, the life blood of our whole economic corpus. That banking system is suffering under this Government from pernicious anæmia. Banking deposits, the Minister has admitted, within the State fell substantially, notwithstanding the fact that banking advances and investments within the State rose by a substantially greater amount. Now that is a phenomenon that we have not seen in this country within living memory anyhow and, I think, within even three generations. We have had this continual hæmorrhage. We have had, as I said before, this pernicious anæmia vitiating our whole system of commercial exchange and credit.
The Minister went on to point out that, despite the lavish expenditure of the Government on one project or another, there had not been any increase in the volume of national production during 1955. Though there was a rise in the money value of the national income this was altogether a reflection of a higher wage and other income levels. The Minister here might have gone on to stress that the increase in incomes was wholly illusory in terms of social betterment. There was no increase in production, as he himself admitted. In short we have been pumping out paper money, purchasing power, if you like, and getting nothing in return. We have been loading this generation and future generations with debt by our unreproductive spending and getting nothing in return for it.
The Minister then went on to point out even more significantly that the impact on the economy of increases in remuneration will not be fully felt this year. We all know, any of us who happen to be interested in business, the difficulties with which we are faced. We are being urged by the Government, those of us engaged in or in any way associated with industrial concerns, to try to break into the export market, a very highly competitive export market. We have to carry the burden of high taxation; we have, if you like, to carry the burden of staffs who, in many instances, are "green" in industry. They are willing, intelligent and apt to learn; they are anxious to learn and they take a pride in their work and are anxious to do a very good job; but nevertheless, they have not the tradition—as the phrase is the "know how"—behind them such as have their competitors in a world market.
The Minister tells us and all other people engaged in industry that we must break into the export market. How are we going to be able to do that if in many instances the impact of these inflationary rises in costs has to be carried without productive return? Many of these are infant, struggling industries. We should either make up our minds that we are going to carry on in an autarchic system here by which we will be content merely to be self-sufficient, working only to meet our own needs, with no ambition beyond the three seas of this country and the northern boundary or else we should be given a chance to sell abroad under a Government which has found a positive remedy for our disadvantageous position. Exhortations have been made that we should try to go into the export market, but we must be put in the position to compete with experienced producers elsewhere. If our farmers and industrialists are to be put in that position, then there must be such an increase in the volume of production as will enable us to carry the high wage structure which is now bearing us all down.
The Minister then went on to say that, despite this increase in the money value, there had been no increase in home production, fixed capital or imported capital goods ready for use. He gave us some figures which paint a very graphic picture. He said the estimated increase in national capital in 1955 was only £27,000,000 or 5 per cent. of the national gross profits. He then went on to say very significantly that this was less than in 1954 by £21,000,000 or £30,000,000 less than in 1953. Personal savings, he admitted, were only half of the 1954 amount last year. That is the picture as the Minister presented it when discharging what I am sure it was a very unpleasant duty. I am sure it was no pleasure to him to come to this House and give us these facts about the state of our economy. I said at the beginning that this was a factual statement and I congratulated the Minister on that fact. I am perfectly certain that he did not relish making it. However, let us remember that this was not a statement made by a disappointed office holder. It was not a statement made by a prejudiced critic from the Opposition Benches. It was a statement made by the Minister for Finance, speaking on behalf of the Government and in discharge of his own special duty as Minister for Finance, to the people.
As I have stated, the Minister's speech must be described as a sober, balanced statement. I am certainly not prepared to underrate the difficulties which the Minister must have experienced before the major features of that statement were passed by his Government colleagues. I feel that he must have had a long struggle before he was permitted to tell the truth to the people. I have every sympathy with him in the position in which he finds himself, and I am prepared to pay him a just tribute for the information which he has given us.
Let us see what that statement means. The statement is, I am certain, correct in every detail and I am certain that the Minister has not exaggerated our difficulties. It would be a natural tendency to try to minimise them, but that, I think, he has not done. The picture which the Minister painted yesterday is not the picture as it existed at the beginning of 1948. It did not describe the condition which existed here when the first Coalition Government took over. I am referring to the first Coalition Government because we can be assured that we are now reaping the harvest of what that Government sowed. When the first Coalition Government took over in 1948, this country had emerged successfully from all the perils, difficulties and dangers of a second world war and it had emerged from those perils and dangers as one of the most creditworthy countries in Europe. This was a State at which even our opponents, if you like so to describe our separated countrymen in the Six Counties, were looking with keen appreciation as businessmen. This was a State which was able, out of its own resources and out of its sense of human obligation, to help the depressed and devastated countries of continental Europe. This was a State which was able to help prostrate Germany. Contrast the position of Germany to-day with the position of the Republic of Ireland and there is a mighty change—a mighty change for the worse on our side, a mighty change for the better on theirs. That change in the two countries has been brought about very largely by the different financial and fiscal policies which have been pursued.
Let me go back a little further. We went into the phase of the second world war strong economically. We went into it in that position because the policy which the first Fianna Fáil Government had pursued from 1932 to 1939 was one which encouraged production, savings and investment in this country. Savings were naturally intensified by the circumstances of the world war, but we came out of that world war, even stronger than we went into it and we came out of it free and at peace. We had every opportunity here of building up the sort of State for which the men of the past generation had gone out and fought and struggled and died to bring into being.
I do not want to minimise the difficulties which have beset Governments in this country since the end of the war. It was natural, due to the fact that so many things had to be denied to people during the period of the war, that there should be some temporary compromise of the policy which had been pursued prior to 1939. Naturally, when people have been denied many little luxuries—tobacco in free measure, clothes in free measure, coal and boots and so forth in free measure—there is an inclination to increase consumption even beyond the natural standards. Therefore, it would have been almost impossible for any Government to continue without some change the policy of building up the productive capacity of this country which had been pursued, as I have said, up to 1939.
There would have had to be some less emphasis on the need for saving to increase investment and production, and perhaps a little more consideration for the desires of people to consume rather than to save. As I am saying, that would be natural but it was not natural and it was not justifiable and it was not prudent or provident to go out and urge the people, incite the people, to eat, drink and be merry, without any regard for the day upon which the bills would come in and the obligations which had been imposed upon the people would have to be faced and met.
To-day, we are reaping the full harvest of the policy which was initiated on the day on which the then Minister for External Affairs played the political cuckoo on his colleague, the then Minister for Finance. I am speaking from facts as I know them. There is not any doubt whatever that, towards the end of 1949, a policy was being pursued by the Minister for Finance and by his Department, at his instance, which was radically different from that which was adopted and followed in the later months of the Coalition. That change was due, as I have said, to the fact that Deputy MacBride, as he is now, Minister for External Affairs, as he was then, ousted the then Minister for Finance and went in and took charge of that Department, virtually, or imposed his policy on that Department. It is from that day that the free spending of the United States loan began.
To-day, we are paying, I think, £1,147,000 in interest and £245,000 or £247,000 in repayment of principal in respect of that loan. That was the period of dollars for mouth-organs, dollars for hair-curlers, dollars for popcorn-making machines. That was the period when, as the present Minister for Agriculture boasted in this House, he was spending 6,000,000 dollars per half-hour in importing foreign-grown grain into this country. To-day, we are paying for that policy as continued by the Coalition, until it was displaced from office in 1951 and as it was resumed by the Coalition when it again took office in 1954.
I do not want to be in any way unfair to the Minister. I am perfectly certain the Minister has been doing his best to put some sort of brake on expenditure, to keep some sort of curb on the spending. But what is this Minister amongst so many diverse elements in the Coalition? How can this Minister deal with colleagues who go out on other platforms—when the Minister is telling people to stint their expenditure, to save so that they may lend him their money—and preach that they will not be satisfied unless expenditure is substantially increased? What can one man do against so many? I am perfectly certain, from anything I know of him, that my successor is doing the best he can. His best, however, is a poor best and it is not good enough for this country in its present circumstances.
I do not want to go into the particular measures which the Minister is taking to raise revenue. The merit, as I see it, in the Budget is that, since these taxes are going to be unpleasant, and so forth, the Minister has managed to screw the Coalition to the point that at least we will have a balanced Budget. A Budget balanced by increasing taxation is a very poor substitute for a Budget balanced in a way which would give relief not merely to the taxpayers but to the whole economy of this country, a Budget balanced by a reduction in taxation.
The Minister, of course, promised that at some not far distant date, we will have substantial economies in the Civil Service. Again, on this matter, an ounce of example is worth a ton of precept. Who is going to believe that this Government is serious or in earnest about tackling our economic problems when we see Ministers flying around helter-skelter all over the Continent and, indeed, all over the world? It is a sorry thing to have to say, but here we are after the Coalition has wasted our substance and brought us to the condition in which we are to-day asking the foreigners to come in and take us over and save us from ourselves.
That is the only possible policy that now informs the actions of the Coalition, when deposits are flying out of our banks and our external assets have dwindled to the point at which they are almost unable to carry our present volume of trade. What is the Coalition cure for it all? Bringing in the foreigners—shades of Dermot Mac Murrough—to restore order to our economy and save us from ourselves!