I have mainly one criticism to make of this Budget, that is, that if the provisions of this Budget are justifiable this year, then the provisions are at least a year too late, in other words that the timing of this Budget is bad and that if the calculated risk the Minister decided to take this year is one he is justified in taking—and I certainly agree with him that he is—then he would have been still more justified in taking the risk last year, and the country is the poorer because he did not. That, as I say, is the chief criticism I have to make on this Budget and I propose to develop that point a little further in the remarks I have to make. Before doing so, however, there are one or two general matters with which I should like to deal at the outset having regard, in particular, to the remarks made by the Minister for Industry and Commerce to-day and some earlier remarks made by the Minister for External Affairs during this debate.
We have been told by the Minister for Industry and Commerce that he looks with a certain dismay at the proceedings of this House and the level of debate. He asks for constructive proposals and hopes there will be some kind of unified effort to achieve the solution of the problems facing the country. I want to recall to the memory of the House the day on which this Government were elected. Speaking on behalf of my Party which had come into Opposition, having finished the most difficult period of government with which any Government since the establishment of this State had to grapple, I said, and I recall it not for the first time in this House, that not merely were the Government, which had got a large over-all majority, on trial but that the Dáil itself was on trial by the people and that unless a solution and an early solution were found for the problems afflicting the country in regard to unemployment, emigration, expansion in industry and in trade and social amelioration, a very grave situation might face the country.
On that occasion we offered from these benches our close co-operation. It is a little difficult now for us to sit here and listen to the pious expressions of views from Minister and from certain Deputies that everybody ought to unite. I have the most firm conviction that on certain matters of economic and financial policy there ought to be a concentration of effort to secure a solution of our problems. We offered that and it has been practically thrown in our faces by the way in which the discussions of affairs, particularly economics and finance, have been conducted since this Dáil was elected over two years ago.
The Minister for Industry and Commerce to-day gave from his point of view the best account he could of an improvement in the economy. There is some improvement in the economy. I have never faltered in my belief in the future of this country. But even Ministers and some Deputies in the Fianna Fáil Party have used the time-worn phrase: "There is no ground for complacency." In other words while they are trying to paint the best picture they can, they admit there are certain very great difficulties still inherent in the economy. Having stated that, the Minister for Industry and Commerce then proceeds to denigrate the efforts made by his predecessors when they were faced with far greater difficulties than his Government or any Fianna Fáil Government have met since they came into this House.
The Minister for Industry and Commerce said that the decline in employment that was proceeding at an accelerating pace when they took office was arrested and that the spiritual malnutrition from which the country was suffering as a result of the policy of the last inter-Party Government was being overcome, or words to that effect. The Minister for External Affairs, as reported at column 532, Volume 174, of the Dáil Debates of the 16th April, 1959, said:—
"The Minister is to be congratulated that, in his third Budget he has cleared up the second financial mess left by Coalitions."
Is that the way in which to secure from all Parties that degree of co-operation which I am sincerely convinced is necessary for the wellbeing of the country? Since this Government came into office it has been the policy of Ministers, supported of course by their followers in the back benches and throughout the country, to denigrate the achievements of their predecessors even at the expense of jeopardising the economic and financial fabric of the State. That is bad policy from the point of view of the national interest. It would be far better from the point of view of the country, far better politics from the point of view of Fianna Fáil itself and certainly would be far better for future Governments who may be faced with difficult economic and financial situations, if they did state fairly and adequately what is the truth, and what everybody with any integrity and impartiality now admits to be the truth—that the last inter-Party Government, faced as it was with a very difficult situation, took the necessary unpopular steps to deal with that situation and, as a result, handed over to this Government a situation where the danger had been averted and the country's finances had been put on the way to a sound condition.
Undoubtedly there was very grave unemployment at that time due to circumstances over which we had no control. Undoubtedly there was a very grave shortage of money. Undoubtedly prices rose because the terms of trade were against us, but in spite of that the unpopular measures that were taken resulted in the fact that cannot be controverted that the year 1957 ended with a substantial surplus on our balance of payments account running to over £15 million. If this Government are ever faced with such a situation— and I certainly hope in the national interest they will never be faced during their term of office with anything like the situation we had—what hope can they have of gaining public confidence or persuading the people they were doing right in the national interest if they pursue the policy they have operated since the Government came into office of suggesting that because we were faced with a difficult financial and economic situation which forced us to take appropriate measures, we had done something to the national finances.
According to the Minister for External Affairs, the Minister in this Budget has cleared up the second financial mess left by Coalitions. The Minister for Industry and Commerce said more or less the same thing to-day. If that class of attack could be ended, there might be some hope of getting unity, not merely in this House but in the country, to meet and solve the economic problems which still await solution and which are only in such a condition that the Minister has to take the faltering and tentative steps which he is taking belatedly in this Budget to give the necessary stimulus so much needed to secure expansion of business and agricultural activity.
We are entitled to take some measure of gratification from the fact that our efforts during the years when in and out of office, and conditions, have helped to bring about a situation where a Fianna Fáil Government is able to reverse their financial and economic policy. Their financial policy has been one of high taxation. I think this is the first Budget where there is any sort of indication of a reversal of that policy, which is so much needed if we are to have an expansionist policy put into operation. Only on one occasion before, I think, during twenty-two years of office, have Fianna Fáil ever decreased taxation. I am sure that those people who obtain reliefs or benefits under the Budget are thankful for them. They may have their own views, I am certain of it, as to the impulses which brought about the easement of the situation by way of taxation and other benefits in this Budget—whether it was force of circumstances arising from a reduction of the income tax in Great Britain or from the economic circumstances in the country or even from political considerations. All these things can be set aside.
This Budget is a step in the right direction but it is an untimely step as it is one that should have been taken last year. If the Minister is right in taking the calculated risk he is taking this year then he would have been very much more justified in taking it last year. In 1957, as I have already pointed out, this country was in the happy position, for the first time for many years, of having such a large balance in the proper direction in our international balance of payments accounts. The 1957 Budget was the first Budget brought in by the present Government. We know the provisions contained in that Budget. We know it was felt and is still being felt in the economy throughout the country. They were faced in 1958 with making another Budget, having at that time taken away all the food subsidies and obtained the benefit of the millions thereby saved. They continued the standstill policy. I want Deputies to consider how far we would be in advance on the road towards the betterment of our economy and finance if the risk that is being taken this year had been taken last year.
The Irish Banking Review, a quarterly Review—the particular number is that of March, 1959, page 27—gives interesting figures, on which I base the argument I am putting forward. It deals with the balance of payments for 1958. I shall just refer to that very briefly:
The deficit on visible account was £67.2 million, an increase of £13.6 million over 1957.
Here is the significant feature:
The terms of trade moved strongly in Ireland's favour. Import prices fell by 5.2 per cent. and export prices rose by 5.1 per cent. It is expected that the invisible balance will have slightly improved, in which case the balance of payments will probably be in equilibrium. The external reserve situation improved during the year. The net external assets in the banking system increased by £14.4 million.
There is a very succinct estimate of a vital part of the economic fabric of our State during 1958. The terms of trade were moving strongly in Ireland's favour. There was a favourable balance of trade in 1958. I want to emphasise this:
The net external assets in the banking system increased by £14.4 million.
This year, so far as it has gone, the terms of trade seem still to be moving in our favour, I am glad to say. The trend of trade, however, in the first three months is not so very hopeful. But, if in the circumstances of the present time, the Minister is justified in what he is doing, surely he would have been more justified still in doing it last year when, in the previous year, there had been a very big balance of trade; when, in 1958, the terms of trade were moving strongly in our favour and there was likely to be, and in fact turned out to be, a fairly good balance of international payments and external assets were accumulated to the extent of £14.4 million?
If the Minister had done that last year he would have been far more justified in doing it than in this year. In 1958, as I have said, there was a very big addition to our net external assets in the banking system. The interpretation of that interesting fact really is that the Government, instead of pursuing the policy which they now seem to be adopting of encouraging economic activity, adopting an expansionist policy, really kept down economic activity during that year for the benefit of the foreign capital which came into the country during that year.
Last year thousands emigrated. Employment, so far from increasing, as the Minister for Industry and Commerce appeared to suggest today, from the point of view of those people in employment, fell pretty drastically. Fewer people were employed in that year than in the previous year. All the time, emigration was at a high level while there was stagnation in our economy; while business was extremely bad, £14.4 million were piled up in the banking system and invested abroad. If that £14.4 million had been invested here last year, look at the difference it would have made to the country and to the Minister's Budget this year.
The policy that was permitted, if indeed it was not encouraged, was one that enabled the banks to sterilise and turn to the advantage of Gt. Britain all the capital which came here from abroad. If we had gone 12 months ago to the point of the Minister taking his courage in his hands, as he has done this year, and giving the reliefs or something like them as a stimulus to industry and a slight indication of an expansionist as distinct from restrictionist policy, we would have had economic activity last year and our economy would be far better this year. Therefore, I say that the chief criticism of this Budget is that it is really a year too late.
One should look at the balance of trade figures, which show the general trend of the balance of payments. Those trade figures are given on a monthly basis. The figures which appear in the trade statistics for the first three months of 1959 show an increased deficit over the same three months of 1958. Of course, if that trend continues, there may well be a very serious imbalance in the balance of payments for this year. In that set of circumstances, the Minister feels able to relax the system of taxation here in this year's Budget, the relaxation of which would merely tend to accentuate and not to curb the trend, the adverse trend, in the balance of trade figures, as I have just stated. I wish to place my real criticism of the Budget on that basis.
It is some gratification to know that we have at least a little indication that the Fianna Fáil Ministers, for the first time, are changing from a system of restriction to a system of expansion. It is also pertinent to recall to Deputies, having regard to the speech of the Minister for Industry and Commerce this afternoon, the advice which he gave to us when we were first in office in 1948. I remember when he was in these benches here, looking across at us in that truculent way he has, and saying to us that the Government, the first inter-Party Government, should teach the people to give the Government their savings, so that the Government might spend their savings for them, because they could do the spending of their money better than the people could do it. That was the advice we got; in other words, tax the country to the highest possible point, get as much money as you can for the Government and spend it on Government purposes.
That was the policy which the Minister for Industry and Commerce, who lectured us here today in the way he did, pressed upon us. We refused it, and we—in circumstances which were favourable at that time—took advantage of the economic conditions; and we, as I suppose the Minister would say now, indulged in an expansionist policy. We refused to take the people's money from them and spend it. We gave some of the people's money back to the people and let them spend it for themselves. That is a policy I would recommend to the Government and particularly to the Minister for Industry and Commerce. We believed in giving the money back to the people and letting them spend their own money.
That is what we endeavoured to do, at a time when we were able to reduce taxation, because a reduction of taxation, as the Minister appears now to have learned, is the real remedy, or one of the real remedies, for the afflictions, economic and financial, which confront us. It is because of high taxation that the country has got itself into the position in which even the Government, bringing in a Budget of the character they have brought into operation in this country this year, must tell the people that they cannot regard the situation with complacency.
It is the régime of high taxation, which was a hallmark of Fianna Fáil, which is largely responsible for the situation in which we find ourselves. Yet the Minister for External Affairs has the audacity to say in this House, as I have quoted already, that the Minister has "cleared up the second financial mess left by the Coalition." We gave decreased taxation and increased social benefits at the same time, when the first inter-Party Government were in office. It was due to a misinterpretation of the economic and financial facts in existence in 1952, that the country was confronted with Deputy MacEntee's Budget of that year, from the consequences of which we are still suffering. Deputies who were here at that time will recall that the Budget of 1952 was based upon the consideration that there was no possibility of increased agricultural production. Look at the increased agricultural production which occurred from the year 1951 onwards, due to the policy we adopted. I repeat that it is bad for the national welfare that statements of this kind should be made by the Minister for External Affairs and repeated, in effect, by the Minister for Industry and Commerce today.
Deputies have not spoken so much in this debate on a topic which loomed very large some years ago—the question of expenditure on productive capital enterprises. That was one of the principal planks upon which our economic policy was based, in the first inter-Party Government, which initiated that policy of productive capital expenditure and the repatriation of our external assets for productive purposes and also for certain human improvement schemes. There has been, in the past few years—and it appears even in the economic documents which have been produced by the Government—a progressive decline in the amount of moneys available or set apart for the financing of schemes of productive capital enterprises
I do not think—and certainly it is open to doubt—that the schemes adumbrated in these economic documents which have been circulated by the Government really are schemes which will come to any degree of fruition or will introduce any substantial increase in employment. The whole basis of financing Government schemes of capital expenditure must be actuated in the first place, by the principle that all those schemes must be directed, not to the mere expenditure of money but to expenditure on productive enterprises. It is for that reason that we object to the vast amount of money which has been rolled into the roads of this country. It is very pleasant to go from here to Cork, or from Dublin to Galway or elsewhere, on the roads which exist at the moment. However, we could have done that, perhaps, by straightening dangerous corners and doing a little more for the county roads—which was our policy—than by giving us these wide motor roads we have at the moment, under the justification that they are for tourist traffic. There were very many schemes to which the millions of money, which could have been saved on those schemes, could have been diverted.
It is for that reason that we object strongly to any of the taxpayers' money being poured into schemes such as transatlantic air lines. On the occasion of the inauguration of the transatlantic air line by Aer Linte some 18 months ago, as I was seeing some of the Americans visiting Dublin, I was asked whether I was against the air line—an air line between Ireland and America. I said I was not against an air line, on one condition only, that none of the taxpayers' money be put into it. Let us have as many air lines as we wish—between here and America or Hong Kong or Timbuctoo, provided none of the taxpayers' money is poured into it. There are far more urgent matters requiring attention here than financing schemes of that kind.
Even Fianna Fáil are converted now to what should have been elementary economic doctrine for this country, the basic improvement of agriculture. They now seem to pay at least lip service to that principle, yet we find them taking away one of the main planks in the land reclamation scheme, which has been such a success and which has brought such increased productivity to this country and enabled the country to weather its storms. If we had not had the increased productivity brought about by the establishment of the Land Reclamation Scheme by the first Inter-Party Government and the increase in our exports, particularly in our cattle exports, which were so much decried by Fianna Fáil, the country would have been in an extremely bad condition indeed. If at a time when we require the greatest degree of incentive to our farmers, the greatest amount of effort to be put into increasing agricultural production above all things, we find that the prop is taken away from under one of the best schemes that have been devised to ensure an increase of wealth here through our agricultural industry, then we can have little hope for the amelioration which the Minister says is taking place or even for the genuineness of their belief in the importance of the agricultural industry.
I have spoken here on many occasions on the subject of the necessity for increasing the wealth of the country by various means. I do not intend to pursue again the line of the necessity for increasing agricultural production. I am sure that has been done over and over again; perhaps it cannot be repeated too often. But one of the ways, apart from increasing our wealth by the absolutely essential means of increasing our agricultural production, is to attract foreign capital here or at least to attract people who will bring their money into the country and invest it here or else secure through the proceeds of their investment, whether here or abroad, additional revenue to the country.
I pleaded years ago in this House— and I think I came back to it last year —for consideration of the abolition of death duties. When we were in office in the first inter-Party Government we initiated that policy. We did what we could in the circumstances of the time to ease the burden of death duties. There is only £2 million involved. If that was completely removed—it could be done progressively and fairly rapidly—you would get far more wealth into this country, which would be employed here and which would itself create more wealth, than you would get from death duties at present.
People would bring their capital here, invest it in the country probably and certainly live in the country and spend their money here, thereby producing more revenue for the State. I believe it would pay ten times over. I commend it once again from the point of view, purely, of the revenue and also from the point of view of producing wealth in the country. I advocated it many years ago—I think on the Supplementary Budget of 1947 when I spoke at great length on this topic. It was one of the many hopes unrealised during my term of office and not put into practical effect.
We are exhorting the people of the country to save. Self-employed people —professional men, and those in the Civil Service, clerical and other jobs of that kind—have really only one effective means of making provision for their families in the event of their early death or for themselves and their families when they reach old age. That is by insurance. We have had the position unfortunately, as a result of world events over the past 45 years, that the value of money has fallen catastrophically. So that those people who insured their lives years ago as the only method of securing themselves in their old age, of making provision for their families or of giving them some easement during their lifetime, find that the proceeds of that insurance—paid for with such pain and at such sacrifice —have fallen in their real value. Yet when a person collects that asset, he finds there is a lump taken off in death duties.
I had hoped that some Minister—in fact I had the matter put on inquiry— would see what could be done and would realise the justice of the case of that self-employed man—whose assets, equipment and machinery consist of his health, brains, hands, perhaps his feet, and in the case of some types of people, perhaps their voices—and that some allowance such as is made to industrialists for the depreciation of their capital assets would be made for the depreciation in their mental and physical condition as a measure of justice.
I want to repeat, and I shall go on repeating it so long as I have the capacity to do so, that I hope some Government at some time will see the national advantage that would accrue to this country by the abolition of these death duties, which are outmoded now in modern circumstances, whatever justification they may have had when they were introduced into the British Parliament in the late nineteenth century to redistribute some of the wealth of the people who had accumulated wealth during the industrial revolution. It is a disincentive to the savings that we all affect, at all events, to want our people to bend their energies towards increasing. What is the use of saving if a large lump sum has to be given up when you die to be frittered away by some Government? What is the use of spending all your years building up some little pool for your family when a large part of it will be taken away in death duties? It is an unjust tax, but I do not even ask on the grounds of its injustice that it be taken away. I do so because of the fact that it is better national policy, looked at from a strictly materialistic point of view.
While on the subject of capital expenditure there was one matter to which I should have referred. I should like to refer to it briefly now. Many speeches are made and much written matter disseminated by newspapers and Chambers of Commerce deploring the extent of Government spending and the fact that money is taken from the stock markets for Government purposes that should be available to private enterprise. To a certain extent the criticism is justified, but I think it is not entirely justified because, provided two conditions are fulfilled in relation to State capital expenditure— that is to say that the schemes on which the money is spent are schemes of productive enterprise, and that they are intended to supplement the efforts of private enterprise—I think it good national business that capital investment should be conducted by the State because it aids private enterprise, steps in where private enterprise is unable to work effectively and, above all, creates that pool of employment so necessary in any circumstances, but all the more necessary in the present circumstances.
I think there is a fallacy in some of the arguments put forward by the people who spoke in that way because they say that the State, in going year after year for National Loans, is interfering with the money market and preventing private enterprise from getting the money it ought to get for increasing its capital and developing its business. In the first place, the best way of letting private enterprise create its own capital is by decreasing taxation. But, in any event, if schemes of productive capital enterprise are properly thought-out, and properly carried out, the addition that is caused each year—according to these people who spoke—to the national debt and the interest that must be paid on that additional national debt year after year as it accumulates, is, in a very great degree, liquidated by the increased assets and spending power and increased yield of revenue brought about by the increased production, provided the capital is spent on productive enterprises.
The argument is that you go year after year and borrow money and, year after year, you thereby increase the national debt and the amount of interest to be paid on it. If the schemes are proper schemes, not merely does the amount of interest each year become a mathematical calculation but the results accruing, if the moneys are properly invested, though they may not go the whole extent, will go a long way in liquidating interest charges.
There is one final matter upon which I have a certain deep personal feeling. Deputy Cosgrave raised the question of the necessity for removing the tax on newsprint. I am not so much interested, perhaps, in the repeal of the tax as I am in the principle involved. When the special levies were imposed, they were imposed in the interests of the security of our national financial structure. It was stated most specifically—I took many an opportunity subsequently to emphasise the point —that these duties were temporary and would be removed at the earliest possible moment. That was our intention. It was our desire to do justice all round, even where doing justice might involve hardship. Where these duties were concerned, we felt there could be no exception. The duties were imposed on a range of commodities and that range was inflexible, so inflexible that it could almost be said we were defeated in the last election because we did not take the levy off oranges.
The tax on newsprint was of that character. That tax affected our newspapers here. We felt, however, that it was fair at the time. But we made it clear that every levy was of a temporary character and it was my firm intention that these duties would go at the earliest possible moment. That was also the intention of my colleagues in the Cabinet. Some of these levies have now been incorporated into permanent taxation by the Government. Included in those is the tax on newsprint. I regard that action as a breach of faith and because it is a breach of faith, I most strongly object to it. It was accepted by the Opposition—now the Government—at the time these levies were imposed that they would be of a purely temporary nature. We realised that they fell heavily on people and called for a certain amount of sacrifice. We believe that was accepted by the then Opposition.
Deputies will remember how we resisted the temptation to use the yield from these levies, as we could so easily have done, for revenue purposes. We passed a special section in the Finance Act to put the levies into capital account. We did not yield to the temptation to which our successors have yielded to use the proceeds of the levies as annual revenue. I register now a solemn note of protest. I believe the incorporation of these levies, which were specifically intended to be of a temporary nature only, into permanent taxation is a breach of faith with the nation and with those affected by these levies.
