As I was saying earlier in relation to the speech we had from the Taoiseach this morning, it was one of those frothy speeches without any factual proposals to which we have become accustomed to hearing from him. It would not be unreasonable to say that we could paper every room in this building with the speeches the Taoiseach has made in relation to alleged plans over the years. We hear a lot of those plans at times of crisis for the Fianna Fáil Party when it is necessary to rouse their morale, but we hear virtually nothing about them at a later stage. I venture to say that the speech we heard from him this morning will be about as successful in providing the things people on all sides of the House desire as was his famous, or infamous, speech in Clery's Restaurant when he categorically promised he had a wonderful plan to provide 100,000 new jobs for our people. Of course, he never had any such plan. There was nothing there except a desire to take advantage of the fact that naturally everybody listening to him was anxious to see that employment would be provided.
Equally, today everyone of us wants to have economic growth balanced as well as it can be without straining our trade to a great degree. But the repetition of truisms, such as we heard from him today, are not any indication of a policy as such. The only indication we have of a policy is, first, what is included in this Finance Bill, and about which I shall have a word to say in a moment, and, secondly, that he believes that Government expenditure must go on rising and rising.
In an aside, the Taoiseach suggested that he now accepted and admitted that Fine Gael had a philosophy, although it was a philosophy of which he did not approve. We can all remember it is not very long since the Taoiseach was trying to say there was no place whatever for Fine Gael and that he was trying to court the Labour Party into a different policy. His normal form in this regard is to produce a statement of a principle with which everybody can agree but in respect of which he can produce no positive factual method of reaching a conclusion.
I gathered he was anxious for a scheme of greater capital investment. Greater capital investment on what? Greater capital investment on worthwhile projects that were going to increase employment and living standards throughout the country would obviously have the support not merely of every Deputy but of every person throughout the country. The fact is, of course, that the record of his Party in relation to capital investment has been a singularly unhappy one. During the years 1932 to 1939—I am not going to blame the Taoiseach for what happened during the war years—it is a fact which cannot be gainsaid that there was no capital investment of any sort in any worthwhile project undertaken by Fianna Fáil as a Government in that period.
It is a fact that cannot be gainsaid that the pattern Fianna Fáil were following after the emergency—the pattern initiated by the supplementary Budget of 1947—was the continuation of the anti-capital investment programme of the early 'Thirties. It was not until 1949 that there was any realisation by the Government at all of the necessity to have a vastly expanded capital programme, but one expanded on worthwhile projects. The changes that were made in 1949 were made in the teeth of Fianna Fáil opposition at that time, but they are changes that, having been made, have come to stay. I am glad they have come to stay. My regret, however, is that the record of performance in relation to capital investment by Fianna Fáil when in government has not been a very happy one.
As was indicated in an article in one of the papers this morning by a person who cannot be described as being a Fine Gael propagandist, the Taoiseach himself more than anyone else has been responsible for the failure of capital investment in relation to our transport. It is to him that that failure through the years must be mainly attributed. The whole problem in relation to capital investment has been not a desire by any Government since 1949 to refrain from State capital investment, but to find projects in which it was worth while to invest the people's money on behalf of the State—to find viable projects that would mean a permanent increase in employment and, therefore, in living standards.
The manner in which a vast sum was thrown away stupidly, instead of being invested productively, in Dundalk has already been discussed in this House. I am not going to anticipate a discussion in relation to a similar effort that will take place after this debate has finished. The fertiliser project which was recently started at Arklow was put up to us and was condemned by technical experts at that time as being a project that was not economically viable. The Government say that there has been a change since then, both in technical methods and in the economies of the project. When we asked them for particulars, they have taken the line of saying that it would be commercially harmful to the company for the change to be made public. In the circumstances, the Opposition have no option but to place the responsibility firmly on the backs of the Government. It must be on them alone that the responsibility for the investment lies.
It is a fact that cannot be gainsaid that no Government since the change in outlook in relation to capital investment in 1949 have ever refrained from making any capital investment because they were against a capital programme as such. The only tests that have been made were whether the project proposed was a viable project or was something that was not likely to produce permanent results. As I have said a second ago, the judgment of Fianna Fáil in relation to those projects has been sadly lacking.
On the income expenditure side, the Taoiseach also gave us an indication that we could look forward to nothing but increasing Government expenditure to be met from current account all the time. If increasing Government expenditure were to be met by increases in the national income so that the proportion of national income set aside for Government expenditure would remain more or less constant and at a reasonable fraction, no one would object to Government expenditure as such going on; but when Government current expenditure is allowed to outrun the increase in national income and to outrun the normal revenue buoyancy that comes from increases in national income, then the situation arises that such increases require the imposition of additional taxation which may well have the effect of retarding economic growth. If Government expenditure is so allowed to run ahead and taxation has accordingly to be increased beyond the limits, then the effect is not going to be a consistent and permanent growth. It may provide a temporary inflation and a temporary sense of well-being but it will not provide the conditions in which we can hope to have any permanent increase in our living standards.
This Finance Bill which we are discussing today and which we have been discussing for some considerable period is based on the fact that the Government have allowed that expenditure to get beyond the point at which it could be met by revenue buoyancy or by the increase in national income. The natural and inevitable corollary of the statement made by the Taoiseach this morning that Government expenditure on current account is going to go on increasing is that the turnover tax of 2½ per cent imposed in the Budget and in this Finance Bill will equally be increased by Fianna Fáil for the purpose of meeting that expenditure. One cannot go without the other. If the Government said categorically that they are going to go on increasing current income expenditure over and beyond that amount by which revenue buoyancy may come, then we see the real reason for the turnover tax was that it is a very simple tax to increase at any time. It is as well, as I said earlier, that the Taoiseach should have made his speech so that stripped of the verbiage, not merely we but the whole country can see the mentality behind the imposition of this tax. In my view, an increase in taxation of that sort outstripping any rises in national income or revenue buoyancy is going to prevent further growth rather than assist it.
I was rather surprised, too, that the Taoiseach when about to make a fundamental speech of that sort—if it was intended to be a fundamental speech —did not advert at all to one of the vital things in relation to our economic progress, in relation to our position regarding the Common Market, GATT and EFTA, and did not say where we are to go in relation to our external trade and economic conditions. It is a fact that we are in the position at the moment of being alone and isolated in economic and world trade. We are not a member of the Common Market. I may say at once that I agree and always agreed with the Taoiseach in the final decision, not with the kite that he flew about joining the Common Market if Britain did not join. I always agreed that it would be impossible to join if Britain did not join. We are not a member of it. We are not a member of GATT and yet at the same time, we are reducing our trade tariffs.
We are not a member of EFTA, and I do not think that there is any very great advantage per se for an agricultural country in joining EFTA, if that agricultural country is to maintain a tariff selection. But it seems now that what we are doing is remaining, willy-nilly and without any choice outside the European Economic Community, outside EFTA and outside the General Agreement on Tariffs and Trade, and at the same time, committing ourselves to a policy of complete tariff reduction without getting from that policy any benefit whatever in direct negotiations with the people who will benefit by it. That seems to me to be getting the worst of both worlds.
Let me say at once that I was all in favour of joining the European Economic Community, if that had been possible and if Britain had joined. Then we were going to move into a world in which there would be a dismantling of tariffs by ourselves, a dismantling that I agree may be inevitable in the future, but a dismantling of tariffs by us in return for a quid pro quo—for our possibility of access to a much greater market than that to which we are able to have access at the present moment.
I cannot understand where the Government want to go in this matter. I accept that the free world ultimately is moving towards a period of tariff reduction and freer trade. Everyone else in the world is moving towards that by dismantling of tariffs in exchange for other benefits. We could obtain other benefits in the EEC or even outside that community but we have preferred to take unilateral action in our dismantling. For example, we could have done some bargaining in this trading respect in the direct Government order placed in France of £250,000 for helicopters. That was a direct Government trade operation. They know the ratio of our trade with France is about seven to one against us. As the Minister for Defence and his colleagues acknowledge, no effort was made by the Government at that time to get any reciprocity for a very substantial Government contract. That is one type of example. Another is that we are apparently committed by the Government to short-term tariff reductions without any negotiations or bargain in any other country where that would assist us in getting something worthwhile for ourselves in exchange.
I agree that the free world is moving towards tariff reduction in the long run and it is obvious that the position will be such that we shall have to compete on far less favourable terms in some of our best markets, notably Britain. This is the time, knowing that, at which steps should be taken to try to ensure that this disadvantage will be overcome and yet I have seen no moves in that direction by the Government. Therefore, if the Taoiseach was going to branch out from the Finance Bill into a discussion on general economic growth, as he did this morning, clearly that is one of the sides on which he should have given some lead or explanation to the country.
So far as the possibility of increasing exports and the possibility of Irish private enterprise increasing productivity are concerned, this Finance Bill does not help at all. On the contrary, it deals it a body blow. The imposition of retrospective corporation profits tax to be paid out of reserves can only diminish the amount of those reserves that would be available for further expansion, modernisation and employment and better conditions of employment. If the policy was to reduce dividends, there is a simple way of doing that—or even holding of dividends—by imposing a distributed tax at a differential rate from an undistributed tax but the way it is being done rules out any possibility of that. The reserves that would have been there for modernisation, expansion and improvement of productivity, which we must have if we are to compete for markets, have been dealt a bad blow in this Finance Bill.
It is a truism that nothing in relation to industry can stand still. Unless industry can be constantly modernising it will not be able to hold its own, much less improve. Perhaps, to some extent the shock of tariff abolition may provide some shake-up towards competitiveness in industry but it will be as nothing compared to the benefits available if the Government had done their part in negotiating a counterpart of the reduction. The target for a dynamic economy must be not only to modernise and expand continuously —a fair amount has been done in relation to free equipment by grant inducement—but this Finance Bill will prevent a great part of the modernisation that should go with it.
Before the Budget, everybody thought what was needed was a Budget to encourage saving and investment and to encourage exports. There is little prospect of anything done in this Finance Bill encouraging any of those features unless the Minister claims for the turnover tax a discouragement of consumption. I should like to know when he is replying if he does make that claim.
I want to draw attention to the fact that the turnover tax, the main feature of the Budget, is allegedly modelled on the Swedish pattern. The Minister cannot deny that his justification everywhere for this type of tax is that it is modelled on the Swedish retail turnover tax. It is not quite the same but he says it is modelled on it. I was particularly interested, therefore, to read in Skandaniviska, a banking quarterly review, No. 2 of 1963, an article on the value-added tax, an entirely different tax, which suggests that Sweden is going away from the type of tax we are introducing towards the French value-added tax. In other words, having based our tax on the Swedish pattern, we now find that is going to be thrown overboard by Sweden as entirely out of date and unsuitable even for them. I am sure the Minister has in the Department this particular banking review.