(South Tipperary): When the Parliamentary Secretary to the Minister for Lands was speaking, he adverted to a publication by the OECD on Ireland and quoted on several occasions the opening sentence, which reads as follows:
The five years of the first programme witnessed Ireland's period of fastest economic growth in the century.
He wished to give the impression that this production was a critical document of our economic position here. He wished to give the impression that it was a document produced by the economic experts of the various countries that are members of the OECD. In point of fact, while I do not want to detract from the value of the document in any way, I wish to point out that I do not consider that it is a critical document. It is really a publication of information and data on each country presented by the Government of the country. In fact, on the back of the booklet is written:
Each year the OECD publishes a series of economic surveys by Member countries.
That would indicate that this is an economic survey published by this country as a member country. In the opening pages, it is stated:
The Organisation for Economic Co-operation and Development was set up under a Convention signed in Paris on 14th December, 1960, by the Member countries of the Organisation for European Economic Co-operation and by Canada and the United States
and it goes on to describe the functions of the OECD. I merely advert to that because the Parliamentary Secretary wished to convey that this document exalted everything that the Government did and rather underwrote their policy from A to Z.
There has been much comment in the newspapers, and, indeed, by Deputies, that this was practically a farmers' Budget. Anyone who knows Fianna Fáil well, who knows their history, will always be doubtful about any statement of policy emanating from Fianna Fáil that can be described as favourable, or unduly favourable, to the farming community. For the benefit of some Deputies who may have notions that farmers all over the country are extremely well off, that they are a pampered and privileged class, I wish to give a few figures from the Government's publication, Economic Statistics.
On page 30, it is stated that the net output from agriculture in 1953 was £148 million. In 1963 it is given as being £170 million. Let me refer to a further series of years; the net output in 1961 was given as £169 million, in 1962, £171 million and in 1963, £170 million. That would clearly show that during the past three years there has been no increase in farmers' incomes, and yet during these three years, to show there has been no fall off in the efforts of farmers, the net input is given as £37 million in 1961, £41 million in 1962 and £43 million in 1963.
Therefore, as the volume of the net output has only slightly fallen, it means farmers' prices did not rise correspondingly with other costs and incomes. There are further figures given in the national income tables for 1962. It is stated that in 1960 wages and salaries were £268 million, in 1961, £292 million, in 1962, £324 million and in 1963, £353 million. For the corresponding years company profits range from £54 million, £59 million and £64 million in the first three years of the period. I have not the figure for 1963.
Farmers' family incomes during the same period ranged from £113 million in 1960, £120 million in 1961, £125 million in 1962 and £123 million in 1963. The population engaged in farming during these three years was: 1960, 383,000 males; 1961, 380,000 males; 1962 360,000 males. These figures clearly indicate that during the past few years the farming community have not been improving their position correspondingly with other sectors.
There has always been a difficulty here, and always will, about agricultural exports. In 1948 the British Government passed an Act in which they provided for a policy of unlimited imports, of unlimited subsidy. Subsidies were calculated annually in consultation with the British farmers' organisation on the market price obtaining, plus an agreed price for the farmers' produce. This subsidy has increased year after year and amounts nowadays to roughly £1 million per day. That is given to four per cent of the population.
That degree of heavy subsidisation is something against which the Irish farmer has to export and is the explanation for the high prices necessary for the different agricultural products. Last May I think it was, after the breakdown of the EEC negotiations, the British Minister concerned changed his attitude and announced that he would investigate the question of quota restrictions. That has been the method of protection favoured on the Continent and it may be of significance that the British Minister had that change of heart after the break-down of the Brussels negotiations.
There is probably a limit to the distance any British Minister can go. He must contend with difficulties from his own farming community and as Britain has always pursued a policy of cheap food, a switch over to a quota system, even though it may spare the Exchequer some of the agricultural subsidies, will raise the price of food and cause an outcry from the industrial population and may upset Britain's exports and balance of payments. It is problematical how long they can maintain that position.
I do not think we in this country can really build too much hope on a switch over to a full quota system which might suit us better. As it was, we got an increased quota for our butter and, small as it was, it relieved the situation somewhat here.
There has been a tremendous emphasis on the importance of industrial exports, particularly by some of our new economists and by Government circles as well. However, when we come to examine the picture of this new enthusiasm for industrial expansion, we are inclined to overlook the importance of our traditional exports —agricultural produce. I went to the trouble of going through the figures set out in Economic Statistics and found that our exports for 1963 approached £190 million.
I endeavoured to analyse these in an effort to find out how important agriculture was, vis-à-vis industrial production. It is not easy on all occasions to define a particular produce as purely agricultural or purely industrial. Some products are processed and may be regarded as partly one and partly the other. Unless you have access to the actual data on which this table is based, it is difficult to produce a very accurate figure. I have taken the following as being purely agricultural: cattle £41.6 million, live animals £11.1 million, beef £6.1 million, poultry, pigs and sheep £13.7 million, butter, eggs and chocolate crumb £12.9 million, sugar £3 million, raw materials £5.6 million, potatoes £1.4 million, vegetables £1.5 million, which gives a total of approximately £110 million. Tinned beef, drink, hides and skins I have left out. They would account for £13.3 million but the factor of processing is there so I left them out of my computations.
It will, therefore, be seen that out of our total exports of £190 million at least £110 million are agricultural. If you add the more questionable items you could bring that figure to £123 million or £124 million so that the statement that our agricultural products account for nearly two-thirds of our exports is substantially correct. In this country 35 per cent of our population are engaged in agriculture. If we take the figure we have of £110 million we will find that 40 per cent of our population are producing 58 per cent to 60 per cent of our exports. I am adding 5 per cent to the 35 per cent primarily engaged in agriculture so that is a very good performance.
I labour these points to emphasise the importance to our economy of that 35 per cent of our population. They are exporting, not as our industrialists are exporting, into a fairly open market. They are exporting into the most restricted market of all, the food market and they are exporting largely to Great Britain where the competition is keenest.
As regards our imports, I find that in 1963 they amounted to £306 million. As far as I remember, in the past 12 months our exports increased by £20 million and our imports by £30 million. I found from page 28 of Economic Statistics that of our imports raw material for further processing amounted to £181 million. Of that figure agriculture constituted £16.9 million and other materials for processing amounted to £164 million. These figures prove beyond doubt the importance of agriculture as a primary export. That fact should be laboured because as a primary product for which so few raw materials have to be imported agriculture is a very important aspect of our economy as regards the balance of payments. Much of our industrial production depends to a great extent on the import of raw material and the expansion of our agricultural economy assures us that there will not be any great expansion in our imports.
It is believed by many people that the farmers have got a tremendous concession in this Budget. Coming from a milk county as I do, I am pleased that they got concessions as regards their milk products but we must temper our thanks to the Government by our consideration of the fact that ?d per gallon was taken from the farming community last January as a subsidy to Bord Bainne. We must not forget the fact that the butter subsidy was reduced considerably last summer and we must also be mindful of the fact that the farming community had to meet increased costs recently and that next June they will have to meet a further increase in agricultural wages. If we give the producer 10/- extra and increase his cost by 7/- extra he is not going to get very fat on it.
From the reading of the Minister's Budget speech he appeared to be pleased with the increase of 6½ per cent in our manufacturing output last year. I am not in a position to pass judgment on whether that is something wonderful or not. We have the proper circumstances at the moment as regards good industrial trading conditions but we must not forget that we are passing from a pastoral economy and that in that process there must be much looseness to take up so that the expansion achieved in the early stages will not be so easily sustained in the later stages.
The Minister mentioned the question of the imbalance of payments which was £13½ million in 1962 and is expected to be £22 million in 1963. He mentioned the increase in our assets abroad and the increased influx of capital which, he said, will help to cover this deficit. The question of foreign capital inflow has been argued here. Capital inflow has occurred. It has occurred for the purchase of land. It has occurred for the purchase of Irish securities. It has occurred for the purchase of trading concerns. It has occurred for the purpose of industrial development. While all of us welcome the inflow of foreign capital for industrial development, certainly very few of us welcome it for the purchase of land.
This matter has been debated here rather hotly on several occasions. I should like to read from the OECD report to which the Parliamentary Secretary to the Minister for Lands referred earlier. It says at page 15:
It would certainly seem reasonable for Ireland to try to accelerate the development of the economy by some import of foreign capital. The investment rate is likely to rise, and the heavy dependence on agricultural exports which are faced with protective policies abroad complicates the problem of maintaining a stable external balance. Foreign capital should not, of course, be a substitute for measures to stimulate domestic savings, nor for proper action to deal with a balance of payments deficit resulting from domestic inflation. But if it is needed to maintain a satisfactory rate of growth in non-inflationary conditions, a moderate inflow of foreign capital would seem appropriate.
Do these conditions obtain here at the moment? This report stresses a moderate inflow in non-inflationary conditions. We may, I suppose, regard the inflow as moderate, but we can hardly regard conditions here at the moment as non-inflationary, having regard to the fact that not all the capital coming in is of the most desirable kind.
Later on, in his Budget Statement, the Minister proceeded to give us a little fatherly advice. He stressed the dangers of incomes outstripping increased productivity, although his Government have been responsible for precisely that development. He exhorts us all to increase productivity. He must be aware from the results of his survey teams that in many sectors of our economy the possibility of increased productivity is limited. He warned against consumer spending. Mark you, that is one warning he will succeed in having heeded, because his Budget will leave so little in most people's pockets for consumer spending that the warning is almost unnecessary.
He warned against increased profits. At the same time, he and his Government have made little or no effort at adequate price control since the recent advances in cost. He advocated more savings, having produced a Budget that will leave most people with very little in their pockets with which to save. He mentioned Savings Certificates and the Post Office. He will improve arrangements with regard to Savings Certificates and the Post Office Savings Bank. He mentioned saving committees. He did everything, in fact, except produce the money box.
All that advice from the Minister, is, I believe, economically sound and economically correct, but, in the context in which it is given and in the circumstances in which it is offered, it has a rather cynical ring. The man who caused inflation is now offering us the cure. Later he states—I find this a little hard to understand—that the turnover tax did not increase the cost of living as the index figure for mid-November and mid-February shows. It did not cause, he says, a disproportionate rise in prices. He alleges that the effect of the tax was to raise prices little more than the tax rate itself. I find it hard to follow that. I find it hard to accept it. I find it hard to believe that the effect was to raise prices little more than the tax rate itself. If he accepts, as he must accept, the effects which flowed from it, with the ninth round wage increase, surely he cannot seriously say the effect of the tax was to raise prices little more than the tax rate itself.
We are all, of course, now familiar with the various concessions given: £4,500,000 to the farmers in the form of 2d. per gallon on milk; £1.4 million for the relief of agricultural rates and improved prices for pigs. There is a small social welfare concession of 2/6, but this will not become operative until August. For public service pensioners, there will be a five per cent increase, costing £140,000. I do not think that five per cent increase distributed over these pensioners will make them any better off. It is, I think, a miserable concession. In view of the increased cost of living, the Minister could have been a little more liberal.
He offsets these, of course, by his various taxes: 3d. per gallon on petrol bringing in £1,250,000; 3d. on the 20 cigarettes bringing in £2 million; 1d. on beer to bring in £1.1 million; 4d. on the glass of imported spirits to bring in £.4 million. That is £5 millions all told. He circulated an explanatory table of the Current Budget for 1964 setting out the latest figures. Here we find he is planning for an expenditure in 1964 of £215.13 million. That is a substantial advance on the figure which was originally estimated, £209 million. We can assume that that expenditure of £215 million will be added to during the year by one or two Supplementary Estimates. If we take it that the expenditure, to put it modestly, will be £220 million, we shall all have to agree that it is an all-time record demand upon the taxpayers.
What must be considered are the various costs which are mounting at the present time: rent, particularly differential rents here in the city of Dublin, rates, agricultural and non-agricultural, and in that respect the non-agricultural ratepayers are probably more severely hit nowadays than the agricultural ratepayers. The prices of bread, flour and sugar have advanced since this time 12 months ago. ESB and CIE charges have increased. National health stamps have advanced from £5.5 million to £13 million. We are to face shortly new demands for postal services, for stamps, telegrams, telephones, and of course there are the increases in the price of cigarettes, spirits and the pint.
With all these increases, one august body has remained untouched, the dancehall proprietor. I do not know who was the dancer in the Fianna Fáil Party but there must be some gentleman who has an extreme regard for the dancehall proprietors because they continue unscathed at a time when our dancehalls are crowded to the doors and there are Beatles and fellows with Beatle haircuts floating all over the country.
With all this expenditure, we seem to have much the same health services and much the same educational services. Social welfare has not improved, has not even kept pace with the increased cost of living, house building has shown no tremendous upsurge, and the help given to the agricultural community is, as I have shown, more apparent than real.
There is nothing in the Minister's statement to suggest anything in the way of a plan for agriculture. While some of the Government speakers talk about planning and marketing, when the Minister for Agriculture was asked the other day whether he would agree on a marketing board, he just replied "no". I wonder could I ask him now: will he finally state why the Government have so completely put aside the question of a meat marketing board? I would also ask him why agriculture is not represented on the NIEC. That is an omission which has been commented upon by many people.
On the question of employment, the figures are always a matter for argument in these Budget discussions. However, the statistics compilers seem to have satisfied themselves that they have now produced a set of figures which may be accepted as correct. I find here there has been a decline in employment from 1956 to the present day, from 1,125,000 in 1956 to 1,052,000 in 1963, a decline of 73,000 employed. Of course, this decline has been most marked in the agricultural sector. The unemployment figure is at 61,000 and this seems to be a recurring figure for a number of years. With our total labour force standing at 1,113,000, this represents an unemployment rate of six per cent which compares unfavourably with the two per cent obtaining in Great Britain.
On the question of emigration, again there has been argument as to the correctness of the figures. One figure which has been given is 250,000 since 1957. The Minister for Finance insists the figure is 211,000. Whether it is 250,000 or 211,000, it is a substantial figure. It is a very regrettable situation that there are more people of Irish birth living in Greater London than in the entire province of Connacht.
The Second Programme for Economic Expansion envisages the creation of 144,000 new jobs between 1960 and 1970. It used to be 100,000 but it has improved; I suppose that is expansion again. Yet when we look at the Government's figures, we find that the total number at work—not those registered —in 1960 was 1,055,000, and the total at work in 1963 was 1,052,000. The first three years have passed of the ten years in which we are going to create 144,000 new jobs. In the first three years during which we are embarking on creating 144,000 new jobs, the total number at work has dropped from 1,055,000 to 1,052,000. If that is the rate of progress as regards securing 144,000 new jobs, I fear that aspect of the Second Programme for Economic Expansion will hardly be fulfilled.
The Minister and the Taoiseach are very fond of quoting as a defence of their taxation and expenditure current Government revenue as a percentage of gross national product. In 1963, Government expenditure was 22.7 per cent of the gross national product. I think that is the highest yet, but I am confident it will be exceeded for 1964. The Minister says it compares favourably with most European countries.
The average Irishman has an income of about £200; the average Englishman has an income of about £400; and, using the same currency, the average American has an income of about £800. Individuals with small incomes are like nations with small incomes. You cannot, in equity, tax the man with the small income at the same rate as you tax the man with the big income. If an Irishman with his £200 is taxed 20 per cent, he is left with £160 for himself. The Englishman with £400 similarly taxed is left with £320. He has a correspondingly larger amount of money to live on. I do not think that the assumption that it is equitable to have a flat rate between Government taxation for Government expenditure and gross national product is proper. Countries, like individuals, with larger incomes can tolerate a higher percentage of taxation in equity than poor people and poor countries.
The Minister's estimate of expenditure for the coming year was originally £209 million. It is now £215 million. Let us take the lower figure as a conservative figure. Let us consider our average Irishman with his £200, the population being 2.8 million. The average Irishman will be paying out of his £200 income £75per capita in central taxation as I calculate it. The rate of pay in my constituency, South Tipperary, is £23 per capita. It is higher since I got this figure. Of that £23, the Central Government pay £13 and the local people £10 per head. Therefore, the average Tipperary man with his £200 income is paying £75 to the Minister or more and the county manager £10. That is £85 out of his total average worth of £200 a year.
Worked on that basis and viewed in that light, it would be interesting to compare our taxation figure with the economies of other countries. I have no figures or data for other countries, but in view of our economic circumstances, I feel sure the taxation figure here is one of the highest in Europe in proportion to our capacity to pay.
About February, 1963, we were discussing the White Paper entitled Closing the Gap and the general atmosphere was that a pay pause was imminent. It was pointed out to us at that time that salaries and incomes had outrun productivity, and that even the eighth round wage increase had already caused a certain degree of embarrassment to the economy. Last year's Budget was followed up by the 2½ per cent turnover tax. I thought then, and I think now, that the introduction of that tax was a mistake. It was a mistake in itself but even more, it was a mistake in what it culminated in. Later in the year, we had the Dublin North-East by-election. It was unfortunate that it took place but even with no by-election, we should probably have our turnover tax. However, events which subsequently occurred would not have happened.
The tremendous unpopularity of the Government of the time as revealed by the reaction to that turnover tax caused Government panic and that panic culminated in the next mistake when the Taoiseach gave the green light for further wage and salary demands. Nobody is more appreciative than I am of the importance of a good income policy and good relations between employers and employees. However, when a Taoiseach finds himself unpopular and then, in a desperate effort to regain his popularity, leans over backwards to produce agreement which resulted in the ninth round of wage increases, the economy is likely to suffer. If there were no turnover tax, there would probably still be a ninth round wage demand. I believe it would be a smaller demand and one which the economy could sustain more easily. Probably, eventually, it would be of more use to the recipients than the bigger money they ultimately got and which has now been debased by inflation.
The cynical atmosphere of the entire situation is that no attempt whatsoever was made by the Government at price control, relying entirely upon the ordinary competition as between one tradesman and another. As a consequence, we now have upon us wellestablished inflation. Perhaps Governments like inflation. This inflation was deliberately provoked by the Government. The ninth round wage increase was beautifully timed for political purposes. It was announced before the people could feel its repercussions and it won for the Government the two by-elections. Politically, it was highly successful but economically and measured by the yardstick of patriotism, it was deplorable.
Not alone will the recipients of the increase find by the end of this year that they are no better off but they will find that this global dispensation of 12 per cent increases the stresses between the lower and upper income groups. A 12 per cent increase may compensate those in the higher income brackets; it may compensate those who have little family commitments; but a 12 per cent increase will be of less use to the man of smaller income or the man with large family commitments. In that respect, it increases social stresses within our community and that is something that is undesirable socially.
When this tax was being debated in this House, the Government attitude was: "What alternative is there?" The propaganda was very effective. Many people up and down the country believed that this tax was an absolute necessity and that there was no other way to get the necessary revenue. We were offered two excuses at the time by the Government. The first excuse was that traditional methods of tax collection had become exhausted, that we had reached the point of diminishing returns. We were also told that the 20 per cent reduction in tariffs and the 20 per cent increase in quotas last January—they were ten per cent then and ten per cent the following January—cut down Government revenue and therefore they needed some steady reliable source of revenue in the form of a turnover tax.
No evidence was adduced that the traditional methods of revenue had in fact become exhausted except for some statement that the consumption of spirit had increased by a small percentage in one year—which, really, was not evidence to adduce in any convincing manner. But, in the event, what did happen? Instead of a falling-off in the traditional methods of revenue from customs and from excise, we find that, in effect, our customs revenue advanced from £46 million between 1st April, 1962, and 31st March, 1963, to £50 million for 1963-64. Excise advanced from £34,600,000 to £37,700,000 and there were corresponding increases in income tax, from £36 million to £40 million; in corporation profits tax, from £4 million to £7 million; in motor vehicle duty, from £7,400,000 to £8,200,000. There was a total increase in revenue from £163 million to £184 million, from which you must deduct the turnover tax of £3.6 million. On customs and excise alone, without putting on any extra taxation, there was an increase in revenue on customs of £3.5 million and on excise of £3 million. These are some of the traditional methods of taxation which the Government would have us believe had become exhausted.
Furthermore, during the past year the prices of spirits and cigarettes advanced. It has been estimated—how accurate the estimate is I cannot say —that £6 million was actually siphoned off by the trade over the past year which could have gone to revenue. One must, therefore, ask one-self, in a situation where with the natural buoyancy of revenue, leaving out the £3.6 million turnover tax, there was an increased revenue of £18 million, was it ever necessary to introduce a 2½ per cent turnover tax calculated to bring in £11 million or £12 million per year?
Exports are vitally important to the economy of the country by virtue of the fact that we have a small population and, consequently, a small home market for our produce. It is vitally important that we should remain as competitive as possible in the export market. Let us consider for a moment how this Budget and previous fiscal measures adopted by the present Minister for Finance have come to effect costs of production here. First and foremost, any industrialist has had to face the 20 per cent increase in quotas and the 20 per cent reduction in tariffs which took place on January 1st. That is not unreasonable. I am not referring to it in a spirit of criticism. I am merely stating it as a fact. Since the 1st November he has also to face a 2½ per cent turnover tax. Subsequent to and consequent on the 2½ per cent turnover tax, he had to face the ninth round 12 per cent wage increase. Arising out of the last Budget, the producer had to meet increased and retrospective corporation profits tax. Owing to the general increase in the cost of living, largely arising from the turnover tax and consequent increases, he has had to face increased rates, which have gone up steeply all over the country. He has had to face increased costs for repairs and renewals for his industrial complex. Now, with the increased taxation on petrol, he will have to face increased transport costs. I have no doubt that some of our merchants and industrialists will succeed in overcoming all these difficulties, but some may not.
Surely nobody will deny that, if some of these handicaps had not been introduced, our competitive position as an exporting community would be very much stronger. I accuse this Government of deliberately sabotaging our competitive economic position internationally merely to gain a temporary political advantage. As I said, politically it was an excellent move. The short-term policy succeeded, but the long-term policy may not. It was very bad economics. It was clearly the conduct of a Party which placed Party interest before the national interest.
Excluding the tax on petrol, if the Minister for Finance introduced last year the Budget he introduced on Wednesday, I would not feel too disposed to criticise him for taxation on such items as cigarettes, tobacco and beer. Something we can all do without is fair game for any Minister for Finance. When he uses it on the model of the Budget introduced last year, introducing it with all the economic jargon he used 12 months ago, before the last Budget, when he uses it merely as a means to mop up the £50 million which he has caused to be disbursed through the community with a view to buying the votes or the goodwill of 350,000 or 360,000 people, I feel he has grossly misused the budgetary weapon. It is envisaged nowadays that the Budget should be used as an instrument to determine fiscal policy, but it appears that while at one time, there may be a pretence of using it in that fashion, if our political existence is in danger, we are quite prepared to use it, not as an instrument of policy, but as a political weapon. If I were in a position to make, and called upon to make, a decision between my Party interests and my national interests in such a matter, I hope I would be big enough to face the situation honourably and resign.
