The proposal really is to provide another Prize Bond but stripped of its short-term character and made a medium-term security. To tell the truth, I do not see what anybody hopes to achieve by this. If the Minister says it will assist him to have access to credits, I do not think there is any objection in principle to it, but I imagine that it is really designed to attract money from rich people who primarily seek capital gain rather than income tax.
I should like to ask the Minister to be clear on this. Would I be right in assuming that it is intended, under this system, to have in this country a security which stands in the same relation to our income tax law as a municipal bond stands in relation to the Federal income tax law in the United States of America? The municipal bond is not assessable to Federal income tax, with the peculiar result that municipalities are able to borrow at a much lower rate of interest than the States of the Federal Government.
When the Minister calculates what the discount or the bonus will be on these bonds at maturity, will the calculation be made at current rates of interest or will there be some estimate made of the savings effected as a result of this bond's addition not being liable to income tax? It would look queer to establish a form of Government security accessible to rich individuals everywhere to avoid not only our income tax laws but possibly income tax laws in their own country. I do not know that it would be a very desirable form of security to establish. A decent democratic system depends on the proposal that we all pay our taxes—and some of us find our taxes extremely onerous—but we all pay them, in the hope and belief that our neighbour finds them as onerous as we do. As long as we all pay our fair share, we keep going, but if we suddenly discover that some wealthy individual has succeeded in hiring a skilled accountant who has punched a hole in the income tax code and, as a result, he is avoiding income tax, then that gives rise to justifiable resentment on the part of the rest of the taxpaying community who feel they are being asked to bear more than their fair share of the burden.
I can imagine a man who has today an income of £20,000 a year and is paying 12/6d, or whatever rate in the £ so large an income would attract, saying to himself and his family: "If we can cut our annual income to £10,000 a year, we can put the balance of our capital into this new kind of loan and can collect on this. I can make the other half of my income free of income tax but I will simply save it up". I would ask myself the question if that was a fair form of security for the Government to issue: I should like to hear the Minister on it.
I do not think we ought to create a section of the community who could avail of a device of this character to avoid what Oireachtas Éireann has determined to be a fair rate of income tax to be paid on a particular income. If this form of security is of that character, I think we ought to look at it again. I could not help feeling that if that was the plan we had in mind, we would be catering for a society in which the poor got poorer while the rich got richer. The Minister may say that that is not so and that what they are trying to do is to get for the Government of the country the same kind of advantage as the American municipality enjoys in compensation for this security being of a kind which in effect does not attract income tax.
If the Minister said: "We shall be able to get this money from a certain type of wealthy citizen or farmer at a lower rate of interest than we should otherwise have to pay", then I would be able to understand what this is all about. Unless there is an element in it that the Government are, for the time being, to get the benefit of a substantially lower rate of interest than they would otherwise have to pay, I feel constrained to say that I cannot understand why this device has been worked out. I do not think the Minister should ask us to give approval in principle to this new system of borrowing without being able to reassure us in some degree but in a more detailed form than he has been able to do in his introductory remarks.
On the Second Stage of the Central Fund Bill, I think I am entitled to ask the Minister certain questions. We are operating this year, for the first time, a new system designed to expedite the disposal of financial business by dealing with main Estimates as soon as they are ready so as to get them out of the way by the time the Book of Estimates is ready for publication. That has involved us in the obligation of dealing with certain of these Estimates without knowing what the global sum of the Government's estimate for expenditure in the coming financial year is likely to be. We do not yet know how the present financial year will turn out. I should like the Minister, if he is in a position to do so, to give us some estimate today.
The Minister and the Taoiseach have thought it proper, not for the first time, at dinners and functions outside this House to make forecasts about the outturn of their present Budget. That is an exercise that goes on in the autumn every year. We, who are familiar with political procedures in this country, are inclined to get cynical about it. We are always told in October or November that the outlook for the Budget is very bad, that the Minister is full of apprehensions that there will be a very large deficit and that there will be an obligation on him speedily to increase tax in the coming financial year. Then, as we approach Budget time, we are accustomed to hear speeches that a modern miracle has taken place, that the immense ebullience of the national economy has resulted in increased revenue which illustrates the extraordinary prosperity of the country and that the Minister for Finance will not have to impose all the awful taxes he was so afraid last October he would have to impose. I do not think that is a very healthy exercise but if the Government think it is useful there is not much we can do to stop them.
We are now within three weeks of the end of the financial year. The Minister ought to be able to foresee more precisely what the outturn will be. All of us have accessible to us the revenue returns in Iris Oifigiúil and we can all make our own surmises from them. The Minister will agree that there is available to the Department of Finance an abundance of detailed information which makes it possible for them to make much more accurate estimates than the best informed amongst the Opposition can do, having at their disposal nothing but the figures published in Iris Oifigiúil from time to time.
The present situation is that we have had an adverse trade balance of £120 million odd in the past 12-month period. We have had an adverse balance of payments for the past calendar year of slightly over £30 million and the cost of living is steadily rising. I mention these things because these are the common economic denominators by which one seeks to determine whether or not we are dealing with an inflationary situation and they are all closely interrelated.
The Government have made certain predictions as to what they would regard as a healthy trend over a seven-year period. I think they said that, over that seven-year period, they would not be unduly dismayed if there was an adverse balance of payments in the order of £16 million per annum. Not everyone agreed that an estimated deficit of that magnitude could with equanimity be borne by a country which was in the process of drawing in substantial blocks of foreign capital for investment. The interesting fact is that in the first two years of the period to which the Government then referred we have had an adverse trade balance in the first year I think of £20 million and in this, the second year, of slightly over £30 million so that we are running a great deal ahead of the adverse trade balance which the Government themselves thought to be tolerable. Both these adverse balances have been realised in a period in which a substantial volume of foreign investment has been coming into the country.
I do not know whether the Minister's attention has been drawn recently to the situation that has developed in New Zealand. In the decade immediately after the war, from 1946-56, New Zealand passed through the same phase as that through which we are now passing. They set out all over the world on a very active campaign to draw in foreign capital and they succeeded. They drew into the domestic economy of New Zealand a very large volume of foreign capital which, while it was coming in, operated to obscure the underlying adverse balance of payments which the New Zealand economy was in fact experiencing at that time. The influx of foreign capital has now reached a point at which the Government of New Zealand, under considerable domestic pressure, have taken to ask themselves if they want any more because all New Zealand industry is coming under foreign control.
There has been a tendency for the influx of foreign capital to falter, and superimposed on that are domestic doubts as to the desirability of drawing in further foreign capital for industrial development. As the influx of foreign capital tends to dwindle, the Government of New Zealand have been confronted with a formidable problem to meet the adverse balance of payments coming into view as a result of the reduction in the influx of foreign capital.
We are at a period when we are drawing in very substantial sums of foreign capital and operating a trade deficit of £124 million. We are running an adverse balance of payments, despite the inflow of capital of nearly twice the size that we anticipated, that the Government anticipated when they published the Programme for Economic Expansion. This year, I think I am right in saying that the adverse balance was £30 million. If our experience approximates to the experience of New Zealand, should the influx of foreign capital tend to dwindle at the end of five or ten years, all the capital that has arrived here in the meantime will be drawing out the seven per cent from our economy that it was sent here to earn, and for every £1 million that comes in at present, we must find £70,000 a year to finance it. For every £10 million, we must find £700,000 a year, and as the influx of foreign capital dwindles that will have to be produced by our export surplus.
We have already a visible adverse trade balance of £124 million. The Minister will agree that when we look about the world and see the USA clamping down on tourism, see Brussels warning the European Economic Community they had better be careful about their adverse trade balance of a billion dollars, we must agree that tourism is something we have got to be circumspect about. It is one of these very volatile exports that can rise and fall in a dramatic way.
For these reasons, I should like the Minister to tell us today, when we have before us ascertainable facts in regard to the visible trade balance, the visible balance of payments, the visible cost of living figures, what he expects the position in regard to the national Budget to be on 31st March next. Will we have a surplus? Will we break even? Does the Minister anticipate a deficit and, if so, a deficit of what size? It would be a valuable exercise to all those considering the fundamental economy of the country to have at their disposal that information at the earliest possible time.
Under our new procedures, we are trying, in the name of expedition in the discharge of public business, to take some of our financial fences somewhat earlier than we had been in the habit of doing. It would be of great assistance to the Opposition to do this with a clear conscience if the Minister at this stage could give us a reasonably accurate forecast—I fully appreciate it cannot be precise — of what the out-turn of the present Budget is likely to be at the end of this month. I gather from some of his pronouncements recently that it is not as gloomy a picture as he had apprehended it might be in the autumn. If the revenue produces a surplus on this year, then the country may look forward with some confidence to some stabilising factors being introduced in the year that lies ahead.
On the other hand, if the Minister has to tell us today that because of the Budget picture that is likely to emerge on the 31st of this month, the Government will be desirous of raising further revenue to meet the situation that confronts the country in the year that lies ahead, we will have rising taxes, rising rates, a rising cost of living index, a rising adverse balance of visible trade and a rising adverse balance of payments and, if the Minister for Finance urges us to believe that such a picture represents economic stability, I suggest that would be putting a strain on our credulity greater than the best goodwill on this side of the House would willingly sustain.
