When progress was reported, I was drawing the attention of the House and of the Minister to the lackadaisical, slick and yet extravagant manner in which he had drawn the Financial Resolution, or else had misdrawn his Budget speech. It is, I suggest, entirely improper that the Minister in his Budget speech last week should give the impression he was going to tax with this wholesale tax only those articles which were already subject to turnover tax, but when the Financial Resolution comes along— which he will be exhorting his cohorts to vote for in due course—that Resolution imposes the tax not merely on those articles that are subject to turnover tax but on a great many other articles exempt from the turnover tax.
The habit the Minister got in relation to that last year in the Resolution grounding one section of the Finance Bill of 1965 and which he has continued this year is one that is bound to cause great uneasiness and to disturb greatly the community as a whole. I would have thought that after the public outcry last year he would have learned his lesson. Apparently he has not because we find in this he has taken power to do far more than he indicated in his speech he was proposing to do.
I notice also that in his Budget speech the Minister described this as a selective wholesale tax. The essence of a selective tax is to impose differing rates on different commodities. This is a flat tax at one rate, taking no account of whether it is a luxury, a nearluxury or something absolutely and vitally essential. While frankly I feel the manner of imposition of the tax is an improvement on the turnover tax of three years ago, at the same time, it is disturbing that it is being imposed, not in substitution for that tax but in addition to it.
We were told at that time that it was utterly impossible, administratively and otherwise, to have anything other than a flat, one-scale, one-rate tax on everything. The excuse given for including in that turnover tax the bare necessaries of life was that the tax itself would not be operative administratively unless it covered everything from bread to butter, meat and every single article of food. Shortly after the turnover tax was enacted in 1963 and put into force, we found exemptions were being made, thereby showing it was possible not to have the universality of its application that the Fianna Fáil Party claimed was necessary for it. Unfortunately, however, as we all know now, the damage had been done at that time and the spiral commenced which was continued for the purpose of Fianna Fáil saving themselves from a general election by winning dishonestly the Cork and Kildare by-elections of that time.
It is not that I want to go back particularly to that turnover tax, but this tax in itself, while put on the wholesale level which is better than the universal turnover tax, is, however, contrary to the best present thought on taxation such as this. The best thought on indirect taxation of this kind is universally accepted to be that propounded in Sweden. I do not know whether the Minister reads the monthly pamphlet of the Svenska Handelsbanken, the economic review published by the Bank of Sweden. In the issue that came at the beginning of the year, they made it clear that in Sweden they were moving on and away from a flat turnover tax to what is commonly called a value added tax. It is extraordinary that when progressive countries in Europe and elsewhere are moving on to a value added tax the Minister has not thought fit to give any consideration at all to that but has applied a single rate tax at wholesale level. I stress “single rate” in order to make it quite clear that it is not a selective tax.
One of the advantages of the value added tax is that companies which have to pay tax on their turnover have the right to deduct from the tax payable the tax already paid in earlier stages of production and in earlier stages of distribution on goods and services required by them. The reason for doing that is to avoid many of the disadvantages that there are in the flat turnover tax, operative at retail level by the disastrous imposition of 1963 and now to be operative at wholesale level. The flat turnover tax, or what I may call the 1963 tax, was aimed primarily at consumption. It was aimed, I believe, not merely at increasing revenue but also at damping down consumption, something of course which it was utterly impossible to do in that way and which was entirely wrong in the universality of its application. It had the effect not merely of initiating the spiral but on businesses and investments and on some services that are used in production, it has led to double taxation in certain fields of taxation. This double taxation under the 1963 tax has affected different products in varying degrees and in a haphazard way. Companies which sometimes manufactured goods they needed for their own investment do not have to pay turnover tax on these goods, whereas the companies which buy goods from other companies have to pay tax.
The simplest and best example of that is in relation to the building trade where a company that buys its joinery from someone else has to pay 2½ per cent on the joinery for the house which it buys, but if it manufactures the joinery itself, no 2½ per cent tax goes into that house when it is being built. However, the value added tax which allows the company to deduct the tax paid on goods and services used in production is free from this disadvantage. It also means that the effect of it is that it is neutral in relation to comtage panies of different sizes and of different production structures.
Another great advantage of the value added tax is that it is free in its impact on the export industry and therefore its impact on exports can be entirely eliminated. I agree, of course, that there is no turnover tax as such on exported goods and I think the Minister will propose that because they are exported, they will be free from this new tax. Again, he does not say so in the Resolution, although he did say it in the Budget speech. It is another case in which the Resolution does not follow the Budget speech. Exports are indirectly affected by the existing turnover tax and by the new wholesale tax because the tax is levied on investments at various stages of production and naturally those investments have to get their return and the effect of it is indirect in its application to the export field. When you take into account how badly we need exports, and how badly we need to encourage those exports, it is to be regretted that the Minister used the most hamfisted method he could in 1963 and now in 1966 he is using another hamfisted method, although it is not as hamfisted as his earlier method. If he had gone to the value added tax, it would have been possible to deduct this from goods and services included in the production of exported goods.
I do not know why the Minister has described this as a selective tax. The word "selective" to any ordinary person means something that chooses between one aspect and another. It is perhaps, selective in that food, drink and tobacco are excluded from its operation. Of course, they are excluded merely because they could not bear any more. One of the things that appears from the Budget speech—and I use the word "appears" quite deliberately because it is very difficult to follow— is that the existing turnover tax of 2½ percent will apparently be paid on the mark-up to the retailer which includes this wholesale tax and therefore we are going to be in the position of paying 2½ per cent turnover tax not merely on the cost of the goods themselves to the retailer but in addition the 1966 wholesale tax. How the Minister can suggest that that is fair or equitable, or going to inure to the permanent betterment of the economy, is another question.
I gather that the wholesale tax is not to include services. The Resolution appears to cover only goods and therefore services are completely exempt. There might be some justification for a tax of a certain kind on doodling or drawing caricatures of other people when one should be taking account for one's Minister of what is said and other such things but apparently the Resolution is so phrased that these services are left out.
The Minister also suggests that the effect of this tax would only be to increase the cost of living by half a point. I find it difficult to understand his calculation in that respect. The Consumer Price Index, the cost of living, which has gone up in the manner in which it has in the past year, cannot bear an increase of even half a point. In mid-May, 1965, when we were told by posters and in speeches that Lemass must lead on, we were not told that in the first year of his leading on, between mid-May, 1965 and May, 1966, the cost of living would increase by no fewer than five points, from 180 to 185 points, and that we have, in addition, another tax which, while it may increase the cost-of-living index figure by only half a point, will undoubtedly have the effect of increasing the price of the small comforts to which people have become accustomed and to which they were entitled to be accustomed before they had imposed on them this peculiar policy of Fianna Fáil which does not seem to know where it is travelling or exactly in what direction.
Apart from the effect of the wholesale tax itself, this Budget will have the effect of making the cost of distribution of goods substantially dearer because of the increase in the price of petrol. On the Second Reading of the Finance Bill, prior to the Presidential election, and before the exact details of the awfulness the Minister for Finance had in store for us were disclosed, I made some comments here about the cost of petrol as compared with the price of petrol in other countries. Premium petrol at that time was 5/10d a gallon. That was about the time the Budget was introduced in March. The price was reduced slightly by the companies since then. Then the Minister promptly ensured that the price would go back again.
As far as I can make out from the figures available to me in relation to other countries, we have now got almost one of the highest prices for petrol in any European country, Iron Curtain apart. I accept that in Poland the price of petrol is 7/2d a gallon. But who wants to go and live in Poland, behind the Iron Curtain? It may be dearer in Hungary, again behind the Iron Curtain. But we are dearer than Bulgaria and Czechoslovakia; we are dearer than East Germany; we are dearer than Austria; we are dearer than Belgium; we are dearer than Denmark; we are dearer than Finland. We are dearer than— Greece is higher than we are—West Germany, Holland, Luxembourg, Norway, Sweden, Spain and Switzerland. As far as I can find out, there are only three European countries which have as high a price for petrol as we have, Greece, France and Portugal. We are in the lamentable position of being the fourth highest petrol-cost country in Europe, with all that means in relation to increased costs in distribution and also with all it means as a deterrent on the tourist industry—the tourist industry which, God knows, will suffer enough this year as a result of the British seamen's strike.
I must confess that I was surprised that the estimate of the hotels' federation was that we would lose only £3 million. Perhaps what was meant was that we had already lost £3 million to date in our tourist industry as a result of the seamen's strike in Britain. Whether that is so or not, the increase in the price of petrol is a tragic blow to the tourist industry. There is no tourist relief. Of the countries that I have mentioned as being higher than Ireland, the only one of which I have any personal experience from the point of view of the price of petrol is France. There they have a system of tourist coupons. Of course, the Minister for Finance and the Government here could not possibly do anything that would be as progressive as that, and so the deterrent of high-cost petrol remains and is exaggerated further by this new Budget.
While these are the specific taxes, one must also look at this Budget in the context of the general picture. Before I do that, there are a few things I should like to mention. Deputy O'Leary talked about a capital gains tax. I have no fundamental theoretical disbelief in such a tax as a fair method, provided it is operated fairly, but one of the things that is crystal clear at the present time is that a capital gains tax, far from providing capital, would cost the Exchequer money. You cannot have a capital gains tax without, at the same time, providing allowances in income tax for capital losses. Anybody who knows anything about capital now knows that in the past year, for example, the Stock Exchange investment lists were down by about eight per cent and, far from a capital gains tax providing money, as Deputy O'Leary said, it would on the contrary cost the Exchequer substantial sums at the present time. In any event, apart from perhaps the appearance of inequality, we have not got here the large-scale extravagant capital gains that they may have in other countries and our anxiety here must be the overriding one of ensuring that we get not merely more capital into the country but that we get sufficient capital to be able to maintain the employment we have and to extend that employment.
When you consider that as our primary objective, as it must be, and when you consider the fact that the Exchequer would lose in present circumstances by the introduction of a capital gains tax, it is easy to see why the Minister turned his back on it, and he was quite right to do so. I must confess I cannot pay the same tribute to the Minister for the manner in which he presented his Budget last week. It was virtually impossible to follow, not merely when listening to him but also when reading his speech. It was impossible to know exactly what he wanted and where he was going to get it. He was jumping around all over the place. One moment he talked of what he wanted in a full year and the next minute, not giving any figure, he talked about what he would require for the remainder of the current year. Nowhere in his Budget Statement did he give any figure for the amount required in this financial year for increases to State servants. One was left to make one's own estimate on the figure he gave of £4 million in a full year and make a calculation as best one could. The calculation, by a process of subtraction, arrived at a figure of £2 million.
The Minister also failed to provide any tables, the kind of tables that usually accompany a Budget, showing the effect of the Budget. Again, it was left to Deputies to make up their own tables—not a very easy thing to do when the figures were jumbled about in the way they were. The Minister failed to provide any reason at all for the inclusion of the additional £100,000 for social welfare. He did not say how it arose. He did not say whether it arose, as I think it did, from bad estimation last March, or from some new service. If it arose from some new service, I am pretty certain he would have been bound to have mentioned it in excuse, but he failed to give the reason why. He merely said he wanted another £100,000, and I would suggest it was because he had mis-estimated the amount that would be necessary in March when introducing his Budget.
In relation to the Minister's Budget, on all sides and in relation to what flows from it, we are struck by extraordinary coincidences in dates, struck by the fact that the Presidential election took place on 1st June. Before that election, he announced he was going to pay more to State servants, but he did not announce until after the election the manner in which he intended to collect that payment. Before that election, he and the Minister for Justice announced that the Garda were to get substantial increases in salaries, but, again, it was not until the election was over that they were told the details of how that £500,000 for the Garda was to be collected.
It was before the election, before 1st June, that the Minister for Agriculture announced that farmers in the creamery areas and in the liquid milk area would get an extra 2d per gallon for their milk, but it was not until the election was over that the housewife had to pay the extra 3d per pound for her butter or that the details of the manner in which the Minister for Finance intended to raise the additional amount required were told to the people as a whole.
It was an extraordinary coincidence, too, that CIE, with the connivance and assistance of the Minister for Transport and Power, announced before the election that those who were employed by CIE were to get an increase in wages, but it was not until after the election that it was announced by that company that fares were to be increased. In fact, we could say quite truthfully that in relation to anything good that they could announce, they were quite prepared to make sure that they paid with the people's money to get their nominee home, and even then they succeeded only by the skin of their teeth.
We must consider this Budget also in connection with the general economic position. We are told constantly by the Minister who has just left that there is no shortage in relation to housing, that there is more housing being carried out this year than ever before. Let us have a look at Economic Series published on 14th June. In relation to private houses being built with State aid, that is to say, grant houses, Table 56 shows that in the first five months of 1965, January to May, 3,282 new houses were built by private persons and public utility societies. In the same five months of 1966, the number had dropped to 2,892, a drop of 390 houses, or approximately 12½ per cent.
In Table 57, we find that in relation to the number of houses for which reconstruction grants had been obtained, in the same first five months of the year, it dropped from 3,643 last year to 3,352 this year, a drop of 291 or roughly eight per cent. In regard to the total number of new houses built, which is only available for the first three months of the year—the figures for April and May are not given—we find a drop from 2,734 houses to 2,228, a drop of 506 houses in the first three months of the year, or in total house production, very nearly 25 per cent on this year's figures and 20 per cent on last year's figures. How, in the face of those figures published by the Statistics Office, the Minister for Local Government can come in here and say regularly, as he does, that there is no reduction in housing, beats me and must indeed be beyond the comprehension of any reasonable person.
Let us look at the position in regard to emigration. I know very well that the net passenger movement by sea and air is not a complete picture of the emigration problem. It is true to say that it is not always accurate, but it does show a trend. Tables 54 and 55—Table 55 for the first four months of the year and Table 54 for the first two months—show there is an increased trend in emigration this year. That is borne out by the Economic Research Institute when they referred to the very matter to which Deputy O'Leary referred, that is, the shortage of skilled labour, particularly in the metals, engineering and vehicles section of industry.
The latest industrial survey available from the Economic Research Institute is that which was made in April, 1966 and published a week or so ago. Anyone who looks at that and endeavours to analyse it cannot but be frightened by certain of the indices in it. Total manufacturing sales in the first quarter of this year compared with last year are down. Total manufacturing production in the first quarter of last year compared with the first quarter of this year is down. In the metals, engineering and vehicles industry, which is to a large extent part of our basic build-up for other goods, there is no less a figure than 60 per cent given of cases in which production is lower this year than last year. This is perhaps the worst of the whole lot.
We find also that, in the beginning of the second quarter, sales are lower than they were last year, that exports, I am glad to say, are on average higher, prices are higher, employment lower on average than last year, orders lower on average than last year, and the general opinion appears to be that we are not going to be able to get a norm of progress at all. We have an acknowledgement in this that in the metals, engineering and vehicle side of industry, in 71 per cent of cases they are able to obtain their skilled labour only with difficulty, that they can get only sufficient in the other 29 per cent and that nobody at all says they can get their skilled labour easily.
The Economic Research Institute goes further and says that, on its estimate, total sales in the first half of 1966 will be less than the total sales in the first half of 1965, that home sales will be less, that investment expenditure on plant and equipment will be less—that is one of the worst features of the whole lot—that whereas, in 36 per cent of cases, it will be higher, in 23 per cent of cases, it will be the same, but in 41 per cent of cases it will be lower and, unless we are to get proper investment in plant and equipment, we cannot hope, not alone to increase employment, but to maintain the employment we have, nor can there be any prospect whatever of increasing our standard of living.
The Economic Research Institute estimates that there will be less employment in the first half of 1966 than there was in the first half of 1965, and that in spite of the fact that it is not so many years since the Taoiseach gave vent to his grandiloquent and extravagant promise that if only he were allowed to lead on, he would provide 100,000 new jobs.
The sum total of it all is that the prognosis of the quantitative result for the whole of the calendar year 1966 is that production will go up by only two per cent this year compared with the norm we know we have to get if we are to succeed, not merely in achieving the target set by the Second Programme for Economic Expansion but to achieve a target reasonably good enough to be able to take our place with the other nations in Europe, should we be able to become a member of the European Economic Community. Indeed, that two per cent increase is accompanied by an estimate that production will be down by one per cent for the second quarter of 1966 as compared with the second quarter of 1965. That production estimate of two per cent increase is taken after we have taken account of an increase in our exports and, of course, there will be some increase in exports, thank goodness, this year.
I do not know where this new addition to our Budget will take us in relation to our social welfare proposals. It is a sorry reflection that, in the 1963 Budget, certain social welfare improvements were given, that, in the 1964 Budget, certain social welfare improvements were given, that, in the 1965 Budget, certain social welfare improvements were given but, in every single one of those years, the amount of the improvement was paid, not out of current revenue, but by borrowing. It is the first time in the history of this State that a Minister for Finance has so mismanaged his affairs—of course, it was not Deputy Lynch all the time; before him it was Dr. Ryan—that one can say that the amount of social welfare benefits has had to be met by borrowing out of the already far too scarce pool of capital. It is not that the people did not need the improvements they got. Of course, they did, with the way the cost of living was going up spiral-wise, thanks to the initiation by Dr. Ryan of his turnover tax in 1963.
Here are the details: the Budget of 1963 gave 2/6 a week to old age and other pensioners at a cost of £1,191,000, and gave an increase in public service pensions at a cost of £120,000, making a total to these two classes of £1,311,000. Unfortunately, in that year the Minister for Finance so failed to balance his Budget that he had a Budget deficit at the end of the year of more than that figure and had to provide that figure by borrowing and an addition to it, because his total deficit was £2,220,000.
In the 1964 Budget, the Minister for Finance at that time gave an increase of 2/6 a week to old age and other pensioners at a cost of £730,000 and gave an increase in public service pensions at a cost of £140,000, making a total of £870,000, but he did not get that £870,000 out of current revenue. No—he had a deficit of not merely that but of a sum of £4,070,000.
We come on to 1965. The Budget of 1965 gave an increase of a penny a gallon on milk at a cost of £400,000, an increase of 10/- a week to old age pensions and other pensions at a cost of £3,220,000 and an increase in public service pensions of £400,000, making a total of £4,020,000—apparent beneficence by the then Minister for Finance but, unfortunately, when it came to the end of his Budget there was a deficit not merely of that amount but of virtually double it, £8 million.
It is easy to be munificent with borrowed money but it brings its sad tale with it, and it is because Fianna Fáil Ministers for Finance in these three Budgets failed to do their job of seeing how their Budgets would balance that we are in part of our difficulties today.
In fact, the record of Fianna Fáil in relation to Budget deficits is something that has to be totted up to be believed. Let us take the past six years. In 1960-61, the Budget deficit was £730,000; in 1961-62, £710,000; in 1862-63, £4,850,000; in 1963-64, £2,220,000; in 1964-65, £4,070,000; in 1965-66, £8 million approximately—a total of £20 million in six years—£20 million which had to be borrowed and paid for over the next 30 years, as a result of the incompetence of Fianna Fáil—£20 million, which means that every child born in 1966 will have to pay for approximately 25 years of his life something in taxation to make up for that incompetence of Fianna Fáil over the past six years. Then they talk of Lemass leading on and of the economic improvements they have been able to make.
The fact, of course, is that this Government are bereft of control, bereft of ideas and do not know where they are travelling. The only records that the Government have been able to make are records that everybody would prefer not to make in his private life. They are endeavouring to curry support by an old maxim, statement, quotation—whatever word you like—of George Bernard Shaw, which was never so true as today, that is, that a government that robs Peter to pay Paul can always count on the support of paul. They are even failing to get that support now.
We have the worst record in Europe for industrial disputes, a record of industrial disputes that has its inception and beginnings in the spiral initiated by the turnover tax of 1963. The Government have that worst record because of the manner in which they deliberately set their face against any effort to devise an incomes policy at an early stage and at the appropriate time. We have said before from these benches, and we shall continue to say, because it is true, that Fianna Fáil never think in terms of an incomes policy until the crisis is upon the nation and then it is too late, and it is not the time or the climate of opinion in which to get it through.
With regard to an incomes policy, the Taoiseach, speaking in Mullingar, made this categorical statement as reported in the Irish Press of 6th April, 1965:
We of Fianna Fáil do not believe that any system of this kind is workable. It has not been successfully operated in any country except in Communist countries. We are definitely against it. If we are in Government we will not apply it and if we are in Opposition we will oppose it strongly.
Later on last year the Taoiseach was reported in the Chamber of Commerce Journal as having said at a function of that body:
As regard an incomes policy there are some very vague ideas floating around, and a reiteration of this phrase by many people who seem only dimly to comprehend what it means. There is need to define precisely, and to promote understanding and acceptance of, what are the components of an incomes policy related to our circumstances.
In Mullingar, the Taoiseach said that an incomes policy had never been successfully operated in any country, except in Communist countries. Then he goes on to say:
An incomes policy is a fundamental requirement of continual economic growth, and it is also the foundation of a just social policy, which must involve a degree of income redistribution.
There he went very near the just society but checked himself in time. Again he says with regard to an incomes policy:
In a totalitarian regime it is imposed by government order: in a free democracy it has to be worked out by consultation and agreement. There are many aspects of a sound incomes policy which have yet to be settled, and careful consideration has to be given to the social objectives which should inspire it. These are tasks on which all who have responsibilities in this regard have now to embark.
How could the Taoiseach reconcile that statement with that he made in Mullingar when he said: "We of Fianna Fáil do not believe that any system of this kind is workable"? How can anybody hope to have any confidence in the leader of a Government and the leader of the country, and the present Taoiseach should be the leader of the country but he has abdicated that position both at home and abroad, who changes his mind so blatantly in the space of less than six months? At least I am glad of his conversion if it is a genuine conversion but I doubt it. The Taoiseach has dithered along and has done nothing and has given us good reason to doubt whether his is a real, genuine conversion.
I now go on to quote from a journal of 10th June, 1966, in which there is a photograph of Taoiseach Lemass and contains a heading: "These are the Men to Blame". They give various people to blame for the fact that Ireland is in a sorry mess and they say that in a mere 24 hours that week the typical Irish firm found itself: closed down by the ESB strike, penniless because of the bank strike, frustrated by the continuing delay in the docks and by the British seamen's strike and paperless because of the continuing closure at the paper mills, unable to get its internal telephone system fixed because of the picketing of the Standard Telephone offices. It says that holiday-minded executives found themselves unable to be sure of an air ticket because of two weeks strike notice by 1,500 Aer Lingus clerks.
Here is the answer they offer to the question why these men are to blame. They say that Deputy Lemass and his Government stood by through the critical months of the winter and did nothing save summon the occasional, ineffectual meeting; they say their industrial legislation has yet to appear and is too late to have any immediate effect, that fearful of upsetting an already touchy electorate, Deputy Lemass and his men fell backwards in all directions simultaneously in order to avoid losing a single vote for their candidate.
