As I was saying before progress was reported, we consider that the immediate impact of devaluation is adverse and that certain new measures are called for to offset the adverse effects in order to get our economy moving again and to protect the weaker sections of the community from the hardships that devaluation will bring if suitable remedial action is not taken. We can detect no sign in the Minister's statement or in Government statements that the Government are alive to the urgency of this problem. In fact, it is difficult to understand why the Government are impervious to the economic effects of devaluation and, in particular, to the social effects.
During the past two years, particularly since the false economic boom that was created in 1964, the effect on the economy of restrictive measures has been particularly severe. These effects were pinpointed by the references made, not merely by the Economic Research Institute, but by the NIEC Report, and in particular in the comments contained in Report No. 11 of the NIEC. That report adverted to a number of factors which contributed to the situation, such as the excessive rise in incomes, the avoidance of which in the future would require a planned development policy, a planned policy for wages and incomes. It referred to the excessive aggregate growth of demand requiring effective action in future to prevent demand rising at an excessive rate particularly when it was stimulated by Government policy. It also adverted to the need for a flexible banking and credit policy.
I refer to these comments which have been referred to already in the debate, because they confirm the comments that were made and the remedies which were proposed in the policy document Towards a Just Society published by Fine Gael in respect of Government economic and credit policy. The failure of the present Government to institute an incomes policy, to control its own expenditure and to operate a flexible and effective credit policy necessitated and resulted in the deflation of the economy in 1965. This deflation or restictive policy, as I said earlier, was so severe that during the first half of 1966 and, indeed, for a great portion of that year, it brought the economy virtually to a halt. When the Minister speaks of a growth in this year in the gross national product levelling up to what was the target laid down in the now defunct Second Programme account must be taken of the fact that a great deal of slack had to be filled in due to the failure in 1965 to measure up and, indeed, last year the economy showed a growth of something like only three-quarters of one per cent. I think the up-to-date figure shows that it was less than one per cent.
The Economic Research Institute commented severely on the fact that this policy of restriction or deflation had continued for much longer than was needed. The time has now come to get the economy moving again. Faced with that situation, with the exception of the relaxation of hire purchase restrictions which was announced belatedly, the Government have done nothing. Time has passed and no action has been taken or was taken to stimulate growth. In fact, but for the comments of the Economic and Social Research Institute no action whatever would have been taken by the Government.
It is well to quote the comments of the Institute on the economy during the last three years. The Institute commented that an unstable boom was allowed to develop in the early part of 1964 and to continue until the middle of 1965, that the increase in money earnings could not be regarded as the sole cause of the boom which took place because consumer credit was allowed to rise pari passu with industrial earnings; that had hire purchase controls been tightened and the growth of personal advances been checked early in 1964 the rise in personal consumption would have been modest.
Similarly, they said, the jump in Exchequer expenditure in 1964 cannot be attributed solely to the increase in wages and salaries; that the increase in the volume of Government expenditure in that year was the highest in the period under consideration; that had action been taken to offset the increase in wages by some curtailment in the volume of Government consumption rather than to augment it by an expansion, the pressure of Government spending on final demand would have been less severe.
The report went on to say that the authorities were mistaken in 1964 in failing to counteract, by appropriate policies, the volume of public expenditure and the availability and attractiveness of consumer credit. The action that should have been taken in the fields of credit control and public spending in that year was finally forced on those in authority in the middle of 1965. The Institute report went on to say that the action taken was probably too vigorous; it was clear, and this was pointed out at the time, that the restrictions introduced in 1965 were maintained for too long. The final comment was the most severe: "Official mistiming has aggravated, if not indeed caused, the economic difficulties of Ireland since 1964."
I mention these things because I believe the time has now come for a review of the methods and system by which economic policy is operated. We have had admissions from the Government that the Second Programme has been abandoned, abandoned because the review has been postponed. Efforts have been made to confuse that review with the annual review next year. Action must be taken now to stimulate the economy in order to ensure that deflationary and depressive policies operated in Britain will not creep in here and operate to affect our economy in circumstances which are entirely different. In that regard it is, I think, well to point out that, if we take the import figures for September and October, we see there has been an actual decline despite the relaxation in hire purchase and the impression created that hire purchase facilities are now more liberal. Actual import figures show a drop for September and October. Allowing for the rise in the cost of living, retail sales for that period indicate that the measures taken to stimulate the economy have not been sufficient. Some more radical measures are necessary to pull our economy out of its present depressed state. National expenditure on investment and on consumption has risen very little and the living standards of our people have been unnecessarily depressed over the past 18 months.
The question is: what action should be taken now to stimulate the economy? We are in a different position from that of Britain. A mere decision to relax hire purchase is not of itself adequate. It is for that reason we advocate effective action in respect of social welfare designed to cushion social welfare recipients against the increase in the cost of living. Nobody suggests that the tax cuts recommended should be other than temporary; they should be designed to offset the increase in the cost of living as a result of dearer imports.
One of the immediate effects of devaluation will be to increase the cost of a number of products, particularly oil products; this will push up distribution costs, thereby affecting transport costs generally and impacting on the national transport undertaking. Tobacco will be affected. Normally a relaxation in respect of tobacco, for a number of reasons, including that of health, might not be recommended, but some relaxation is essential in present circumstances. We are not wedded to one particular commodity more than another except from the point of view of stimulating the economy and, in particular, reducing taxation where it impinges most heavily and where it affects adversely the less well-off sections in the community. Despite the fact that our interest rates are being kept at one per cent lower than Britain—that decision was originally taken by Deputy Sweetman as Minister for Finance—the rise in interest rates will put up the cost of distribution. It will affect house building and therefore house purchasers. Many have commented on the adverse aspect of devaluation in relation to housing. Imported timber is mainly used in house building; indeed, it may be exclusively used in housing construction. The rise in interest rates must affect house building.
Many problems arise. Earlier this year there was widespread concern at the decision of building societies to raise interest rates. The present basic grant under the SDA loan system, with minor variations, is the same as it was 20 years ago when building costs were substantially lower. Again, we are not wedded to any particular form of assistance; the only qualification is that it must be effective.
Another matter that arises is the question of the annual Budget. This is looked upon now as out of date. Here we have had numerous mini-Budgets. We have had action taken by the Government from time to time increasing Post Office charges, increasing charges for this, that and the other. This action has been divorced entirely from the Budget. If we are prepared to take action imposing penalties and additional burdens then we should likewise take effective action to the extent necessary to stimulate the economy. For that reason we believe it is unrealistic to wait until the Budget in March or April next without taking action to stimulate the economy in the interim.
The question of the sterling link has been debated here. There are few topics on which there is more sentimental nonsense talked than there is on the sterling link. That does not mean that the present position should not be reviewed clamly and as a financial and economic matter rather than a sentimental one. It is an economic fact that more than threequarters of our trade is with Britain. That means that any action taken by the British Government must affect our economy.
We have had, in the course of this discussion, to consider the present position whereby, by statute, we retain parity with sterling. I believe, as was said in the course of this debate and even here this evening on an entirely different topic, that the time to consider this is when there is no immediate crisis. Such matters are better considered when there is no impending crisis or urgency. As I understand it, there was an announcement some time ago by the Central Bank and the Department of Finance that new banking legislation was on the way. If there is one criticism that can be levelled against the Central Bank it is that it is too lethargic in its action and that criticism can also be expressed against the Department or the Minister for Finance.
Decisions affecting business and commerce must be taken quickly if they are to be effective and if the action is to be of benefit to the interests concerned. I believe that one of the criticisms expressed in the report of the Economic Research Institute and implied in the report of the NIEC, if not expressly made, I think, in one comment in it, was that the action taken was too long-delayed to have effect; that, in some cases, action was too severe and, in others, because it was too long-delayed, was ineffective.
The present development over devaluation highlights the need for this country to make strenuous efforts to diversify our exports. We have undoubtedly so endeavoured in the past and negotiated a number of bilateral trade agreements. With the idea that EEC membership was a possibility in the reasonably near future, action to review and revise these agreements was deferred or postponed. It is now quite obvious, and I think we must face it, that the possibility of EEC membership has receded. We must see what steps can be taken to secure either through bilateral agreements or through direct negotiations, alternative outlets for our exports. It is, therefore, essential that the question of trade in general be considered in its widest context.
The question I was commenting on— action in respect of legislation to deal with this problem—should be considered detached from a crisis or a situation such as now exists or was present in the past week. Nothing is less conducive to economic progress than panic or uncertainty. In the past week, we have seen across the water scenes the like of which have not been witnessed since the 1929 financial crash. At the same time, the lethargic approach, the traditional approach, of the Central Bank is entirely inappropriate in modern conditions. After an announcement that legislation is being drafted, action should follow introduction of the legislation. I want to urge that this problem should be considered on its merits and, if necessary, to give this country statutory powers which would enable a government, by Order, to take a decision rather than have it copper-fastened in a particular piece of legislation.
One of the matters the Minister adverted to in his speech was the effect this would have on our trade. I believe this decision now makes it imperative that we review the Anglo-Irish Free Trade Agreement. That agreement was initially negotiated and accepted on the understanding that it was an essential preliminary to ultimate membership of EEC. If we continue under the existing terms of the agreement, and with EEC possibilities getting dimmer and obviously being more remote than they were or we were led to believe they were, then it is essential that we examine the effects of a continued reduction in tariffs in respect of industrial goods. All the comments that have been made on devaluation would appear to indicate that while the prospects in respect of agriculture, in respect of livestock, in respect of foodstuffs, may be reasonably satisfactory, the prospects in other respects, in respect of industry because of the increased cost of raw materials, and so on, must mean that we should review and avail of the provisions in the agreement to review the effects of them at the earliest possible date.
The effects of devaluation make it essential that we review this agreement, particularly bearing in mind the continued reduction in tariffs and the emphasis now being placed in Britain on increasing exports. The steps being taken there to provide an incentive for industrial exports will have repercussions on industry here and may well affect employment and cause problems for which immediate action is essential.
In the course of the debate, reference was made to the decision to transfer certain Departments or sections of Departments to provincial areas. I want to try to find out from the Minister and the Government if there is any plan for decentralisation. In 1957, when Senator Dr. Ryan was made Minister for Finance, he announced in his first Budget a plan for reorganisation of the Civil Service and promised a reduction in the number of civil servants. That plan is now like the Second Programme. It has disappeared under the carpet. If the numbers are taken, it will be found that there are now not fewer civil servants but more civil servants. When that decision was taken, it was welcomed by newspapers and commentators as imaginative and progressive and every adjective considered suitable was applied to it. It is as dead as mutton. In 1966, the present Taoiseach, when Minister for Finance, announced the establishment of the Devlin Commission to review the position.
Now, obviously without any plan, without any thought as to the problems and, worst of all, without any consultation with the interested bodies representing the civil servants concerned, a decision was taken to locate some undefined section of the Department of Lands in Castlebar and some section of the Department of Education in Athlone. I think everybody accepts, and it was made clear in the course of this debate, the desirability of securing a proper spread of economic development throughout the country. The present situation in which most growth is concentrated in the area immediately around Dublin while large parts of the rest of the country are left in decline is highly undesirable. That situation has developed because of a lack of long-term economic planning over many years. It can only be remedied by the adoption of a properly thought out plan and by implementing Government policies designed to bring about permanent and continuing economic development.
These policies are needed not only in the agricultural but in the industrial fields. To suggest they can be solved by spreading Government Departments around the country is both dangerous and irresponsible, because not only will this action not contribute significantly to solving the underlying problems of these areas but serious damage could be done to the efficiency of our public service at the very time when the Government are urging industry, agriculture and other interests to become more efficient either to face the competition of free trade or the competition inherent in membership of the EEC.
Deputy Lemass, when he was Minister, particularly Minister for Industry and Commerce, criticised the fact that in his earlier years as Minister his Department was located in different buildings. He waxed eloquent on the delays, the frustrations and the problems which militated against the effective running of a Government Department because it was dotted all over the city. Here, without any plan, we propose to dot different portions of Government Departments not in the city but piecemeal in the country. It is essential that we have the highest standard of efficiency in the public service. What I want to know is: when are the Government going to adopt a plan and stick to it? We had the Ryan plan in 1957 and we had the present Taoiseach as Minister for Finance establishing a committee in September, 1966. I do not know who is the father of this plan; apparently the parentage is divided.
The committee set up by the Taoiseach as Minister for Finance was to inquire into the operation and working of the public service. It is now being provided with certain additional assistance, according to the Minister. The issues involved in the committee's investigations are so far-reaching that before taking any final decision, there should have been an exhaustive public discussion. It is obviously unsatisfactory to take a decision of this character in advance of the report of the Devlin Commission. Experience has been that traditionally various branches of Government are concentrated in the capital city to be in close proximity to Parliament, to have public advisers available for the Ministers and to ensure that they will be reasonably accessible when required for consultation and discussion.
There are, of course, other objections to the proposal. We have consistently urged the need for administrative devolution but there is no evidence that there is to be administrative devolution. At present a variety of functions are administered by the Department of Local Government which act in a restrictive way on local authorities from exercising their responsibility. Housing schemes, water schemes and a lot of schemes of a particularly local character come up time and again for examination and discussion with the Department of Local Government and inevitably delays occur. Even with the best will in the world, not to mention the restrictions which Ministers have been operating in recent years to prevent or delay housebuilding programmes being put into effect, the result is delay and frustration. Apparently that situation is to continue.
That is the type of situation in which proper devolution of authority and responsibility could be regarded as effective policy but merely to send a couple of sections of several Departments to some provincial centre is a political decision taken for a political reason. I am all in favour of building up provincial centres, but on a sound basis and not on the basis of a political decision to keep a centre satisfied until after the next election. The general experience of Deputies and Senators who are members of local authorities and, indeed, of members of local authorities who are not Deputies or Senators, is that local authorities are frustrated by the number of occasions on which matters have to be referred for decision to the Custom House, and by the complication created by the fact that the manager in most cases is not certain whether he is the servant of the local authority or the servant of the Minister for Local Government. Under the Act, the manager is subject to the local authority but experience has shown that a great many managers are trying to do a tight-rope act, keep the local authority on hands and not offend the Minister for Local Government.
This particular policy appears to have little to recommend it. I suppose one town feels as much entitled to this as another. It seems extraordinary that of all the Departments, it was decided to transfer the Department of Lands to the constituency of the Minister for Lands and to transfer the Department of Education——
