Dáil Éireann díospóireacht -
Tuesday, 26 Nov 1968

Vol. 237 No. 7

Committee on Finance. - Financial Resolution No. 4: Wholesale Tax (Resumed).

Debate resumed on the following motion:

(1) That, with effect as on and from the 1st day of January, 1969 wholesale tax imposed by section 2 of the Finance (No. 2) Act, 1966 (No. 22 of 1966), shall be charged, levied and paid at the rate of ten per cent in lieu of the rate of five per cent specified in sections 7 (1) and 11 (1) of that Act.

(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).

—(The Taoiseach).

Mr. Corish

I should like, within the time at my disposal, to look at this Budget not alone in the light of the new impositions, the new taxes, but in the light of what I regard to be of greater importance. Although these taxes have been severe I should like to examine this Budget in the light of our greatest needs: economic growth and the provision of jobs. May I say our greatest failures have been to attain the necessary economic growth and provide sufficient jobs. I do not want any Member of the House to take my word for this. I am sure every Member got the same document as I did, through, I suppose, the Department of the Taoiseach, entitled "Comments on Second Programme. Review of Progress 1964/67" by the National Industrial Economic Council. This is an admirable council which has treated its job seriously and has on numerous occasions given valuable advice to the Government in regard to the First and Second Programmes for Economic Expansion but, unfortunately, did not have it implemented by the Government.

On the very first page of this document we find that as far as growth is concerned the Government have failed miserably in every single sector with the exception of imports and exports. It seems tragic as well that we should in discussing this Budget be concerned with our balance of payments when our exports, particularly our industrial exports, improved so much in the years 1964 to 1967, whilst on the other hand our imports increased as well. The NIEC report that as far as gross national product is concerned we failed to achieve our annual average target. It was similar in agriculture, forestry and fishing, in industry and in consumption, private and public, and in employment.

As a matter of fact, as far as employment is concerned, we find that since 1961 not alone have we not been improving the position in regard to the provision of jobs but we have been losing an average of 1,600 jobs per year. One is, therefore, inclined to ask what price programmes whether the first, second or third, as long as we have the Government adopting a policy which is demonstrated to the fullest in the proposals in this Budget and when none of these targets was achieved? I am convinced that the Budget was framed merely to satisfy the economic theorists rather than have regard to our great need—the provision of jobs and the creation of economic growth.

This Budget, mini or maxi, whatever you want to call it, spotlights the Government's concern to maintain or, indeed, increase our external reserves at the expense of losing employment opportunities. I think it was the Institute for Economic and Social Research which said recently that there should not be anything done now and particularly nothing like what has been done in this Budget because Irish industry was finding itself at a stage at which it could make some move forward in regard to the provision of more jobs. In the last three or four years the position in regard to the provision of industrial employment has not been improved to any great extent. Now we are told by those who should know that if we did not have deliberate deflation at the present time there would be a great possibility of increasing the number of industrial jobs.

I do not know whether or not it will be said in this House or outside it— I do not think anyone on the Government Benches would have the neck to say it—that the justification for this Budget lies in the recent financial crisis we had in Europe and in the world. It has got nothing at all to do with it. The proposals now before the House were decided upon four or five weeks ago or maybe they were decided on even a short time before that or possibly they were decided on before the referendum, but the announcement of the proposals was delayed. The Taoiseach says, and I believe him on this occasion—although that is not to say that I disbelieve him on other occassions—that these proposals were introduced to protect our balance of payments and our external reserves. This is where I join issue with the Government, with the policy of the Fianna Fáil Party with regard to our balance of payments and with regard to our allied external reserves. As I said, this has nothing to do with Europe or with the world. It is a Fianna Fáil Government economic exercise and the Budget would have been introduced in any case no matter what happened in the last week, as, indeed, a similar Budget was introduced in 1964 by the then Minister for Finance, now the Taoiseach, when practically the very same proposals were brought in and, unfortunately, the same damage was caused. One would have imagined that the Fianna Fáil Government should have learned the lesson from the repercussions which followed the introduction of a further Budget in the autumn of 1964.

The European problem is caused by difficulties in the French economy and by the crazy and inflexible world exchange system. This Budget has been necessary because of the mismanagement and ineptitude of the Government. There is no point in the Minister for Finance saying: "We have to do these things because we have an unfavourable balance of payments" because there will be a much more unfavourable balance of payments next year. If the balance of payments is unfavourable this year the Government must take responsibility and if the balance of payments is unfavourable next year it will be the full responsibility of the Government. The proposals in this Budget have been introduced because of the supreme importance which Fianna Fáil appear to attach to our external reserves even at the expense, as they have done and as they are doing, of relegating economic growth and the provision of employment to second place.

The basic job of this or any Government is the creation of jobs. The stated purpose of the First and Second Economic Programmes was the provision of more jobs. We had a target of about 8,700 jobs per year but, of course, that target has gone by the board. The stated intention of those who framed the First and Second Programmes, and I assume they will have the same intention in the Third Programme, was to provide for economic expansion and the provision of more jobs. Our criticism has always been that these programmes were merely pious hopes that these things would be achieved without the necessary action, or the minimum action, being taken in order to achieve them. While that has been the attitude of the Government and of the framers of the Programmes, there is a contradiction in that the Budgets which the various Fianna Fáil Ministers have introduced have been deliberately designed, or if not deliberately designed then unconsciously designed, to ensure that growth would remain static or drop back and that there would be similar regression as far as employment was concerned. It seems to me, therefore, that our workers, men and women, must come second to the sacred cow of our external reserves. Programming for employment is dead.

I listened to the Taoiseach's speech and read it subsequently and I did not see in it any great emphasis on the provision of employment. It did not appear from that document that there would be more employment or that employment would be sustained. On the contrary, underlying all this was the suggestion that there would be hardship as far as the provision of employment was concerned. The targets have been scrapped altogether. Employment opportunities are being sacrificed. Conservative policy makers detect unfavourable trends which violate any or all of the commandments of the financial world. I do not know who the advisers are. I do not know who advises that, in present circumstances, we should inflate in order to defend or to protect our economy. All I know is that the result will be catastrophic for the Irish people generally and for the Irish worker in particular.

As I said earlier, Budgets introduced here have been used consistently not as instruments of economic growth or for the provision of jobs but to defend and maintain banking and other financial interests, interests more concerned in economic theories and the mythical value of high finance rather than in the provision of good jobs at good wages. The sooner senior politicians, those in Fianna Fáil in particular, rebel against this persistent advice given by so-called economic advisers the better.

I have seen the trend in various Budgets under various governments. The advice of theoretical economists is taken, economists who know very little about men and women, very little about prices and the effect of prices on people; the Government should reject this advice and act as humans, not as economists; they should act like people who know the needs of people and who, because they know the needs, introduce measures designed in their own sagacity to protect employment and to expand employment.

The policy being pursued is a cautious and conservative approach to our problems. The proposals in this Budget will have the effect of stopping the growth of industrial jobs. The savage and unnecessary increased taxation will deflate the economy, with dire consequences. We should have learned from the lesson we had two years ago when, as a result of the mini-Budget at that time, there was practically no growth in national income for two or three years. That was the result of the panic measures taken by the Government then. In the early autumn of this year the Government were warned by the Economic and Social Research Institute—I do not know whether the Minister for Finance and the Taoiseach read the report of that body—that they could do either of two things in their general financial approach to the problems the country was facing. They could decide to encourage growth and production and employment by allowing expansion to continue, by not interfering with it or with the purchasing power of the people, or they could deflate the economy to cut down the balance of payments deficit. The latter is what they have done in the Budget proposals before us. They have done that at the expense of existing jobs, the creation of more jobs or the risk of losing some of the jobs that are there at the moment. The Institute warned that the two things could not be done simultaneously. One cannot deflate and expect the economy to expand. One cannot deflate and expect to maintain the status quo or to create more jobs.

We must give credit to the Fianna Fáil Government for their consistency because, once more, they have chosen the second course. They have decided to deflate in order to reduce the balance of payments deficit. They have done so at the expense of economic growth and at the expense of existing jobs. The two greatest needs we have are growth and the creation of jobs. The dramatic impact on the public, as far as this Budget is concerned, is the increase in the price of cigarettes, tobacco, beer, spirits, etc. These are what hit the headlines because newspapers know what is news—cigarettes up by 3d, the pint by 2d, spirits up by 4d a glass and the wholesale tax up by five per cent. That was the first impact of the Budget. Unfortunately, there is another impact. Some will try to compensate themselves for these increased prices and some will be successful in doing so.

Have the Taoiseach and the Minister for Finance considered the repercussions of these increases? Apart from these increases, other increases in prices have been approved by the Minister for Industry and Commerce—tea, bread, bus fares and various other items. What a reduction these will represent in the pay-packets of the workers! Perhaps, the Taoiseach could throw a little light on one aspect. When were these increases applied for? When did those who engage in the distribution of tea ask for an increase in price? When did those who make bread ask for an increase in the price of the loaf? When did CIE ask for an increase in bus fares? Would it be unfair to suggest that these applications were made some months ago and decisions were deferred pending the referendum?

The Taoiseach

It would.

Mr. Corish

I pose the question so that the Taoiseach may clear the matter up. Up to 16th October, apart from one speech in which the Taoiseach gave a gentle warning, things were apparently rolling along fine; we had nothing to fear. However, from 17th October onwards, everything came down on top of the people: tea, bread, bus fares, telephone charges, etc. Is it a coincidence that all this happened a few short weeks after the decision given by the people in the referendum on 16th October? I am not saying this is punishment, as has been alleged by other speakers here; I am saying, however, that a great many of these decisions must have been deferred so as to prop the falling credit of the Fianna Fáil Party during the referendum campaign.

Most speakers here have referred to the social welfare classes. Old age pensioners, widows, the blind and those on unemployment assistance got an increase of 7s 6d from the beginning of August last. What effect will this Budget have on that 7s 6d? How much of it will be absorbed in the increases on the various items I have mentioned? There are, too, social welfare classes who have not yet got any increase. I am referring to those on sickness benefit, unemployment assistance and contributory pensions, both old age and widows. They will get no increase until January next, but in the five or six weeks up to Christmas they will be required to pay these increased prices and these increases will certainly be a pretty heavy burden on these people. They will represent a big reduction in the weekly income, such as it is.

As I said, these are the items that got the headlines. There were no headlines in regard to other items because I suppose unfortunate people do not understand all the repercussions of the Budget. There was no headline about the loss of purchasing power as a result of these increases in taxation and their effect on the level of production and employment. I cannot say with accuracy the number of people who will now be denied jobs as a result of this Budget, but I would reckon the number at something between 3,000 and 5,000. These will not now get the jobs which leaders of industry said they might expect if the economy were not interfered with by the Government. We have all seen the results of other Fianna Fáil Budgets. The evidence is there in their appalling employment record. All their targets, particularly those with regard to employment, have been shamelessly abandoned.

On the last occasion I spoke here on the motion of no confidence in the Government, I posed a query to the Taoiseach about the level of our external reserves. I do not pretend to be a financial expert nor have I many, if any, advisers on this subject, but as an ordinary citizen in present circumstances, and particularly having regard to what is happening in Europe and in other places in the world today I must feel very bewildered. I asked the Taoiseach what was the safe level for our external reserves. To give him his due he is the only Minister for Finance in my term in this House who gave me some sort of an answer. I also asked him to what level could they be run down with safety. I did not get a reply to that question.

The Taoiseach said that our external reserves would be safe at the same level as our imports bill for nine months of the year. I think I am quoting the Taoiseach correctly because I have since checked up in the Official Report. I do not know where we got this nine months. When I queried the safe level for our external reserves the Taoiseach said they should stand at the same level as the cost of our imports for nine months of the year. Where do we get this nine months? Are we following the example set in other countries? Is this the level in Great Britain, America, Denmark, Belgium, Holland or Italy? Is this our yardstick?

We have not very many international records political or financial or otherwise, but we have this record—perhaps, the Taoiseach will correct me if I am wrong—of having the highest level of external reserves in Western Europe. I will go further and say that we have the world record so far as external reserves are concerned. The Taoiseach said our external reserves should be the same as the cost of our imports of consumer goods and raw materials for nine months of the year. Denmark is a country with a record of having progressed in recent years. The yardstick for Denmark is that their external reserves should be the same as the cost of imports for two months. In Norway it is three months. In Sweden it is 2½ months. In Belgium it is 3½ months. In nn Holland 3¼ months. In Canada it is three months. In Japan it is 2½ months, and in Switzerland it is eight months.

We beat them hollow so far as our external reserves related to imports are concerned. We are better than Denmark, Norway, Sweden, Belgium, Holland, Canada, Japan and Switzerland —even the mighty Switzerland. Our Irish banking system has more money abroad, relatively speaking, than Switzerland or any other country. I do not like to accuse the Taoiseach of sharp practice but what was done was that in relating our present external reserves to the cost of our imports for a full year he got nine months. I have given the figures for other countries in Europe and in the world, and I think it is up to the Taoiseach to be a little more helpful and tell the Irish people and the Dáil why it is necessary to have so much Irish money abroad when it is so badly needed at home. Denmark does not need so much abroad, Sweden, Belgium, Japan, Canada do not need so much abroad related to their imports, and I should like to know why our reserves are greater than theirs. Denmark is a country which is often compared with ours but, so far as our external reserves are concerned, we have 50 per cent more. The peculiar thing is that their gross national product is far greater than ours even though we have more money abroad. It reminds me of someone down the country living in penury with thousands of pound notes or plenty of gold under the mattress. The money is not being used.

I do not want all our reserves to be run down, but I do not think we should be the "champs" so far as external reserves are concerned for the sake of having investments in other countries. I must say, therefore, with all due respect that I am not satisfied with the explanation of the Taoiseach. I say we should be prepared to run down our external reserves in order to invest in productive enterprise in Ireland where investment is needed badly. I do not say our external reserves should be dissipated but if some countries consider two months or 2½ months imports a safe level, I do not see why we should be the top with nine months.

I believe that if the Taoiseach had taken the course of running down our reserves it would not have been necessary to introduce these savage taxation proposals and the other proposals contained in the Budget. The Taoiseach gave me this information because I interrupted him but I think we should have a serious discussion on this matter. I do not pretend to be an expert in high finance but it seems peculiar to me that in this situation we have a balance of payments problem and we still have £275 million or £300 million invested in other countries. The other aspect is that while we have this sum of money in our external reserves in order to correct a balance of payments situation we must tax the people and ask them to pay more for the pint for the second time in six or nine months, ask them to pay more for cigarettes, more in wholesale tax and more for whiskey. That is a ridiculous situation and it should be studied more deeply than it appears to have been studied in the framing of this Budget.

This is the difference between the Labour Party and Fianna Fáil or any other Party. We believe that in a situation in which there is a balance of payments problem our external reserves should be used to combat that problem, and not the old device of taxing beer, cigarettes and tobacco and all the other things generally taxed in the Budget. We do not think the people should have to suffer when we have a balance of payments problem and also £275 million abroad. As I said earlier, we believe in putting employment first and Fianna Fáil appear to put financial theories first.

In addition to the effects of this Budget we have the Fianna Fáil mania for free trade. We have had exhortations from Ministers over the past five or six years that we should prepare for free trade and that industry should adapt and modernise to meet the competition of free trade. May I ask the Taoiseach a question? Will this Budget help that? How can Irish industrialists plan ahead when the Government themselves will not plan ahead? How can they plan ahead and decide they are going to expand and develop in different directions if they are not certain what prices will be? Did they know after the April Budget that there would be another Budget which would increase the cost by way of wholesale tax? How can you expect Irish industry to plan ahead when they do not get a lead from the Government which do not seem to be concerned about planning ahead? Trade unions cannot be indifferent to the increases proposed in the Budget and the recent increases approved by the Minister for Industry and Commerce. I know we will get the usual call for restraint from the witch-hunting Minister for Transport and Power and Posts and Telegraphs. I know we will get the usual exhortation from Dr. Hillery, the Minister for Labour.

Will they put themselves in the shoes of those who have to bear the burden? I know everybody has to pay increased taxes. Will they put themselves in the shoes of these people who negotiated wage agreements on the assumption the Government were concerned about keeping prices at a reasonable level? Surely, having regard to these increases they must review their whole position? As a matter of fact, some of these increases were phased out to the extent that they are to be paid in two instalments. These wage negotiations or agreements were drawn up on the assumption that there would not be increases in prices. Would anybody blame them for calling for review? The agricultural worker with £10 per week could not be blamed for asking why he should not get the money to bear these increases. Do the Government understand the position of a man with an average weekly wage of £13 in Ireland today? Will they understand his point of view when he asks how he is going to pay the increased prices for tea and bread and the increased prices proposed in the Budget? These increases which they were guaranteed and which may come as a result of the fixed agreement are whittled away, some by the April Budget, some by the November Budget of this year, and by the price increases over the past six to 12 months

I am not quite satisfied about the attitude of the Minister for Industry and Commerce with regard to price control. A Price Control Bill was introduced into this House with a great flourish of trumpets two years ago following the insistence of the Labour Party. The Minister who introduced it was, I think, Dr. Hillery, and we gave it our wholehearted support. Valuable amendments were proposed by the Labour Party and graciously accepted. Does anybody believe price control is being exercised? I remember Deputies from these Labour benches asking the Minister for Industry and Commerce what staff of inspectors had he got. I would say prices in certain commodities are going up without any approval at all. This is because the Minister's Department is not equipped with adequate staff to ensure price control will be applied as was intended in the legislation passed by this House.

Therefore, there are three reasons which I will describe briefly why the Labour Party reject the proposals. First, we believe these deflationary measures will do nothing but damage to employment opportunities. I guarantee that in three months time such will be the case. The Taoiseach may deny it. Secondly, I believe that the proposals will upset plans for industrial modernisation. All the Taoiseach has to do in that respect is to consult the various industrial organisations and employers' groups to know that is so, and again, to refer to the advice given by the research institute in the autumn of this year that if there was no interference by the Government we could have more jobs in industry in this country in a short time. Thirdly, we reject the proposals because they will seriously affect industrial relations and wage structures.

In addition, there is another serious aspect of Government policy which must be considered in this debate on the mini-Budget. It is, in fact, our utter dependence on Great Britain as a trading partner and the Government's determination to hitch themselves to a country which has the slowest growthrate in Europe. We are the second slowest in growth rate.

Again, when discussing devaluation about two years ago there was a lot of hollow talk from the Government Benches about diversification of trade. Will anybody tell me what has been done? Will anybody tell me what any Government Department has done to diversify trade? Everybody in the House knew then that dependence on Britain and on the British market could mean that if anything happened in Britain economically we would get the backlash of it. The Taoiseach, or his predecessor, talked about diversification of trade. It was said we would go to Europe and sell to various countries. I have seen no figures which show any evidence of diversification of trade at all.

We have the current situation with regard to the new import regulations to Great Britain. This, again, indicates how very vulnerable we are, so long as we keep all our eggs in one basket. What emanated from the question to the Taoiseach today by Deputy Cosgrave was that we are going to prop and guarantee Irish exporters in order to be able to meet all these regulations to the extent of £25 million. Again, it emanated from the question which I put that the Irish taxpayer will have to pay £2½ million for this. Not alone did we get a bad bargain in the Anglo-Irish Free Trade Area Agreement but the Irish taxpayer is now going to pay money for it. Let it be known that if there was another Budget the man who has to pay extra for the pint will be paying for this agreement which the Fianna Fáil Government made with Britain.

We all remember the claims for the Anglo-Irish Free Trade Area Agreement. We were told we were traitors because we voted against it. We were told we were rocking the boat because we spoke violently against the Anglo-Irish Free Trade Area Agreement. The Minister for Finance claimed that agriculture would benefit to the extent of £10 million in the first year and that the Irish farmers would never know a hungry day or a hungry month. It was claimed that Irish industry would be stimulated. It was claimed that there would be competition and Irish industry could face the challenge. This is the second or third occasion on which the British have broken this agreement. We still will not have a review of it. The peculiar or tragic thing about this whole situation is that the Irish Government asked for the Anglo-Irish Free Trade Area Agreement. It would not be so bad if Britain asked for it but the Irish Government asked for it as an exercise to prepare us for admission to the European Economic Community. We looked for it and we certainly got it.

Under recent regulations proposed by the Chancellor of the Exchequer in Great Britain, industrial exporters will be in the difficulty that those who buy our goods in Britain will be required to put down 50 per cent deposit over a period of six months. As well as that, as was mentioned here at Question Time, the British Government propose to implement what the Minister for Agriculture calls a plan. For years and years there was a policy whereby agricultural exports from this country were guaranteed. What did we get out of the trade agreement? Employment did not improve. Agriculture did not improve, and now we find these people with whom we sought an agreement are seeking to try to block industrial exports to Britain. We were told we could get as many cattle as we liked and that, as I have said, the Irish farmer would never know a hungry day again.

Here we are, on the other hand, in the position that not alone are we being subjected to these restrictions by Britain in respect of industrial exports, not alone are we being subjected, or may be subjected, to curtailment of our agricultural exports, but we are even stripping ourselves of the protection that is so badly needed by many Irish industries. I think we are daft. This is an agreement whereby Britain can do anything she likes. This is an agreement whereby Britain can protect her industrial products, whereby Britain can take away any advantage we had as far as agricultural exports are concerned and we are sitting back. We are going over to see Mr. Wilson. We are going to ask him about all this.

Is it not time that we had a review of the Anglo-Irish Free Trade Agreement? If that is not conceded by Britain and by the British Prime Minister, surely this House should be given an early opportunity to review the Anglo-Irish Free Trade Agreement and then let us hear from Fine Gael and from Fianna Fáil and, particularly, from those who spoke in favour of the agreement that has proved a fraud, a fraud that is the responsibility of a former Taoiseach and the colleagues who went with him to negotiate this trade agreement with Britain? They have done all this without consultation. We were told that as far as even small things were concerned, say, the price of soup, nothing would be done without consultation; that with regard to the price of cattle— anything we mentioned — nothing would be done to damage the Irish economy without consultation. Is it not time for us to wake up and to ask for a review of this trade agreement and, for God's sake, to try to negotiate a far better one than was negotiated during the Christmas period of 1965-66?

As I said, we were the only Party to oppose the Anglo-Irish Free Trade Agreement. If anybody read in the last week the speeches that were made by practically every single member of this Party on, I think, 4th, 5th, 6th and 7th January, he will be forced to concede how right we were; he will be forced to concede that we were concerned at that time, not with the waving of a paper in which was contained a trade agreement, but with Irish workers and Irish people. Again, that is demonstrated, if you like, in the circumstances that we have now in which, as I have said, over the last six years not alone have we not improved the employment position but have lost 1,600 workers, on average, for every year between 1961 and 1967. The Labour Party opposed that trade agreement because we believed the balance of advantage lay with Britain and the Labour Party have been proved right in the attitude it adopted in January, 1966.

This has been, in my view, a Tory and most reactionary Budget. It will bring all the consequences in employment and industrial relations that I have mentioned. This is a Budget that will hit the pocket of the man-in-thestreet. This is a Budget that will take from the shopping basket of every housewife. This is a Budget in which the people are now being asked to pay dearly, very dearly, for a Government that are inept.

Mr. Cosgrave

Before discussing the terms of the Budget, I should like to join in the expressions of regret which have been made by my colleagues and from different sections in the House at the absence of the Minister for Finance, Deputy Haughey, through illness. We sincerely regret the circumstances causing his absence from the House and we hope and pray that he will shortly be fully restored to health.

In considering the Budget at the present time we have to consider the whole effects of the Government's economic policy. Since this debate started the NIEC review of what has happened has been published. The examination which that review has made of the economy and the facts which are disclosed in it and, indeed, some of the conclusions and observations made in the report, constitute a most telling and effective indictment of Government policy and the failure of the Government to adhere to the directives laid down in its own programme and the complete inability of the Government and, indeed, of Government Departments, to do the very thing that they say it is necessary to get across to the people — to get the public and the different sections affected involved directly in implementing and working the policy and decisions that have been laid down.

This NIEC review shows that a number of the targets which were laid down for the period 1964-1967 have not been realised and that in the main the failure has been entirely on the side of the Government in respect of their share of the particular section for which they had special responsibility. In respect of a number of the targets as published in Table I of this review, on page 5, it is obvious that the targets laid down in the Second Programme have not been achieved and that in a number of cases, particularly in output from agriculture, forestry and fishing, the actual outturn is substantially below target. In industry there is a shortfall in respect of the private sector in regard to private consumption.

When lectures are delivered by Government Ministers and sections are admonished to live within their means and to produce more, it is important to bear in mind that private consumption was estimated at 3.6 per cent annual growth rate for the period 1964-67 but that the actual outturn reached only 2.6 per cent; and that when we look at public consumption — this applies to expenditure by public authorities — the figure shows that in this respect and in respect of investment, there has been a very substantial shortfall. On the other hand, exports were substantially above the estimated target and employment, as has been said, was very much below it.

This particular review examined what happened and there are obvious conflicts in the conclusions and statements made in certain parts of it. In dealing with the adverse trading conditions which were encountered, especially in the British market, in the early years of the Programme, reference is made to the fact that the British economy grew relatively slowly, that domestic inflationary pressures developed during 1964 as a result of a combination of excessive increases in money incomes, in Government expenditure and bank credit. Then, in the next page, it states:

The measures taken to deal with it were promptly and successfully taken as far as the British levies were concerned.

However, the kernel of the whole report is reflected in a statement later in which it is made clear that in Ireland, Government, management, trade unions, farm organisations and other agencies concerned with major national economic decisions, must all be involved in the planning of programmes, in the provision of the initiative in formulating targets. The Government are primarily responsible for creating conditions conducive to economic progress but, taking economic planning in the private sector, the Government must create a favourable environment through economic and social expenditure and through monetary and fiscal policies. In another part of the report, reference is made to the failure of the Second Programme, to the nuturing of cynicism, and stress was laid on the importance of consultation between those who are charged with pursuing major objectives and public policies and the representatives of those who make the final economic decisions in the private sector.

What has happened here in so far as one major aspect of the economy is concerned, and this has been commented on time and time again, is that the Government have done the very thing the NIEC Report states they should not do. They have failed to consult with the bodies and organisations concerned.

Deputies

Hear, hear.

Mr. Cosgrave

How can you expect trade unions to accept, farming organisations to believe and industry to participate and share in the responsibility for implementing economic policy, if in a number of cases the Government fail to discuss with them and fail to negotiate where necessary with the responsible organisations concerned? I know it takes two to negotiate—perhaps three if there are more organisations involved—but that is what the Government are elected to do—to work with and to serve the interests of the different sections in the community. A number of people in the organisation responsible for this report represent particular sections in the community. Others are nominated by the Government. They have devoted a considerable period of time during the years studying and considering in a responsible way the problems and the difficulties and the measures that must be taken to deal with the situation. But the reason people are cynical and disillusioned, the reason people have no confidence in the Government, is that the Government were found to be unreliable; their estimates were inaccurate and could not be believed.

Deputies

Hear, hear.

Mr. Cosgrave

This country, this Dáil and many Fianna Fáil Deputies, whether they say it or not, have no confidence in the Government.

Deputies

Hear, hear.

Mr. Cosgrave

Many Fianna Fáil supporters have no confidence in them. One reason is that their estimates and statements cannot be believed. I do not know whether they are made in good faith or in circumstances that will create the impression that whatever is said in the easiest possible fashion may be got over quickly and without as much difficulty as would arise otherwise. Almost exactly a year ago when devaluation occurred, in introducing the Estimate for his Department, the Minister for Finance said:

As to the overall effect of devaluation on the price level, it is reasonable to calculate that it should not be more than 2 per cent.

The Economic and Social Research Institute in a report already quoted stated:

It would appear that the full impact of devaluation has not yet been felt on consumer prices, while the effect of the current series of pay increases has likewise yet to become apparent.

The consumer price index in May, 1968, was 4.4 per cent above that for the previous May and 3.7 per cent above the figure for November, 1967. This six-monthly increase is the highest since 1964. The report went on to state that it has been assumed for the purpose of these accounts that there will be a further rise at a later stage. It had already mentioned that the full impact of devaluation had not yet been felt—that the effects would become apparent at a later stage.

Of course, the effect of devaluation was not the only contributory factor in the price rise but the situation has now been reached when we find that the Government, despite the fact that the Minister for Finance when introducing the Budget last May said his estimates were based on the best arithmetical information available, are completely out. The Taoiseach, acting as Minister for Finance, had to introduce a Budget here on 5th November for additional taxes which impose a burden of £15 million more this year or, in a full year, almost £20 million. Even that allows for the fact that the estimates were buoyant to the extent of £7½ million—£7½ million over that which was estimated. Even with that buoyancy and this additional taxation, we face the end of this year with a deficit, shown in the table presented by the Acting Minister for Finance at the end of the Budget, of more than £7 million.

Is not that a fantastic situation for a Government whose advice, it was said six months ago, was based on the best possible calculations? Is it any wonder that the NIEC Report states they have not got across, that they have not got the participation and the cooperation of the outside interests concerned? During a long period we have been repeatedly expressing the view, but particularly during the past nine months and since the debate on the referendum began, that the failure of this Government can be blamed on their arrogance and intolerance. I want to show how that has happened.

They refused to negotiate with the farming organisations. Again, I agree this may not be an easy matter: there is politics in this and we know who started politics in it. Leaving that aside, if one turns to education one sees what happened in relation to the policy for the proposed merger of the two universities in Dublin. In that sphere, which embraces the welfare of so many of our young people, we had the extraordinary situation in which, after an initial announcement and a promise that there would be a White Paper—this was not honoured—the Minister for Education made an announcement on 6th July last: "Those are the terms and there are no other terms either offered or open to the body for consideration." This was another illustration of the arrogance and the dictatorial attitude of the Government. A number of the members of the Higher Education Authority were eminent people in their respective spheres. They were in effect told that, whatever else might be open for consideration by them, they were to understand clearly that the decision on the merger is not open to question. They were told: "You have only to discuss the means."

Surely this is an intolerable attitude to a body appointed by a Minister, because in the last analysis Ministers and Government Departments are there to serve the public interest. I should like to emphasise what happened here over a week ago. We had a good, constructive and responsible debate considering, as a result of a motion brought forward by Deputy P. Hogan (South Tipperary), Chairman of the Public Accounts Committee — this debate was contributed to by Deputies from all Parties on that Committee — a matter about which two officials had a disagreement. We asserted the supremacy of Dáil Éireann. That was asserted and vindicated and we recognised the constructive manner in which the Government faced it. It arose because two public servants about their respective duties had nearly brought the machinery of the Public Accounts Committee to a full stop.

We now have a situation arising in respect of the proposed merger and in other spheres of education. I do not want to speak at length on educational problems but this is a discussion on the whole question of Government policy. We have seen a series of articles written in a recent publication of Studies; these articles were not written by politicians or people concerned in any sense in politics. Again, the same situation was exemplified, as has been exemplified in what happened here in relation to the discussion over the Public Accounts Committee, as a result of an arrogant approach either spearheaded by a Minister or spearheaded because a Minister has allowed his officials to take authority.

Here we have an extraordinary situation in which the Secretary of the Department of Education went to a meeting dealing with post-primary or secondary education. There had been a good deal of discussion about the revised Leaving Certificate. The Secretary spoke in laudatory terms of the grouping of subjects and was in fact flatly downed by every educational group except one. Yet, the afternoon session of the meeting was peremptorily informed that it was the intention of the Department to introduce grouping and it was only after some discussion that it was agreed to have it on a voluntary basis for a few years.

This handing down of diktats by Government Departments is undemocratic and is resented by Irish people in different sectors. It is no use saying that this is a political point of view. This is a view expressed—and I have only read a brief reference from one particular article. There are a whole series of articles all commenting on it. This is in many ways an extraordinary article because it is the accepted practice to preserve the anonymity of the Civil Service and this has been asserted here by all Governments and all Ministers since the State was established. If you want to criticise policy or decisions, you do not criticise officials. The Minister concerned and the Government must bear the responsibility. Here, for the first time, the Civil Service have departed from this practice, and I suppose departed from it with the approval or the knowledge of the Minister, and one assumes that Ministers are reasonable in their approach to what happens in their Departments.

The Government approve and confirm what happened in relation to education. We believe there is a case for the rationalisation of university education in this city. There should be some form of co-ordinating authority. Initially there was possibly a case for some form of single university but, whatever decision is reached or whatever action is taken in this matter, whatever conclusions are eventually reached, they can only be made effective by consultation and agreement. There is no use in the NIEC Report saying that sections of the community must be involved in this if the particular groups concerned are not consulted or are handed a diktat and told that this is the Minister's decision, or that this is the Government's decision and you must make the best of it.

Leaving aside this aspect of the Government we see an extraordinary failure in relation to the policy of the Government over a wide area of the economy. The report in the quarterly commentary by the Economic and Social Research Institute indicated under every major heading with one exception that Government policy had no effect and that there had been a failure to expand employment. More people have left agricultural employment since the target which was laid down in the Second Programme. There are fewer people at work than before either Programmes started, the First or the Second. There are fewer people at work in Ireland. Is it any wonder that this NIEC Report says that the fact that the targets of the Second Programme were not achieved in that period has nourished cynicism where it already existed?

I sometimes smile when I hear spokesmen from the Fianna Fáil benches say that Fine Gael are not producing a policy. There are books produced not by Fianna Fáil but by departments of the civil service, departments that are now spreading all over this city to such an extent that when a question is put down to the Board of Works they do not know where their offices are or who are working in them. It would take up to next February to calculate the number of these departments. It is no wonder that people say that the economic situation is deteriorating because the Government have failed to deal effectively and in a competent manner with the problems that affect the country.

We believe that the people are prepared to make sacrifices and are prepared to pull their weight in a national crisis. They are prepared to discuss, as many have done. Many have spent long hours in discussion in a voluntary capacity in industrial organisations, in trade union circles, in farming organisations and in academic educational services.

It has become fashionable, again possibly not merely through a display of arrogance but ignorance, for many spokesmen to criticise the contribution of religious and teaching orders to education, when much of whatever standard we have achieved would not have been achieved but for these orders. Some of those who are criticising them would not be where they are today but for these religious orders.

I was glad to see the Taoiseach making up for some of the omissions and some of the comments made by Ministers and by people offering comments out of turn, with, I hope, no authority to speak on behalf of Governments or Government Departments.

The Taoiseach

Would the Deputy tell me whom I made up for?

Mr. Cosgrave

The Taoiseach made up for some of the articles.

The Taoiseach

The Deputy is talking about Ministers.

Mr. Cosgrave

I referred to the authority of the Minister for Education. It is the first time that I have seen the Secretary of a Department allowed, off his own bat, to express opinions.

Mr. T.F. O'Higgins

The Taoiseach does not know about that.

The Taoiseach

I know all about it and he was not the Secretary of a Department either.

Mr. Cosgrave

In this sort of situation in which an authoritative publication asserts and suggests that there is a failure to participate, we must start at the top. Government Departments, Ministers, permanent officials, Deputies, we are all there to serve the public, not to dictate to them, and work on behalf of their interests. This Government have failed to meet the burdens which they should have foreseen and forecast in the Budget and, as a result, we now find additional burdens being put not merely on beer, tobacco, post office charges but heavy additional burdens on transport users as well and on bread and tea. Some of these were deferred during the Referendum. Some of them were in the pipeline. It is an extraordinary thing that none of them emerged until after the 17th October.

Deputies

Hear, hear.

Mr. Cosgrave

But leaving that out of it, I listened here today and we have been listening for weeks to the Minister for Transport and Power doing his best to try to explain the situation that has developed in CIE, the situation that has developed over container traffic and liners and what he calls the bunching of buses. What has happened is that the Minister and the Government have become befogged with big words and all kinds of tautological phrases and they have lost track of the ordinary person. The plain truth is that this policy has been put into operation and decisions taken without effective and proper consultation with the people affected. The decision in respect of Cork had to be postponed because of mounting public pressure. There has now been a loud outcry against the increased bus fares. This situation has developed because the Government failed to plan ahead and failed to examine carefully the whole economy to see where it was going. There is not any use in Government Ministers saying that other sections of the community should exercise some degree of restraint in formulating demands when the one authority in the country that should set an example, when the one body that has available to it professional, technical and every sort of advice, cannot even present an accurate Budget, not for 12 months but for six months.

Deputies

Hear, hear.

Mr. Cosgrave

Before six months the figures that have been presented are found to be inaccurate and have been nullified by events, nullified not by external factors, not by a sudden upsurge on the import levies, althoungh undoubtedly there was some variation in these but, in fact, we have had a remarkable growth in exports, a growth in exports secured by our own enterprising industrialists, by farmers working under difficult circumstances and by the fortuitous advantage of British and other continental travel restrictions, in having here an unprecedented tourist season, a season that according to one estimate will mean a rise in income for the current year of over £10 million. That is the situation that has fortuitously affected this country and even with that the Government have allowed the economy to get out of order. We have criticised not merely the lack of consultation and arrogant attitude of the Government to farming organisations, but also their attitude to university and post-primary education and more recently their attitude to the Criminal Justice Bill. I welcome the conversion of my colleague in Dún Laoghaire-Rath-down, Deputy Andrews, who says he is going to vote against it.

Deputies

Hear, hear.

Mr. Cosgrave

It is a late conversion. We have an amendment down for weeks, a reasoned amendment rejecting the Second Reading of the Bill and I am quite satisfied that the Bill will not be proceeded with during the lifetime of this Dáil or, if it is, the only thing it will contain will be what we appealed for, new provisions in regard to flick knives. What is the necessity in this country after almost 50 years of self-government to have more power to control meetings? In other words, you are only going to have a licence to speak if you are given it by a Fianna Fáil Minister or a Fianna Fáil Government. Mark you, I believe there is a remarkable change in Fianna Fáil. I think my old friend, Dan Breen, is right, that when The Chief was there no one was allowed to open his mouth and now no one can stop some of them from talking. There is only this about it, that some of them talk a lot but there is not a great deal in it when you re-read it.

The position is that our economic situation has been allowed to deteriorate and the impact of the recent British decision is a most serious question. We expressed, at the time that this agreement was negotiated, a number of reservations. I do not share the view that we should not have trade agreements. In our time in Government we initiated in 1948 the very advantageous trade agreement of that year with Britain. We subsequently negotiated agreements with other countries. Our proximity to Britain, our traditional business and economic and trading relations with that country have always made it obvious that we must trade and any other view is completely unrealistic — the view, for instance, that we can trade with the Laplanders or somebody else on more advantageous terms than we can trade with Britain. However, the decision to tie ourselves completely by an irrevocable agreement on our initiative was dangerous and had defects and deficiencies which we pointed out when this matter was debated here on the 4th January, 1966. Since then two matters have occurred that have caused considerable concern. One was the fact that, despite the negotiation of this agreement during the term of the special import levy that had been imposed, the British Government failed to withdraw that levy until a much later date.

The serious situation has now arisen that without advance consultation and with the very minimum of notice the British Government have imposed a special import deposit system. In that trade agreement as in a number of similar agreements it is generally accepted that provision is made in a special clause to allow for action in respect of balance of payments difficulties. It is well accepted; in fact, it is expressly included in this that:

Notwithstanding any other provision of this Agreement, either party may, consistently with its other international obligations, introduce quantitative restrictions on imports for the purpose of safeguarding its balance of payments.

That is in Article 18 of the Trade Agreement. Article 24 defines quantitative restrictions as a collective prohibition or restriction of imports or, as the case may be, of exports where made effective through quotas, licences or other measures with equivalent effect, including administrative measures and requirements. That is very wide. It might be regarded as almost of limitless interpretation but there is also in Article 18 a provision in subparagraph (2) which states that the party who has not taken the measures may propose, at any time, other measures designed to moderate any damaging effect of the restrictions or to assist the other party to overcome its difficulties.

The Taoiseach admitted today in reply to a Private Notice Question that the Government regarded this as a breach of the agreement in the spirit, if not in the letter. We should not be mealy-mouthed about this. This is a definite breach of the agreement and we are entitled to take countervailing action. I certainly agree with the view expressed that it is not a matter that we should rush into but we are entitled certainly to consider countervailing action. Whether announcing in advance what action the Government were going to take here to assist Irish exporters and whether, in fact, by that announcement we did not give way straightaway the bargaining position and the fact that we accepted the British decision on it is another question.

We must, I think, consider this not merely in the context of what was done on this occasion but of a recent statement by the British Minister of Agriculture. In this connection again we must take action. A reply which was given to me by the Minister for Agriculture and Fisheries in the House on the 19th instant referred to the British Minister's statement and said it represented a continuance of the established policy of selective expansion which had been followed since 1965. Whether it had been followed or not, is there a breach or is there a conflict with the spirit, if not with the terms of the agreement? When the Minister spoke yesterday — I think this is important—we must consider it in the light of two facts, first, the decision last Friday to operate this special import deposit levy. We must also consider the decision of the British Minister of Agriculture when he spoke at the Farmers' Club in London on 13th instant. He said that these agreements were there and that they must honour their obligation but that did not mean that where some regulation was made to provide greater stability or better phasing of supplies into their market they were precluded from securing this if they went about it in a reasonable and equitable way. It cannot be suggested that the decision taken the other night with minimum notice and without consultation and, as the Minister for Agriculture and Fisheries, in replying to a supplementary question by me, there was no notification or only minimum notification and there was no consultation before this decision was taken, was going about the matter in a reasonable and equitable way.

This is important under two headings. It is important because of the increased taxes in this Budget in which one of the items to be assisted is the production of beef to the extent of £2 million. It this selective expansion is operated it could affect the purpose for which we are taxing our people, in order to assist our own farmers to produce in a particular line. On the other hand, action has already been taken and is foreshadowed in respect of cheese and possibly butter. There is even a warning on bacon. If we take that special statement of the Minister of Agriculture in Britain into consideration and the decision of the British Government to impose this import deposit requirement, I believe there is a definite indication that the British Government are unilaterally breaching the agreement which was made. The country will expect the Taoiseach to indicate in general terms what action it is proposed to take and what decisions the Government have reached on the matter.

There is a very strong case — and in this connection I want to re-emphasise what has been said during the debate —that we should seek—and it is the responsibility of the Minister for External Affairs and the Government —to review and revise our trade agreements with other countries. In the main, our trade agreements have remained static in a number of cases. It is obvious that the initial case made here that the Free Trade Area Agreement was being negotiated as a prelude to EEC membership is now at best in cold storage if not a very unlikely eventuality. When the then Taoiseach recommended this in 1966 he said that the idea of making the Free Trade Agreement with Britain came in the context of certain developments in connection with the European Economic Community. That situation no longer exists. At best it is in cold storage and at the worst it is unlikely to occur for a very long time. It is time that we sought a review of the operation of this agreement and had it re-examined in every detail.

Deputies

Hear, hear.

Mr. Cosgrave

It is unthinkable that an agreement of this sort should be unilaterally repudiated in respect of a very important section and that the Irish people — in the last analysis it is the Irish taxpayer who will have to pay the interest resulting from this arrangement with the banks — should be asked to pay a sum of £2.5 million or so depending on the duration of the agreement and the extent to which it will affect our exports.

Before concluding there is another matter to which I should refer in a debate of this sort because it covers not merely economics but also other questions. Some criticism has been expressed in a number of quarters of the types of debates conducted in this House and the cross-talk that goes on from different sides, or from all sides at times, and the fact that the behaviour is not always constant with what one would expect from responsible, elected public representatives. I believe we get respect and attention for the views expressed if Deputies behave in a responsible and dignified way. I want to say now that I deprecate and repudiate some remarks or behaviour of my colleagues as well as my opponents. They do not represent my views whether in the Front or other Benches. If this House is to function in a responsible way and serve the interests of the people we have an obligation to concern ourselves with the nation's problems and the people's interests in that we were sent here to do the nation's business and to serve the people and not to indulge in endless and futile talk about the past or some present matters of headline hunting.

There was an example last week to which I referred earlier, of a constructive, useful debate to which Deputies of all Parties contributed. Possibly it should never have arisen but the fact that it did arise demonstrated, asserted and vindicated the supremacy of Dáil Éireann. I believe the people of the country will respect that kind of leadership and responsible direction and that it is because they are not getting it and have not got it that they have not responded. I am convinced that if they do get it they will give as good a response as any people gave in previous generations.

The Taoiseach

I propose to deal quickly with the main points of criticism that have been made of this Budget and to deal with the circumstances in which it was drawn up.

I will deal later with the situation which has been caused by the British action in imposing the obligation to deposit certain moneys on the value of imports. The measures in the Supplementary Budget have been criticised on the grounds that they are more stringent than the balance of payments situation would demand, but the critics have been very careful to avoid giving any indication of the degree of restriction that they themselves would advocate.

It is likely that, in the current year, there will be a deficit of some £15 million in our balance of payments and, comparing that with a surplus that we enjoyed last year, our position in this respect will have worsened by some £30 million. The factors which gave rise to the reverse during 1968 are likely to persist during the coming year of 1969. One of these factors is the large increase in the purchasing power of the people caused by pay rises given in excess of output.

During the course of the present year there was a substantial increase in consumer spending and a widening of the gap between imports and exports. There are prospects of further pay improvements in 1969 and in many cases these are likely to be out of line with the expected improvement in output. There are various views as to what our balance of payments deficit is likely to be in 1969 itself. Our estimate is that, without corrective measures being taken now, this imbalance would probably exceed £50 million and, apart altogether from the fall in our external reserves which would be caused by such a deficit, there would obviously be a lack of confidence, not only by our own people, but by foreign investors, in our resourcefulness.

We have had several occasions since the Second World War when the balance of payments went so awry that the consequences we had to face were so dangerous and so inimical to our progress that we certainly would want to avoid a recurrence in the future. Everybody will remember the deficit of £61.6 million in 1951. That was at the end of the first inter-Party period of office. Everybody will remember, too, the drastic action that had to be taken in 1952, in the first Budget that Fianna Fáil had to face after resuming office, and everybody will remember the £35.5 million deficit in 1955 which led to one of the most serious economic situations that this country has experienced. Again, in 1964, there was a deficit of £31.4 million and in 1965, £41.8 million.

All these experiences are much too recent to permit anybody in this country to be complacent about their effects. I might say that we were not on our own because the NIEC in its report on the economy in 1967 and the prospects for 1968 said:

The progress of the economy should, however, be kept under close and continuous review in the latter half of this year to ensure that any tendency towards the development of an excessive pressure of domestic demand (which could occur if money incomes or public expenditure or credit rose excessively) should be quickly identified and corrected. If this is not done, the adverse effect could be felt in the first half of 1969 and stronger corrective measures would then become necessary. The main lesson of 1965/66 is that the occasion for sharp correction should if possible be avoided, because apart from the economic disruption and hardship created, the loss of growth which it entails is greater than can be recouped in subsequent expansion. In all of this, of course, we cannot hope to insulate ourselves from events affecting Britain, our principal market. The fact that determined measures are being undertaken in Britain to hold down costs during 1968 underlines the importance of maintaining a safe relationship between growth in incomes and increases in productivity.

This was a report signed by every member of the National Industrial Economic Council and these members included names like John Conroy, James Dunne, William J. Fitzpatrick, Fintan Kennedy, Charles McCarthy, Donal Nevin and Dominic F. Murphy. I am singling these out to indicate that whatever arguments one might make for increased wages to offset the increased cost of living, these men recognised that increased wages must be met by commensurate increases in output.

Deputy Corish suggested that no intimation whatever was given of the Government's prognostications of the situation, certainly not until after the referendum. However, I would remind Deputy Corish of a speech that I made at the ninth conference of Cumann na nInnealtóiri on 26th September, 1968, in which I highlighted most of these things. This was, in fact, three weeks before the referendum.

Mr. Corish

I give the Taoiseach credit for that.

The Taoiseach

In any event, I said and I quote:

In any event, there have been developments in recent months on the salaries and wages front to which I shall refer later which make any complacency quite out of place. These are pushing up our costs to dangerous levels and have very disquieting implications for our balance of payments position unless they can be matched by increased productivity.

Further on, I said:

Developments just now on the wages and salaries front have to be seen in this context.

—that is the context of productivity——

The current round of increases has resulted, in very many cases, in increases that are beyond the projected and potential growth in national output. What is worse, a dangerous bidding up of claims has now shown itself. In his Budget statement the Minister for Finance stressed that, if excessive spending were generated during the year, corrective action, which is never palatable or popular would have to be taken.

This speech was headed in the newspapers by headings like "Mini-Budget on the Way", "Autumn Budget" and "Supplementary Budget". These were the kind of headings that I intended to generate as a result of that speech.

Mr. Corish

All credit to the press, not to the Taoiseach.

The Taoiseach

At least I got some credit from people who realised that I had the courage to say it three weeks in advance of the referendum. Each of the last two speakers, Deputies Corish and Cosgrave, seemed to suggest that we did nothing unpopular before the referendum and that we let all the troubles pile up and then loaded them on to the people; but I might say in respect of recent increases, CIE increases for example, the request came in the last couple of weeks. Certainly, this was after the decision on the referendum was taken by the people.

However, what I want to say is that no economic commentator would have suggested that the Government could have stood by and let events drift without making some attempt to meet and mitigate their effects. The Government were faced with a large excess of current expenditure over revenue in 1968-69. The principal item responsible was the £9 million estimated increase in public service pay. At the time the Budget was introduced, the 11th round had barely got under way. There was no indication as to the extent of the increases that might be given and I think it would be irresponsible for the Government to earmark a sum that would indicate to all and sundry what kind of an increase there might be. This £9 million is the equivalent, for public servants, of the 11th round pay increase which people in private industry and private employment have got, and it means a rise for all branches of the public service: the Army, the Garda, civil servants including postmen, forestry workers and so on. None of the Government's critics suggested that these people should be denied the 11th round that has been granted by and large.

The other large item comprising the excess was one of £6 million which was made available for the improvement, directly or indirectly, of farmers' incomes. Again, none of those who criticised the imposition of taxes to meet these sums indicated that they should not be made available. In reference to a remark by Deputy John A. Costello last week, that the Minister for Agriculture and Fisheries disclosed a Budget secret by announcing here the increases that were being made available for farmers in the price of milk and the announcement of the beef incentive scheme, let me say, that the Minister for Agriculture and Fisheries made that speech here with my encouragement, with my knowledge and my full permission. There was no suggestion whatever of disclosure of what was contained in the Budget statement. As everybody knows, the Minister had invited both farmers' organisations to come and discuss these two very matters with him, but they refused to do so. The Minister then brought the proposals to the Government, and the Government gave him permission not only to introduce the scheme and to increase the price of milk but to announce them as well. There was no question whatever of prior disclosure of the budgetary provisions.

I may say, too, that this time last year our much-criticised Minister for Agriculture and Fisheries was fighting a hard battle very successfully for which he got very little credit. I refer to the maintenance of the health of the cattle of this country and keeping out foot and mouth disease. Thanks be to God, he was so thorough and so knowledgeable about every aspect of that problem that he was entirely successful.

Instead of imposing taxes, we could, perhaps, have raised the extra money which was required, by borrowing, but this would obviously have only added fuel to the inflationary fire that was already raging and would have put our balance of payments in even greater jeopardy. Instead of doing this we took what I believe was the course of sound reasoning by increasing the taxation on the less essential consumption goods, by restricting hire-purchase credit, by earmarking bank credit for productive purposes and by introducing new incentives to encourage people to save rather than to spend.

There have been some press comments—I must say, rather few—to the effect that the Government should have accelerated out of the difficult situation before 1969 and that, by pressing on the pedal and pushing expenditure above the danger limit, we could have reached 1969 and 1970 in a burst of speed and prosperity. That would be a rather tempting prospect for a Government which is in the last 18 months of office. We could have faced the people in just such a burst of speed and prosperity without indicating to the people that the day of reckoning was around the corner. We would, as the Government, have had to face a day of reckoning ourselves, or, if we failed to secure office, blame the incoming Government for failure to deal with the situation.

Instead of so pressing forward, however, we decided to introduce these moderate restrictions. Instead of accelerating to the point of getting into danger, we decided that we should, as a prudent and responsible Government, effect the necessary remedies now rather than face 1970 in the certainty of the kind of recession we suffered in 1957. It has been suggested that one can spend one's way out of economic difficulties and out of an economic recession. That, perhaps, is quite acceptable in certain circumstances, the theory being that by deliberate injection of purchasing power we generaate demand and therefore give an impetus to increased activity. However, where inflation is not only already present but is very much in prospect in the future, what is needed is a curbing of demand, and I think no economist worthy of the name would seriously advocate spending one's way out of an inflationary situation.

None of the critics of the Government's financial measures tried to contest the basic facts of the present situation or deny that there were economic difficulties. If the facts are correct and if inflationary tendencies exist in the economy and if they continue uncorrected, then they could cause a sharp disimprovement in our balance of payments next year. Therefore, the responsible course of action for any Government to take is to introduce certain moderate restraints now so as to avoid a worse position in a few months' time.

The Government, undoubtedly risked political unpopularity because of our conviction that a moderate check now to inflationary forces was the best way of ensuring continuous and steady growth in the years to come. We took the decision after very carefully weighing up all the economic factors and, as well, after considering the best advice we could obtain from inside and outside the public service. I do not think we are doing too much. We do not anticipate that the measures that have been announced will cause any economic setback or depression. We expect, on the contrary, that the growth rate will be at least four per cent in 1969, almost as good as it was in 1968 and, indeed, in 1967.

Deputy Corish said we are slaves to book economics and are forgetting altogether about raising the level of employment. I should like to refer to the very recently published figures which were circulated to Deputies in the last week or so, the Quarterly Industrial Inquiry for the June quarter of 1968. These figures indicate that the level of employment in transportable goods industries now stands at 189,900, and that is the highest ever; and that the volume of production in the period since the June quarter, 1967, increased by some 10 per cent. The figure of almost 190,000 in employment in the transportable goods industries is an increase of some 3,700 over last year. I am not suggesting that that is a sufficient increase, but I should not like Deputies to go away with the impression that employment is static; it is increasing in these industries over the past few years.

However, with the measures that we have taken if we find that a satisfactory rate of growth is not continuing and, if we find that we have to ease off, then that can be done readily because we can very quickly relax the restraints we have imposed. In recent years we have been advised by international organisations like the OECD and the International Monetary Fund that there was need for more flexible use of the Budget as an instrument of demand management policy. I think the introduction of the supplementary Budget now rather than postponing fiscal action until the end of the financial year is in full accordance with this kind of advice and it avoids the Government's having to rely unduly on monetary measures to ease those pressures of demand.

Somebody suggested that the tax increases and other restrictions we have introduced are excessive because they will in the current year yield £4 million and in a full year £15.4 million plus of course the £3.7 million to £4 million from post office increases. I think it is well to remember that out of every £10 million of new purchasing power about £4 million is spent on imports and, therefore, the converse also is true. Clearly if we withdraw £10 million purchasing power the effect as far as the balance of payments is concerned will only be £4 million or so.

Somebody put forward a suggestion that more stringent hire-purchase controls would have been adequate. This suggestion completely ignores the fact that hire-purchase in any one year accounts for only £7 million or £8 of new credit. Even if hire-purchase were stopped altogether this would obviously do very little to redress our balance of payments. The hire-purchase restraints we have imposed are part, even though a small part, of a package of restraints whose total effect can be expected to take some millions off next year's otherwise excessive balance of payments deficit.

Critics of the Budget from the economic standpoint assert, without any attempt to establish their assertion, that it is too deflationary and that tax increases should have been milder but accompanied by greater credit restraint. Nobody who has put forward this point of view has addressed himself to the question of what exactly can be done now with regard to the balance of payments in 1969. The critics appear to concede that without some corrective measures or correcting action the deficit would be excessive but they do not say by how many millions. Nevertheless, if they concede that the balance of payments has to be reduced by £10 million and accept the example I have given a few moments ago that for every £10 million generated £4 million is spent on imports, then it must be accepted that a purchasing power reduction of £2 million would save roughly £1 million on imports. Therefore, measured in this rough way, the supplementary Budget might be taken as really the reduction of balance of payments deficit in 1969 by about £8 million and nobody can regard this as excessive.

To advocate credit restrictions as the only form of corrective action that should be taken is, I suggest, only a form of escapism. It is scarcely credible that there should be a general credit restriction. It is generally accepted all over the world, at the present time, that credit restriction is a crude form of restraint and often most unpredictable in its effects. Sometimes it tends to go too far and even to strike at the very root of growth. I do not think it could be applied with the delicacy that is needed to differentiate between productive and less productive forms of investment. In any case, at least as much cutting back would be needed in this area as through taxation to produce the desired effect on the balance of payments.

The choice facing the economy was between, on the one hand, maintaining steady growth and, on the other, achieving for a year or so an unsustainably higher rate of growth in production which would be followed inevitably by a serious recession. We have chosen steady growth and we have decided not in any way to allow our economy slide again into recession. Monetary restraint now will help to ensure a sustained and steady rate of growth. It will help to ensure that we will not have to encounter again the problems in unemployment that we had to surmount in 1957.

Some people say nothing should be done—that we should have drawn on reserves. I think it was Deputy Corish who said this. I gave the Government's attitude to drawing upon reserves during the course of my reply to the no confidence debate. I would like to say in respect of what Deputy Corish said about the reserves in the countries he referred to such as Canada, Japan, Switzerland, Holland and some other fairly powerful countries—such as Germany—that they confine their reserves to about 30 per cent or so of their yearly imports. I think the Deputy had in mind what are described as official reserves plus commercial reserves. If we use the second basis, then we would be very much in line with other countries. Our official reserves would be about three or four months purchase of our requirements from abroad.

Mr. Corish

Does the Taoiseach mean bank reserves?

The Taoiseach

I am talking about official reserves. I think the figures which the Deputy has given in relation to those countries he mentioned— Canada, Japan, Switzerland, Holland and Germany—are official reserves as against commercial reserves.

Mr. Corish

I will take it up again.

The Taoiseach

Deputy Corish can come back at me again if I am wrong. In any event a small country like ours which is open to extreme trading vicissitudes, as we are every day, would need much bigger reserves than the very big trading countries with very high gross national products and these we are now very happy to have. France is an example of what happens when reserves are permitted to run down. They ran down there whether they liked it or not. They fell from about 6,000 million dollars to about half that amount and thereby caused not only a crisis in France but a world crisis. In any event, the psychological effect of that development affects the world generally and we must keep our balance of payments in a healthy state to avoid a serious setback here. We maintain reserves at a healthy level because it is prudent to do so.

The rightness of the Government decision to act in this way was borne out by developments in the past few weeks and by additional evidence of inflation coming to hand since the supplementary Budget was introduced. The trade returns for October, which were published a couple of weeks ago show a further big rise in imports and in our trade deficit generally.

I think it is true to say that we should take no one month's figures in isolation in this respect and draw conclusions from them. Nevertheless, when these figures recur month by month over a period, then I think a deficit could arise that no responsible Government should ignore. It would be tempting for a Government to ignore the certainty and to save itself the unpopularity which this kind of corrective action inevitably brings with it. The Government know that the job of governing the economy is delicate and crucial and that it must be tackled in good time with courage and care. The Government know that the price of delay, negligence or indifference is a balance of payments crisis which would set back confidence, promote a calamitous downturn in economic development and cause a reduction in employment. This is a price which this Government are certainly not willing to pay. We are certainly not willing to permit a situation to develop such as existed in this country in 1957, a situation causing the gravest financial economic crisis that this State has known.

I might say that the Government have drawn considerable encouragement from the success of the recent national loan. I think that success was a reward for prudent management— reward to a Government prepared to take their responsibilities in a serious way. I think that success was a reward to a Government who were prepared to take, whatever the consequential unpopularity, the measures we introduced. I think that success indicated that the people were prepared to invest in a Government which they saw was acting in such a responsible manner.

Mr. Corish

What sort of person contributed the money? It was not the people the Government are now taxing.

The Taoiseach

We got less than half of it from the ordinary institutions——

Mr. James Tully

The two Opposition Parties asked for support for the loan and now the Taoiseach gets the credit for it.

The Taoiseach

Are the Deputies sorry we made a success of the national loan? Are Deputies opposite sorry that the people had such confidence in the good management of this Government that they supported the national loan? I am glad the people supported the national loan. I take this opportunity to express my thanks to them and my appreciation of their confidence.

Deputies

Hear, hear.

The Taoiseach

Deputy Corish, Deputy T.F. O'Higgins and some other Deputies alleged that the Government are adopting a dishonest budgetary policy. They suggested we are imposing more additional taxation now than is really needed in order, as they suggest, to build up a strong financial position so that, in the Budget of next year, we can hand out benefits to all and sundry without imposing additional taxation. I do not think any one of those who made such assertions can have taken the trouble to do the most elementary budgetary arithmetic. First of all, the amount we require in order to have a balance in the current Budget, that is for 1968-69, is something in the region of £11 million. The taxation that we imposed will, in this year, bring in something slightly over £4 million. That will leave a deficit of the order of £7 million. I think this can hardly be described as building up a strong financial position for the end of the fiscal year and for the Budget of the spring of next year. I gave some indications of the prospect for next year as far as expenditure is concerned when I introduced these Financial Resolutions a few weeks ago. I said that the extra taxation would produce an estimated £15.4 million extra revenue next year. I also gave the following increases in expenditure next year over this year as an illustration of the growth of outlay. I said that we would require an extra £9 million for Central Fund services; an extra £8 million for Agriculture; an extra £5½ million for Education; an extra £2½ million for Social Welfare and an extra £2 million for Health. These are merely the principal items, and not the total sums of all the items that will increase although they amount, in all, to about £27 million. Total Government expenditure on other services is likely to go up as well. That has been the experience since the State was founded. I do not think there is any likelihood that this trend will not continue into 1969 and 1970.

Another major item that we now have to reckon with, of course, is the cost of reimbursing the banks the interest they would otherwise lose in the support they are giving to our exporters: I shall refer to that later. However, much of the Government expenditure involved is paid out in the form of salaries and wages to civil servants, to gardaí, to the defence forces, and the growth in the salary bill has been a very important factor in the increase in the expenditure. Many of the grants that have to be made to local authorities contain also a very large element of salaries.

Another important contribution, of course, is the rising expenditure on the service of public debt. Our capital programme has expended spectacularly. That programme—in conditions of rising costs—contributes to the general increase that is taking place. The devaluation of sterling has added further to that burden.

There is very little that we can do to control these expenditures. No Government will cut back and reduce the salaries of public servants to a point lower than that which is available in outside employment. Very few Governments would cut back on productive capital investment. No Government will welsh on its obligations to pay the interest due on the money required for capital purposes. The other increases in expenditure can, perhaps, be attributable to policies more amenable to Government control. I refer to the substantial outlays on Education, Health, Social Welfare, Agriculture, Transport and Industry. I certainly, as Head of the Government, make no apology to anybody for the level of our expenditure in those fields. In fact, I challenge any Opposition Deputy to indicate where, and by how much, expenditure under any of these headings can be reduced.

Throughout the debate, many Opposition speakers have mentioned the increases in the price of electricity, transport, bread, beer, spirits, tea and so on. These increases are attributable to a number of causes, the primary cause, in the cases of transport and electricity, being the cost of increased wages. That must be obvious to everybody. In the case of an undertaking such as CIE or the ESB, if wages go up then the cost of the product they produce or the services they give must also increase. That is as plain as the nose on a person's face. There is no point in decrying, on the one hand, the low level of wages and, on the other hand, in advocating increased wages and then, again, decrying the increased costs which are directly consequential on the increased wages.

In some cases, there were external factors, such as currency devaluation, over which we had no control. That applies to tea and to other commodities. Then there was an increase in the price of bread. Everybody was clamouring for better conditions. The farmers got better prices by reason of greater production. That had to be paid for either by increasing the price of bread or taxation, or both, as, in fact, the case was.

Some price increases represent extra taxation. The need to give public servants the kind of pay increases that others have got and the need to give farmers the guaranteed price supports for this year's record production of milk and wheat, all necessitated extra taxation. There have been suggestions that the additional taxation might be regarded as justifying another round of pay increases.

I should like to suggest to those who put forward this idea that they are doing the trade unions, the workers themselves and the country no good in advocating such action. A further round of pay increases now would bring about a two-way worsening of the position—increasing imports because of the greater spending power generated and reducing exports because of making our products less competitive especially in conditions where Britain, our main customer, and other countries are taking steps to reduce their imports, to hold down wages and costs generally.

We all know that, if unit costs are increased and if our wage costs rise faster than those in other countries, then our whole economy is in jeopardy because the advance of our economy is, and must be, based largely on our exports. This is particularly relevant at the present time when the British are imposing severe restraints on domestic consumption and imports and are limiting wage increases to levels justified by rises in productivity. These measures obviously will create great difficulty for our exports to Britain— exports that are very important not only to our economic growth but to our industrial expansion generally. Inflationary pay rises now would really add to these difficulties and would lead, almost inevitably, to a significant reduction in our total exports and in our level of employment as well. I suggest therefore that irresponsible comment about wage increases should be discouraged by everybody, by the Press the Opposition Parties and the trade unions themselves.

Deputy Dillon made a suggestion— perhaps he made it in good faith but I rather expect he made it with his tongue in his cheek—that an import levy on luxury consumer goods would be a more appropriate way of reducing our imports bill. The weakness in this suggestion is, of course, that the kind of luxury consumer goods on which you can put a levy form a very small part of our total imports.

Mr. Dillon

It worked in 1956.

The Taoiseach

In 1956? Yes, it covered a fairly wide range of imports but, as Deputy Dillon will remember, it was accompanied by a very marked downward trend in employment and production. The Deputy will remember that there were almost 100,000 people signing on at the employment exchanges throughout the country at the end of that year. That action dealt a severe blow to our economy generally and I do not think the Deputy can suggest that this is the kind of remedy we should apply now. The range of goods on which we imposed a levy in 1965 represented only about ten per cent of our total imports. Because of the improved standard of living, goods that might have been regarded as luxuries in 1956-57 were regarded as essential in 1965. Hence the reduction in the range of goods covered by the 1965 levy. In 1968, I think that range would have to be considerably further reduced. Therefore the imposition of an import levy on a small range of goods would not have any significant effects on our balance of payments and, in addition, it would bring with it the difficulty of restricting people's choice, importers' choice and manufacturers' choice of raw materials and services. The Government have, therefore, decided to employ fiscal methods rather than import restrictions in order to abate the unduly fast rate at which purchasing power has been increasing.

Deputy Dillon said that he would like our national loans to be linked with the cost-of-living index so as to protect the savings of investors against the effects of inflation. He mentioned that this was done in Finland but the Finns have desisted from this practice because of its inflationary effects and the experience there would scarcely encourage us to introduce such an experiment here. I should like to say this about Deputy Dillon's comments generally in regard to the rate of interest payable on national loans: the Opposition Parties made their usual comment when the national loan was announced but this was the first occasion on which I ever heard a Deputy undermining a national loan while the lists were still open. I deprecate Deputy Dillon's action in this respect very, very much. I do not know whether he made it deliberately or otherwise but, thanks be to God, whatever he tried to do had no effect.

Mr. Dillon

It is the third time I dealt with this in this House.

The Taoiseach

Deputy Sweetman made a number of references to the harmful effects which he believed the increase in the rate of wholesale tax would have on the exports of our manufactured goods. He seems to have overlooked the fact that exports are not affected by wholesale tax. Deputy Governey and Deputy Donegan made some comments in this regard as well. Deputy Governey said, in respect of building generally, that sand and lime were the only building materials outside the scope of the tax. In fact, most basic building materials are exempt. Deputy Dunne stated that the increase in the rate of the wholesale tax would cause the cost of the gallon of petrol to rise by threepence. I should like to emphasise that this tax does not apply to petrol at all. I suppose that Deputy Dunne knew that but thought it was a good point to make.

Mr. S. Dunne

It is nice to get these things clarified.

The Taoiseach

Deputy Donegan said that some items of equipment used in agriculture were liable to this tax but, of course, Deputy Donegan must know that these are exempt.

Mr. Donegan

No, I asked a question: if a farmer buys a hammer for use on his farm is he liable to the selective wholesale tax? You can work it right through from there.

The Taoiseach

The Deputy also implied that tools and equipment for manufacturing industry would be hit. The Deputy with his wide knowledge of industry—I understand that he is the shadow Minister for Industry and Commerce—must know that industrialists who are registered are completely exempt from tax on tools and equipment. The Deputy will come to realise this when he reads more of the speeches that he should read.

Another point that was made by the Opposition was that the Budget introduced last April was inadequate, that not enough taxation was imposed, but apart from the usual complaints about it not having imagination or that it was not progressive enough, that Budget was generally regarded as being adequate for the situation as it appeared at that time. Most commentators accepted the point made by the Minister that, if large uncovered liabilities should arise, he would have to impose additional taxation. I suggest that most Opposition Deputies knew and understood this as well.

While I am talking about the Opposition's comments I might refer at this stage to something that Senator Garret FitzGerald said with regard to the kind of action that should be taken. He was speaking in the Seanad on Friday, 12th of July last and at column 1417 of the Official Report of the Seanad he said:

The mistake made by every Government in this country so far has been to wait too long and then to act too severely. I think that is a fair description of what happened in this country in 1947, in 1951, in 1955 and indeed in 1965.

I do not accept that, of course, because the action in 1965 was timely and——

Mr. Corish

That is because the Taoiseach is a member of the Fianna Fáil Party.

The Taoiseach

——it was highly successful in that we emerged from the economic difficulties that enveloped the whole world much quicker than any other country. Let me proceed with Senator FitzGerald's quotations:

On each occasion, action was postponed too long and then the action required was correspondingly more severe and, in each case, the action was more severe than was needed. We know that now with hindsight. At the time it seemed right. However, each Government in this country has tended to make the same mistake. If there is even a sign of inflationary pressures, if there is anything that begins to be worrying, I hope the Minister for Finance will not be afraid to cut back. If our growth rate is five per cent in the current year it may help to have that slightly moderated. It is better to be wise in time, and take action in time, than to let things go too far too long.

I take it the same Senator is still the economic adviser to the Fine Gael Party. This is the kind of advice he gives in a situation like this.

A Deputy

Silence on that side now.

Mr. Dillon

There is silence here out of courtesy to the Head of the Government, who is speaking——

The Taoiseach

Because I am making a constructive speech. I am not being provocative.

Mr. Dillon

And we are not interrupting the Taoiseach.

The Taoiseach

There are certain things I want to put on the record. During the past few weeks we have heard many suggestions of a general nature in this House, in the public press and elsewhere, as to what the Government should have done or should not have done in face of the present and the prospective state of the economy. None of the critics has ever denied that there is a problem. All, however, pretend that the particular treatment they favour would be painless. To say the least of it, this is naive. If an inflationary situation is to be kept under control, kept from getting out of hand and from causing serious damage in the long run, then there has to be a lessening of excess purchasing power. That, of course, does not take place without the shoe pinching somewhere.

Special import levies, monetary or fiscal measures, may be adopted. Their object is control, that kind of control which will contain the tendency to expand too quickly. Such control is bound of its very nature to affect trends and expectations in certain sectors of the economy and it just makes no sense to pretend otherwise.

I will now turn to the events of the last couple of days, deal with the implications for the Irish economy and outline the course of action we propose to take. First of all, despite what Deputy Corish said, we are, I think, entitled to take some credit for our timely action in this respect. We are entitled to take credit for introducing remedial measures in time, measures of a nature designed to protect our own economy in the face of the present western world economic difficulties.

We are a small country and I do not think we could expect our vulnerable economy to survive undamaged unless we took the right action. We cannot immunise ourselves against adverse world trends. Had we not taken the action we did a couple of weeks ago we would now be driven to taking more serious action, perhaps, and we would probably be accused, and quite rightly, of "doing too little, and too late". In fact, we would probably be described as being "just too late". We acted in good time. We read the signs correctly. The Government have advice open to them. The Government are bound to look around for information. That we did and we are, I think, entitled to take some credit for it.

Mr. M. O'Leary

Is the Taoiseach suggesting that the Government recognised world trends before the countries involved in those trends were aware of them?

The Taoiseach

We knew the trend and we knew the situation developing in France.

(Interruptions.)

The Taoiseach

These recent developments obviously call for comment because of their implications for us and for our plans of continued economic expansion. I have in mind particularly the international monetary crisis and, more particularly, the measures taken by Britain to reduce imports.

Mr. Corish

Their proposals had nothing to do with the monetary crisis at all.

The Taoiseach

That is what they said.

Mr. Corish

The Taoiseach believed what they said when he went to London looking for a trade agreement.

The Taoiseach

I shall deal with that.

(Interruptions.)

The Taoiseach

We took advice from inside and outside the Civil Service, as we are entitled to do. That is what we are bound to do in the interests of our economy, instead of turning our backs on it as, apparently, Labour would have done.

If one can assume that the arrangements made last week with regard to the deutschemark and the franc will last, then what has occurred will not greatly affect Ireland's position in relation to those currencies, at any rate. The old parities will remain. Nothing is changed so far as the franc is concerned except that the internal restrictive measures will probably affect, to some extent, our export potential to that country and the growing tourist business we have been getting from France.

The German export tax of four per cent will make our imports from Germany correspondingly dearer, but our exports to Germany will have the advantage of a corresponding reduction in the rate of import duty. It is certain, therefore, that our exports to Germany will have a better chance of competing successfully.

The British measures have by far the greater implication for us. As the House is aware, the Chancellor of the Exchequer announced these new measures on Friday last, measures designed to reduce demand and imports in Britain. These measures include increased taxation designed to have the maximum effect on consumption— taxation much more severe than we saw fit to impose and this in a country with a huge economy, an economy which might reasonably be expected to withstand the impact of world conditions better than we could. Secondly, there is a general and severe curtailment of credit and, thirdly, and much more important, there is the imposition of import deposits. The measures designed to reduce demand by the imposition of higher taxes and the curtailment of credit will, of course, tend to reduce the flow of imports to Britain. These are virtually impossible for us to counter so far as our exports to the British market are concerned. The import deposit scheme means that, before British importers can obtain clearance of goods through customs, they must make an interestfree deposit with the British Customs equivalent to 50 per cent of the value of the imported goods. The period for which this deposit must be lodged is six months from the time of clearance. The deposit must be paid on imports of manufactured goods. There are certain exemptions—for example, food, feedingstuffs, oil and oil products and raw materials. However, because of the severe curtailment of credit in Britain, the deposit requirements must be expected to create great difficulties for British importers in obtaining the necessary finances to maintain their purchases from other countries. The deposit requirement could, therefore, have a very serious effect on Irish exports. It could affect, in c.i.f. terms, about £100 million worth of Irish manufactured goods, or nearly one-third of Ireland's total exports to all destinations. This would, I think, constitute the highest proportion of any country's exports to Britain; in other words, the proportion is much higher in our case than it is in that of any other country.

It is clear that the direct purpose of this import deposit scheme is to reduce imports. It runs counter, therefore, to the declared object of the Free Trade Area Agreement, which is:

To expand mutual trade and, to that end, to eliminate duties and other restrictive regulations of commerce on substantially all that trade:

In our view, therefore, this scheme conflicts with the spirit, if not the letter, of the Free Trade Area Agreement and should have been the subject, not of prior notification, but of prior consultation. This, as I said earlier today, did not happen. The case for consultation appears to be all the stronger when account is taken of the very high proportion of our total export trade which is affected. As the Dáil is aware, I have sought an early meeting with the British Prime Minister and I intend, without prejudice, to tell him of the steps we have taken to help our exporters, and to try to persuade the British Government to remove these restrictions so far as we are concerned, and to make them fully aware of how we regard their action.

Mr. Corish

Hear, hear.

The Taoiseach

Since the imports deposit scheme is due to come into operation tomorrow and we could not afford to await the outcome of this meeting with the British Prime Minister, I decided to take the action which we regard as necessary to sustain and expand the present level of the export of the products affected. I issued a statement yesterday outlining the action we propose to take to assist our exporters to maintain the flow of trade. As I said in the statement, discussions have taken place between the Department of Finance, the Central Bank and the Banks Standing Committee and following those, the Irish banks have prepared a scheme to assist exporters by providing funds to obviate the difficulties which British importers may have in making the necessary deposits with the British customs. This difficulty of course, is increased by the reduction of the availability of credit which accompanied the other measures taken by the British Chancellor.

As I said also in that statement, the Government will compensate the banks directly from public funds for the loss of interest which the scheme will entail. No liability will therefore fall on the Irish exporters for either the principal or interest. Details of the operation of the scheme are being worked out at present with all possible speed and full particulars will be announced at the earliest possible moment. At this point I should like to pay tribute to the Chairman of the Banks Standing Committee, Mr. Don Carroll, and to all his banking colleagues for being not only helpful but most resourceful in devising and developing, at extremely short notice, simple and efficient financial arrangements to assist Irish exporters.

I hope the prompt action taken by the Government and the banks will encourage exporters to make every effort to overcome these latest obstacles to the maintenance and expansion of our export trade, particularly by increasing their sales to markets other than Britain. The Government are urgently examining ways of helping exporters through Córas Tráchtála and other Government agencies to strengthen their selling arrangements in those markets. Given the necessary energy and resourcefulness on the part of everyone concerned—and the Government have given and will continue to give a vigorous lead in this respect—I am confident that it is within our capacity to make good any losses we may suffer as a result of the latest British measures

I should like to emphasise that the arrangements we have made for dealing with the British import deposit will not interfere in any way with the normal credit facilities for exports and for domestic activity of a productive nature. Indeed, the Government are determined to do everything possible to maintain a high level of domestic production and employment in the year ahead. We will be concerned— and I think it is important to say this —to ensure that the general effect of the British restrictions will not be too severe on our own producers and will not push our balance of payments too far into the red. If that happened we would certainly have to consider countervailing action and we would not hesitate to do what would be necessary.

In preparing the recent budgetary measures the Government had foreseen the possibility that developments in the United Kingdom would create difficulties for our balance of payments. Here I should like to refer Deputies to the speech I made to the Dublin Chamber of Commerce on 24th October, a month ago. Again I am not claiming any prophetic powers except to say we had been keeping our eyes on the situation. By ensuring that we ourselves did not incur a large budgetary deficit and allow personal consumption to grow at too fast a rate, we have taken the necessary steps to avoid difficulties emerging in the balance of payments in the months ahead as a result of excessive domestic pressures. The course of events over the past few days strongly confirms the wisdom of our action and must surely persuade even our most persistent critics that what has been done is in the best national interest.

While the external developments of the past few days are worrying there is, nevertheless, no reason why we should give way to despondency. Thanks to the Government's careful management of external reserves in recent years these should be large enough to cope with a temporary widening of the gap on external account. It is fortunate that we did not listen to those who suggested that our external reserves should be run down. Had we done so we would now have no option but to cut back home demand with consequent repercussions on growth and employment.

Besides the satisfactory level of our reserves, the policy of diversification which the Government have pursued over the past 12 months has added to their value. We now hold much more gold and non-sterling reserves, including credits with the International Monetary Fund and Deutschemarks. Besides, under the recent agreement with the British Government, most of our official sterling holdings are guaranteed in value against any change in the exchange rate between the £ and the US dollar. There is no question but that the Government's diversification policy has been fully justified by the continued unsettled state of the foreign exchanges.

Before I conclude, there are a couple of matters to which I would like to refer. Deputy Cosgrave spoke again about the arrogance of the Government. For some reason he brought in the recent debate—to prove his point —on the motion put forward by the Committee of Public Accounts in regard to the conflict between two officials, the Secretary of the Department of Justice and the Comptroller and Auditor General. I do not want to see any official isolated as the Secretary of the Department of Justice seems to have been in the past few weeks. Every official acts under the authority of his Minister and no doubt Mr. Berry acted under this authority on this occasion. He believed in the rightness of what he was doing and had the Minister's direct approval for it.

The practice in these cases has been to show the files, if necessary in confidence, to the Comptroller and Auditor General. The Comptroller and Auditor General put forward the claim that he was entitled to examine the administrative efficiency of Government Departments. Mr. Berry disputed that with him. The Comptroller and Auditor General has since stated that he is entitled to examine any wastefulness that emerges because of the lack of administrative efficiency.

My main purpose in commenting on this is to make it clear that this Government will not let down a civil servant and isolate him in the course of doing his duty as he sees fit.

Mr. M. O'Leary

Mr. Berry is the Minister for Justice.

The Taoiseach

That is another of Deputy O'Leary's snide remarks. He is not very long in this House and has no experience of administration. When he has he will probably talk with greater restraint.

Mr. T.J. Fitzpatrick

(Cavan): The Minister for Labour cannot believe his ears.

The Taoiseach

Deputy Cosgrave said that the increase in our tourist business was fortuitous. All the bad things happen because of the Government's arrogance and we are not entitled to claim credit for something good. Certainly so far as our export trade has expanded this has been achieved mainly by Government encouragement and by assistance from Government schemes. I think that Deputy Cosgrave or any member of his Party cannot comment with any great effect on this expansion because everybody knows they opposed it in years gone by.

Mr. Cosgrave

The Taoiseach knows that is not true.

The Taoiseach

Indeed, yes. I remember the representatives of Deputy Cosgrave's Party advocating taxes on tourists.

Mr. Cosgrave

I brought in a firm of consultants to clear up the mess created by two previous Tourist Boards.

The Taoiseach

Deputy Cosgrave deprecated the kind of comment his colleagues made in the course of this debate and in recent debates. He cannot escape responsibility for this. He started it in the debate of "no confidence." He encouraged it to continue right through this debate.

I want to refer to two specific aspects of the debate. One is the comment made by Deputy Lindsay in relation to the failure of Deputy L'Estrange to make in public or to an authorised officer of the Garda Síochána a statement he made in this House. Deputy Lindsay said he made information available to me ten years ago which led to a criminal prosecution. I quote what he said at column 75 of the Report of the proceedings of the 12th November:

I gave him information over ten years ago on what related to a criminal charge; I gave him accurate information; I gave him information of full evidential value and how did he use it? He was the relevant Minister and he used it, with the collective authority of the Government to which he belonged, to instruct their then Attorney General to ask the district justice to refuse informations at a time when the district justice was going to return the accused for trial.

This case involved the selling of wool to Gaeltarra Éireann. As a result of whatever information Deputy Lindsay made available at that time I caused an investigation to be made during the course of which statements were taken from many witnesses and these statements formed the basis of a prosecution against an individual of the firm in Dublin. The case was based mainly on the statement of one witness. It was based legally on intent to defraud. That one witness, having made a certain statement, after several days of the hearing in the district court withdrew that statement and made a completely different statement to the police officer in charge of the investigation who duly reported it to the senior counsel for the prosecution. I will make his name available and Deputy Lindsay can consult him if he likes—Mr. Justice Brian Walsh of the Supreme Court. He, having considered the new statement made by that witness, informed the Attorney General that on that evidence there was no prospect whatever of the prosecution succeeding. He asked the Attorney General's permission to withdraw the case and enter an nolle prosequi before the district justice. There was no question of any interference with the course of justice. I have no knowledge whatever what the counsel for the prosecution advised the Attorney General. I had no knowledge whatever, at the time, of the Attorney General's decision. Deputy Lindsay ought to have known that as a practising barrister. He ought to have known that no district justice would permit a case to be withdrawn where the evidence was sufficiently strong. It was only after full advice from the district justice involved and without interference with the Attorney General that the case was withdrawn.

The other matter is the charge made by Deputy Dillon in the House. This is the kind of contribution that Deputy Cosgrave deprecated a few minutes ago. These charges are of a general nature and are demeaning not only to the House but to anybody who makes them. Anybody can make a charge of a general nature. I admire the stand Deputy M.P. Murphy took after that accusation on that occasion.

I want to repeat what Deputy Dillon said at column 338:

"I want to ask him now so that he will have an opportunity of answering it categorically to the House and to the country: is it true, what is popularly believed throughout the country, that Members of his Government have been speculating in lands and making large personal fortunes as a result of their speculation? This question needs to be answered because I can assure him that I have been approached by bankers, architects, prominent members of the solicitors' profession and prominent members of the auctioneers' and valuers' profession and challenged as to why that fact is not ventilated in Dáil Éireann and clarified for the people at large."

Deputy Dillon ventilated but he did not clarify. He made a general charge trying to denigrate the reputation of Ministers individually or collectively. I want to say categorically that no member of this Government has been in any way involved in land speculation. One Minister recently sold a house in which he lived for several years and bought another to which there was also attached some land. That land is in no way earmarked for housing development. Deputy Dillon came in with his acknowledged eloquence and all his experience and said in one breath that he was a champion of democracy while, at the same time, he denigrated the attitude and conduct of subversive elements which abused decent people. That is the kind of charge which is being bandied around —denigrating the Government and shouting "corruption" at them without any proof.

I do not know who the solicitors, bankers, prominent members of the auctioneering profession or architects are. I do not know where Deputy Dillon heard these slanders or heard these people who are mud-slingers and slanderers. They live in some protection and can try to bring down the reputations of members of Government and try to be as subversive as the people that Deputy Dillon deprecates himself. Deputy Dillon by his own acknowledgment is a defender of democracy. He is being equally subversive and equally damaging to the democracy of this House by making these general charges here. It is time they were contradicted. There are very few members of this or any other Government who, having left office, were the richer for it. On the contrary, many people who left this House were in dire straits. We have ample proof of that, at the present time, unfortunately. I do not think I need say more about the matter. This kind of charge has been coming from Fine Gael for a long time, especially on the eve of elections. It came during all the by-elections in which I was engaged since I became Taoiseach. I challenged them to withdraw or prove their charges. They come and repeat them time and time again. It is the lowest form of political activity and is beneath contempt.

I do not want to delay the House any longer. We have come through a difficult period. We have read the signs well. We must recognise that we, in this country, cannot avoid the repercussions of international situations, especially the repercussions of inflationary tendencies and recessions. By foresight and courageous measures we have taken in time the kind of action that will ensure that our economy can continue to expand at a steady rate. We must recognise that we are a small country and that we live mainly on what we can earn abroad. If we look for too much by way of pay increases, Irish industry will be made less competitive. I believe that everybody recognises the position in which we find ourselves at the present time. Everybody who will be honest with himself will recognise that this is not a time for complacency. This is a time, more than ever, for ensuring that everybody will work to the fullest extent of his ability. Everybody will have to examine his or her own conscience to this extent to ensure that he or she is putting at least as much into his or her work and into the economy as he or she is taking out of it.

With an honest approach to these problems, with the kind of guidance the Government are giving, with the kind of management the Government are giving in relation to our national affairs, there is no reason for despondency; we can look to the future with confidence and, as a result of the measures we have taken now, that we have debated at length, we can look to 1969 to be as good a year as 1967 and 1968.

Question put.

The Committee divided: Tá, 67; Níl, 60.

Tá

• Aiken, Frank.
• Allen, Lorcan.
• Andrews, David.
• Barrett, Sylvester.
• Blaney, Neil T.
• Boland, Kevin.
• Booth, Lionel.
• Boylan, Terence.
• Brady, Philip.
• Brennan, Joseph.
• Brennan, Paudge.
• Briscoe, Ben.
• Browne, Patrick
• Burke, Patrick J.
• Calleary, Phelim A.
• Carter, Frank.
• Carty, Michael.
• Childers, Erskine.
• Colley, George.
• Collins, Gerard.
• Corry, Martin J.
• Crinion, Brendan.
• Cronin, Jerry.
• Cunningham, Liam.
• de Valera, Vivion.
• McEllistrim, Thomas.
• MacEntee, Seán.
• Meaney, Tom.
• Millar, Anthony G.
• Molloy, Robert.
• Mooney, Patrick.
• Moore, Seán.
• Moran, Michael.
• Nolan, Thomas.
• Dowling, Joe.
• Egan, Nicholas.
• Fahey, John.
• Fanning, John.
• Faulkner, Pádraig.
• Fitzpatrick, Thomas J. (Dublin).
• Flanagan, Seán.
• Foley, Desmond.
• French, Seán.
• Gallagher, James.
• Geoghegan, John.
• Gibbons, Hugh.
• Gibbons, James M.
• Gilbride, Eugene.
• Gogan, Richard P.
• Healy, Augustine A.
• Hillery, Patrick J.
• Hilliard, Michael.
• Kenneally, William.
• Kitt, Michael F.
• Lalor, Patrick J.
• Lemass, Noel T.
• Lemass, Seán.
• Lynch, Celia.
• Lynch, John.
• Norton, Patrick.
• Ó Briain, Donnchadh.
• Ó Ceallaigh, Seán.
• O'Connor, Timothy.
• O'Leary, John.
• O'Malley, Desmond.
• Smith, Patrick.
• Wyse, Pearse.

Níl

• Barrett, Stephen D.
• Barry, Richard.
• Belton, Luke.
• Belton, Paddy.
• Burke, Joan T.
• Burton, Philip.
• Byrne, Patrick.
• Clinton, Mark A.
• Cluskey, Frank.
• Collins, Seán.
• Connor, Patrick.
• Coogan, Fintan.
• Corish, Brendan.
• Cosgrave, Liam.
• Costello, Declan.
• Costello, John A.
• Coughlan, Stephen.
• Creed, Donal.
• Crotty, Patrick J.
• Desmond, Eileen.
• Dillon, James M.
• Dockrell, Henry P.
• Dockrell, Maurice E.
• Donegan, Patrick S.
• Donnellan, John.
• Dunne, Seám.
• Dunne, Thomas.
• Esmonde, Sir Anthony C.
• Farrelly, Denis.
• Fitzpatrick, Thomas J. (Cavan).
• Flanagan, Oliver J.
• Gilhawley, Eugene.
• Governey, Desmond.
• Hogan, Patrick (South Tipperary).
• Hogan O'Higgins, Brigid.
• Jones, Denis F.
• Kenny, Henry.
• Kyne, Thomas A.
• Larkin, Denis.
• L'Estrange, Gerald.
• Lindsay, Patrick J.
• Lyons, Michael D.
• McAuliffe, Patrick.
• McLaughlin, Joseph.
• Mullen, Michael.
• Murphy, Michael P.
• O'Connell, John F.
• O'Donnell, Patrick.
• O'Donnell, Tom.
• O'Hara, Thomas.
• O'Higgins, Michael J.
• O'Higgins, Thomas F.K.
• O'Leary, Michael.
• Pattison, Séamus.
• Reynolds, Patrick J.
• Spring, Dan.
• Tierney, Patrick.
• Timmins, Godfrey.
• Treacy, Seán.
• Tully, James.

Tellers: Tá, Deputies Carty and Geoghegan; Níl, Deputies L'Estrange and James Tully.

Question declared carried.

Financial Resolutions Nos. 1 to 4 reported and agreed to.