In view of the detailed analysis of the economic situation given by the Taoiseach last November and the number of documents currently available reviewing the economy, I do not propose to give more than a broad outline of economic trends in 1968. Detailed information is contained in my Department's "Review of 1968 and Outlook for 1969", the comments of the National Industrial Economic Council on that review and the annual survey of the Irish economy published by the Organisation for Economic Co-operation and Development.
1968 was the best year in our economic history. The main objective of economic policy during the year was to keep the economy on the path of steady and substantial growth without imposing an undue strain on the balance of payments. We achieved a growth rate of 5½ per cent. The balance of payments outturn was not unsatisfactory. The actual deficit, £20 million, was not much above the £15 million projected at this time last year, though it represented a swing of £35 million from the surplus of £15 million in 1967.
Industrial production increased at the remarkable rate of 11 per cent and reached a record level in 1968. While an expansion of domestic demand contributed to the rise, exports were the main source of growth. The stability of unit wage costs resulting from a productivity rise which virtually offset a sharp increase in wages contributed to a 30 per cent expansion of industrial exports. This gain in productivity was based largely on the taking-up of slack capacity in industry and may not be experienced in the same measure in 1969.
In building and construction, there was a marked rise in the volume of output in 1968. Agriculture too had a good year. Thanks to substantial increases in crop output and to a rise in livestock numbers, a growth rate of up to 6 per cent seems likely on the basis of provisional figures.
Employment outside agriculture increased and is likely to have more than offset the continuing decline in numbers engaged in agriculture. In the last quarter of the year, employment in manufacturing industry was 6,400 higher than a year earlier. At the end of the year, unemployment was below the level at the end of 1967, while emigration was approximately the same.
Both industrial and agricultural exports showed satisfactory increases, although agricultural exports lagged behind the others mainly because supply difficulties limited the volume of cattle and beef exports. In the balance of payments, net earnings from invisible transactions were boosted by high receipts from an excellent tourist season.
As I envisaged last year, imports grew rapidly throughout 1968 from the abnormally low base in 1967. This was associated with a quickening rate of growth of consumer expenditure which rose by five per cent over the year as compared with 1½ per cent in 1967. The main factor in stimulating this rise was the substantial increase in incomes, accompanied in many cases by the promise of more in 1969.
Despite the generally favourable trend of production, employment and exports in 1968, the threat posed by the rapid rise in incomes, consumer expenditure and imports necessitated the corrective measures introduced in November.
International monetary situation
During the past year, we pursued a policy of diversifying our currency reserves and acquired a creditor position in the International Monetary Fund. We agreed to release part of the Irish currency element of our subscription to the Fund for use in convertible form by countries in need of foreign currency. As a consequence, we have become creditors in the Fund to the extent of £13¾ million.
Under the Basle arrangement for the support of sterling, we in common with other members of the sterling area, received from Britain a guarantee of the maintenance of the dollar value of the greater part of our sterling reserves. On our side, we have agreed to maintain a minimum of 65 per cent of our official reserves in sterling.
Unfortunately, the international payments system has been showing increasing signs of inadequacy, and the past year witnessed further strains upon it and upon the principal international currencies. It is a tribute to the system's resilience and to the ingenuity of the many ad hoc arrangements made to support it that it continues to function reasonably well. However, one must note that surplus countries have been hesitant to aid international liquidity by substantially reducing their surpluses, while countries with balance of payments difficulties, such as the United States, Britain and France, have adopted increasingly defensive policies.
Although few are satisfied with the present system, a consensus is lacking on what should be done to improve it. There is fairly general acceptance of the new special drawing rights scheme of the International Monetary Fund. For our part we have accepted it and passed the necessary legislation to enable us to participate in it. I hope that our fellow-members of the Fund will agree to its early establishment and implementation.
Even if there were general agreement on further improvements, it would take time to bring them into effect. We must, therefore, base our short-term policy on the assumption that the external environment will be one of continuing uncertainty.
Foreign trade
The most important element of our foreign trade is our trade with Britain. The Anglo-Irish Free Trade Area Agreement is working well and has substantially justified the hopes we held when entering into it. Between 1965 and 1968 the annual value of the total trade between the two countries has risen by 38 per cent. During the same period our exports to Britain increased by 46 per cent—from £160 million to £234 million. A striking feature of these trends is the remarkable growth in our exports of manufactured goods to Britain which rose by 78 per cent.
During the second half of 1968 there were some developments which affected the smooth working of the Free Trade Area Agreement. I refer, in particular, to the British import deposit scheme and to British proposals for restricting supplies of cheese to the United Kingdom market. These matters were of sufficient importance to warrant a series of ministerial discussions which took place from November to March
The Government, in co-operation with the Irish banks, devised a scheme which ensures that, so far as our exporters are concerned, there will be no difficulty about financing the deposits on Irish goods entering the UK. While this scheme has gone a long way towards enabling Irish exporters to maintain the rising trend of our exports to the UK, we cannot insulate our exports against British measures for the curtailment of internal demand which affect British as well as imported goods.
In making the arrangements for exports of cheese to the UK market for the two-year period ending March, 1970, we emphasised that we do not regard voluntary restriction arrangements as a normal feature of the Free Trade Area Agreement, and we reserved all our rights in regard to the future. This position was accepted by British Ministers.
It is clear that the Agreement can bring considerable benefits to both economies and that there should be continuing close contacts at ministerial level to ensure that any difficulties arising are resolved promptly and that the agreement realises its full potential.
While Britain is and will for a long time remain the principal outlet for our products, it is important that progress should be made towards greater diversification of export markets. Our experience in the British market in recent months emphasises the need to hasten this process.
In the long term the best prospect for diversification of markets lies in membership of the EEC. Recent political events have led to speculation on the possibility of the opening of negotiations with the applicants for membership, including Ireland. The Government are following developments closely but, while it may be permissible to hope for a more fluid situation favouring progress towards the enlargement of the Community, it is, as yet, too early to form an opinion about the likely course of events. I would like to emphasise, however, that, despite present uncertainties, it will be in the long-term interests of our exporters to have secured a foothold in the EEC market when membership becomes a reality. This applies particularly to industrial products since, until membership is achieved, the prospects for industrial exports to that area are much better than for agricultural exports.
To find new markets is a top priority. Córas Tráchtála is charged with the task and has been provided with substantial additional resources to enable it to do so. Another field to which increasing attention will be given is the development of new products for export and finding ways of harnessing the talents of our young scientists and technologists to this end.
Outlook for 1969
The autumn budget was designed to moderate the rate of increase of domestic demand in 1969 and make it possible to maintain economic growth at a satisfactory rate without allowing the balance of payments to get out of hand. This strategy was founded on a careful assessment, based on such information as was then available, of economic prospects in 1969 and, in particular, on the likely trend of demand pressures.
During the early months of this year certain adverse trends persisted. Demand pressures remained high despite the appeal which the Government made in January for restraint in requests for pay increases. The settlement of the maintenance craftsmen's dispute at a level far beyond any likely increase in production would have had the gravest consequences for the economy if, as seemed possible at one stage, it set a headline for general pay revisions. The Government were, understandably, concerned since such a development would have made it impossible to sustain the rate of growth which the economic indicators showed to be within our capacity this year. Thanks to the responsible reaction of the trade unions and other groups, that danger seems to have receded and the economy's prospects for 1969 can now be viewed with less apprehension on that score.
The indications are that the growth rate will be about 4½ per cent. This means that 1969 will be our third successive year of satisfactory growth. There are, however, some warning signals. Export expansion is likely to be slower than last year because of less favourable conditions in our main export markets, and the recent interruption of industrial production has probably lost us a number of export opportunities. At the same time, the pressures carried over from last year are likely to cause a large rise in imports of consumer goods and raw materials for further processing. Capital imports will be swollen by exceptionally heavy purchases of aircraft. Allowing for a rise in net invisible earnings, the likelihood is that the balance of payments deficit will be about £55 million. Even if aircraft imports are excluded on the basis that they will be financed in the first instance by foreign borrowing, the deficit is likely to be £40 to £45 million. This is still large but must be viewed against our strong reserves position, the voluntary capital inflow and the prospects of substantial increases in output, savings and investment.
Investment, both private and public, is likely to be vigorous in 1969. The ratio of total fixed investment to gross national product should not be far short of 22 per cent.
Incomes
The background to this year's Budget is dominated by the incomes situation. Developments on this front in recent months have been responsible for the basic approach to the strategy of the Budget. With a view to working out an acceptable, realistic policy for incomes this year in which budgetary measures would play a vital role, the Government initiated a programme of wide-ranging discussions with all the parties involved.
The prospect of a growth rate of over four per cent in 1969 means that we can reasonably allow the general level of money incomes to rise by that amount in sharing the fruits of our advance. Coming on the heels of the exceptional rise of 1968, this would represent a substantial average improvement over the two years. However, the particular settlement I have already mentioned, representing more than four times the expected growth in national production, set a dangerous pattern early on. The Government have been active in alerting public opinion to the dangers involved in sharply rising prices which affect particularly the lower-paid and weaker sections of the community and threaten employment.
The rapid recognition of these dangers by employers and employees alike was encouraging and there is every reason to hope for a united effort to avoid them. This would remove the most dangerous threat to our chances of a further year of substantial improvement in 1969 and would be of enormous benefit, not only in its material aspects, but also in the confidence it would create in our combined will and ability to overcome similar dangers in the future.
There is widespread agreement that any general restraint should not extend to lower-paid workers and that a special effort should be made to improve their position and that of the poorer and weaker sections generally. Any attempt to do this would, of course, be impeded and, indeed, negatived if other groups were to insist on maintaining differentials and relativities.
The Irish Congress of Trade Unions, which held a special consultative conference to discuss the situation, has pointed out that the majority of wage agreements do not terminate before the end of 1969. It has called for urgent action to improve the position of the low paid by substantial increases in family allowances and for effective action by the Government to restrain non-wage inflation by price control and other appropriate means.
It is reasonable to infer from this and other trade union statements of a similar nature that, if the Government take action along those lines, the trade union movement will not seek to alter existing agreements which run to the end of this year and will pursue a policy of moderation in negotiations where agreements have already expired or will expire during the year. The Government welcome this response which accords fully with our social and economic policy regarding the rights of the less well-off sections to a growing share of increasing national prosperity. The Government are prepared to play their part in facilitating the development of incomes along these lines in 1969. We have decided, therefore, to make substantial improvements in the main benefits payable under the Social Welfare code, which I will shortly announce. I propose also to apply to public sector pay the general policy already outlined and to take related action to which I shall come at a later part of my statement.
Rise in Government expenditure
While the budgetary proposals I will announce are of more than usual importance this year in relation to incomes, the major part of budgetary policy is contained in the expenditure proposals published some weeks ago. Accordingly, before coming to to-day's budgetary measures, I intend to deal with the current expenditure set out in the book of estimates and to comment on the growth of that expenditure
A year ago, I drew attention to the huge rise in social expenditure generally and in aid to agriculture. I pointed out that current Government outlay on social welfare, education and health had more than doubled in the decade to 1968. Outlay on the economic services and on the improvement of the growth infrastructure has also been buoyant. This rise in expenditure came in response to the need to strengthen the social and economic framework of the national economy.
The Government's continuing desire to increase social expenditure and to help agriculture is again evident in this year's volume of estimates. The total of non-capital outlay is £298½ million. This is £41½ million, or 16 per cent, up on the figures in last year's volume. Over £31 million, or more than 75 per cent, of this rise is devoted to the social services and to agriculture.
Agriculture
Total Government expenditure in relation to agriculture is estimated at about £81 million for 1969-70, compared with £78 million in 1968-69, and £38.5 million in 1963-64. Two items account for well over half of the £81 million. In 1969-70, support of creamery milk prices will account for £27 million, which is £6 million above the original estimate for 1968-69, and relief of rates on agricultural land will cost over £19 million—an increase of more that £2 million on the previous year.
The cost of supporting creamery milk has risen from the comparatively modest sum of £6 million in 1963-64, to an estimated £27 million in the present year. The dairy industry is, of course, a key one and is closely linked with the cattle industry, which gives us our largest single export. At the same time, the Government are, naturally, concerned at the steeply rising cost of supporting creamery milk, especially at a time when the return from marginal markets represents no more than about 2d per gallon at the creamery exclusive of the value of skim. The reasons for the high bill are the low prices on export markets, due to over-production all over the world, and the increase in production here. The more money is required for support of creamery milk, the more difficult it is to find the additional funds needed for other sectors of agriculture. For all these reasons, the Government decided that the last increase in creamery milk prices should be on a selective basis and intended to benefit mainly the small and medium-sized producers.
In view of the depression in export markets for milk products, it is, obviously, a sensible course to give increased incentives for beef cattle production, and this has been done under the recently-introduced Beef Cattle Incentive Scheme. The response to this Scheme has been encouraging. It will cost about £1 million this year, but expenditure is likely to increase considerably in later years.
Because of increased State support for the relief of rates on agricultural land, net rates on such land are at approximately the same level as eight years ago. With the complete exemption of small farms with a land valuation not exceeding £20, only one farmer in three now pays rates on land.
The cost of supporting agriculture now represents a very significant proportion of the Budget and Government expenditure accounts for a large part of the increase in farm income in recent years. It is the Government's policy to preserve a reasonable relationship between farm and other incomes. The Government, therefore, will, throughout the year, watch carefully the development of farm incomes in relation to the movement of incomes in other sectors.
As stated in the Third Programme, studies are in progress to establish whether the best results are being secured from the heavy State expenditure related to agriculture. When these studies are completed, they will be published as a basis for public discussion. In reaching decisions on these studies, the Government's aim will be to ensure that the agricultural community gets maximum benefit and that national resources are allocated to the best national advantage.
Agriculture again made very good progress in 1968. The value and volume of output broke all previous records. As I stated earlier, provisional figures indicate a growth rate of 6 per cent. Agricultural exports totalled £155 million. It is provisionally estimated that farm income went up by about 16 per cent, as compared with 10 per cent in 1967, and that those engaged in agriculture not only held their position relative to the rest of the community in 1968, but improved it somewhat. This is, indeed, a welcome development.
As regards 1969, it is, of course, too early to attempt an income forecast, but there seems no reason not to expect another good year, assuming favourable weather for the rest of the year and no disruption of prices on export markets.
Education
The non-capital estimates for education amount to £51¾ million. The corresponding figure for 1959-60 was £15¾ million. This vast increase is compelling evidence of the Government's commitment to improve the prospects of our young people.
Within the past three years, there has been an increase of almost 25 per cent in the enrolments in second level schools and of 2,500 in the number of university students. As a consequence, the school building programme has been stepped up and there has been a considerable expansion in the recruitment of teachers. In the present financial year five of the Regional Technical Colleges will be opened, additional comprehensive schools will be built and new services, such as a nation-wide scheme of career-guidance masters in post-primary schools, will be introduced.
The growth in numbers in whole-time education will continue. The number of students is expected to increase from 695,000 in 1968 to 760,000 in 1972. Most of this increase will be in the number of post-primary pupils. Thus, over the next few years, we will have to meet a continuing growth in expenditure on education.
Social Welfare
In the past five years expenditure on social welfare has risen from £52½ million to £81 million. This year, it is estimated that £85 million will be spent on existing services before today's increases are taken into account.
A special feature of the growth in social welfare expenditure has been the shift in emphasis from non-contributory to insurance, or contributory, arrangements. The increases of recent years have been far in excess of the rise in the consumer price index and have substantially raised the real value of the benefits.
Legislation has been introduced to provide for three eminently desirable innovations. These are: a limited scheme of retirement pensions for insured workers at age 65; invalidity pensions for insured workers whose illness or incapacity is either permanent or likely to be of long duration; and payment of a death grant in respect of a qualified insured worker, or of his close dependants. A scheme of pay-related unemployment and disability benefit is under consideration.
Health
Current government expenditure on health services has been rising steeply. The total amounted to £9½ million in 1961-62; it had risen to £14¼ million in 1964-65 and this year it will cost about £30½ million.
The Government's general proposals are set out in the White Paper on the Health Services and their Further Development. Discussions on the implementation of new services are in progress with the relevant professional organisations, and legislation has been introduced in the Oireachtas.
The Bill includes a new structure of administration for the health services. It provides for the replacement of the dispensary system by a service offering choice of doctor in the general medical service for the lower income group in so far as this is practicable. It also proposes that drugs and medicines will, as far as practicable, be issued through retail pharmaceutical chemists to the eligible groups.
Financing of local authorities
Local authority finances and rates relief are current and controversial topics. Undoubtedly, a problem exists but the debate of recent months has tended to ignore the fact that, over the years, more and more of the burden of local expenditure has been borne by the Exchequer and less and less by the rates. This is clearly evident if a comparison is made with the pre-war position. Coming to more recent times, local authority current expenditure rose from £90½ million in 1965-66 to an estimated £123 million in 1968-69. £18 million, or more than one half of this increase, was financed by way of Government grant while the rates have had to bear an additional burden of only £8 million or about one-fourth of the total increase.
These figures effectively rebut allegations that the Government have been complacent in their approach to the rates problem. Indeed, they illustrate how much has been done by the Central Government in this sphere without any apparent recognition.
The Exchequer comes to the assistance of ratepayers in several ways. Apart from the rates relief for agriculture mentioned already, it meets the bulk of the cost of the health services. Last year, 56 per cent of the net expenditure of health authorities came from the Exchequer. In addition, the Exchequer makes good part of the deficits of voluntary hospitals relating to Health Act patients. The sum included for this item in 1969-70 is £2¾ million. It must also be emphasised that the Government have decided that no part of the cost of new health services or further extensions of existing health services should fall on local rates.
On the recommendation of an interdepartmental committee, the Government have introduced legislation providing for the payment of rates in instalments and a flexible form of rates relief for necessitous persons. Other recommendations are being considered in conjunction with a review of the structure of local government at present being undertaken.
Service of Debt
The estimated cost of the service of debt shows an increase of £11½ million over last year because of the additional borrowing required for the capital programme and the very high level of interest rates now prevailing. There is continued advocacy for the provision of more money for housing and sanitary services, for rural electricity and for telephone development, to mention but a few items of the programme. Money borrowed for capital investment must be paid for, and as long as we accept the duty of providing the capital we must also accept the responsibility for the servicing of the resulting debt. At present, interest rates all over the world are at phenomenally high levels, and we cannot isolate ourselves from these trends. We must be prepared, therefore, if we are to press on with capital development, to remunerate the borrowing involved at the going rates. In general, these are 1 per cent or more over those prevailing this time last year.
Budget outturn 1968-69
I will now review the budgetary out-turn for 1968-69 and survey the opening position of the account for the present year.
The budget plan for 1968-69 provided for a balance between revenue and expenditure after making an allowance of £4 million for errors of estimation. However, for a variety of reasons which are now well known, expenditure outpaced revenue and excessive demand pressures developed as the year progressed. The supplementary budget, which was introduced in November to cope primarily with the demand situation, projected a deficit for the year of little over £7 million.
In the event, the deficit was £8.4 million. Expenditure, at £353.9 million, was £2.4 million higher than the November estimate. Increased outlay on the health services accounted for the greater portion of the excess. Despite the depressing effects of industrial disputes on tax returns, revenue continued to be buoyant and at £345.5 million was £1.2 million above the November estimate. Receipts from Customs and Excise duties and from the turnover and wholesale taxes were greater than expected.
The 1968-69 capital Budget proposed an expenditure of £136.4 million on the public capital programme, but because of increases during the year in the allocations for industrial grants, electricity generation, transport, agriculture and agricultural credit and for housing and sanitary services, this rose to £141.6 million and was 28 per cent higher than in 1967-68. The deficit on current account, a shortfall in the investment resources of Departmental Funds and reduced public holdings of Exchequer Bills had the effect of raising Exchequer residual borrowing requirements from the estimated figure of £33 million to £52 million.
Budgetary outlook 1969-70
The primary economic aim of budgetary policy, both capital and current, for 1969 must be to encourage the continuance of the satisfactory growth performance of 1968 and the main contingency we have to guard against is the possibility of excess demand arising from money incomes growing faster than national production.
In view of the attitude of the Irish Congress of Trade Unions in regard to pay for the rest of this year, and the Government's intention to foster a realistic development of incomes on the lines I have already mentioned, there is much common ground between the economic and social objectives of budgetary policy on this occasion.
The public capital programme is reasonably expansionist without running the risk of undue inflation. Although it shows a substantial rise over last year's expenditure, the original proposals for capital spending have been reduced by some £23 million in order to keep the State's credit requirements at a reasonable level.
The estimates of current expenditure have undergone similar treatment. While they are £41½ million above the corresponding figure for last year, they would have been almost £25 million higher still but for the Government's determination to reduce them to a figure which could be met from the estimates of revenue at present rates of taxation. This was a formidable task. The original total was an intimidating figure and Ministers have been continuously engaged since the beginning of the year in getting it down to manageable proportions. To succeed in doing so involved many difficult decisions including the postponement of many desirable new projects and extensions of existing ones. The aim was to favour expenditures contributing to economic growth, to eliminate anything that seemed wasteful or unnecessary and to use existing resources to the best possible advantage. This work will be followed up vigorously throughout the year to ensure that appropriations are not exceeded.
In all, £48 million has been lopped off public expenditure, current and capital. In different circumstances much of this would have been approved. A reduction of this size is an earnest of the Government's determination to ensure that inflationary pressures are contained and that economic progress is not imperilled by excessive external deficits.
The major part of budgetary policy is normally contained in the pre-Budget expenditure proposals as set out in the capital programme and the book of estimates published some weeks before Budget day. The policy measures I am announcing today, however, are more important than usual. They represent the Government's contribution to a specific approach to incomes in 1969 which we hope will be adopted by all the parties involved for the common good.
I propose to balance the current account for 1969 at a level which is likely to facilitate achievement of our economic and social aims. The achievement of balance this year should have a marked disinflationary effect following on the deficit of £8½ million in 1968-69. The supplementary budget of last November had as its principal objective the checking of excess demand in 1969. It has not yet had time to work its way through the economy and I am counting on its delayed effects as a major factor working in favour of moderation this year.
Opening position
The White Paper published a few days ago discloses that estimated revenue for 1969-70 totals £387.6 million and expenditure comes to £386.7 million. I have, therefore, an opening surplus of £0.9 million. This situation was achieved, as I have explained, by a thorough review of every item of expenditure and the elimination of anything not considered necessary for social and economic development. It was open to me to leave matters at that by simply distributing some or all of this amount and going no further. Needless to say this course offered the attraction of avoiding an increase in taxation.
However, it will be clear from what I have said that we decided that the Budget this year must play an important part in establishing a sensible policy for incomes by coming to the aid in a very positive way of the lower-paid and weaker sections. I shall now outline how this is to be done.
Increases in children's allowances
Children's allowances are being substantially increased because it is by this means that assistance can be given directly to the families who need it most.
The present allowance of 15/6 a month for the second qualified child will be increased to 30/- and the present allowance of 26/6 a month for all other qualified children will be increased to 40/-, with effect from 1st August, 1969. The present allowance of 10/- for the first child remains unchanged.
Deputies will recall that, in my budget statement a year ago, I indicated that the structure of the scheme of children's allowances would be reviewed with a view to ensuring that an element of selectivity would be introduced by reference to the means of the parents. I have decided against the introduction of a means test but I propose to make a start towards selectivity by providing that part of the proposed increase in the allowances will be recovered from persons paying income tax.
The allowance for children under the Income Tax Acts will be reduced by £15 for each child who qualifies for an increased benefit under the Social Welfare Acts. For children over 16 years of age who are attending an educational establishment, the income tax allowance will remain unchanged because they are outside the scope of the Social Welfare Acts.
As the new social welfare allowances are payable from 1st August, 1969, the reduction in the income tax child allowance for 1969-70 will not be £15, but £10 for each qualified child. In this manner I propose to recover about £400,000 in a full year and about £300,000 in the current year from income tax payers thus reducing the net cost of the increases to £3.3 million this year and £5 million in a full year.
The combined effect of these changes is that, with the exceptions mentioned, everyone will receive a net increase which will be greater or less depending on the circumstances. An income tax payer with one child will neither lose nor gain and persons in the top ranges of sur-tax, who have qualified children, will be called upon to make a small contribution towards the scheme.
In addition to these increases, and as a contribution towards the heavy additional expenses incidental to multiple births, a sum of £100 will in future be paid on the birth of triplets and £150 on the birth of quadruplets.
Increases in other social welfare payments
Last year, increases of 7s 6d a week were given to the recipients of old age, blind, widows' and orphans' contributory and non-contributory pensions, as well as to those eligible for disability payments, for unemployment assistance and benefit, for maternity allowance and for adult dependant allowances.
This year, to compensate them for increases in the cost of living, and as part of our policy of positively improving the position of the less well-off, we are giving even greater help to persons in the categories I have mentioned. Increases of 10s a week will be paid from August, 1969, in the case of non-contributory pensions and allowances and from January, 1970, in the case of contributory pensions and benefits. The disabled persons maintenance allowance and the infectious diseases maintenance allowance, which are administered by the Department of Health, will be increased by 10/- a week also from August next.
These improvements in the social welfare code will cost £3.8 million in this financial year.
Further social welfare improvements
Last year, a scheme was introduced for the payment of an allowance to incapacitated old age pensioners living alone. The allowance was payable in respect of daughters who left insurable employment to undertake full-time home care of their parents. Experience has shown that this scheme is a worthwhile addition to our social welfare services, but that its effectiveness is impaired by the condition that, to qualify, a daughter must have left insurable employment and by its limitation to our own old age pensioners. It is proposed, therefore, to waive this condition in the forthcoming Social Welfare Bill thus enabling payment to be made in respect of daughters who have never worked outside the home, and also to extend the scheme to cover all incapacitated old age pensioners over 70 who, except for their daughter's company, live alone.
Widows in receipt of social welfare pensions, whether contributory or non-contrbutory, are faced with serious financial difficulties in educating their children. Their problems are not eased by the fact that the allowances in respect of the children cease at 16 years of age. To provide some assistance towards continuation of the children's education, I propose that payment of the allowance will continue for so long as the child is in full-time education up to the age of 21.
A similar concession will be made in respect of orphans' allowances.
There is a distinction between the free travel scheme and the free electricity and television and radio licence schemes, inasmuch as the latter schemes do not extend to persons in receipt of Northern Ireland or British old age pensions. As many of these are Irish people who have returned here on retirement, I propose to remove this distinction and to extend those schemes to such pensioners who are over the age of 70.
The final social welfare improvement I propose is to extend the duration of the cheap fuel scheme for necessitous persons by a month at each end, so that from this year onwards it will cover the period October to April, inclusive. These miscellaneous improvements will cost £310,000 this year.
The Government are concerned at the hardship caused to mothers and families who have been deserted by the father of the family. The Minister for Social Welfare is examining how to provide some financial assistance for those cases in this year's Social Welfare Bill.
Income Tax allowances
I have been considering for some time the general structure of our income tax and sur-tax codes, particularly with a view to making improvements in the personal reliefs and allowances. The basic ones have remained unaltered for many years because, as Deputies will realise, the costs involved are enormous. Because of this, significant changes in our direct taxation structure could only be undertaken in the context of a comprehensive recasting of the general pattern of taxation—both direct and indirect. In addition, the machinery of our system of PAYE makes fundamental changes impossible during the course of the income tax year. A comprehensive scheme is being examined and it is my intention to introduce it, if possible, for 1970-71. This would mean making the necessary legislative and other arrangements before the end of the current financial year.
However, I think it is absolutely necessary to give some relief this year, and accordingly I propose to increase the allowance for married persons by £30 and to increase the allowance for single and widowed persons by £15. I estimate that this will cost the Exchequer £3.52 million in the current year and that it will remove about 30,000 taxpayers from the income tax net when account is taken of the adjustment for the increase in social welfare children's allowances. The magnitude of this cost clearly explains why greater reliefs cannot be given at present.
Dependent Relative
As I announced earlier, I propose to increase the amount of the non-contributory old age pension to £195 as from the 1st August next. Consequent on this increase I intend to raise the income limit for the allowance for income tax purposes of dependent relative relief. This will secure that a taxpayer, who maintains at his own expense a dependent relative having no income other than a non-contributory old age pension, will not have the allowance reduced because of the increased pension.
New Allowances for Incapacitated Spouse
A taxpayer whose spouse is totally incapacitated and who employs a housekeeper to look after the incapacitated person does not qualify, under existing law, for any special relief. In response to representations that this causes hardship I propose to provide that a new allowance of £100 will be granted where such a taxpayer requires the services of a housekeeper to care for the spouse.
Handicapped children
Deputies will recall in the course of the Committee Stage of the Finance Bill last year I was asked to do something for the parent of a child who was, by reason of mental or physical infirmity, incapable of receiving full-time instruction. This year I propose to bring in a provision which will permit the parent to claim, in lieu of the dependent relative allowance, the child allowance which, of course, is substantially larger.
Medical Expenses
The Finance Act of 1967 introduced a valuable tax relief for people who were unfortunately obliged to incur heavy medical expenses. The relief is for expenses in excess of £50 incurred by a taxpayer on himself or on any one who is dependent on him; the relief is related to the expenses for each individual and not to the expenses for the family as a group.
This year I propose to extend the relief by providing that the taxpayer may elect to claim for expenses exceeding £100 incurred by him on his family as a whole if this would be more favourable to him than the existing arrangement.
There is an upper limit of £300 for the amount of expenses which might be considered in relation to each person: this will be increased to £500.
Exports Sales Relief
The exports sales relief, which came into operation in 1957-58, has been a powerful incentive in stimulating investment in Irish industry. As it is due to expire in April, 1980, its incentive value will progressively diminish. If the pace of industrial development is to be maintained, our incentives to export-orientated manufacturing industry must be strengthened. I therefore propose to extend the terminal date of the relief to April, 1990—a period, which, I feel, will be sufficient to maintain the momentum of investment in Irish industry and, in particular, to attract new technological industries requiring a lengthy "running-in" period. The "Shannon" relief will be similarly extended.
In addition, the maximum period for which a company may claim exports relief will be extended from fifteen to twenty years. Full relief will be available for fifteen years, with tapering relief at the existing rates for the remaining years. These extensions will, of course, apply also to existing concerns.
Deductions in respect of decimalised machinery or plant
I have decided to give a special measure of assistance to traders and manufacturers who purchase or convert machinery or plant for the purpose of the change-over to the decimal currency system. In the case of new machinery or plant purchased before the 6th April, 1971, I propose to allow "free depreciation" to be claimed so that the purchaser may, if he so wishes, write off 100 per cent of his expenditure in the first year. In addition where, because of the change to the decimal currency system, a trader or manufacturer incurs before the 6th April, 1971, capital expenditure on major adaptations or conversions of his existing machinery or plant, I propose to allow the amount to be deducted as a business expense.
These allowances will not be felt as a cost to the Exchequer until 1970-71.
Industrial Buildings Allowance— holiday cottages
The Shannon Free Airport Develop- ment Company is fostering, in conjunction with Bord Fáilte and local interests, the building of holiday cottages of a type suitable for letting to tourists. I propose to encourage this development by extending to these cottages the initial and annual allowances which are at present available for hotels and holiday camps. Subject to the provisions of the legislation, the relief will apply to similar projects throughout the country.
Recreational facilities
It is desirable that workers in manufacturing industry should have a wide range of recreational facilities and amenities provided at the factory and elsewhere for use during breaks and after hours. To encourage management to provide these, the Finance Bill will contain provisions to extend the industrial building allowance to capital expenditure incurred by a manufacturer on the provision of facilities such as swimming pools, tennis courts and sports clubs for employees, where such allowances are not available under existing law. The relief will have no effect on the revenue until 1970-71.
Stamp Duties
I propose to introduce a number of changes affecting the incidence of stamp duties. To assist purchasers of "grant-type" houses, I intend to relieve entirely from duty conveyances or leases executed on the first purchase of such houses. In addition, the present maximum rate of £3 per cent will be reduced to £2 per cent in the case of purchases of other property, whether lands or houses, where the value does not exceed £6,000.
To compensate for the loss of revenue resulting from these reliefs, the rate of duty on sales involving upwards of £50,000 will be increased from £3 per cent to £5 per cent. I also propose to impose duty on a new subject of charge, namely, contracts for office block development. This will be chargeable at the rate of £10 per cent of the contract price and will apply only to contracts of over £50,000; it will not affect local authority contracts or contracts in connection with projects in the undeveloped areas.
The overall effect of these proposals will be to increase the yield from stamp duty by £100,000 in the first year and £150,000 a year thereafter.
Premiums payable on the maturity of Government securities
The National Bonds, 1966-77, were issued with the condition that the premium payable on maturity would be exempt from tax (income tax, sur-tax and corporation profits tax) and the 6½ per cent Investment Bonds enjoy a like exemption in respect of the three per cent premium which is payable on the Bonds at the end of five years. This year, I am including a provision in the Finance Bill to grant such an exemption generally in respect of premiums which may be payable on future issues of Government securities. These exemptions do not of course apply where the premiums fall to be regarded as a part of trading profits.
Tax Relief for Assurance Companies
Representations have been made to me that Irish life assurance companies who decide to engage in pension annuity business in Great Britain would suffer a competitive disadvantage by comparison with British life assurance companies which enjoy certain tax exemptions in that field. I propose to include in the Finance Bill provisions which will remove the disadvantage.
Abolition of Schedules A and B
As provided in last year's Finance Act, tax under Schedules A and B of the Income Tax Acts will not be payable for the current year. Detailed provisions removing Schedules A and B from the statute book will be included in the forthcoming Finance Bill. The termination of Schedule A will be of particular benefit to owner-occupiers of private residences, while the abolition of Schedule B will give additional help to the farming community through the exemption of income from the occupation of land.
Death Duties
Recent Finance Acts contained provisions for abatement of the estate duty payable in respect of property passing on death to a deceased's widow or dependent children. The abatement in respect of a widow's benefit is £1,000 and that for a dependent child £500. Experience has shown that in certain cases, on account of the way in which the property passed, the abatement to the widow was less than it might have been otherwise. I propose to remedy this in the Finance Bill.
I propose to relieve further the burden of estate duty on agricultural land. I shall speak of this in a few minutes. These miscellaneous tax reliefs will cost £460,000 this year.
Disabled Persons
Deputies will recall that a provision was included in the 1968 Finance Act exempting from road tax vehicles which are specially constructed or adapted for use by disabled drivers. It has been represented to me that the cost of petrol constitutes a particularly heavy burden on disabled motorists who must use such vehicles to get to work. Indeed many disabled people are totally dependent on this form of transport to enable them to obtain employment. I am satisfied that the circumstances of these motorists are exceptional enough to justify relief from the petrol duty.
I propose, therefore, to authorise the Revenue Commissioners to make repayments of duty at the rate of 4s a gallon in respect of petrol used by disabled motorists subject to an annual maximum of 350 gallons per person. The repayments will cover petrol used only in those specially adapted vehicles which are exempted from road tax. The concession will apply to petrol used on or after 1st June next and will cost approximately £25,000 this year.
Assistance to farmers
Last year, Government expenditure in relation to agriculture rose by £9 million. A further increase of £3 million has been provided in the Estimates already published and further improvements continue to be made where considered necessary. In addition to the new Beef Incentive Scheme, the rate of export subsidy for beef has been increased by 10s per cwt. from 1st April and the rate of subsidy on mutton and lamb by 1½d a lb. An Córas Beostoic agus Feola has been set up to promote exports of cattle, beef, mutton and lamb, and an increase of 3s per barrel for barley of the 1969 crop has been announced.
In the discussions which have taken place between the Minister for Agriculture and Fisheries and farming organisations, a number of suggestions were put forward and were promised consideration by the Minister. Arising out of the various suggestions the following improvements are being made.
The rate of payment under the Beef Incentive Scheme was recently increased from £8 to £12 per animal. As a further encouragement to sheep production, it is proposed to extend the sheep subsidy scheme. Farmers in mountain areas already receive a lamb subsidy of £1 per head: in future they will also receive a subsidy of £1 per head for each hogget ewe. This additional subsidy, for which £150,000 has been provided in the estimate, should lead to a considerable improvement in the quality of breeding stock in the mountain areas and promote an expansion in sheep production generally.
The small farm (incentive bonus) scheme, which is designed to effect a substantial improvement in the income of small farmers, has not proved as attractive as expected. As a further inducement to farmers, the Government now propose to offer a higher cash incentive. At present the scheme provides for a grant of £50 per head for four years. It is now proposed to increase the grant to £75 in the second and third years and to £100 in the fourth. The total grant available per farm will thus be increased from £200 to £300.
The Government also intend to improve the terms for certain grants under the farm buildings and water supply schemes. The limit for the highest rate of silo grants is being increased from 100 to 150 cubic yards. The maximum grant for housing dry stock is being raised from £75 to £200. The maximum grant for the provision of farm water supplies is being increased from £100 to £125. These reliefs will cost £133,000 but, as this is capital expenditure, it does not affect the current budget.
In general, the value of any property for the purposes of Estate Duty is the price which it would fetch in the open market at the relevant date. There is, however, an exception to this in the case of agricultural land. This may be valued on an artificial basis favourable to the taxpayer if, broadly speaking, by adopting such basis the value of the estate does not exceed £1,000. In order to lighten further the incidence of Estate Duty on such land, I propose to raise this limit to £2,000.
Pension increases
In recent years the Government have increased public service pensions on six occasions. Pensions related to 1959 pay levels have been raised by 35 per cent and those related to 1961 pay levels have gone up by 28 per cent. This includes compensation for rises in the Consumer Price Index from those years, up to June, 1966, and, in addition, a further increase of 5 per cent was granted last year.
The pensioners longest retired are, of course, those whose needs are most immediate because of the lower pay rates to which their pensions are related. I have met the representatives of these pensioners many times and they have always pressed for parity with the pensions of those retiring now. This would be quite expensive. While I could not give full effect to it now, I have decided to adopt it in principle and to move towards it over a number of years. As a start, the pensions of those who retired before the general pay revision of 1st February, 1964, will be brought up to the level of the pensions of their colleagues who retired with the benefit of that pay revision.
The main groups affected are retired civil servants, Gardaí, teachers, members of the Defence Forces and Local Authority pensioners. There will be a corresponding adjustment of Military Service pensions and other Army pensions, including special allowances.
In making this provision the Government are continuing to discharge their obligations towards their former employees and are making a substantial contribution to raise their living standards of one of the weaker sections of the community.
The increase will apply as from 1st August next. The cost is estimated at £500,000 in the current year and £800,000 in a full year.
Old IRA
I have been asked to do something for those members of the Old IRA who may be in needy circumstances. I shall always be happy to do whatever I can for these men to whom we are all so deeply indebted. Special allowances are paid to veterans who are not well off. Some of them have small military service pensions also. I propose that any recipient of a special allowance who has a military service pension of less than £25 a year, will have his pension brought up to that amount. The revised pension will then qualify for the general pensions increase which I have just announced and which, in this case, is about ten per cent. The special allowance will also share in that increase.
I am also providing a funeral grant of £25 for those members of the Old IRA who are in receipt of special allowances. The representatives of the veterans have asked specially for this and I am glad to be able to meet their wishes.
The cost of these concessions is estimated at approximately £30,000 in a full year.
Widows of Public Servants
I have considerable sympathy with the widows of pensionable public servants who, because their husbands retired or died before 23rd July, 1968, are not eligible for benefits under the new Widows and Children pensions scheme. The introduction of this scheme was in line with the practice of good employers and has been welcomed on all sides. As it had to commence at some current date, a number of widows whose husbands never had an opportunity of participating in the scheme are excluded. The question of the State accepting some responsibility for these widows has been brought frequently to my attention.
I have examined this question fully and have decided that the most equitable solution is to give these widows half the appropriate benefit under the scheme on an ex-gratia basis. Serving staff are paying half the cost of the scheme, the other half being met by the Exchequer. Thus under my proposal the widows of pensionable staff who retired or died before the introduction of the scheme will be paid the portion of benefit attributable to the State's contribution. This is, I think, a reasonable and generous solution which, I hope, will be welcomed.
It will take some time to set up the administrative machinery to implement this scheme but I propose to introduce it as soon as possible. I am providing £200,000 for this purpose in the current year. The concession will cost almost £500,000 in a full year.
A sum of £100,000 is being made available to promote the provision of recreational facilities for our young people. I shall speak at greater length on this later on in my statement.
That concludes my list of the budgetary reliefs and concessions. They will cost the formidable total of £12.24 million in 1969-70 and more, of course, in a full year.
As I had an opening surplus of £0.91 million there is a net £11.33 million to be found.
By reference to the size of this year's budget — almost £400 million — an allowance of £4 million, or 1 per cent, for errors of estimation would not be unreasonable. However I must have regard to two factors. The first is that the estimates have already been subjected to a very severe pruning, and the second is the necessity to provide for contingencies—notably that which is likely to arise in applying to public sector pay the incomes policy which I have already outlined.
I have had fruitful discussions on this subject with the public services committee of the Irish Congress of Trade Unions and these are continuing at official level. In accordance with the general policy which I have already mentioned, I propose to earmark the bulk of such limited resources as can be made available for public sector pay, to increasing the pay of the lower-paid employees.
I propose therefore to provide for this and any other uncovered contingencies that may arise by making a deduction of only £2 million under the traditional heading of errors of estimation. To raise the sum of £9.33 million required to balance my budget I propose to make the following increases in taxation:
Tax Proposals
I propose to find the bulk of the additional revenue required by increasing the duties on tobacco, petrol, beer, spirits and wine. The specific proposals and the expected additional yields in 1969-70 are:
£million |
|
Tobacco—equivalent of 2d per packet of 20 standard size plain cigarettes and a corresponding levy on manufacturers' stocks |
1.5 |
Petrol and diesel oil (other than diesel oil for buses) 3d a gallon |
2.0 |
Beer—equivalent of 2d a pint |
2.6 |
Spirits—equivalent of 4d a glass on home-made spirits and imported spirits of United King- dom origin and 6d a glass on other imported spirits |
1.33 |
Wine—equivalent of 1 shil- ling a bottle |
0.2 |
In determining the precise additions to the duties on these commodities I have made allowance for the incidence of turnover tax.
As the principal social aim of this Budget is to assist the lower-paid and weaker sections, it seems appropriate that some of the additional revenue required should be derived from spending on less essential items. I propose, therefore, to increase the rate of wholesale tax on certain articles from 10 to 15 per cent, with effect from 1st June, 1969. The articles concerned are motor cars, motor cycles, scooters and mopeds; television and radio sets, radiograms, record players, gramophones and records; caravans; yachts and other pleasure craft.
The increased rate is expected to bring in £1.6 million in the current year; in a full year the additional yield will be £2.2 million.
In the field of sales taxation, the Finance Bill will also contain some minor provisions designed to remove anomalies which have come to notice. It is desirable that one of these provisions, dealing with the settlement of accounts by way of set-off, should have immediate statutory effect. It is, therefore, the subject of a Financial Resolution which I shall be moving this evening.
There will now be a three-tiered system of turnover taxation—the retail turnover tax of 2½ per cent on general consumer goods; the 10 per cent wholesale tax on less essential goods, which makes a total charge of 12½ per cent on these goods; and the additional 5 per cent charge on a very narrow range of items. The total charge in that limited area will thus be 17½ per cent on tax-inclusive prices.
A decision has not yet been taken on the question of introducing an added-value tax but, if at a later date it were decided to have such a tax, it would be quite feasible to retain the new three-tiered system.
In deciding on the tax increases I have just described, I have sought to combine a number of objectives. I wished to avoid raising the money required by increasing indirect taxation on essentials. This would have run counter to the general objectives of the incomes policy which we are seeking to have accepted. Such taxes affect prices and living costs and might, therefore, give an impetus to claims for compensatory pay increases which would be particularly unwelcome in this year's conditions.
Direct taxes, on the other hand, tend to discourage effort and to have widespread disincentive effects. Moreover the Government were conscious of the need to lighten the load of direct taxation on the lower-paid taxpayer. There are now upwards of 700,000 income taxpayers, many of whom can be classified as lower paid and will benefit from the increase in personal allowances. It would have been inconsistent with this objective to raise the rate of the income tax.
I believe that the course I have taken represents the right mix of measures to achieve these varied purposes. It spreads the burden as fairly as possible on the commodities affected by the tax increases and is in line with the general feeling that ostentatious luxury-type spending should be discouraged and the cost of essentials kept down to the minimum.
I am very conscious of the fact that I am turning once more to those well-established sources, drink, tobacco and petrol. The simple fact is, however, that they continue to be as buoyant as ever—the consumption of beer for instance has for the first time ever touched the 40 million gallon mark last year. As long as they continue to come up smiling they cannot expect to escape the attention of any Minister for Finance.
At this stage, I wish to make it clear that the Government will subject applications for price increases to the most rigorous scrutiny. Apart from the economic necessity for minimising price increases, we are determined to ensure that the large sums now being set aside to improve the position of the less prosperous amongst us are not eaten up by unjustifiable price rises. The Department of Industry and Commerce will exercise a continuous surveillance on prices and I would urge an increasing vigilance on the part of the public itself in this field.
The Budget and the Third Programme
This budget is the first to be prepared since the Third Programme was published. It seeks, therefore, to outline a fiscal policy for 1969 with regard not alone to immediate problems and possibilities but also to the potential and the requirements of the economy over the next four years. It is not always practicable in a particular budget to reconcile completely the conflicts between short-term and medium-term needs. I would hope, however, that improved procedures which are now being developed will make this more feasible.
Periodic reviews of the programme will take place from next year onwards. Their purpose will be to assess the progress being made towards the programme's economic and social objectives, and to identify the factors responsible for any significant departures from the expected path of development. The Government's contributions to progress must come in for particular examination. With this in mind, we are attempting to relate Government current and capital expenditure more closely and more specifically to the needs of development. The annual budget will be used to correct any deviations from the programme's targets that may occur in the course of a year and to re-align the public sector if the targets should be altered.
Considerable progress has been made with the appraisal of the public capital programme. There is a large number of items involved and many are complex in scope and effect. It is hoped to complete the task early next year. The possibility of developing a programme budgeting system for Government expenditure, both current and capital, is being examined. This would place emphasis on defining the aims and objectives of expenditure, on analysing the costs and the benefits associated with them, and on aligning expenditure with resources. This work will be assisted by the systematic study of Departmental objectives which will be made by the development units mentioned in the Third Programme. Because of the theoretical and administrative questions to be resolved, it is unlikely that results will be apparent for a number of years.
The most desirable allocation of expenditure is, of course, only one side of the budgetary problem. The financing of these expenditures and its relationship to the general management of demand is another. Here also, the medium-term objectives of the programme have been taken into account in framing the provisions of this Budget.
The extra cost of today's benefits will accelerate the pace of the progression contemplated in the Third Programme in social development and total Government current expenditure but I consider this justifiable in the circumstances I have explained.
Decimalisation of Currency
Last year I announced the Government's decision to introduce on 15th February, 1971 the £, new penny decimal system of currency. In June, 1968 I set up the Irish Decimal Currency Board to facilitate the changeover by familiarising the public with the new currency and by finding solutions for the problems that will arise.
The board are placing most emphasis at this stage on publicity to persuade business to take preparatory action in good time to ensure that accounting and other machines are capable of decimal working.
Many traders have already taken steps to prepare for the changeover. A recent survey made by the board among the main machine supply companies showed that, in relation to about 30 per cent of cash registers in use in this country, action has already been taken. This is a good start but the pace must be accelerated. Those who have not yet made definite arrangements for conversion or replacement of their machines should do so now. I hope that the free depreciation provision which I have already announced will encourage them to take early action.
I have already announced the designs for the decimal coins. The 10p and 5p coins, which correspond to the existing florin and shilling, will be in circulation in the autumn. The new 50p coin, which corresponds to the existing 10s note, will be out early in 1970.
Preparations in the public sector are proceeding. The Department of Education has been planning to phase out the teaching of "shilling-and-pence" arithmetic and to have decimal currency calculations taught. Preparations by the Post Office and the other Government Departments are also going forward.
The education of the general public in the new system is timed for late 1970, when it can be expected to have maximum effect.
Banking Developments
The text of the Central Bank Bill, 1968, which proposes important changes in the law relating to banking, will be calculated shortly.
In my Budget Statement last year, I mentioned the trend towards merger and consolidation in Irish banking. These developments have continued and both major banking groups have now declared their intention to bring about complete mergers of their separate clearing banks into single entities. The Associated Banks are our major banking institutions, the main recipients of the community's savings and the source of a great part of the funds for investment and development. It is important that our banks and financial institutions, in common with other businesses, should make every effort to keep down the cost of their services. Any steps they take to rationalise their business, increase efficiency and widen the range of their services, are to be welcomed.
While it cannot be said that the reorganisation in Irish banking has not been in the public interest, the Government are conscious of the fact that over-concentration of business can entail risks. I am happy to say that the banks have always kept the Central Bank and my Department informed of their intentions in these matters, and have thereby enabled the impact on the community at large to be taken into account.
The money market committee have completed their work and presented a report to the Central Bank. The report was published last week and is being studied by the Bank, by my Department and by the Associated Banks. The results of this examination and the decision in regard to the development of a money market here will be announced in due course.
Savings
The necessity for increased savings to finance the expanding development requirements of the economy has been frequently stressed. Saving is largely a matter of individual decision. The Government can hope to influence that decision mainly by providing incentives to save and by endeavouring to contain increases in prices.
Details of the savings media in the public sector have been conveniently summarised in a brochure by the Savings Committee. I am having a copy of this sent to Deputies and I hope that they will do all they can to encourage savings whenever they get the chance.
Since January last, interest on deposits in the Post Office Savings Bank and the Trustee Savings Banks has been increased to 4 per cent and Investment Bonds have been put on sale offering an interest rate of 6½ per cent and a tax-free capital gain of 3 per cent after 5 years. The Trustee Savings Banks have also introduced a new type of investment account carrying a rate of interest of 6½ per cent. The response to these measures has been most satisfactory. In the first quarter of this year savings through the Government media have shown an increase of almost £5 million over the corresponding period of the previous year. I hope that this commendable performance on the part of the public will be continued.
The Operations Research survey of the Post Office Savings Bank and other media is continuing. Much useful analytical work has already been completed, and market research methods will now be applied to ascertain the views of typical savers. The results of this work may enable further improvements to be made in existing savings media and may indeed suggest some new form of investment for savings.
I have said that saving is a matter of individual decision. It is also a matter of habit. The development of this habit would be greatly facilitated in places of employment if employees were to join in group savings schemes such as those organised under the National Savings Committee. While many employers have agreed to the operation of these schemes there are still some who, for one reason or another, find themselves unable to participate. I would appeal once again to all employers to facilitate the introduction of savings schemes based on deductions from pay.
Before leaving the question of savings, I must again pay tribute to the work of the National Savings Committee whose members, through their unpaid efforts, are doing good work in this field.
Special Regional Development Fund
In 1967 I set up the Special Regional Development Fund to provide a flexible source of finance for economic projects in the West which, though worthwhile, do not fall within the scope of existing schemes of assistance. The Fund has proved itself an effective instrument of development. The projects assisted have given rise to a significant amount of employment and income. The establishment of the Fund has given a new dimension to the work of the County Development Teams and I think it is fair to say that it has an effect far out of proportion to its size.
In each of the first two years, a sum of £250,000 was provided. Experience of the operation of the Fund and the pace at which commitments mature for payment, indicate that a sum of £100,000 added to the balance in the Fund in March last will enable it to meet all the demands which will have to be met during this financial year. I should like to emphasise that this does not place any limit on the activities to be financed but is simply an estimate of what will be required. No worthwhile economic project in the West will be allowed to fail because of lack of funds and whatever amount is needed for the Fund during the year will be provided.
Public Service
The Public Services Organisation Review Group has almost completed its investigation of the organisation of the public services at the higher levels and I expect its report during the course of the summer.
Every effort is being made to keep to a minimum the growth of the Civil Service as Government activities expand and to increase its productivity and efficiency. Recruitment procedures are being adapted to changing circumstances, the use of computers is being extended, appropriate modern management techniques are applied and the assistance of outside consultants enlisted where necessary.
The Civil Service has been in the forefront in the application of organisation and methods and continues to extend the use of these techniques. New methods of clerical work evaluation are being introduced. A recent development has been the setting-up of a special unit in my Department to undertake a continuing survey of work in Government Departments to control numbers and to establish correct gradings. Civil Service training and staff development activities continue to expand.
As already announced, the Government have decided to set up a Review Body on remuneration in the upper ranges of the public sector. This will be a standing body which will advise the Government from time to time on the general level of remuneration of civil servants and local authority officers outside the scope of conciliation and arbitration schemes, and of chief executives of State-sponsored companies. The Government consider that it is both in the public interest and the interest of the staff concerned to have remuneration in this area reviewed from time to time by an independent outside body.
The body will consist of five members, of whom two will be drawn from the Labour Court, in line with the Government's efforts to secure co-ordination in regard to remuneration generally in the public sector. The names of the members were announced on Monday last.
Culture and Leisure
Our recent record of economic achievement has been impressive. In the last decade we have increased national output by 45 per cent and, at our present rate of progress, it will have doubled by 1975.
Material progress is vital to the nation's well-being, but by itself it is not enough. Indeed it brings many problems in its wake which must be identified and solved if the quality of living is also to improve. For more and more people, rising standards are providing time and resources which can either be fruitfully employed or simply frittered away.
Thus, the problem of the use of leisure is already with us. There is an urgent need to provide a wide range of cultural, educational and social facilities not just for the few, but for all our people. We must seek a situation where the arts are an integral part of the daily life of each individual. Only in this way can the individual achieve personal satisfaction and the quality of our society be improved.
The fruitful use of leisure affects adults and young people on different levels. A survey of adult education needs is being undertaken to enable the Government to initiate any necessary expansion on restructuring in this important field.
I have already announced the reorganisation and strengthening of the resources of An Chomhairle Ealaíon. I can assure those who may be growing impatient about this that action will not now be long delayed.
As further encouragement to the creative artists in our midst and to help create a sympathetic environment here in which the arts can flourish I will provide in the Finance Bill that painters, sculptors, writers and composers living and working in Ireland will be free of tax on all earnings derived from work of cultural merit. This is covered in the cost of the miscellaneous tax reliefs.
In the dramatically changing times in which we live there is an urgent need to do more for our young people in their use of leisure also. The provision of suitable sporting and recreational facilities requires a new comprehensive approach. In many areas, individuals and groups, through youth clubs and otherwise, are struggling to meet the need but their efforts need encouragement, expansion and guidance.
Young people in Ireland have always shown a strong inclination for outdoor activities and sports. Several movements and associations help to organise and guide these healthy instincts. How they can be helped and strengthened will be examined. The recent commissioning of the Asgard for the training of young people in seamanship is an example of what can be done.
The Government intend, therefore, that a new and forceful impetus should be given to the provision of sporting and recreational facilities for our young people. By and large, the organisations catering for spectator field games are able to fend for themselves and it is in other directions that help is needed.
I know that very little positive progress can be made in this field without funds and, as already announced, I am providing a sum of £100,000 in this year's Budget to enable a start to be made. We are considering whether a new organisation should be established to undertake the task of administering to the best advantage this allocation, and whatever other moneys may be made available, and to promote progress in this area generally.
Irish Language
As Minister for Finance, I have exercised a general co-ordinating and supervisory function regarding the specific decisions contained in the White Paper on the Restoration of the Irish Language. A progress report giving particulars of measures taken during the two years ended 31st March, 1968, was issued early this year. Arising from this and the last report of Comhairle Comhairleach na Gaeilge, the Government have decided to increase and intensify their efforts. A new broadly-based Council—Comhairle na Gaeilge—are being set up to advise and assist the Government.
The Linguistic Institute of Ireland is being re-organised and strengthened. It will undertake specialised, scientific research and evaluation programmes to identify the methods and policies most likely to succeed in developing the use of Irish. Measures for the economic, social and cultural advancement of the Gaeltacht are being intensified and extended. The Government intend to transform the widespread public goodwill in favour of the language into a sustained national effort to maintain and extend its use. We regard this as the most important cultural activity of all.
Conclusion
I have already stated that the expected deficit on external payments, though exceptionally large, must be viewed against the background of such factors as our strong reserves, the likelihood of a continuing capital inflow, and the upsurge in investment. Strong, however, though our reserves are, we would not be justified in deferring action to correct an excessive deficit unless there were reasonable grounds for believing that the forces generating inflation would be contained otherwise. Apart from the measures taken to secure that the Budget deficit of last year will be replaced by a balance on current account, I have proceeded on the basis that the proposals I have outlined in favour of the less well-off will avert excessive pay claims and income increases generally. If this expectation is realised, the necessity for corrective measures disruptive of output and employment can be avoided.
This Budget, therefore, has been carefully planned to meet the needs of the present situation. Its main purpose is to make sure that economic growth is maintained for the benefit of all the people. At the present time the overriding need is to act in a clear and positive way to encourage the adoption of a sensible attitude to incomes. This has been done by a series of specific, detailed measures to improve the position of the poorer, weaker and lower paid sections. I believe that what has been done should be accepted as reasonable and that claims for an increase in money incomes should be moderated accordingly. There is a great victory to be won here. If the Government, acting in co-operation with all concerned, can steer the community through this anxious period of threatening inflation, the lesson of that achievement will last for many years to come.
As successive Budgets should do, step by step, this Budget takes what measures it can to eliminate poverty and injustice, and to bring everybody in the community a little further along the road to prosperity and the good life.
Because of this, and because of the many provisions it makes for improving our national life, I am hopeful that those who will have to pay more will do so willingly in the knowledge that they are contributing to that improvement and making life better for young and old alike.
I dare to hope that this Budget will be regarded as enlightened and that it will take its place in the financial calendar as one which made a real contribution to improving the present, and safeguarding the future, for the ordinary people of Ireland.
TABLE EXPLANATORY OF CURRENT BUDGET, 1969.
Revenue |
Expenditure |
||||
£m. |
£m. |
||||
1. Tax Revenue (excluding Motor Vehicle Duties) |
315.59 |
1. Central Fund Services (excluding Payments to Road Fund) |
76.45 |
||
2. Motor Vehicle Duties |
13.10 |
2. Payments to Road Fund |
11.50 |
||
3. Non-tax Revenue |
58.90 |
3. Supply Services (non-capital) |
298.73 |
||
387.59 |
386.68 |
||||
4. Add:— |
£m. |
4. Add:— |
£m. |
||
Wholesale tax |
1.60 |
Increase in children's allowances |
3.30 |
||
Tobacco |
1.50 |
Other Social Welfare improvements |
4.11 |
||
Hydrocarbon oils |
2.00 |
Public service pensions |
0.50 |
||
Beer |
2.60 |
Public service widows |
0.20 |
||
Spirits |
1.33 |
Youth clubs and other items |
0.13 |
||
Wine |
0.20 |
8.24 |
|||
Stamp Duty |
0.10 |
||||
9.33 |
394.92 |
||||
396.92 |
|||||
5. Deduct:— |
5. Deduct:— |
||||
Income Tax—personal allowances |
3.52 |
Allowance for errors of estimation |
2.00 |
||
Other tax concessions |
0.48 |
||||
4.00 |
|||||
Total |
392.92 |
Total |
392.92 |
DEPARTMENT OF FINANCE,
7May, 1969.
TABLE I
COMPARISON BETWEEN (i) BUDGET ESTIMATES AND (ii) ACTUAL REVENUE AND EXPENDITURE IN 1968-69.
Estimated |
Actual |
Estimated |
Actual |
||
£m. |
£m. |
£m. |
£m. |
||
1. Tax Revenue (excluding 2 below) |
281.03(a) |
282.30 |
1. Central Fund Services (excluding 2 below) |
65.20 |
65.11 |
2. Motor Vehicle Duties |
12.16 |
12.70 |
2. Payments to Road Fund |
10.70 |
11.16 |
3. Non-Tax Revenue— |
3. Supply Services (non-capital) |
275.54(a) |
277.58 |
||
Post Office |
22.90(a) |
21.70 |
|||
Miscellaneous |
28.23 |
28.78 |
|||
4. Deficit |
7.12 |
8.37 |
|||
TOTAL |
351.44 |
353.85 |
TOTAL |
351.44 |
353.85 |
(a) Takes account of adjustments made by the April and November Budgets.
TABLE II
MAIN HEADS OF CURRENT GOVERNMENT EXPENDITURE
£000
1963-64 |
1964-65 |
1965-66 |
1966-67 |
1967-68 |
1968-69 Provisional |
1969-70 Estimate |
|
Service of Public Debt |
38,156 |
42,849 |
49,035 |
56,462 |
64,286 |
76,580 |
88,938 |
Social Services |
63,243 |
75,181 |
84,165 |
93,095 |
102,928 |
119,462 |
131,566 |
Social Welfare |
30,941 |
34,854 |
38,683 |
42,975 |
45,110 |
49,139 |
51,880 |
Education |
20,600 |
26,132 |
29,586 |
31,257 |
35,758 |
44,639 |
49,067 |
Health |
11,702 |
14,195 |
15,896 |
18,863 |
22,060 |
25,684 |
30,619 |
Economic Services |
39,199 |
47,877 |
55,172 |
59,877 |
75,187 |
85,974 |
91,957 |
Agriculture |
23,966 |
29,967 |
35,795 |
40,802 |
53,342 |
60,603 |
65,236 |
Industry |
3,090 |
3,664 |
4,693(a) |
4,775(a) |
6,604(a) |
8,210 |
9,415 |
Transport |
10,729 |
12,208 |
12,518 |
12,131 |
12,990 |
14,354 |
14,340 |
Forestry and Fisheries |
1,414 |
2,038 |
2,166 |
2,169 |
2,251 |
2,807 |
2,966 |
General Services |
33,630 |
41,088 |
43,016 |
44,126 |
46,429 |
51,451 |
52,848 |
Post Office |
10,092 |
13,323 |
13,846 |
14,866 |
15,348 |
17,164 |
17,840 |
Defence |
8,686 |
11,330 |
11,666 |
10,368 |
11,376 |
12,832 |
12,852 |
Justice, including Gardaí |
7,317 |
8,189 |
8,431 |
9,274 |
9,383 |
10,327 |
10,653 |
Public Service Pensions |
7,535 |
8,246 |
9,073 |
9,618 |
10,322 |
11,128 |
11,503 |
Other Expenditure |
12,234 |
15,016 |
16,599 |
17,060 |
18,127 |
20,382 |
21,374 |
TOTAL |
186,462 |
222,011 |
247,987 |
270,620 |
306,957 |
353,849 |
386,683 |
Remuneration included in above figures(b) |
55,276 |
71,032 |
75,502 |
80,935 |
85,900 |
95,631 |
103,053 |
1963 |
1964 |
1965 |
1966 |
1967 |
1968 |
||
£m. |
£m. |
£m. |
£m. |
£m. |
£m. |
||
Gross National Product |
835 |
946 |
1,013 |
1,063 |
1,142 |
1,260 |
|
Current Government Expenditure as % of GNP |
22.3% |
23.5% |
24.5% |
25.5% |
26.9% |
28.1% |
(a) Excludes temporary assistance to industry of £2.10m., £2.21m., £0.28m. respectively.
(b) Comprises the pay of civil servants (including industrial employees), national and secondary teachers, the Defence Forces, Gardaí, and the Exchequer contribution to the pay of health authority staffs and vocational teachers.
TABLE III
ROAD FUND
RECEIPTS AND ISSUES
RECEIPTS |
ISSUES |
||||
1968-69 |
1969-70 (Estimated) |
1968-69 |
1969-70 (Estimated) |
||
£000 |
£000 |
£000 |
£000 |
||
1. Opening balance |
— |
— |
1. Road grants (a) |
9,981 |
10,030 |
2. Motor taxation, etc. |
11,164 |
11,500 |
2. Administration, etc. |
1,183 |
1,470 |
TOTAL |
11,164 |
11,500 |
TOTAL |
11,164 |
11,500 |
(a) Including payments on foot of previous years' allocations.
TABLE IV
CERTAIN RECEIPTS AND EXPENDITURE OF THE EXCHEQUER AND OF LOCAL AUTHORITIES
Exchequer |
Local Authorities |
||||
Revenue |
Non-capital issues |
Expenditure from revenue (a) |
State grants received |
Rates collected |
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
1959-60 |
129,856 |
128,682 |
55,104 |
24,480 |
21,412 |
1960-61 |
138,839 |
139,565 |
57,885 |
26,476 |
22,058 |
1961-62 |
151,686 |
152,393 |
64,165 |
28,792 |
23,203 |
1962-63 |
163,478 |
168,335 |
67,379 |
32,725 |
22,776 |
1963-64 |
184,419 |
186,638 |
71,323 |
34,871 |
24,466 |
1964-65 |
219,045 |
222,011 |
82,973 |
41,210 |
26,061 |
1965-66 |
240,761 |
248,542 |
90,588 |
46,465 |
29,761 |
1966-67 |
272,843 |
272,051 |
98,959 |
50,676 |
31,534 |
1967-68 |
305,409 |
305,621 |
109,448(b) |
57,504(b) |
34,713(b) |
1968-69 |
345,480 |
353,849 |
123,185(b) |
64,301(b) |
37,660(b) |
1969-70 |
387,592(c) |
386,683(c) |
133,814(c) |
71,556(c) |
42,370(c) |
NOTE:—(a) The revenue of local authorities comprises broadly rates, State grants and other receipts, e.g., rents, fees, etc.
(b) Approximate.
(c) Estimated.
TABLE V
STATE EXPENDITURE IN RELATION TO AGRICULTURE
FROM 1965/66
1965-66 £000 |
1966-67 £000 |
1967-68 £000 |
1968-69 Provisional £000 |
1969-70 Estimate £000 |
|
Products subsidies: |
|||||
Butter and other milk products |
10,704 |
13,781 |
19,295 |
25,440 |
27,000 |
Bacon |
3,100 |
1,200 |
1,418 |
2,950 |
2,600 |
Carcase beef and lamb |
89 |
923 |
5,284 |
1,062 |
1,300 |
Wheat |
— |
— |
— |
910 |
— |
Oats |
— |
— |
— |
26 |
50 |
Fat cattle (temporary scheme) |
— |
656 |
— |
— |
— |
Subsidies to reduce production costs: |
|||||
Ground limestone |
889 |
900 |
1,145 |
996 |
1,150 |
Phosphatic fertilisers |
2,741 |
3,167 |
3,777 |
4,602 |
3,900 |
Potash |
791 |
830 |
952 |
1,214 |
987 |
Livestock headage grants: |
|||||
Beef cattle incentive scheme |
— |
— |
— |
— |
1,000 |
Calved heifer scheme |
2,852 |
1,999 |
1,233 |
1,069 |
200 |
Sow headage scheme |
— |
284 |
275 |
194 |
125 |
Mountain sheep scheme |
— |
46 |
175 |
370 |
550 |
Incentive scheme for small farms |
— |
— |
— |
— |
150 |
Drainage, land reclamation and general improvement schemes: |
|||||
Arterial drainage |
1,421 |
1,165 |
1,253 |
1,369 |
1,290 |
Land Project |
2,386 |
2,729 |
3,443 |
3,575 |
3,630 |
Improvement of Land Commission estates |
937 |
756 |
851 |
891 |
1,077 |
Other improvement schemes |
492 |
211 |
320 |
305 |
469 |
Schemes for Gaeltacht and other western areas |
276 |
317 |
260 |
300 |
323 |
Elimination of disease, livestock improvement, etc.: |
|||||
Bovine T.B. |
2,058 |
1,946 |
2,104 |
2,377 |
1,955 |
Brucellosis |
70 |
219 |
335 |
338 |
700 |
Livestock improvement |
85 |
71 |
85 |
122 |
173 |
Administration of improvement and regulatory Acts |
587 |
600 |
760 |
899 |
898 |
Grants towards buildings and equip- ment: |
|||||
Farm buildings, water supplies and milk coolers |
2,283 |
2,441 |
2,417 |
2,600 |
2,770 |
Poultry houses and equipment |
111 |
89 |
84 |
104 |
87 |
Forage harvesting equipment |
73 |
79 |
71 |
91 |
70 |
Horticulture |
1 |
1 |
160 |
418 |
111 |
Education, research, advisory and technical services: |
|||||
Education |
773 |
877 |
967 |
1,349 |
1,737 |
Research |
1,633 |
1,635 |
1,785 |
1,943 |
2,294 |
Advisory services |
693 |
786 |
796 |
846 |
999 |
Technical services |
378 |
373 |
373 |
426 |
490 |
Departmental land and buildings |
267 |
140 |
220 |
139 |
262 |
Rural organisations |
44 |
44 |
38 |
34 |
41 |
Land annuities: |
|||||
Halving of land annuities |
906 |
955 |
989 |
1,021 |
1,072 |
Bonus to vendors and other costs |
120 |
123 |
124 |
126 |
128 |
Relief of rates: |
|||||
Agricultural Grant |
12,487 |
13,333 |
15,625 |
16,976 |
19,100 |
Rural electrification |
1,133 |
901 |
1,166 |
1,470 |
1,200 |
Capital for Agricultural Credit Corporation Limited |
3,148 |
1,200 |
900 |
1,500 |
1,500 |
TOTAL |
53,528 |
54,777 |
68,680 |
78,052 |
81,388 |
NOTE:—Figures are net of appropriations in aid.