Vol. 241 No. 10
asked the Minister for Finance if in view of the deterioration in the terms of trade and the rising balance of payments deficit he will state what action the Government propose to take to deal with the situation; and if he will make a statement on the matter.
170.
asked the Minister for Finance if he will make a general statement in relation to the present balance of payments problem; if this matter is the cause of concern; what action he proposes to take; and the factors which have caused the balance of payments position to change since last June.
171.
asked the Minister for Finance if he is aware that the recent announcement about Ireland's balance of payments position is causing concern; and what steps he proposes to take to correct this trend.
172.
asked the Minister for Finance what special means he proposes to take to correct the worsening balance of payments position; and if he will make a statement on the matter.
173.
asked the Minister for Finance what measures he proposes to take in view of the adverse trade balance; and if he will make a statement on the matter and on the state of the economy in general.
I propose, with your permission, a Cheann Comhairle, to take Questions Nos. 169, 170, 171, 172 and 173 together.
In my Budget speech last May I indicated that the balance of payments deficit for 1969 was likely to be of the order of £55 million. This figure is inflated by imports of aircraft valued at £12 million and financed by foreign borrowing. The trade figures for the first nine months of the year and such data as is available on the likely trend of net invisible earnings suggest that the outturn of the balance of payments for the year as a whole will not diverge significantly from my Budget forecast.
The trade returns for recent months point to a slowing-down in the rate of increase in the import excess and there are expectations that this trend will continue in the coming months. The large upsurge in imports of capital goods and materials for further production which occurred earlier in the year appears to be levelling off while, on the other hand, exports may be expected to enjoy their normal seasonal upswing in the remainder of the year.
It is true that the import excess would have been about £8½ million lower in the first half of 1969 if 1968 import and export prices had prevailed but contrary to what is implied in Deputy Cosgrave's question the terms of trade have shown a steady improvement in recent months. The rate of increase in import prices has been slowing down while export prices show a stronger rising trend. In June, the latest month for which figures are available, the terms of trade were more favourable than in any of the preceding 12 months apart from last November.
While prospects of a continued improvement in the trade returns and in the terms of trade are encouraging the balance of payments position still calls for the utmost watchfulness. The fact must be faced that deficits of the size expected this year are not sustainable for long without seriously depleting our external reserves. If the balance of payments deficit is to be held to a reasonable level and at the same time sufficient resources are to be made available for the increased investment necessary for growth then consumer spending must be held in check.
The future course of incomes is of crucial importance in determining the level of consumer spending with consequent repercussions on the rate of increase of prices and the size of the balance of payments deficit. The public must realise that a continued scramble for higher nominal incomes in excess of real production is selfdefeating. It raises costs and prices, undermines our standard of living, diminishes our external competitiveness and so reduces the exports on which additional growth so heavily depends.
Deputies can be assured that I am keeping the situation under constant review and will take the corrective measures necessary to counter any forces which threaten to interrupt the forward momentum of the economy.
Is it not a fact that the trend in recent months in respect of the higher volume of imports has been reduced because of the severe credit squeeze which is operating and that in fact the action that has been taken has been to impose a credit squeeze on importers and traders who are asked to take the remedial action while the Government have taken and are taking no action to deal with the situation?
Arising further out of the Parliamentary Secretary's reply on behalf of the Minister, would he indicate what steps are contemplated to ensure that consumer spending will, in fact, be held in check? Would he also indicate what steps are contemplated to ensure that the import excess will not grow to a more formidable figure?
It is true that there has been a reduction in credit available to importers and a reduction in credit available for consumer spending. I think there is another question dealing with that very shortly. This itself is apparently having the desired results in the recent figures, where the rate of increase in the adverse trade balance has been reduced and, as against that, there is not an excessive strain on our external resources. In fact, our external reserves will be down this year, we think, by something less than £12 million as a result of increased investment.
Our external reserves will be down by less than £12 million this year. Is that what the Parliamentary Secretary said?
That is what they tell me.
I wonder would he consult them again?
Is it not a fact that the effect of this credit squeeze and the substantial recent rise in interest rates involves heavy and considerable additional outlay for purchasers of both capital and consumer goods?
The amount of credit available for capital goods will be up for capital investment in this year. There is another question on that.
It is up, but is it not a fact that the amount of the increase has been almost entirely, if not entirely, absorbed by the public sector and that, in fact, the amount of the increase in respect of the private sector is only the same as it was last year?
Yes, I think that is correct.
Might I inquire from the Parliamentary Secretary, in view of the bad news which he has read out to us here this evening, and the news given in reply to further supplementary questions by the Leader of our Party and Deputy O'Higgins, is it not a gloomy prospect for the future and can he reconcile his statement this evening with statements not only before the last election but before many other elections about letting "Lemass Lead On" and the other flag-waving and ballyhoo that went on before the elections?
The situation is apparently going to turn out exactly as forecast by the Minister for Finance in his Budget Statement.
Is it not perfectly clear that if appropriate action were taken in May of this year possible suffering and hardship to people in employment and in business could have been averted? The Government had not the guts to do it.
There is less unemployment than there was this time last year.
A Leas-Cheann Comhairle, would you permit me——
If Deputy Flanagan did not ask so many questions it would not cost this House the amount of money it is costing.
The Deputy has a right to table questions here and this is essential to democracy. Parliament cannot function properly unless we can ask questions of Ministers.
It is not half the cost of the referendum.
We will see that we are not muzzled. We will ask our questions.
They are questions that could be dealt with at county level or by writing a letter to the Department.
Without any disrespect or discourtesy but with the greatest of admiration for the Parliamentary Secretary, would you permit me to postpone the remainder of my questions to the Minister for Finance until the Minister is here next Tuesday? They are of great national importance and of importance to me and for that reason I should like the Minister to answer them personally.
The Parliamentary Secretary is competent to deal with them.
The Minister is responsible for answering Parliamentary Questions particularly on matters of national importance and I would ask, if you have no objection——
What does the Deputy think he has a Parliamentary Secretary for?
——to have these questions postponed until next Tuesday. That is a reasonable request in view of the unavoidable absence of the Minister which we all sincerely regret.
If the Deputy wishes to postpone his questions——
I will be here on Tuesday and Wednesday and Thursday.
Questions Nos. 174 and 175 postponed.
