asked the Minister for Finance whether any decision has been reached on the extent of the balance of payments deficit permissible and the stage at which stringent financial and monetary measures must be taken.
Ceisteanna—Questions. Oral Answers. - Balance of Payments.
44.
The permissible size of the balance of payments deficit in any year depends on a number of factors such as the level of our external reserves, the size of the capital inflow, future external trading prospects and the extent to which the productive capacity of the economy is being expanded through investment. The outlook for the current year is for a balance of payments deficit of the order of £55 million which is broadly in line with my Budget forecast. In view of the continued high level of external reserves, the large net capital inflow, the sharp rise in investment and prospects for an improvement in the trade returns, a deficit of this order of magnitude in 1969 cannot be regarded as outside the permissible limits. As I mentioned, however, in my reply to a question by the Deputy on 23rd October the fact must be faced that deficits of the size expected this year are not sustainable for long without seriously depleting our external reserves. The Government, therefore, will continue to review the situation and will take any appropriate measures to ensure that the balance of payments does not go outside acceptable limits.
Is the Minister being unduly optimistic in his estimate of the actual deficit in the balance of payments position?
No, Sir. I said it would be that figure when I made my Budget Speech and I am prepared to stand over it.
Would the Minister agree that the deficit to the 30th September was of the order of £65 million and, if so, would he indicate the reasons why he expects the annual rate of external deficits to decline in the next three months?
There are swings in the pendulum in this matter of the balance of payments but my latest estimate, based on the most accurate information available to me from my experts, is that the balance of payments for this year will be as we forecast, £55 million approximately.
I asked whether it was £65 million for the period to 30th September?
That is meaningless.
Can we take it that the Minister has no intention of introducing any financial proposals to the House before Christmas?
The Deputy cannot take anything of the sort.
With all respect, may I say that the Minister's replies have not been complete and honest?
We are talking about two different things here. Deputy M. O'Leary's question concerns the balance of payments. At the moment I believe that we will be able to adhere to our forecast of £55 million this year but we must look ahead to next year.
I said "before Christmas".
If events emerge between now and Christmas which would indicate a very serious deficit in 1970——
But this is October. Surely the Minister has an idea of what is going to happen between now and December?
Many things can happen and if it would appear that there would be a continuing sizeable or increasing deficit in 1970 it might be necessary to take some action between now and December. That is what I have to say about the balance of payments position arising out of Deputy M. O'Leary's question. I thought Deputy Corish was adverting to something different, namely, the internal budgetary and Exchequer situation.
The Minister refers to a swinging pendulum and this pendulum might catch the Minister on the ankle and, indeed, might catch all of us. Could I ask the Minister, in view of the continuing worsening of the balance of payments situation and with reference to the financial and monetary measures, whether there have been any informal discussions even at this stage and whether the Minister has any measures in mind, which admittedly he need not specify, he may consider necessary? The phrase "financial and monetary measures" was used by the Taoiseach last week in his speech to the accountants.
I am in close touch with the Central Bank on the question of the external situation. It is true to say that we have practically continuing discussions, not alone about this year, because the shape of this year seems to be fairly well determined by now, but particularly about next year and what the emerging situation is likely to be. I am very concerned about volume of Government expenditure this year on current account. There have emerged quite a number of excesses under different heads. There has been an excess under the heading of Agriculture, for instance.
What about Defence?
I am concerned with trying to eliminate the excesses appearing under various headings.
Would the Minister consider having a Budget debate of some sort?
If we have a Budget we will have a debate.
Could I draw the Minister's attention to the contradictions in the answer where he continues to refer to the inflow of capital as if it had nothing to do with the balance of payments? If you establish the balance of payments you are taking into account the inflow of capital. Whoever wrote that answer for the Minister was not very careful about it.
I do not know where the Deputy got what he is now attributing to me. The Deputy says that in discussing the balance of payments I ignored the inflow of capital.
The Minister suggested it was a factor outside the balance of payments.
I did not.
Yes, you did. However, we can construe the answer when we read it in the Report.
Question No. 45.
I can only go——
I only did a B.Comm.; I know the Deputy is a Doctor of Economics.
Do not get touchy.
As I have tried to bring out in my reply, we have a serious deficit on our current balance of payments but so far it seems as if it is being matched to a large extent by a net inflow of capital.
(Interruptions.)
We can construe the answer when we see it.
Anyway, what did the Minister mean by "only a B.Comm."?
Actually, I should have mentioned "Honours".