This is a very pedestrian type Budget. It does not do anything radical to correct our economic difficulties and it does not do too much to make the Government unpopular. I suppose one could say it is a Budget through which the Government have kept their options open in the event of their own party difficulties forcing them into the arena of a general election. It is in that respect non-committal. In this Budget the Minister for Finance reminds me of the little snippet about the timid spinster: "She would not say `stop', she would not say `go', she would not say `yes', she would not say `no', she wanted to rise but was afraid she would fall, so she bided her time and she clung to the wall."
That is what the poor Minister for Finance is doing in this Budget—clinging to the wall. Deputy Treacy mentioned in his concluding words that one of the tests of Government lies in the field of employment. It does, of course. It lies in the field of job opportunity, and in this age of adolescent unrest affecting every country in the world this question of job opportunity is an important matter socially.
I had a Parliamentary question which was answered here today. I inquired as to the number of people at work as between April, 1956 and April, 1971. The period covers a time during which Fianna Fáil have been in office continuously. It was not possible to get the figures to April, 1971, but the figures were given to April, 1970. When the last inter-Party Government left office in 1956, the number of people at work here was 1,125,000. At the present time that figure has declined to 1,066,000. In other words, there are 59,000 fewer jobs since Fianna Fáil came back to power in 1956. This is in excess of the figure so often quoted in this House by Deputy L'Estrange, his favourite figure, of 56,000, so he will have to adjust his figure upwards.
The flight from the land, which is ruling in other countries as well as here, has not been compensated for by the provision of job opportunities in other spheres. Our figure for unemployment, as every Deputy has mentioned, is now inordinately high, higher than it has been for many years, ranging around 70,000. If we are to judge a Government, and without using any other criteria than of providing opportunities for our people as they grow up, by this test, and without going further, this Government have failed. Without the safety valve of emigration we would have the nucleus of a revolution on our hands. The safety valve is the emigrant ship to England and to America.
It has always been so. It is one of the great difficulties of our particular society, but it is sad to see the situation becoming worse rather than improving. It is pointless to talk about our small increase in population in the last census. That only aggravates the position when we are unable to provide from our own resources gainful employment for our people as they come on the market.
One of the other points of failure— and this failure can be particularly emphasised in the past year—is in the provision of housing. I appreciate that the excuse that will be given is that last year there was a cement strike. I accept there may be some force in that but there were many other years when we did not have cement strikes. I will briefly mention what has happened here and how the pattern of Government activity in this respect has presented itself during the past number of years.
Twenty years ago a White Paper was issued in which it was stated that at that time the country needed 100,000 new houses. About that time there was a change of Government. The first inter-Party Government came in and within three years, under the Minister for Local Government in those days, a revolutionary change had taken place —so much so that our total house production had increased seven-fold within the three-year period and local authority housing had increased tenfold. We are at present passing through a severe housing crisis. A number of our people are very badly housed all over the country, particularly in Dublin. Would that we could have some kind of crash housing programme such as we had then. In the subsequent 11 years, entirely under Fianna Fáil, 98,000 houses were built. In the first ten-year period 100,000 houses were built. There was a fundamental difference in the two periods. In the first period 50 per cent of the houses were local authority houses, in other words, houses available for letting and suitable to the less well off people in our society. In the second 11-year period only 30 per cent of the houses were local authority houses and available for letting. It is easier for the Exchequer to lay emphasis on private house building and give some aid in the form of loans and grants than to build local authority houses. That is the answer to the fundamental difference between those two periods. The Fianna Fáil Party, who pretend to always have a sensitive social conscience, have deliberately altered the pattern here away from local authority housing to the detriment of the people who have not the money to go to a bank or a building society.
Many of our people are being forced by this policy to practically mortgage their future at an early age in order to get a roof over their heads. I may say in this regard that we in Ireland occupy a position inferior to the position in Scotland, Northern Ireland and England, where the percentage of housing over the last decade available for letting purposes, and, therefore, available to the less well off people, is considerably higher than here. In fact, Northern Ireland during the past decade with half our population have built the same number of houses and of the number they have built 60 per cent have been available for letting in the form of local authority houses while here the percentage has only been 30. We all recognise that the allocation of houses in Northern Ireland may leave a lot to be desired. We are ad idem on that point. Let me say, however, that they built the houses and they were sufficiently alert to the needs of the less well off sections because they provided 60 per cent of the houses built as local authority houses.
The number of houses we have provided here over the years has been the lowest of the 22 countries of the OECD. For a number of years we occupied the fourth lowest position. We were better than Spain, Portugal, Greece and Turkey but now we have gone down a little further. The last figures available to me show that we are now the second lowest. We are still higher than Turkey and they can live in tents. This is not a record to be proud of. I may add that we are devoting a lower percentage of our national wealth towards the provision of housing than any other country in Europe. This is not accidental. It is deliberate. In the first Programme for Economic Expansion it was specifically stated in respect of housing that it was regarded not as a commercial investment but a social welfare investment. The first Programme for Economic Expansion is regarded as Fianna Fáil policy but they never wrote a policy document in their lives. Mr. Whitaker wrote that one but they have claimed it. You will find them outside church gates talking about gross national product, even though they might not know what it was, whether it was animal, vegetable or mineral. It was stated in that First Programme that housing had a lower priority than industrial or commercial investment. In cross-examination directly they may like to back out of that statement but that is incorporated in the First Programme for Economic Expansion. If we are to accept that as the gospel of the Fianna Fáil Party, then it would seem they have lived up to that doctrine very well because their record in this regard over the years has not been particularly good. It is not a good achievement that we built a greater number of houses over a ten-year period in the past than we are building now, when we are supposed to be 50 per cent better off.
We are now beginning to feel the full impact of our free trade agreement. I suppose the real crunch will come over the next couple of years when the full impact of free trade will be felt. We have felt it to a considerable degree already. We are now exporting two-thirds of our products to the United Kingdom while some time ago we exported three-fourths. At the same time, the United Kingdom exports to us have increased and there has been a consequential worsening of our trade gap. That is what a Fianna Fáil negotiating team got for us in the Anglo-Irish Free Trade Area Agreement. I would not wish to be too censorious about that because I think in many respects we will have to face up to this position some day in a world moving towards free trade and in the event of our joining the Common Market it may be that the Anglo-Irish Free Trade Area Agreement brought us to our senses in that we have had a preliminary taste of open competition. It is possible that we cannot meet anything worse in the Common Market in the terms of industrial competition than we are already meeting from the United Kingdom with her powerful industrial machine on our doorstep.
Our percentage increase on export prices over the last couple of years was higher than in the United Kingdom or in the EEC while our percentage volume increase in respect of exports was one of the lowest in the world. At the same time, prices and incomes rose faster in Ireland than in the United Kingdom, Europe or many other parts of the world. Our consumer prices kept parallel with the United Kingdom for the first half of the last decade from 1960 to 1965 but after that we began to go down hill. We had an 8 per cent increase in prices during 1969 and something similar during 1970.
Ours is a very fragile economy. We are more dependent on exports than most countries. We are much more dependent on exports than Great Britain and Great Britain is much more dependent on exports than the United States of America which is in a very strong position in that regard. Our per capita income is one of the lowest in Europe —and I am not speaking now about countries in the Eastern bloc—and with the exception of four countries with low incomes, Portugal, Spain, Greece and Turkey, we have the lowest income.
I have already referred to the number of diminished job opportunities. The figure has fallen by 59,000 over the past 14 or 15 years. Over half the people born between 1926 and 1966 have had to emigrate and that position is continuing. Our trading position over the past three years has assumed dangerous proportions. In 1967 we had a trade gap of £100 million; in 1968 it was £150 million; in 1969 it was over £200 million and 1970 it was also over £200 million, substantially over £200 million in both of those years. Last year it was a couple of million pounds more than it was the year before. In the early stages we were able to balance our books in so far as we did not have a balance of payment deficit on current account but that situation changed and in 1969 we had a balance of payments deficit of £69 million. A widening trade gap of that nature is something for which we cannot compensate. Our invisible earnings, such as we get from investments abroad, tourism, emigrants' remittances and capital inflow, have been ranging over the last decade from about £100 million to about £160 million now. In any year if your trade gap gets too much above that level you are going to be that corresponding amount in the red.
At present we are vitally concerned with our exports. If our ordinary merchandise exports are not stepped up, certainly if the ordinary trade gap is not narrowed, we will face in the coming year, and in the year after that, a balance of payments deficit. It is estimated that for 1970 it will be £63 million or £64 million. We may hope that the International Monetary Fund or some other outside agency will come, like Father Christmas, to our help but I do not think that is a long term solution or even a short term solution to our problems.
Our average growth in the past three years has been about 4 per cent but an unpleasant feature is that it has not been a steady 4 per cent. In 1968 it was 8 per cent and then in 1969 it fell to 4 per cent and in 1970 it was down to 1½ per cent. Our inflationary position is one of the worst in Europe. We are being gripped by a degree of inflation which we never witnessed before. I do not do much shopping but from what little I do I can say that I have been appalled sometimes not so much at the increase in prices but at the extraordinary variation in prices between one shop and another, sometimes only 100 yards from each other, for specific, branded commodities. Sometimes there is a difference of 100 per cent. I could name the commodities and I could name the shops. One wonders what is happening in regard to the co-called prices control commission, or whatever body we have to try to regulate prices. There seems to be very little effort made to try to control the prices of very many commodities. As a reflection of our inflation, in 1969 our consumer price index went up by 7½ per cent, which was higher than in Britain or in Europe. Home consumption shows ominous features also. Retail sales showed a considerable increase in 1970, something which is easily and accurately calculated from turnover tax figures. There was an expansion in consumer spending. At the same time industrial output slowed down, particularly in the second half of 1970. There was a combination of increasing consumption and decreasing production at home. The result of these two events occurring simultaneously was that an increasing amount of the home market fell into the hands of manufacturers outside this country. That is reflected specifically in our trade figures. There is an increasing gap between our imports and exports. It has been calculated statistically that this rise in competing imports has now become progressive. In 1967 the import figures increased by 6 per cent; in 1968 they increased by 24 per cent, while in 1969 the increase was 28 per cent. I have not got the figures for 1970. They may be even more formidable and depressing. An economy placed in such a position cannot continue to provide a proper standard of living or sufficient job opportunities for the people.
We are in an open trade position and are now facing free trade. There will be further emigration and increasing unemployment. The unit wage cost has been mentioned. The Review of 1970 and Outlook for 1971 has been referred to. Statistics have been produced about the unit wage costs. In 1967, our position vis-à-vis the United Kingdom, which is the country with which we do most trade, was good. We improved our competitiveness in 1967. In 1968, our position was also good but, in 1969, it began to deteriorate and continued to do so into 1970. Our unemployment figure is rising. Last year it reached a level of 7 per cent. Between April, 1969, and April, 1970, employment in agriculture fell by 12,000. That is becoming practically an average annual figure now. That is approximately the number of persons who leave the land each year. The increase in non-agricultural employment was not able to keep pace with that figure. Non-agricultural employment increased by 5,000. There was a net drop of 7,000 in the jobs available to our people. Last year more than 8,000 people more than in 1969 lost their jobs. We must concede that wages, salaries and incomes generally have increased above our level of production. Money values are falling. Since the last inter-Party Government went out of Office there has been a drop in money values. I suppose it is safe to say that 12s at that time would be as good as £1 now. The £1 in 1956 was worth about 13s a year ago. In another year or two at our present rate of progress it will be worth 10s vis-à-vis the 1956 purchasing power.
This vexed question of inflation and of incomes of all sorts outpacing productivity is an old one. It has been in existence since the First World War. Up to the time of the First World War there was considerable stability in the value of money. Since then there has been progressive inflation. Many individuals, many concerns, and most Governments have an interest in inflation. It suits banks, it suits insurance companies. It suits Governments to borrow money when it has good purchasing power and give it back when it is less valuable, having used it in the meantime. At almost every street corner in our modern cities all over the world you can see large banks and large insurance companies.
It is also the duty of a Government to try to preserve the purchasing power of money. It is not good enough for us to say we can inflate away provided that we do not outpace Britain. That is exactly what we have been doing. If the time arrives when, on her own initiative or because of economic stresses from the Continent when she joins the EEC, Britain decides to try and stabilise the value of money in some fashion, and control inflation, we will have to do likewise. We have outpaced Britain with regard to inflation and it is because of that outpacing of Britain that our trade vis-à-vis Britain is working to our disadvantage. Mistakes were made in that respect back in 1963. At that time the late Mr. Lemass came before this House and read a paper called “Closing the Gap”—and that paper contained all the economic jargon which we have seen in the speeches of every Minister for Finance who has appeared on the far side of the House since then. “Closing the Gap” proposed a reasonable economic approach but unfortunately the gap was not closed. “Opening the Gap” would be a more likely description of what occurred subsequently.
A Budget was introduced by Deputy Haughey as Minister for Finance which doubled the turnover tax. Turnover tax which was introduced a few years ago, and was calculated to bring in £12 million a year, was doubled. That has been criticised as being bad economics at the time. I believe it was the worst possible economics. If you have an inflationary position, a position in which you have too much money chasing too few goods and services, theoretically you can say to yourself: "The way to stop this is to take the money from them" and you tax them. That is a perfectly sensible, reasonable and logical argument, but the difficulty is that there is a hole in the bucket. The hole in the bucket is that you cannot control society afterwards.
If you increase taxation and mop up the money which is available for spending, and the next day there is strike action, or trade union pressure, or pressure from traders or shopkeepers by putting up their prices, and from professional people by increasing their fees, and you are unable to control these pressures, you worsen the economy rather than improve it. This is precisely what happened in the case of Deputy Haughey's Budget. Increased taxation will only worsen the situation unless you have some kind of prior agreement or prior arrangement that the public will accept and you must convince them that they must not make undue demands the following morning which will completely negative what you have done and make your inflationary situation worse than it was before. We have seen the fruits of the Budget which increased the turnover tax from 2½ per cent to 5 per cent. On the other hand, it seems that the lesson has not been learned entirely. I recognise the difficulties of a Government. They commit themselves to certain expenditure and they cannot easily turn off the tap. That may be part of the explanation for what happened here.
Last autumn the Minister came before us with his mini-Budget. It was supposed to be a package deal. There was supposed to be a prices and incomes policy in the offing and some curtailment on the second leg of the tote, the 10 per cent wage increase. The second leg was to be amputated but the leg was too strong for the Minister and was not amputated in fact. In his speech on 28th October, 1970, the Minister produced all the old economic shibboleths. Speaking about our competitiveness he said:
In 1969 unit wage costs in Irish industry increased by over 10 per cent, a rate which was more than double that in British industry. No firm figures for 1970 are available as yet but it is possible that these costs will show a further increase of 10 per cent.
He went on:
Increases in incomes in excess of the growth of national productivity cause prices to rise by roughly the amount of the excess.
He said:
... the fall in industrial production in the second quarter of 1970 is a matter of serious concern; excluding seasonal adjustments, this was the first fall since the second quarter of 1966. Unemployment has increased. Consumer imports are mounting and the external deficit is at an unacceptably high level. Tourism is in danger of losing its momentum.
He also said:
No responsible Government could have delayed action any longer or have refrained from the measure which we propose to adopt.
What did he adopt? He increased company taxation and corporation profits tax from 50 per cent to 58 per cent, thereby taking £6 million in a full year out of the pockets of the productive units, the manufacturers, and this at a time when, as shown by the figures I have given, we had a declining position vis-à-vis our competitors on the far side of the water. He also increased wholesale tax from 15 per cent to 20 per cent on selected luxury items. I do not know what determines a luxury item. Perhaps the Minister for Finance would look on these matters with a more frugal eye than I.
At the same time, tax on motor vehicles was increased by 25 per cent but the extra revenue that will be derived from that 25 per cent is not earmarked for the purpose of helping local county councils in relation to the rates or to the roads. It was earmarked to be dispensed at the judgment of the Minister for Finance. This is his solution to the situation that he described in his Budget speech. He was increasing taxation which, in itself, is inflationary in the circumstance in which we find ourselves and, at the same time, he was going to leave our manufacturing firms, which at that time were beginning to close down and which have been closing down since, less competitive because of this corporation profits tax. To my mind, both expediences are questionable from an economic point of view. It is merely a question of the Minister wanting money and of his saying: "Where the devil shall I get it from without making myself too unpopular?"
In this context let us not forget that when turnover tax was introduced— since then, we have had our greatest degree of industrial unrest—it was proposed to bring in £12 million per year but since then we have seen the quiet introduction of wholesale turnover tax which the people do not seem to notice very much. There also was an increase in August last in the wholesale tax on luxury items from 15 to 20 per cent so that the £12 million which was expected originally to accrue from turnover and wholesale taxes is now netting £70 million a year. That is a big jump. It is a big injection into the inflationary atmosphere of our economic situation. Of course, the money was necessary because we had already committed ourselves and our Government expenditure had increased to the peak level of 20 per cent of our total expenditure.
We hear a lot about our external reserves. Many people seem not to be particularly concerned in so far as our trade gap is concerned or about our imports getting out of hand. They say we have external reserves of £300 million so why bother; but even that figure cannot be taken in isolation because we must relate external reserves to imports and to the trade gap if it is to be a meaningful term. If, ten years ago, we had external reserves of £300 million, that figure would be viewed in a much different light today. The ratio of our external reserves to our imports is declining. That is rather ominous. The ratio of our external reserves to our imports was 60 per cent in 1966. It is now down to 40 per cent. Furthermore, the ratio of our external reserves to our trade gap is declining. It has decreased from a 2 to 1 figure to a figure of 1.3 to 1.
The question of Government borrowing has been adverted to more than once in annual bank reports. They have been mentioning it now for some time. During the past few years the Government have been borrowing a considerable amount of money and, particularly, borrowing from abroad. I think most people will concede that foreign borrowing is the most precarious form of borrowing because when one borrows from abroad he becomes dependent on rates of exchange, on devaluations and on altering rates of interest. Our foreign currency indebtedness rose, on foot of borrowing by the Government, by £100 million between March, 1966, and March, 1971. We have also had considerable credit expansion here from our non-associated banks during the bank strike when everybody who had a cheque book could put a quantity of money into circulation by simply signing cheques. I do not know if anybody has yet assessed the amount of extra money that was put into circulation during that strike—a matter that the Government did nothing to rectify. To quote the now famous phrase, they stood idly by.
I am not aware whether any credit guidelines have yet been given by our Central Bank to our commercial banks in relation to the position for the coming year. Usually at about this time every year, they give some guideline. If they have already done so, I would be interested in knowing what the guidelines are, whether they mention a credit squeeze and, if so, the extent of such credit squeeze.
Another ominous feature of our present economic position, whether or not it is very much appreciated, is the peculiar association now arising of low growth and balance of payments difficulties. If there is economic stagnation our experience has been not to have balance of payment difficulties or in layman's language if you are living on a low level, with a tightened belt, not on top of the world, you will not be "in the red" in the bank. In the past when we had sluggish economic growth we had not balance of payment difficulties but now for the first time, so far as I know, with the projected growth rate of 1½ per cent for this year, we are passing through a period of substantial balance of payments deficits on current account—£69 million, £65 million and so on. I should like the Minister, when replying, to deal particularly with that aspect of the situation. Can he reconcile the fact that with economic stagnation we have at the same time balance of payment difficulties? There may be a simple explanation but on the surface it appears decidedly suspicious.
Essentially, we are an agricultural community. I come from a farming constituency and it is disappointing to find that in the past year our agricultural production has been stagnant. There has been a slight increase in output and stock figures are good but I understand when that situation is balanced against input and agricultural expenses that, in effect, our agricultural production is stagnant. There still exists the differential between farm income and incomes of people in non-agricultural pursuits. That gap may be £6, £7 or £8—the economists will not agree on it but they agree the gap is there and the Budget has done nothing to bridge the gap or reduce it. I do not pretend it can be reduced in a day. We have lived in an economy since the State was established in which the farming community have been bearing the price of political freedom. They, and practically almost alone they have carried that burden since the State was founded while most other members of society have been securing incomes comparable to corresponding occupational incomes in Britain. The farming community, in that they had to export their goods to a world food dump, have had to pay the economic difference between their income and the income of the Northern Ireland and British farmer. Our farmers have paid that price for political freedom since the State was founded and they have never been thanked by anybody for it. It is as well to say it now.
A small matter, which may be a little specialised for a Budget debate, is the failure of the Government and the Minister for Agriculture and Fisheries particularly to pursue the warble fly eradication scheme. This pest is costing £1 million or £2 million a year. It would pay for the dole that may be throwing the Government out of office, if they looked after it. It is only a matter of organisation to ensure that all our cattle are dressed with the very simple dressing now available. The loss in hides and in cattle weight, the loss to farmers in their stock represents a very substantial figure and it is sheer neglect on the Government's part not to look after cattle hides. I suppose they were too busy looking after their own hides so that they could not look after the cows and sheep throughout the country. I want to draw attention to our sheep population. In June, 1969——
