asked the Minister for Finance the principal factors responsible for the deficit of £27.8 million projected for the financial year 1972-73 being reduced to £5.4 million.
Ceisteanna—Questions. Oral Answers. - Deficit Reduction.
106.
It was indicated by my predecessor in the 1972 budget statement that, to the extent that the budgetary measures would give rise to increased economic activity, there would be a consequential increase in revenue. This additional revenue, in fact, materialised and, together with extra revenue arising from a higher rate of price inflation than expected and certain once-for-all receipts, substantially exceeded the comparatively small increase on the expenditure side, leading, in the outturn, to the reduction in the deficit originally estimated to £5.4 million.
I must confess that answer is not very satisfactory. Surely the Minister could give me, at least very roughly, an outline of the headings of revenue which are accounted for in the very considerable reduction in the projected deficit?
Mr. Ryan
The position is, as I am sure Members will recall, that from the Opposition benches last year we pointed out that the expansionary nature of last year's budget was likely to produce increased revenue of anything from £12 million to £14 million. In the event the very expansionary nature of the budget produced this yield and that represents the most significant contribution towards the deficit. Apart from the overall increase when you have such a large quantity of revenue coming from indirect taxes it is very difficult to identify the particular matters which yield the additional revenue. In addition to the across-the-board increase there was a steep rise in consumption of the old reliables, beer, spirits and tobacco, so that they produced in themselves, and they can be so identified as producing in themselves, an increase in the overall revenue figure.
Is the Minister saying that expenditure by and large was within the limits projected and, in fact, the deficit was reduced because revenue was very considerably increased over and above what was estimated? Is that the position?
Yes. There was of course, also an increase in expenditure in the course of the year but it did not run ahead at a rate as fast as the increase in revenue. This is the reason why the figure turned out at the figure it did.
The Minister has indicated in his reply that in the budget statement last year it was specifically stated that the consequences of the reflationary measures were not taken into account. Would he agree that substantially the reduction of the projected deficit is a measure of the success of the efforts made in that budget to stimulate the economy which was specifically envisaged in the budget statement?
I do not think Deputy Colley can have it both ways. One can appreciate that his attitude has changed since he crossed the floor of the House but last year he was not prepared to acknowledge the contention of the then Opposition that the expansionary nature of the Budget would mean an increase in revenue of £12 million to £14 million. Today he is asking me to acknowledge that he was right last year when he would not acknowledge that we were right in making that claim. When the Deputy was Minister for Finance last year he was not prepared to acknowledge that it would have that expansionary effect. That is one aspect of it. The other is the unusual and extremely high rate of inflation which is not a sensible way to try to balance your budget. That, in fact, is what has happened. The budget has been partially balanced by depending on an excessive rate of inflation.
Surely the Minister is not correct in stating that the then Minister for Finance refuted the suggestion made. If he refers to the reply he has just given us he will see that he refers to the fact that even in the budget statement last year I said specifically that there were measures being taken in the budget to stimulate the economy which would have the effect of increasing revenue. He will find that is in the budget statement and I think it is in the reply he gave us today so how can he say I did not accept this?
You see I put up that particular hook so that the Deputy could hang himself on it. The Minister last year was not prepared to identify the extent of the expansionary nature of his budget.
That is not what the Minister said a moment ago.
Yes. When he was pleading last year and saying that the then Opposition were wrong he was saying that they were being reckless in their estimate but the turn out figures prove us to have been right.
That is not true and that is not what the Minister said a moment ago.
It is. It is precisely what the Minister has been saying all along.