When speaking last night, I referred to the capital budget as opposed to the current budget, the capital budget being at least as important but not one which gets any great attention as a rule. It contains considerable economic significance within itself. The most significant fact in relation to the budget estimate for 1973-74 was that the balance of the capital budget would be financed by what are described as residual borrowings of £37.7 million, but the provisional out-turn for 1973-74 so far as residual borrowings were concerned came to £99.8 million, which was approaching three times as much as had been estimated.
There is no particular area in which any Government can borrow that is more dangerous or damaging to the national economy in the long run than this residual borrowing which for the most part is either foreign borrowing or is brought about by the inflationary use of moneys which were designed to be held by the Central Bank or by Departmental funds. We have the rather frightening situation that as well as borrowing £44 million odd abroad—all of which has to be repaid over various periods and for the most part out of current taxation —we have the situation whereby the Central Bank contributed £20 million towards the capital budget in an effort to balance it for the purchase of Government stocks. We are not sure, because we are not told, where this £20 million came from but it is a fair guess, as has been suggested by Deputy Colley—and he has not been contradicted by anybody—that that money came from deposits held by the Central Bank from the commercial banks, deposits that were taken out of circulation deliberately by the Central Bank in an effort to deflate certain aspects of the economy here which they considered, and rightly so, needed deflating. Therefore, to use £20 million of that money for something that is inflationary is, I suggest, doubly inflationary because it was taken out originally to prevent inflation and is being used in the opposite way to what was the original intention of the Central Bank.
In addition to that, we have something that has never happened before on anything like the scale we are now witnessing. I refer to a balance of £35.6 million to make up the residual borrowing which was got by what to some people is little more than a bookkeeping exercise but, nonetheless, one which is both inflationary and dangerous for other reasons, that was, the reduction in liquidity of departmental funds to the extent of £35.6 million. These funds which, among other things, go towards social welfare, are normally well in credit. It is necessary that this is the situation so that beneficiaries and potential beneficiaries can benefit from the funds. They are funds that usually are invested from a fairly longterm point of view. We find that these funds have been used to pay for the capital budget at a time when it was totally inappropriate to use them in that fashion. The proof that this was inappropriate is contained in page 7 of the publication, Capital Budget 1974. I quote from paragraph 13:
The amount provided by the Exchequer from its normal resources was £149.6 million, some £40 million less than expected... Receipts from sales of securities to the non-bank public, at £35 million, were below expectations, largely because the unsettled state of capital markets prompted many potential investors to remain liquid. Receipts from small savings were also below the budget estimate even though improvements were made in the terms of Savings Certificates, Investment Bonds, National Instalment-Saving Scheme and the interest paid by the Savings Banks.
That paragraph is very significant because it tells us that one of the reasons for the fall in receipts by the Exchequer through its normal resources for financing the capital budget was the fact that the unsettled state of capital markets prompted many potential investors to remain liquid. At the same time £35.6 million was taken out of the balances in departmental funds. Table 1 in this capital budget summary contains many interesting figures. One of these is that in the normal Exchequer resources the estimate of sales of securities to the public for 1973-74 was £55 million whereas the actual receipts were £35 million.
We are living in a time of rampant inflation and one might say that, as a matter of course, any estimate made on a particular date nowadays will, as a general rule, be considerably higher 12 months later because by then money will have inflated at the rate of 10, 11 or 12 per cent. The rate of inflation during the 12 months between the preparation of the budget estimates for 1973-74 and the end of that financial year was 10½ per cent but, notwithstanding that fierce inflation, the total amount obtained from the public by way of sales of securities was £20 million less than estimated. The banks, also, took in £10 million less than was estimated and small savings, which form an important part of the Exchequer's normal resources for the capital budget, dropped disastrously by £10 million to £18 million despite, as the publication points out, improvements in the terms of saving certificates, investment bonds, the national instalment-saving scheme and interest paid by the savings banks, including the Post Office savings bank. Therefore, during the past 12 months we have had an extraordinary situation whereby, although inflation was higher than ever before in the history of this State, less money was available to the normal resources and more money had to be borrowed from abroad at increasingly higher interest rates. When this money is being paid abroad to those from whom it was borrowed, it is paid free of tax and the interest paid abroad is in many ways at least one-third higher than it appears to be by virtue of the fact that the tax is not being recovered on it as would be the case if it were being repaid to residents of this country.
The capital budget is very significant as an indication of the general economic well-being or otherwise of the country in any given year. The figures published in this summary and the reason given for the decrease in the figures indicate clearly that a serious situation exists. If we must resort continually to foreign borrowing on a scale comparable with last year's, the national debt will increase at a colossal rate and we will be faced with a situation in which the cost of servicing that loan means that tens of millions of pounds more each year must be obtained from the ordinary taxpayer.
When discussing matters arising from the capital budget it is no harm to refer to the unemployment figures which were issued within the past two or three days. These figures related to the second week in April of this year and they show, rather significantly, an increase of 600 unemployed on the previous week's figure and indicate that the total number of unemployed was 261 fewer than for the corresponding week last year.
This is in spite of the fact that a lot of people who would have been classified as unemployed last year are no longer so classified because they are in receipt of old age or retirement pensions to which they would not have been entitled at the same age last year. Therefore, the figures are not strictly comparable because several thousand people would have come off the unemployment register in any event. Notwithstanding the fact that they did, we discover that the number returned as unemployed is only 261 less than last year. I suggest, therefore, that on the basis of a true comparison the number of unemployed has actually risen in the last 12 months. If you combine that situatiton with the fact that we are in an inflationary period and that our domestic Exchequer resources for capital formation are in serious difficulties, it seems very doubtful, unfortunately, that the underlying basis of our economy at the moment from this point of view is a sound one.
The matter which dominates all economic problems and thinking here is, of course, inflation. This above all else affects everybody whether he is poor or rich. Of course, it affects the poor to a greater extent than it does the well-off. It is the greatest single problem which needs to be tackled and overcome. The manner in which the economy has been run in the past 12 months leads us to believe that this Government have a vested interest in the continuation of inflation. I should like to give an example. At column 30, Volume 272, of the Official Report, Deputy Brennan asked the Minister for Finance the estimated increase in revenue in the current financial year from the latest price increases in (a) beer and spirits and (b) petrol and fuel products generally. The Minister replied:
The estimated increases in revenue in respect of the items mentioned in the Deputy's question are £400,000 and £450,000, respectively, for the current financial period April to December, 1974. These figures do not take into account the possibility of a consequential diversion of expenditure from other consumer items, which if it took place would tend to keep the overall yield from VAT at the figure forecast for budgetary purposes.
These increases were not increases in excise duty but simply price increases. As a result of the increases of 1p on the pint, 1p on spirits and ½p on petrol, the Exchequer got, according to the Minister for Finance last week, £850,000 extra, practically £1 million.
The March report of the Prices Commission came out ten days ago. It contained 121 price increases over a huge variety of products and items. Generally speaking, the increases were considerably greater, in percentages and money terms, than those I have mentioned. I should like to know, and I have put down a Parliamentary Question to this effect, what will be the increase to the Exchequer from VAT as a result of the 121 price increases. That covers only one month. Each month for the last year has not been substantially different from last month. My point is that every time there is an increase in price, the Exchequer benefits enormously. More and more tax is collected. That in itself helps to put up prices and retain the inflationary situation which is liable to strangle us all if a stop is not put to it soon. More and more money is pouring into the Exchequer as a result of these constant price increases, not just every month as they used to, but almost every week now. We have a situation in which the Government would not be able to continue in power if these tremendous price increases, which are the consequences of inflation, were not constantly taking place.
That is why I feel I am justified in saying that this Government have a vested interest in inflation. Inflation enables the Government to get along from month to month and from the beginning of the financial year to the end, limping along and keeping their heads above water, because these vast extra sums are coming into the Exchequer which would not be coming in if prices did not rise.
I look forward with interest to discovering next week, if I can, what the additional revenue to the Exchequer from VAT will be on the 121 items which were increased in price this month. This is an appropriate time to discover whether there are any items of any description which have not increased in price since February, 1973. That question was asked six months ago. At that time there were about ten items which had not increased in price, some of them a little unusual and not used very frequently. They included exotic things such as neck mutton. I could never discover, unfortunately, just how many commodities there are on the consumer price index. Presumably it could run into several thousand commodities if some of the single items we speak about are regarded as separate items for that purpose. It is very interesting to compare the grandiose promises which were made in February, 1973, with the situation which exists at present. I want to refer now to some of the Minister for Finance's proposals which he mentioned in his budget statement, particularly in relation to taxation on farmers. As we are aware it is proposed at first—I emphasise the words "at first" because these were the words used by the Minister in his speech—to impose income taxation on farmers with a valuation of——
