This was the size of the deficit I have referred to. Looked at in absolute terms as a proportion of the gross national product of the current year it is by no means as formidable. In fact, it is recognised that it represents something less than 2 per cent of the value of the likely product of the country as a whole.
In the course of his opening speech the Leader of the Opposition quoted at some length from the June report of the Economic and Social Research Institute. It is important to refer to a short quotation that was included in the summary of the report. I quote from page 6:
Viewed in an international setting, the forecast growth rate is high, inflation average, and the current account external deficit moderate.
I have quoted from those various bodies in order to demonstrate that the decisions that were taken and the action which followed those decisions in respect of the budget were sound decisions based on the best advice available in the circumstances. I recognise and none of us denies that circumstances change, that there is in the whole economic situation both outside and inside very few things static and that there is a situation that has to be watched with care but I think we can see also when we look at this what has been happening elsewhere. It has been forecast that the economic growth for the seven largest economies in the OECD is expected to be no more than ½ per cent this year. In 1973 the estimated growth rate in the United States was almost 6 per cent. This year the forecast of the OECD is that the American economy will decline by an estimated ½ per cent. In Japan the decline is forecast at 1½ per cent after a growth last year in excess of 10 per cent. In Britain, our largest market, it is predicted that there will be a decrease of 2 per cent in output in contrast with a growth rate of nearly 5½ per cent last year. These figures all illustrate what the Minister for Industry and Commerce pointed out last evening that what is being experienced is the most exceptional deceleration ever experienced and the expected performance of our economy with a growth of 4 per cent as against 7 per cent last year is one for which neither the Government nor the country need make any apology but rather regard it as a vindication of the policies we adopted.
The further criticism of this budget was that it failed to assist and promote investment and that it failed to encourage exports. As I mentioned, in the course of my opening remarks, investment in 1973 was of the order of 23½ per cent of GNP, the highest level ever recorded. Many of the indications we are receiving this year show a continuation of this trend. The planned investment in projects approved by the Industrial Development Authority in the year ended 31st March last reached £280 million, compared with £135 million in 1972-73. These factual statistics of finance may not convey the full extent of the transformation which is taking place in the industrial infra-structure of the country. Deputies will appreciate, if that trend continues, it will transform the Irish economy.
These figures are no flash in the pan. The statistics for IDA grants approved by the Government for industrial projects in the year to the end of June, which are the grants, as Deputies know, which require specific Government approval, for the larger capital intensive industries involving grant expenditure of the order of £350,000 or more, show that the grants were more than double the level of the preceding year. At £54 million they compare with £23 million in the year ended 30th June, 1973. Grants of this level, representing one quarter or one-third of the total capital investment involved in the project concerned by the firm or the industry, indicate a very considerable programme of industrial investment.
On the other hand, the figures for loan finance for agriculture provided for by the Government through the public capital programme for the year 1974-75 are £45 million, compared with the figure of £24 million for the year 1972-73. This is not the whole picture. Many other lending institutions, apart from the State agencies, are involved. These statistics, as far as they can be interpreted, indicate a substantial investment in respect of industry and agriculture.
In respect of building and construction, in 1972-73 the total amount of money provided through the public capital programme for building was £82 million approximately. In the year to the 31st March next some £136 million will be provided from the same source. This, too, is investment in the provision of the infra-structure of houses, serviced land, hospitals, schools and so on, all of which indicate progress and without which no progress could be made.
I would like to refer at this stage to some comments made by a number of Deputies in respect of the building and construction industry although I propose at a later stage to deal in more detail with it. I would like to again put on record the views of the Economic and Social Research Institute, which stated in the June report on pages 17 and 18, issued last week:
For building and construction as a whole our forecast is for no change in volume of activity, but substantial changes in price, given the rapid increases in materials prices in recent months.
This emphasises the fact that has been mentioned here by different spokesmen on behalf of the Government that this country cannot isolate itself and that it would be unrealistic to imagine that what happened when the Arabs increased the price of oil last November could pass this country by and affect everywhere else but that we would be excluded from it. It is nonsense to suggest this and Deputies know that the effect of this running through the whole economies, not only of those of Europe but of the entire world, with a few microscopic exceptions, has had, and will have, a dramatic effect on prices. It will have an effect that in many cases has not adequately or fully been understood up to the present. Any suggestion that this country could isolate itself from it, or that we could escape from the consequences of this, is a failure to accept the facts as they are and to recognise these as facts having an influence on our economic life, and in many ways transcending the economic facts in respect of the influence it will have on prices and costs.
I want to indicate that, in addition to the figures I have mentioned, the expansion—this is proved by the statistics—in industrial exports in the first half of this year rose by an estimated 42 per cent in value. The overall level of increase in exports is lower because of the effect on agriculture of current world difficulties. Nevertheless, the size of the average increase is by no means insignificant.
The development of industry, the expansion of exports based on industrial concerns, depend not only on investment, on the money put into it but on the soundness of the economy as a whole, the efficiency of the means of production, the attitudes, aptitudes and degrees of training of people working in industry as well as in agriculture and the services. It depends on the way in which our productive and service facilities are used and it depends on the quality and infra-structure of the environment in which we work.
I mention these things because, taken in conjunction with the Government direction of the economy, it is important that they are taken into account in how the economy of the country as a whole responded. I believe the Government have dealt with the economic situation in a balanced and rational manner, but, as I said a few moments ago, there are certain realities that must be recognised. The economic situation does not remain static. Policy has to be formulated in face of uncertainty about future developments. Assumptions have to be made about the likely direction and intensity of various influences outside the control of Government or even of anyone in this country. Who could have forecast this time last year, or even as late as October, that the transformation in respect of the price and availability for a period of oil supplies, would have occurred? It, therefore, is important that policy has to be continually reviewed as events unfold and adjustments made, which are considered necessary.
The Government are watching this situation. One thing that was emphasised at budget time, and which has been re-emphasised in the course of this debate and the debate on the Finance Bill, is that the danger of inflation has emerged as even a greater threat in the last few months. It is essential, having regard to the evolution of the balance of payments and the threat inflation poses for the long-term progress of the economy, that this situation should be recognised and that the necessary action, when required, to deal with the situation is taken.
One of the matters that was mentioned in the course of this debate by a number of Deputies was administration and included in that was the manner in which Dáil business is dealt with and the amount of time available to discuss certain matters that come either in the way of Estimates or legislation before the House. As Deputies are aware, this week the House spent some time discussing a motion, which is designed to amend the Standing Orders, and to bring these amendments into operation from the beginning of next session. The recommendations involved in these amendments are based on the all-party committee report, which was chaired by Deputy O'Malley when he was a Minister in the last Government, and on which Deputies from all parties were represented. A number of recommendations were made; a few have already been brought into effect. The motion authorising the amendment of Standing Orders now is designed to make further changes.
In order to show that the progress of legislation has not been slow during the period of office of this Government I have here some figures which indicate that up to last March 40 different Bills were enacted. That total was not exceeded in any one of the 10 calendar years 1963-1972 and was only reached in one of them, 1964. The average annual number of Bills enacted over the last 18 years was only 32. I accept, as I think we all do, that there is need for reform. This matter was considered in considerable detail and many useful proposals were brought forward by members of the committee which resulted in this agreed, all-party report. But no matter what changes are made, it seems to me that having amended and altered Standing Orders, having devised revised machinery for dealing with matters that come before the House agreement to work the system will be necessary.
Next year one specific change of an important nature will occur in that the financial year will be changed and the budget will be much earlier than previously. Consequently, the Finance Bill will be reached at an earlier stage than has been customary since the House was set up. Apart from that, I am convinced from experience that the only really efficient way to get business through is to have a timetable that can be flexible, one that enables the Opposition to request longer time for a particular piece of legislation as more time for some Estimates as against others. But in the last analysis discussion must end at some time and decisions must be taken and heads have to be counted. It does not matter whether people vote with their feet or their heads so long as the tot comes out right.
Decisions must be taken and no matter how elaborate procedure for getting business through may be, unless there is agreement to work the system in a rational way it cannot operate. It is unsatisfactory to have protracted debates on limited aspects and then rush through large chunks of business, whether a Finance Bill or something else. Another suggestion has been made, one we put forward on more than one occasion, that more business should be referred to select or special committees. Deputy de Valera referred at length to this last night and rightly pointed out that some of the changes that have been made have not substantially altered the manner in which business is despatched here. I think that with the amendments proposed in the motion passed during the week the changes will mean an improvement in the next session.
I want to deal with a number of points raised in connection with agricculture and because these are important it is necessary to go into some detail. First, I want to make clear that there is no question of the Government dragging their feet on the green pound. Before deciding to seek Community agreement to a change in the representative rate for the Irish pound for the purpose of the CAP, the Government had to consider the wideranging implications for the economy as a whole. Contrary to suggestions made, a formal request by the Government for a change has been made to the Commission. This was considered at a meeting of the Council of Ministers last week and in accordance with normal Community procedure it is being studied by the Commission. It will come up again at the next Council meeting in September.
I should like to re-emphasise some of the comments I made in opening this debate and in doing so to refute categorically the allegation that the United Kingdom Government took unilateral action in regard to agricultural subsidies. At its meeting in March the Council of Agricultural Ministers at the request of the United Kingdom delegation authorised a special temporary subsidy for pigmeat production. The UK Government were authorised, at the request of the UK delegation, to provide a special temporary subsidy for pigmeat production in Britain from national funds with a corresponding subsidy for pigmeat production in Ireland paid from FEOGA. The British subsidy was paid from their own Exchequer; the Irish subsidy for pigmeat was paid from FEOGA.
The UK delegation was also authorised at the March meeting not to make the full transitional alignment step in their cattle guide prices but instead to grant an increased calf subsidy. This was compensated for in our case by compensatory amounts on our cattle and beef exports to the United Kingdom which are financed from FEOGA. The French Government in the past few days announced their intention to grant certain temporary aids to farmers mainly on interest rates, cattle, pigs and taxation. It is understood that these proposals are being examined by the Commission on the question of compatibility with CAP and, on preliminary indications, the Commission appeared to have a number of reservations about them.
It is not in our interest to revert to a system of national aids for agriculture but rather to ensure that any problem arising for any member state is dealt with on a Community basis in accordance with the CAP. I do not think any Deputy is seriously advocating that we should revert to the policy of subsidising food exports to other countries at the expense of the Irish taxpayer.
There was some criticism here about the farm modernisation scheme and the EEC directive on disadvantaged areas. The scheme adopted here to implement EEC Directive 159 has exploited to the full limit any flexibility allowed for the needs of smaller farmers. As a result the level of aid provided for them under the scheme is not only better than what was previously available but is also more favourable than what is offered to similar farmers in other member countries. Taking account of the various elements of the EEC farm structure policy, smaller farmers now have a wider range of absolutely voluntary options than they ever had before.
As well as expanding business by availing of the aids offered they can hope to become development farmers, for example, by acquiring extra land vacated by retiring farmers. The Minister for Lands recently introduced a generous scheme to enable farmers to retire with dignity and security either by selling or leasing their land. The EEC directive on disadvantaged areas is, of course, not yet final. The extent to which the Community will contribute to the costs of member states remains to be settled. The sections of the measures which have been agreed lay down precisely criteria for the selection of the disadvantaged areas by each country. The main aid envisaged in the directive is an income supplement to farmers in the areas concerned payable in the form of a livestock headage payment. The measures will give a degree of additional flexibility and investment aids which may be paid to farmers and should prove of considerable benefit.
One of the matters mentioned by Deputy G. Collins was the question of the difficulties in the beef sector. Since December last the Minister for Agriculture and Fisheries has taken every opportunity to press Brussels in the strongest manner to protect the beef community and, in particular, the imposition of a temporary ban on beef and cattle imports from third countries. The new slaughter premium authorised by the EEC for the first three months is on much the same lines as the pigmeat support subsidy which was introduced. Both these supports are valuable and will provide assistance to the livestock industry. This change in respect of pigmeat has also been beneficial. Some time ago the Minister for Agriculture and Fisheries obtained a FEOGA subsidy of £2.80 per pig which has been of assistance and recently there has been an increase in pig prices.
The debate has been notable for the continuous references to the housing situation. The Minister for Local Government dealt at considerable length with this in both his Estimate speech and in the course of his remarks here this morning. There are a number of points I would like to mention. In 1972-73 the total amount provided by the Government for housing under the public capital programme was £45 million. The total in the capital budget this year is £77 million. In addition, the Government have now indicated, as announced by the Minister, their intention of providing a further £9 million. This morning the Minister for Local Government announced an additional sum of £5 million. The Minister for Finance in the Seanad will also refer to this matter. The important thing in this regard is not the source of the money for housing. That is not of great consequence. What matters is whether it is available or not. The sources are numerous. The money may come from the building societies, the banks, the local authorities or the Government but irrespective of the source the more money allocated for housing the less there is for personal consumption, for industrial and agricultural investment or for any productive purpose or to finance the throughout of either industry or commerce.
It, therefore, requires an exercise of considerable skill to maintain a proper and delicate balance between these competing, deserving needs. I want to give the House some facts of the increase in the money supply. Last year, to May, 1974, the money supply increased by 23.3 per cent. In the same period the resources of the associated banks grew by 21 per cent, of the nonassociated banks by 44 per cent and of the building societies by 19 per cent. It will be seen from these figures that the building societies, while they made significant advances, have been the poorest performers in this group despite the fact that they had tax concessions and a State interest subsidy of over £2.4 million per year.
Last year, the building societies received a loan of £6 million from the Bank of Ireland and the Allied Irish Banks through a special arrangement made by the Government with the banks. This involved an interest subvention and a guarantee by the Exchequer. The Government have been in negotiation through the Central Bank with the associated banks. The banks have agreed to a further advance of £5 million to the building societies. The details will be announced next week. It is important to mention why the growth of the building society resources has not kept pace with those of other deposits. The building societies lost the interest rate advantage which they formerly had over the banks. This happened while the banks had to increase their rates as world rates climbed and the societies did not raise their rates to the same extent.
Thus the differential in their favour disappeared and at certain levels of deposits it has now become a differential against the societies. It is a fact that to some extent building societies while they did well in difficult circumstances, lost the advantage of the pulling power for funds. The Government appreciate that high interest rates are a heavy burden on house purchasers even if the burden is significantly eased by abatement of income tax and mortgage rates are lower than those charged by other financial institutions, but if the choice has to be made between higher mortgage payments on the one hand and more money for housing on the other the decision, however reluctantly taken, must be one of providing more money for houses.
If higher interest rates are necessary to achieve that goal they must be accepted. The present Exchequer subsidy to the building societies is related to the present deposit rate available of 8 per cent and a mortgage rate not exceeding 11¼ per cent. The Government have decided to continue to pay the present subsidy until interest rates have improved downwards but will discuss immediately with the societies appropriate revised new levels of interest on deposits and mortgage rates.
Deputy J. Lynch referred to the limit of £4,500 on house purchase loans by local authorities and said they were inadequate. The Deputy appears to have forgotten that the limit up to March, 1973, was £3,800 for greater urban areas and £3,300 for the rest of the country.
It would be well to bear in mind that the total applications for these loans in the hands of local authorities at the end of March, 1974, was approximately £50 million. This does not show any real difficulty on the part of applicants. The Institute for Economic and Social Research in their examination of the outlook for the building and construction industry commented that the outlook indicated considerable progress. That comment was made before the Government's recent decision and the allocation of the extra £9 million and the additional £5 million which have been announced today and which the banks have agreed to provide. That all indicates the extent to which the Government are committed to housing. It is also important that in their recent statement on monetary policy the Central Bank specifically exempted lending for house purchase, including bridging accommodation, from the restrictions introduced for banks in relation to personal and other nonproductive lending. This indicates the special attention and the provision of adequate funds by the State and other institutions to ensure that the construction industry will maintain its development and continue to make progress.
A number of Deputies, particularly Deputy Faulkner, referred to the changes in social welfare benefits and payments. He appeared to criticise the actual increases given on the basis that they had not kept pace with the increases in the consumer price index. The annual rate of spending on social welfare based on the 1974 budget provision is 77 per cent greater than the provision for the 1972 budget. This increase includes not only an increase in numbers eligible, but it includes an increase in the actual benefits, many examples of which I gave in the course of my introductory speech.
The Minister for Health and Social Welfare announced that an examination is being made of a number of aspects of the social welfare code and of what changes, improvements and alterations should be made. The fact is that the changes which have been made in this year's and last year's budgets are the biggest ever given and show a real advance in the amount of money available in the actual income over and above any increase in prices or rises which have occurred. It is not necessary to restate the examples I have already given except to say that the amount voted in this year's budget in respect of social welfare is 77 per cent higher than it was two years ago. No Deputy will suggest that increases in prices in the meantime have approximated to that level.
Deputy Staunton and others referred to a number of administrative matters, the regional structures and the importance of promoting western development in general and regional development as well. It is generally agreed that the structure which has evolved over the years has involved a certain blurring of responsibility with a consequent block in progress. Deputy Staunton expressed particular views and others may have other views, but the matter is primarily one of organisation. The Department of the Public Services and others are in discussion to see what changes, if any, are desirable and where they should be made. The matter will then be brought before the Government.
One of the matters referred to in the course of this debate was the fact that in recent months there has been concern about the deterioration in employer-labour relations. The criticism, of course, was made in the course of the recent bus dispute. Suggestions were made that the Minister should intervene. I think it is well that I should quote to the House a view expressed by Deputy Brennan who was the Minister for Labour in the last Government. I do this, not to indicate any basic disagreement with what he said, but simply to show that Deputies sometimes take a different view in Government from what they take outside it. When there was a cement strike on here, and I am quoting from the Official Report of 14th May, 1970, column 1612, Deputy Brennan, as Minister for Labour, said:
I am very much concerned, but I am also concerned that the adequate institutions provided for settling this or any other strike are used to the fullest extent. By intervening at an inappropriate time I would only weaken those institutions, which we all agreed should be set up. I do not see what my intervention would accomplish, because we must view this strike in the context of the general economic situation. This is not the only strike we are likely to have. How we handle it and how the institutions available for settling the strike are used will establish a precedent for future negotiations.
In the ESB dispute in 1972, Deputy Brennan, again as Minister for Labour, on the 12th April—and again I am quoting from the Official Report, Volume 260, No. 1, columns 43 and 44; again, he had been urged to intervene—said:
That is the very type of action that would bring absolute chaos into the whole procedure of industrial relations in the ESB. It is the very type of thing we have been advised not to do.
I do not think it necessary to give any further quotations in that regard except to say that the general experience has been that when a strike occurs—if there is pressure on the Minister or Ministers involved or on the Government to do something about it—the history of all strikes shows, or nearly all, that there may be an appropriate time for the Minister or the Government to intervene but that the established procedures under the legislation enacted for the purpose of dealing with these matters, and the whole framework involved in the Labour Court, by and large, are the best available to us.
The Minister for Labour has indicated that he is considering what changes and alterations may be required before recommending amending legislation or before bringing proposals before the House.
I have dealt in some detail with a number of points made. What I have said has ranged over a wide variety of subjects. The debate, ranging as it did and as is usual in a debate of this sort, covers a great many problems that affect the country. Individual Deputies may have raised specific matters and, if I have overlooked dealing with any of them, I will endeavour to have their queries answered by means of a direct reply.
The matter that I mentioned initially, that has been the subject of a good deal of comment in the course of the debate and one to which I want to advert again is the problem of inflation which is the major one facing the economy at present. Continued at its present rate it could erode the very fabric of our society. We are not alone in the world in this problem. As I have said, all countries in the Western world and beyond it have similar difficulties. Its solution, in part, is a matter for international action. Also, as I have made quite clear, it is a matter for domestic action on the part of the Government and we will face up to whatever responsibilities we have in that regard.
There are also the associated problems of the size of the deficit on the balance of payments and of unemployment. Sometimes action taken to deal with one of these problems will aggravate the intensity of the other. In their actions the Government, at all times, will be concerned with the principle of human concern and the good of the community as a whole.
I hesitate to mention Northern Ireland in the category of a problem. In many ways it is more in the nature of a tragedy. I have been asked to say more on the subject in reply to this debate and, for many reasons, I hesitate to do so. As I have said before, if words could solve the problem of the North or relieve the tragedy, then it would be the happiest place in the world. But I want to reaffirm the policies which have been enunciated by myself and Ministers of the Government, in this House and elsewhere, on numerous occasions during the past year and most recently in reply to a number of questions put down by the Leader of the Opposition. Our concern now is to do everything possible to bring about peace, reconciliation and the reconstruction of power sharing in Northern Ireland. Our concern is for the entire population of that area and, in particular, for the minority living there. We wish to see progress made by the only means possible in our time; I mean by the processes of discussion and consent.
In the past few days we have surveyed the economy as a whole. Despite the signs of strain which are evident and which have been referred to in the course of this debate by Deputies as well as by Ministers and despite the effects of inflation, there is a substantial momentum of progress. Perhaps this momentum is evidenced most dramatically by the massive increase in industrial investment and by the industrial progress I have mentioned. It is evidenced by the progress being made in agriculture. Despite the present unfavourable world conditions for cattle prices, the long-term prospects cannot be anything but good. The potential for mining and for further finds of gas and oil—which could transform the economy beyond anything we know or, indeed, beyond the recognition of anyone listening here or elsewhere—will be developed fully in so far as the Government are concerned in the interests of all of the people of this island. By our actions we will ensure that the prospects I have mentioned—in so far as we can contribute to them—will be realised. We will provide and encourage an environment which in turn encourages and stimulates development and ensure that the fruits of this development, as far as possible, are distributed fairly amongst the entire population.
The debate was also notable for a number of extraneous matters not strictly relevant to it. There has been a good deal of comment, firstly outside the House and, in the last couple of days, inside it on how I voted last week; I do not propose to add to the comment.
