Deputy J. Lynch moved the adjournment; he has one hour and a half.
Financial Resolutions, 1975. - Financial Resolution No. 13: General (Resumed).
Debate resumed on the following motion:
That it is expedient to amend the law relating to customs and inland revenue (including excise) and to make further provision in connection with finance.
—(The Taoiseach.)
It is expected from Opposition spokesmen, and particularly perhaps from the Leader of the Opposition, that on such an occasion, the beginning of the general debate on the budget proposals of the Minister for Finance, he would immediately attack and denounce that budget. But I want to say right away, and acknowledge, that there are a few good things in the budget.
Deputies
Hear, hear.
But, unfortunately, they are so few and so far from being good enough in the circumstances that that is about the extent to which I can go in acknowledging the efforts of the Minister. This is his third formal budget is about one-and-a-half years. If we take account of the informal budgets and the amount of money the Minister has taken in, one's mind could only boggle at the kind of deficit with which he would have to contend were it not for those intakes. For example, the £20 million or so—perhaps a little less—that will accrue from the increased postal charges imposed late last year; the £27 million—and I believe that that would be a conservative estimate— which will accrue from the 15p per gallon increase in the tax on petrol introduced just before Christmas, and now the £34,500,000 which will accrue as a result of this more formal budget. That brings the total sum raised in the short space of a few months to something like £81,500,000. This takes no account whatever of the sum that will accrue by way of taxation from the increased input to health charges.
In his last budget the Minister anticipated a deficit of, I think, £75 million, more or less. In the event, he got a deficit of £92,500,000. The purpose of that deliberately anticipated deficit was, according to the Minister, to create expansion and, in other words, to create employment. In the event, the expansion sought did not take place and the employment increase turned out to be a disastrous decrease, indeed, a spectacular increase in unemployment. This year the Minister budgets for £125 million. Again, he does this for expansionary purposes to boost employment. But, unfortunately, all the predictions are that, in the coming year, the unemployment figures will get worse. Therefore, he takes a deficit last year and increases the deficit this year, in the knowledge that the deficit that he deliberately budgeted for last year did not achieve its purpose. In another context people advocate. after a bad experience, taking a hair of the dog that bit one, although it is going to be an expensive hair as from this morning. But, in the circumstances of the economic situation at present, I do not see why the Minister should have taken a whole litter of the dog and, what is worse, they seem to be biting dogs instead of working dogs because there is no indication, except for a few million pounds, how this deficit of £125 million is going to create a boost in the economy. I will refer to those few million pounds later on, which I will acknowledge can and I am sure are designed by the Minister to create that boost, to help liquidity in business firms and industrial undertakings.
Apparently the Minister admits that there is little prospect of achieving what he sets out to do. In his budget statement—I have a note of it and I had better use my note— he acknowledges that this huge deficit is expected to provide only, he says, "a moderate stimulus for the economy". He couches the rest of his words elsewhere in his speech in rather frightening terms when he says:
I am estimating receipts on a fairly optimistic basis in 1975 in the expectation that the economy —aided by the beneficial effects of today's budget—will revive in the coming year. Indeed there are hopeful signs of such a revival already: I refer to the continuing rise in industrial exports——
and, again, I shall come to that in a few moments
——and the boost to agricultural exports that will be provided by higher EEC prices. I must, however, sound a note of caution. If, contrary to my reasonable expectations at this stage, the economy should not respond adequately during the year there may be a fairly serious shortfall in revenue and appropriate corrective action may have to be taken later.
At least that is near an admission that the Minister is far from certain that his reasonable expectations will be fulfilled. To indulge in a little commendation let me say that there is a note of honesty in that passage of the Minister's speech. The budget is introduced against the worst economic background that we have experienced since the second world war. We must go back to the forties to find unemployment figures as high as 100,000. Also, it was only during war years that we experienced an inflation rate of 20 per cent but we do not have to go back to the war years to find the alarmingly high rate of unemployment that persists now because, 17 years ago, at the end of the term of office of the second Coalition Government, unemployment figures reached 96,000 at this time of the year. At that time, though, emigration was in full spate and this factor cased considerably the kind of figures that appeared in our statistical publications. I have heard that if the up-to-date figures were published, it is likely that the unemployment figure would be 120,000 but the figure we have is ten days old.
Given that level of unemployment, together with a price rise of 20 per cent, it is the over-riding duty of the Government in such an overall disaster situation to protect existing jobs and to get the unemployed back to work as quickly as possible. Allied to this action there is the need to cut down inflation. This figure will not remain as it is. It will either go up or down and it is more likely to go up. Unfortunately, any further increase in the figure could lead to a runaway uncontrollable price spiral which would wreck any chance of a continuing improvement in employment.
Therefore, there is a compelling need to take prompt action to reduce substantially the rate of inflation. Little, if anything, is being done in this budget to reduce unemployment. Nothing is being done to halt inflation. Indeed, the whole budget speech underlines the hopeless submission to the inevitability of increasing inflation. There is hardly a mention of, much less any action being taken in regard to the balance of payments situation. Is this, again, an abject admission that nothing can be done? There is no word, either, of any plan for the economy, not even for one year ahead. This, too, is an abject submission to what the Minister regards as the inevitability of the Government to do anything positive so far as directing and influencing our economic destiny is concerned.
It is adequate testimony of the failure and incompetence of this Government that we should now be faced with such a dreadful situation. The Government would have us believe that all these difficulties are due entirely to events outside our control but I assert again that this is not true. We have been given figures by the Central Bank and by other sources which indicate that perhaps slightly less than 50 per cent of our inflation arises from causes which are within our control and, consequently, are subject at least to Government influence. It has been our consistent view that while world events have worsened the position they cannot be responsible for all the unemployment that this country is suffering at present or for all the inflation that has been inflicted on us. This excuse on the part of the Government is totally unacceptable. It is a total abdication of the Government's responsibility for handling our affairs. If we were to accept the excuse offered by the Government, we could take it that the Government would be powerless to influence the course of economic events in the face of these world influences. In that case it would be pointless for the Minister to introduce any budget. We are told that the budget is intended to help the situation but if we should follow the corollary that the Government can do nothing to help the situation because of world events, there would be no point in introducing any kind of control or legislation to help influence the position.
The truth is that the Government can take action either to help or to worsen the situation. As I have said already, the Central Bank in their autumn quarterly report said that external influences account for only about 50 per cent of our inflationary trends. In the course of a reply to a parliamentary question yesterday, the Parliamentary Secretary to the Minister for Finance admitted that outside influences were responsible for something more than 50 per cent of our inflation. He stretched the figure as far as he could and mentioned 58 per cent. Most people who have looked at the situation objectively must agree that during the past year much of the problem has been due to the Government's failure to take any action and that what little action was taken was either ill-timed or inappropriate.
I am not making wild statements. One way of examining the situation is to ask to what extent the Government took independent action to offset world events that might have affected us. On the Government's figures higher prices for oil and other imports accounted for about 7 per cent of last year's increase of 20 per cent in price rises. If we add to that another 3 or 4 per cent to allow for the fall in the value of the £ on world markets, or for any other outside factor—and that is being generous— we find that little more than half of our inflation, say, 11 per cent at most, can be blamed on the outside world. The rest has been due to internal domestic forces and, therefore, was capable of being influenced by the Government.
I could put this in a different way. Other countries have also been affected by higher oil prices and raw material prices, including small countries like ourselves who are dependent on foreign trade. These countries have not inflation rates of 20 per cent. The EEC countries do not have such a high rate of inflation. The small States such as the Netherlands, Luxembourg and Belgium have a rate of inflation between 10 per cent and 15 per cent. These small countries are dependent in the main on foreign trade. With the exception of Belgium they are dedependent on imports of raw materials for their industry.
The same picture emerges when we look at what is happening in employment and output. If the world situation were to blame for the falling off in this area, we would expect to see a fall, or at least a slowing down, in our exports. Last year there was a 40 per cent rise in industrial exports. Even though much of this rise was as a result of higher prices, there was still a substantial volume increase in exports. In other words, we were selling more on world markets and, therefore providing more jobs in industry to cater for this world trade. We did this against a background of a catastrophic overall decline in numbers at work during the year. Therefore, to explain this slump in employment we must look elsewhere for the causes. In looking elsewhere, we find clear Government neglect in the areas we examine.
There were two or three obvious explanations for the decline. In each case the Government had the power of influence and control over the situation. One was in agriculture where the severe slump in cattle prices and other products caused a serious drop both in farm incomes and in the value of agricultural exports. Much of this decline in agriculture could have been avoided if the Government had acted promptly to avail of EEC support by the introduction of the green £ or if they had taken similar steps. This was not done until the closing months of last year—we assert eight months too late. Much of the damage done then had been done before the Government's action was able to work.
I suggest, as I did before and it has never been denied, that this delay was due to differences of approach between the two components which form this Coalition Government. I believe and acknowledge that the Minister for Agriculture and Fisheries and his party would have applied for and implemented the benefits of that green £ in the spring of last year but they were not permitted to do so by the Labour Party. As I said, that has never been denied and the lack of denial is to me an acknowledgement of its truth.
This fall in farm incomes was just one of the factors which in turn contributed to the falling off in consumer spending. This fall, in turn, caused many of the redundancies in industry. It was not only lower farm incomes which caused consumer spending to fall in the autumn and winter months, but the wage agreement negotiated last spring envisaged a price rise of 15 per cent for 1974. In fact, prices rose much more rapidly than that. One consequence, therefore, was that by the autumn the real spending power of the people was falling because their income was not keeping pace with increased prices. This temporary—and I stress "temporary" because I hope it is—fall in spending power caused much of the reduced demand for Irish-made products in the closing months of the year and forced many workers to spend Christmas on the dole. Somebody with an eye for alliteration yesterday called it a Coalition Christmas.
The Government had a clear, speedy and effective remedy open to them to deal with that problem. They could have, and should have, reduced prices either by introducing subsidies on food and other essentials or by reducing VAT. The Minister cannot tell us he could not introduce subsidies on food by reason of our obligations under the EEC because the British did it. Last summer they introduced a subsidy on bread, flour and, I think, sugar, costing some hundreds of millions of pounds.
If the Government had done either of these things in October or thereabouts it would have cost about £20 million out of the Exchequer at that time. That would have lowered prices by about 5 per cent for the remainder of the year. This lowering would have had a cumulative effect. It would have kept up spending power and so would have kept thousands of workers off the dole. It would have meant that the payment due under the escalator clause in the National Wage Agreement in March would have been 5 per cent instead of 10 per cent. Not only would that have reduced inflation in 1974 but it would also have made a major contribution towards a further reduction in 1975. It would also have avoided the imposition of the winning of that extra increase by workers which would not have been necessary. Employers would not have been faced with the added difficulty of paying the extra 5 per cent. They would not have been faced with the extra problem of having to increase their costs, thereby making them more non-competitive and pushing up still further the rate of inflation.
The Government could have taken clear, decisive action at that time. Instead, to borrow the words of the Minister for Industry and Commerce, they were talking them into a crisis. And this was at a time when we were being lectured by the Minister for Finance and other Minister on economic blizzards and the need to tighten our belts. I am satisfied that the consequence of this dangerous and misguided talk was further to worsen the position because it was helping to destroy the little confidence still left in commercial circles. In the face of these dire warnings, it was no surprise that many firms, already unsure about the future, should have cut down on their work force in anticipation of darker days ahead.
This was the time when the Minister could have been acting positively and should have been talking positively to restore confidence and to support employment. Another sector which the Government had a clear duty to help and had it within their own power to do so, without let or hindrance from anybody, is the building industry. The building industry was permitted to run down to the extent that not only did numbers in the building industry itself decrease but all the ancillary industries of this great economic indicator lost workers and had to reduce output. I shall come to that in a few minutes. Those examples are sufficient to give the lie to the idea that the Government themselves have not contributed to our difficulties. The Fianna Fáil view, repeatedly stressed and which I repeat now, is that by our own actions we can substantially influence the course of events for good or ill. It is our view that this Government have rarely, if ever, managed to act in a beneficial way in dealing with the economy. I mentioned the possibility of a slight change in VAT rates last autumn.
The building industry certainly could gratefully have made use of a less dogmatic attitude on the part of the Minister for Local Government and a more realistic one, which he seems now to be taking up. His early actions in the field of local government housing loans and the easing of the housing finance squeeze were not commensurate with the responsibilities that a Minister for Local Government should face up to. However, at least he took steps ultimately. They were not timely enough, but nevertheless welcome. The house building industry, both private and public, notwithstanding the actions of the Minister and perhaps because of the late action taken by him, is far from being out of the wood yet.
In this context we can only stand and gape in wonder at the inaction of the Government on the Kenny Report on the acquisition and use of building land. Unfortunately this inaction is adding to the difficulties of the building industry. The Government have given no indication as to what they are going to do about the recommendations in that report. Therefore, people who have developed land or land capable of development are sitting on it wondering what to do with it, not releasing it to the building market. There is no sign of legislation coming up and legislation is necessary because there have been suggestions about the constitutionality of those recommendations. In the meantime this air of uncertainty is hanging over the building industry because of Government inaction in this very important and specific area. Again there is no gainsaying what I have asserted.
Then we have the overall cloud of the Government's capital tax proposals. They were intially half-backed, ill-considered and badly presented. This created an air of uncertainly in all business areas and this uncertainty still prevails, directly due to Government inaction in this field as well. I will come again to another sphere of inactivity, of uncertainty—the Government's mining policy and the doctrinaire intransigence on the part of the Minister mainly responsible. Nobody wants to see mining speculators getting away with things they do not deserve. Genuine mining operators, I believe, will look to reasonable profits. But now, instead of an expanding mining industry, we have one that is grinding to a halt and in many important areas not even making a start that is long overdue. These are all causes of declining employment. These are all areas where the Government could act and should have acted long ago.
In agriculture we are now beginning to see the light at the end of the tunnel and, to give credit where it is due, the Minister for Agriculture and Fisheries was only about eight months late in making his application to the EEC Commission for the implementation of the so-called green £ proposals; but in the area of feedingstuff prices and agricultural liquidity generally we have seen promise replaced by inaction and progress by inertia.
One could go on adding to the list I have given but I think enough has been said by me to indicate the kinds of actions and policies, whether of a budgetary or other nature, which would help to solve our economic difficulties in some way. Instead we have had the mixture of confused, half-hearted and tardy steps which, at best, only tinker with but do not solve our problems.
The latest example of this half-hearted, half-baked approach is provided by yesterday's budget. Everybody on the Government side and on the Opposition side and indeed all over the country was alive to the need for action to boost employment and to cut inflation. With dole queues at 100,000 according to the last published figures, we were entitled to expect a determined full-scale assault on the problem. Instead we were treated to, in the Minister's own words, "a carefully expansionary budget" that will give, again in his own words, "a moderate boost to the economy". These lukewarm words come from a Minister who is now the President of the Council of Finance Ministers of the EEC and who told us when he was going to Europe in that capacity that he was going to chastise his colleagues for not taking effective reflationary action so as to supplement and complement the action he himself was taking. The Minister will, on reflection, have to chastise himself. He called the budget "a carefully expansionary budget". What we have is a calamitously enervating budget which will do little if anything to give the kind of boost the Minister said he wanted to the economy and to employment.
There are some things in the budget which we can all welcome and support. The improvement in social welfare benefits are clearly needed to help the weaker sections of the community. We can welcome, too, the introduction of a review clause in October next in the likely event, obviously in the Minister's thinking, of the increases he now gives not keeping pace with the inflationary rate. May I again give credit where it is due? The Minister proposes to introduce the new rates of benefits as of the 1st April. That is a help, but even on the 1st April the recipients will have fallen behind.
The 21 per cent to 23 per cent increase in benefits will fall behind by April by at least 2 percentage points of the current cost of living. The figure of inflation is about 20 per cent but I am convinced that as a result of the budget and other forces it will be 24 per cent by 1st April. By the time payments are made to social welfare recipients they will have fallen further behind in the battle against rising prices. The Minister has been almost defeatist in deciding on some form of adjustment by 1st October, a few months after the introduction of the new benefits. We have not been given any indication where the money for the adjustment will come from, whether it will mean extra taxation or adding more to the budget deficit. However, the Minister will probably deal with that, if not in his reply to this debate at least at the appropriate time.
I have said the rate of inflation will probably increase because of the direct effect of the budget and other forces. The rate of inflation will increase because the Minister, by increasing the tax on the old reliables—spirits, beer and tobacco—will add 2 per cent to the price index figure. Yesterday the Minister spoke rather loosely about different forms of indices. To me that seems to suggest that henceforth he will ignore the cost of these commodities —luxuries or essentials depending on how one looks at it—and any increases in their cost for the purpose of the price index. It is a very convenient way for the Minister to dodge, on paper at least, the impact of the increased cost of living and, therefore, try to help himself so far as paying adequate social welfare benefits are concerned or acknowledging to workers their rights to increases.
It has always been part of Fianna Fáil policy to see that the weaker sections do not lose out in the inflationary race. It is a sad commentary on the extent to which this Government have thrown up their hands in despair over the inflationary situation when they accept that the increases given yesterday to social welfare recipients will not be adequate in a few months' time. In this context the promise to review the matter is beneficial.
By way of aside, if the Government were so concerned about the poorer sections why did they not introduce a cheap beef voucher system, especially when other EEC countries did this, and at the expense of the EEC? It was there for the taking but I suggest it was either Government inertia or lack of consideration for the people that caused them to fail to take action where it was needed and when it could be taken at no cost to the Exchequer. I should like somebody to deal with this matter because poor people throughout the country are asking why they have not been given the opportunity of buying cheap beef on the voucher system, as is available in other EEC countries.
The remarks I made about the Government throwing up their hands in despair in dealing with inflation and failing to ensure that their measures kept pace with that rate, apply also to the reliefs announced in income tax. Last night the Minister suggested that while the reliefs accounted for about 15 per cent instead of 20 per cent of the inflationary rate this applied only to nine months. The fact is that the 15 per cent will come in on 1st April, the start of the income tax year irrespective of a change in the overall financial year. That year will operate from 1st April, 1975, to 31st March, 1976. In the meantime the allowances that the Minister promised last year would keep pace with the cost of living will be decreasing all the time. There is very little in these allowances for the smaller taxpayer by way of any encouragement. Despite the Minister's many claims that he did not intend to use inflation as a tax-gathering device, he continues to do just that. He is openly admitting he has a vested interest in inflation and, apparently, he cannot afford to preserve the real value of tax allowances for even one year. One shudders to think what will happen if we are subjected to many more years of inflated problems and inflationary action.
Before I deal with the reliefs given to business, I should like to draw attention to a very interesting table in the business and financial pages of today's Irish Times. Taking account of the taxes on spirits, the income tax allowances and social welfare increases. The Irish Times writer examines four categories of families. For family No. 1 with an income of £1,000—they never paid income tax before—and assuming that someone in the family takes a drink, the net result will be that they will be worse off to the tune of £24.33 per annum. For family No. 2 with a pre-tax income of £2,500—taking into account the children's allowances and other benefits the average family receive, subject to tax—they will be better off to the tune of £8.95—a great boon. Family No. 3 with an income of £5,500—with the usual mix of social welfare benefits, income tax allowances and spending on so-called luxuries—will be better off to the tune of 78p. For family No. 4 with an income of £10,000 per annum—and taking expenditure and income into account —the overall improvement for them amounts to a substantial £394.21 per annum. So much for the Minister's concern for the lesser paid. I have not analysed these figures but the examples struck me as being a reasonable analysis of how the budget proposals will affect the general run of the people.
With regard to the tax reliefs given to the business sector—I include in this area the farming sector—we see another example of the half-hearted, inadequate approach to our current situation. The Confederation of Irish Industry in their pre-budget submission to the Minister suggested that their liquidity problems would require an input of about £100 million from official sources in order to help them maintain output and employment.
I will accept that most people, like bringing a beast to a fair, look for a bit more than they are likely to get. The story is told of a man who once brought a cow to a fair and he was asked afterwards if he got his price. He said he did not get as much as he expected but he did not expect he would. I feel certain that the Confederation of Irish Industry would have been glad to get £100 million in some form or another. Even if we take it that their realistic expectations might rise to about 50 per cent of that, that is £50 million. They have not even got half that amount. They got £12 million, which is undoubtedly a step in the right direction but I do not think it is sufficient input in a situation where the estimated shortfall of cash for business purposes ranges up to £100 million.
Other evidence of this half-hearted approach—I was surprised to hear it being lauded by agricultural spokesmen—is the £100,000 relief given to farmers who put money into the building of outhouses and things of that nature. They are given tax relief by adjusting the allowance for expenditure on farm buildings. If that was the measure of farmers' expectations one wonders what all the talk was about.
It is a measure of how few farmers are involved in the tax net.
Yes, but it would not seem to merit commendation on the part of farmers who speak for over 150,000 of them. However, that is a matter for them. The only other positive thing I see done for farmers in this budget was lending them the money necessary to finance the food voucher scheme for cattle. I expected something much more positive, that something much more dramatic would be done in the light of the serious feed situation over this winter. Admittedly the weather has been fine and the grass has been growing but I think this morning we got the first blast of the kind of cold conditions that can yet arise between now and the end of March. This is completely inadequate in present circumstances. This is a case of "live cow" instead of live horse and get grass.
Other evidence of the half-hearted and ineffective nature of the action to help business firms is the absence of any measure to help the hardest hit industries. I have already mentioned the problems of the building industry, which are due in no small part to the early bungling of the Government. We might reasonably have expected some action yesterday to get house building on the move again. Again i come to some positive suggestions. It has been suggested that we can criticise without making reasonable propositions. In each sphere so far I have made some reasonable proposals to the Minister which he might have adopted and thereby avoided the current situation, or if he adopted them now that would ease the situation.
One way of relieving the house building problem would be to reduce the tax liability of building societies and also extend credit facilities to them. This has not been done. Even last year our modest proposal of relieving tax on interest on sums of up to £5,000 with building societies was rejected by the Minister. This would have had some beneficial impact on the building industry and employment in it during the past eight months.
In the case of other hard pressed industries, such as clothing and knitwear, the Government should also be prepared to take action. This side of the House have raised this again and again by way of parliamentary questions and debate in Private Members' time. We believe it is possible, notwithstanding the excuses put forward by the Minister for Industry and Commerce, to take action to help these industries by way of taxes, quotas or other measures to slow down the level of imports and give a much needed boost to the demand for home-produced products.
In short, the picture which emerges is one in which at best there will be only limited boosts to demand for output which could lead to increased employment. I am afraid the best is unlikely to emerge. Even the Minister appears to appreciate the half-hearted scale of his effort since he made no attempt whatever to offer an opinion of what kind of increase in employment and output he expects to be achieved from yesterday's measures. From a Minister and a Government who are so quick to seek publicity we can be reasonably sure if there was any good news under this heading we would have been told it yesterday at great length in the Minister's own inimitable, voluble and colourful style. The total absence of reference under these headings can only be regarded as ominous and completely disappointing.
Now, turning to the tax side, we had increases in tobacco and alcohol, which were widely predicted in advance. I will not go into their merits. I know they were unjustified in the context of a deficit of £125 million. It is not appropriate in present circumstances to hit this same source of revenue so hard. For many years Governments have used revenue from this source to finance social welfare and other improvements. If these were the only changes taking place this year and if this was a normal year for the economy there might be a just case for these tax increases although here one would question the severity of the increases. However, they are not the only changes and this is not a normal year.
Tax rises on this scale will add substantially to the price index. I suggest a figure of 2 per cent per annum and I do not think that can be denied. Again, the Minister rather coyly and conveniently forgets to tell us the size of this impact. He forgets to tell us that this will in fact add 2 per cent to the price index. This action and the lack of any counterbalancing elsewhere to lower prices displays a dangerous irresponsibility on the part of the Government and also displays a dangerous ignorance of the effect which faster price rises. could have in defeating efforts to raise employment and output.
It appears to be widely accepted that pay increases, and now social welfare benefits, should be raised by amounts sufficient to compensate for any price increases since it is only in this way that the real living standards can be protected. Therefore, by raising prices now by 2 per cent the Minister appears to be accepting that another 2 per cent will be added on to pay rises during the year and these in their turn, as we know well, will compel many business firms to increase prices for their products. So, the process will go on, prices and wages chasing one another in an ever upward situation.
The Minister speaks about the continuing rise in industrial exports. I would like the Minister and the Government to examine what the real position of exports is. The Government have been living on the fat of Fianna Fáil policy for the past year and a half in this respect, but even the Fianna Fáil carcase can get a bit thin. What I mean is that Fianna Fáil policy induced scores of foreign firms who are export-orientated to come into this country. The effects of that policy have been paying off over the past 18 months in particular. Many of these firms came bacause of our advent to the EEC, but if they see a rate of inflation here which exceeds most—in fact all but one—of the other EEC countries, then for them the attraction of Ireland will fall off, and not only will we suffer a lack of new industrial investment, and particularly investment for export-oriented companies, but our manufacturers at home who can supply home and export markets will be priced out of their business. Not only will our exports decline in circumstances where the inflationary rate is let rip ahead, not only will the outside people be scared off, but confidence in existing industrialists will be undermined.
It would be foolhardy to expect that this growth in industrial exports will continue if our prices continue to rocket upwards at rates far in excess of those in other countries. This is what is happening, and as far as I can see, as a result of the Minister's budget or because of lack of action in the Minister's budget, this will continue to happen. Therefore, the Minister cannot glibly refer to industrial export increases and do nothing about either maintaining the increases or helping to avoid a decline.
I am certain that in the event of no better action being taken by the Minister the consequence will be a tapering off in exports leading to a further fall in employment. Thus by failing to act to reduce inflation the Minister is helping to defeat the very objective he declares to be his primary goal, namely, improving employment.
As a people we can have no confidence in a budget, in a Minister, or in a Government which would take so little effective action to deal with the dire economic situation we are experiencing in Ireland today. To the extent that he has at least moved away from his economic blizzards we can be thankful. This would only have further aggravated the position, and I suppose we should be grateful since at last he seems to be moving, albeit far too slowly, in the right direction. But he certainly has not moved far enough or fast enough.
I suppose we no longer wonder at history repeating itself, and here is a brief political history of Coalition Government: in 1948-51 we had the first Coalition Government. In the first year of that Government the economy was going well; in the second year the economy began to decline, and in the third year we reached economic chaos. Then Fianna Fáil took over. In the second Coalition period 1954-57 it was the same pattern. The first year was good, employment being reasonably maintained: in the second year there was a decline, and in the third year there was more chaos.
Now we come to the third Coalition period. In the previous two periods Fianna Fáil were able to transform economic chaos into economic progress, but if we look again at what happened we shall see how history is repeating itself: in the first year the Coalition were going very well—our entry to the EEC, Fianna Fáil policies working—but in the second year there was economic decline. We are now in this economic decline. Let us hope we shall not reach the third year of economic chaos, and much more do we hope we do not reach the fourth year of economic collapse, because Fianna Fáil, who can create progress from chaos, would be able to do little about economic collapse.
I hope this Coalition will have thrown the towel in long before chaos or collapse is reached. In the meantime, I suppose we could listen to the call of the heroes of old: God Save Ireland, for the Coalition certainly will not.
I think it has been recognised not only by what the Minister said yesterday but also by a number of commentators that the effect of the budget in managing the economy has not the influence or does not exert the measure of control and direction that was customarily associated with the operation of budgets in the past. Which were traditionally regarded as part of the mechanism of not only controlling public expenditure but directing financial and economic policy.
This view was never more relevant than at present. When I attended a meeting of heads of Government in Paris last December there was a growing realisation of the interdependence of the economies of every country of the developed world. Even the largest countries cannot now, of themselves, determine their prosperity or their future. To a greater extent than ever before in history they, like us, depend on what is happening outside their borders. We all live now in one another's shadow. To that extent, within our own country what the Government or a Minister for Finance can achieve is often more limited than many persons believe or than was accepted as the traditional view. What we are discussing here today is the size and direction of public expenditure for the current year. It is equivalent to about 45 per cent of the total expenditure—using the word in its widest term—of all persons and organisations in the country. This 45 per cent if properly used and directed can achieve substantial benefits in living standards and in the war on poverty and inflation, as well as in the investment of money in enterprises on which the success of all our efforts depends. But, substantial as its influence is, the budget by itself cannot achieve what we want. The 55 per cent of expenditure which is within the discreation of private individuals and organisations is of the highest importance. Even more important are the rules and assumptions by which society governs itself and acts. In world conditions as they now are, with their unique combination of rising unemployment, inflation and failing business confidence, if any section, inspired by greed or envy, pushes its own case to the extreme, then there is only one fate for all of us.
The budget can undoubtedly help many and influence all, but it cannot by itself determine the course of our economy. The responsibility for that rests not only with the Government but with every group and, indeed, with every individual, certainly with every individual in employment. An understanding of this, among not only wage and salary earners but also among farmers and the self-employed, is of vital practical importance to our economic prospects in this difficult year. We can, however, safely claim that when the achievements of this Government come to be recorded, our budgets will stand out as among the most impressive of those achievements Time, care, humanity and imagination were given to putting these budgets together and all three have clearly borne the hallmark of that time and effort and consideration in dealing with those in need and these are clearly demonstrated in the provisions and details once again of this budget.
The stimulus given by our first budget in 1973 enabled the economy to achieve a record growth in that year. It also included the greatest ever distribution of State help in money terms to the less well-off in our community. This pattern of remarkable advances in social welfare in these budgets, in terms both of rates of benefit and of new groups for whom support was made available, was followed once more in this year's budget. The pattern was maintained in last year's budget, which also saw adjustments in income tax allowances after many years in which the erosion in their value had been ignored. Deputies will recall that these reforms removed 60,000 people form the income tax net. That budget also helped our uniquely open and vulnerable economy to register a modest but creditable growth rate in a year in which the whole world faced an economic crisis on a scale unprecedented since the end of the war.
It will be recognised that this year's budget has been framed in the most difficult economic and fiscal circumstances faced by any Irish Government for very many years. Yet, I believe that because of what has been put into this budget—it is possible to quote impartial commentators who have expressed a view on it since yesterday—this budget can take its place with the two previous budgets introduced by the Minister and will be recognised as a balanced and effective response to the problems affecting our economy and our people.
The Minister described the budget as carefully expansionary. If I were asked to say what the keynote of this budget is, I would say it is realism. In face of the dangers currently threatening the world economy, a budget based on an excessively optimistic assessment of likely developments, either at home or abroad, would run grave risks of damaging confidence and pushing us towards rates of inflation which would threaten social stability. Equally, too pessimistic an analysis would have ignored the significant potential of our economy and could have led to a budget which would curb the investment so essential for a resumption of growth in the future. I am firmly of the view that we have avoided these pitfalls and framed a budget which reflects the realities of the time and provides a basis for sober confidence in the future. It is a budget based on realism.
Since this budget is based on realism it naturally provides the basis for that national partnership the Government proposed in the recent White Paper issued under that description. In fulfilment of the commitment in the White Paper, we have avoided restrictive measures and opted for policies which will give a fresh stimulus to the economy. The further significant tax reliefs and increases in social welfare will boost consumer demand. The substantial expansion in capital expenditure will also add to general domestic demand. It will also, of course, benefit employment, both in the very large amount of aid being provided for the establishment of new firms and the expansion of existing firms. I need hardly stress or point to the fact that the amount being provided for grants and other aids to industry through the public capital programme is more than twice the level of the nine months up to 31st December last. The investment in new factories and new equipment which this helps is one of the best guarantees of our future.
It is appropriate now to look at some of the comments made on the budget. The leading article in today's Irish Independent refers to this aid and to the size of the problem involved. It says:
The upshot of the budget is a current deficit of £125 million—a deficit of a size which would have caused a general shock wave not so long ago. The country faces a massive foreign borrowing requirement this year; when the borrowing under the Public Capital Programme is added in, the Government must borrow abroad some £225 million—with the State bodies adding a further £50 million.
Borrowing on this scale cannot be tolerated for long. It is, therefore, fair to say that the Government has gone to the practicable limits in opting for expansion and protection of employment.
There will also be a positive effect on employment as a result of the taxation changes and other measures taken to relieve pressure on company liquidity. The substantial increases in assistance to farming, as a result both of measures announced yesterday by the Minister and as a result of the provisions included in the Book of Estimates, will help to promote the revival of the fortunes of agriculture.
In pursuance of the undertaking given in the White Paper and in recognition of the pace of inflation, we have increased social welfare payments by amounts which, in all cases, will more than compensate for price rises. The increases will take effect on 1st April, only nine months since the last increases came into operation. These increases, the adjustments to the means tests and the improvement in the age allowance against income tax, will preserve the living standards of the weaker sections and, indeed, maintain the momentum of social reform which has marked our period in office. Deputies will also note that it is proposed to increase further social welfare payments as and form 1st October next. This is the first time the payment rates will be adjusted twice in the course of a financial year.
Lastly, in relation to the policy considerations set out in the White Paper, I consider that the help the Government have given to benefit employment and to improve the living standards of those least well-off among us, and the increases in taxation allowances which will benefit workers generally, will provide a firm basis for a responsible reaction from the trade union movement and employees generally in favour of the moderation which is essential if the negotiations on the 16th round which will be starting shortly are to prove successful.
I have referred to the gravity of the economic situation on the international scene, in particular as it affects this country. Members of the Government and I have endeavoured to bring this home to Deputies and through comment here in the House to all our people in the course of debates here in July and October last and in our meetings with groups representing employers, trade unions, business organisations, farming organisations, groups representing the major economic interests in the country. We have endeavoured to bring home to all sections the seriousness of the situation. It is true that the Opposition have endeavoured to suggest that this is not due to external causes but due to some inaction or ineffectiveness on the part of the Government.
Since then the seriousness of the situation has been fully documented in the White Paper. It may help, however, to hammer home the lesson if I refer to authorities outside the country and authoritative assessments and evidence from other countries including America and Germany. Indeed, Deputies may recall that in the presentation of the British Budget in November the Chancellor of the Exchequer gave a very somebre analysis. Since then he and the British Prime Minister and other members of the British Government have expressed not merely concern but in certain cases alarm at the prospects there. Perhaps even more telling than speeches of politicians, because some critics may say that politicians are inclined to paint either a rosy picture or a gloomy picture to suit the view being expressed at the time, has been the fall of prices on the London Stock Exchange which, at one stage recently, reached the lowest level since the thirties, the collapse of some blue chip companies and the difficulties being experienced by important sections of British industry.
The White Paper which we published referred to the way in which OECD forecasts for major world economies in 1974 had been revised downwards between the publication of the December, 1973, and the July, 1974, issues of that organisation's bi-annual publication Economic Outlook. It showed that a forecast made in December, 1973, that the OECD area as a whole would grow by 3¾ per cent in 1974, had been pulled back to 1 per cent by July last. This forecast was marked down to ¼ per cent in the December issue of last year which shows less favourable forecasts even than those given in July for Japan, the United States and Germany, the actual revised forecasts being respectively —1¾ per cent, —3¼ per cent and +1 per cent. For 1975, the OECD forecasts that, on the basis of existing or announced policy, the growth rate for the OECD countries combined, will be no more than 1/2 per cent and that the current balance of payments deficit will, as in 1974, be close to $40 billion.
The organisation goes on to point out that the forecasts assume no major deterioration in confidence and that this may be too optimistic. It says that the forecasts point to a pronounced and prolonged slowdown. To illustrate further this assessment, may I put on record the organisation's view that the economies of member countries are currently being put, and I quote, "to a test which is probably unprecedented outside time of war". That is not a view expressed by any member of the Government or any spokesman on behalf of the Government. This is an assessment by an independent organisation looking at the whole world scene and commenting on the situation as the facts disclose, and as they assess, based on these facts, the outlook for the future and the problems and difficulties of the present.
Deputies have referred to the substantial increase in unemployment. Indeed, sometimes listening to the Opposition one gets the impression that they gloat over these increased figures. The Government's concern at the increase in unemployment has been matched by our actions to deal with it. It is a matter of grave concern and we have no wish to minimise the hardship involved for those affected and their families. It is no harm to say that the increases in some other EEC countries were much higher. I am not saying that to congratulate ourselves on doing better but to point out that the problems which affect this country also affect other countries. As an entirely open economy, vulnerable to every economic change, this country cannot isolate itself from or insulate itself against the consequences.
For example, the increase in Denmark, a country often held up in the past as an example to this country, is 320 per cent. In Germany, certainly the strongest economy in Europe and one of the strongest in the world, it is 141 per cent, and in France it is 51 per cent. Indeed, only in Italy and Luxembourg, which has no unemployment, was the relative increase less than in Ireland.
This is the environment, these are the conditions, in which we have to live. I would stress in this connection, to point to the vulnerability of our economy, that our total merchandise trade, imports plus exports, is now equal in value to about 90 per cent of the gross national product. This makes our dependence on the external environment uniquely high.
Perhaps I might refer again by way of independent analysis to estimates of the impact on our economy of price rises for imports given in the recent report by the secretariat of the National Economic and Social Council, entitled "The Economy in 1974 and Outlook for 1975". The authors estimated, inter alia, that external influences operative since September, 1973, could add some 8½ per cent to consumer prices and reduce demand by an amount that could eventually be equivalent to 7 per cent of gross national product when they had worked themselves fully through.
Looking to the task which confronts us over the next few years, I should like to refer to an economic policy report published by the EEC's economic Policy Committee. The report is largely concerned with the problems of restructuring existing patterns of consumption, investment, trade and employment to give the necessary stimulus to increased exports and to finance, and later repay, the external debts which will have to be incurred to pay for the higher cost of oil. The report gives some quantified indications of the necessary adjustment. They are highly qualified but probably give a fair indication of the relative burdens on the different countries in the Community.
The report estimates that the necessary adjustment for Ireland, on the basis of cumulative developments up to 1978, may be up to 15 to 20 per cent of GNP. Put another way, this means that the higher cost of oil will take from this country the equivalent of many years of economic growth. That is an inescapable fact. It is not caused by any action or inaction of the Government. It is an inescapable fact of what happened last December 12 months. The figures represent about twice the burden estimated to fall on the next two member states most severely affected, Italy and Britain, and compare with much smaller burdens of about 1 per cent or less which this will have on Germany and the Benelux countries. I have quoted enough from international authorities and documents to reinforce the statement of our analysis of the gravity of the economic crisis affecting the whole world and of the particularly acute difficulties it will present for us this year.
On the other hand, not all of the analyses and assessments spell gloom. Deputies will recall the undertaking given by Chancellor Schmidt of Germany, at the recent Paris Conference of Heads of EEC Governments, where he undertook to reflate his country's economy in the interests of avoiding a recession in the Community, apart from any domestic reasons because of the rise in unemployment and the related problem of inflation. A number of measures are being taken and it is expected that fiscal policy this year will exert an important expansionary effect on the Germany economy.
We are also glad to note that within the last few days President Ford has announced measures to give a stimulus to the economy of the United States. It is clear that the action taken there will be on a significant scale. All of this is heartening news. Germany and the United States between them account for two-fifths of total world trade. Moreover, the action taken by the American Administration should give a helpful boost to international confidence. Indeed this is one of the intangible elements in the whole situation: to what extent confidence can be restored by a belief by people in the capacity of themselves, and their governments, to go in the right direction, at the right pace, and to take action in the right areas.
Expansionary measures also figured, of course, in the November budget in Britain and I understand that the French Government are also moving to expand the French economy. It seems, therefore, that the measures that we have taken indicate that we are in good company. More importantly, a measured degree of expansion by these countries will help to revive flagging world trade. The prospects here are now much better than they seemed up to recently. This improved outlook bodes well for a continued rise in our industrial exports, which increased by an estimated 40 per cent last year—an increase which matched a similar improvement the previous year.
In agriculture, the signs of better times are beginning to show. The adjustments in the arrangements for calculating monetary compensation payments negotiated in Brussels will mean some £50 million extra for farmers in a year. Spread among some 200,000 farmers this alone means an average of £250 extra per farmer. The negotiations now going on in Brussels on prices, taken with the transitional arrangements under the Accession Treaty, cannot fail to means additional benefits. The price of cattle is starting to move to a more realistic level and prices for other commodities are also reasonably favourable.
What about the young cattle, the foundation? They have not improved, not one £.
The measures taken yesterday are designed to assist in that problem, to enable farmers to retain them. As the Deputy appreciates, until farmers who have larger cattle dispose of them they are not in a position to buy the younger cattle. As the Minister said, the rescue operation adopted in respect of buying into intervention at a cost of £75 million is designed to help that and both the fodder vouchers and the extension of the interest loans for farmers is designed to assist in this way.
I apologise for interrupting but we, the small farmers, got nothing at all. The young cattle will not be there in 12 months. The producer will be short of them.
I also believe that the measures which are being discussed for the recycling of the surplus oil revenues of the producing countries will make a positive contribution. These include the proposed 1975 IMF facilities which are designed to extend the 1974 arrangement, the EEC loan scheme and the separate US safety net proposals. While much has yet to be settled, progress is being made and the indications are that sizeable international credit facilities should be available, which we can avail of should the need arise.
I believe it is correct to say that our membership of the EEC will continue to be of assistance in 1975 in weathering or surmounting the economic storm. Here again, I should like to refer to the decision taken at the meeting of the heads of Government in Paris in December that the Regional Fund should be put into effect from 1st January, 1975. Our receipts from the fund will amount to £35 million over the three years, 1975 to 1977, of which £8 million accrues this year.
Because of the current economic difficulties the overall size of the fund is not as great as we might have wished. However, the important thing is that the decision to get the fund under way has been taken. We may look to an expansion of its resources as the economic situation improves. We should then stand to gain from the fact that our percentage share of the fund is higher by two-thirds than was orginally proposed. Even in the initial three-year period, our receipts per head of the population will be about three times those for the next major beneficiary, Italy. The money to be received from the fund will be in the form of non-repayable grants which will supplement our capital resources at a time of scarce money and high interest rates.
Public attention is mainly being concentrated on the assistance we might get from the fund towards our development. It is correct to say that it will be only one of a number of elements of a substantial transfer of funds which we can expect from the Community. Even without a regional fund the amount we have received from the transfers, including loans, approved in our first two years of membership, have amounted to almost £150 million against payments by us of only £13,500,000. About £90 million of the transfers has come from FEOGA. This is one of the striking benefits which we have received from the EEC in respect of the common agricultural policy, despite the difficulties of the past year. Under present circumstances, we can look forward to an even higher rate of inflow this year. The only possible reason for its being less would be that improved market returns for beef might involve smaller receipts from the operation of the intervention system. I do not think anyone would object to a reduction in the inflow caused by this. Against these benefits we must count the effects on other countries and on ourselves of the increase in trade which our membership has brought and the expansion in markets in the EEC, for industrial exports as well as the benefits received from the common agricultural policy.
Membership of the Community has, of course, also helped our development by encouraging overseas investment in industry. This has been quite remarkable in the last couple of years in opening up new export opportunities. In the year ended 31st March last— which broadly corresponded to our first full year of membership—the planned investment of projects approved for grant aid by the industrial Development Authority was £77 million, double the corresponding figure for the previous year. The new jobs content was also up substantially from 14,000 to 23,300. In the nine months from April to December last, despite the adverse economic circumstances, this rate of new job creation was exceeded. Over 21,000 new jobs were involved in the projects approved. This is equivalent to about 28,000 in a full year. For the current year it is expected that the target of 23,000 jobs will be achieved. I think the progress is reflected in the increased provision for the Industrial Development Authority to which I have already referred.
I should like now to refer to some of the criticism voiced that sufficient has not been done in the budget to assist industry. It is correct to say that the assistance being provided—the tax concessions and reliefs which were announced—have been welcomed. The Leader of the opposition quoted an article from the business and finance section of The Irish Times of today. However, he omitted to quote some comments of Mr. Donal Carroll, the chairman of P. J. Carroll, the tobacco firm, in which he said and I quote:
As one of the members of the business and financial community who has spoken and written on these issues,——
that is, the problem of the operation of credit policy, price control and tax policy—
——I have been asked to comment on this aspect of the budget statement.
He went on to say, and I quote again:
I want to begin by congratulating the Minister for responding so promptly to a problem which was first publicly indentified not more than four or five months ago.
This is an outside commentator, and the Opposition have criticised the Government for not acting promptly and decisively. Mr. Donal Carroll went on to say:
He has responded by reducing the current tax liability of companies engaged wholly or mainly in manufacturing, construction or farming, or in the sale of productive plant, machinery or materials to those sectors by an amount of £12 million in 1975. By any criteria, a substantial figure.
Indeed, in a recent publication of the Confederation of Irish Industry, reference was made to this and the estimated figure that would need to be applied to that comment was something between £10 million and £15 million. Therefore, the decision which was taken by the Minister yesterday is of substantial and practical benefit.
In Table 5 of the tables published in connection with the budget there is shown that for the nine months of last year—April to December—the amount provided for industry was £28.17 million. This year the sum being provided is £61.63 million. Both of these decisive examples of aid are not merely welcomed but are regarded as a positive contribution to the easement of the problems of industry.
In the course of the White Paper published before Christmas A National partnership, we proposed that such a partnership must be designed to preserve and protect the momentum towards social reform and to ensure fair sharing during the difficult period of the present and immediate future. Nobody can deny that the improvements in the budget constitute a major contribution in achieving those objectives and maintaining the tempo of social reform. In fact, in total, the amount provided in the Book of Estimates and the further provisions announced by the Minister yesterday, will amount to £100 million more for social welfare than was provided last year. Following on the large increases which took place last July, these improvements will give those dependent on social welfare worthwhile increases in their real purchasing power and those improvements will be preserved by further increases which it is proposed to make in October next. The increase are quite substantial. For example, a married man with three children, who is drawing unemployment benefit at the flat rate, will obtain an increase of £4 a week. His wife will, of course, benefit from the increase in children's allowances. The amount received by an old age contributory pensioner whose wife is 67, will increase by £4.40 as a result of the increased rate of benefit and the further reduction in the qualifying age. A widow or deserted wife with four children in receipt of the appropriate insurance benefit will also receive an increase of £4 and will now receive over £22 a week. I could give examples of further increases but I think Deputies have the tabular statements issued and can see these for themselves.
It is not a straightforward matter to make comparisons, although comparisons are often made between social welfare benefits here and those in Britain and Northern Ireland. The structure of the two schemes are by no means identical and one has to be careful that one is comparing like with like. However, it is possible to draw some valid comparisons. These show that, in a number of cases, the rates payable here from the 1st April will be very close to those payable in Britain and the North from the same date.
To give an example, a person entitled to a retirement or an old age contributory pension here, whose wife is 67 or over, will receive benefit amounting to £18.40 as against the English rate of £18.50. Indeed, where such a pensioner is aged 80 or over, he will be better off here, with £19 a week, than he would be in Britain where he would receive only £18.50. The flat rate disability and unemployment benefit will be £9.40 a week here, for a person without dependants, as against £9.80 in Britain. For a married couple, the respective rate of benefit will be £15.50 and £15.90 a week. However, through the operation of pay-related supplements, persons in at least certain income ranges and family circumstances, who are in receipt of benefits will receive more than in Britain or in the North. However, it is correct to say that this is a positive contribution towards harmonising standards of social benefits here with those in the North.
In that connection I note a comment in the leading article in today's Irish Times where there is a reference that is somewhat difficult to understand. I quote:
...So is the future of our relationship with the North dismissed, most dangerously.
There is another matter to which the Minister adverted in his speech which indicates the cost in other areas of the problem of dealing with the North of Ireland, that is, that in respect of the Justice and Defence Estimates there is an increase this year amounting to £24 million. If it were not for the problems which have overshadowed all our affairs during the past five years this extra expenditure would be devoted to more productive uses and to the welfare of those in need.
This budget goes a considerable distance towards improving the lot of the poorer sections of our community. It is relevant to contract the amount provided in the budget with an article which appeared in the newspapers on the day before the budget and in which Deputy Colley was quoted as suggesting that an amount of £20 million extra be spent on social welfare. The amount provided yesterday under this heading was £34.36 million.
The Taoiseach will note that that was said in the context of the increases in VAT.
I want to give examples of the percentage increases that have occurred since this Government came into office. If we compare the rates of old age contributory pensions in March, 1973, with those of July, 1974, the date of the last increase, we find that the personal rate increased by 37 per cent and by 45 per cent in respect of a person with a dependant. During the same period the widow's contributory pension increased by 39 per cent, while disability and unemployment benefits in respect of a person with a dependant increased by 38 per cent.
The increase in the consumer price index between mid-February, 1973 and mid-November, 1974 show an increase of 30.1 per cent. The percentage increases in benefits between March, 1973 and April, 1975, the date on which the new rates will be applied, will be 69.4 per cent in respect of the personal old-age contributory pension, 77.8 per cent in the case of their being a dependant, 69.6 per cent in respect of the widow's contributory pension and 66.7 per cent in respect of disability and unemployment benefits. These figures prove that the Government have made a positive contribution not only towards alleviating the problems which affect the poorer sections of the community but towards improving their standard of living, also.
I find it difficult to understand the argument of the opposition because Deputy Lynach said that he was in favour of subsidies in respect of food but when this Government removed the VAT from food the Opposition did not agree with that move and said that, if returned to office, they would reimpose VAT. Where do they stand on this? Fianna Fáil removed the food subsidies in one fell swoop in their budget of 1952. Now they are suggesting that subsidies should be applied. Deputy Lynch has told us that this will cost about £20 million but he has not offered any suggestion as to where this money might come from. I suppose their idea would be to put it on the deficit, thereby worsening the problems for which they say the Minister for Finance and the Government are responsible. They are not sure where they stand.
I wish to refer briefly to a matter which recently has been the subject of a good deal of comment, that is, the question of the threatened refusal to grow sugar beet unless demands in relation to taxation and certain other aids are met by the end of this month. If fully implemented the threat could mean additional imports of sugar of more than £30 million and the loss of the export trade in sugar and sugar-based goods worth at least £6 million. In addition to the damage to the economy generally that would be caused by this situation, it is highly likely that the Irish Sugar Company and many other companies using sugar as a raw material could not survive. The total loss in jobs could be as great as 25,000.
Many of the workers concerned, if not all, pay by way of taxes substantial contributions towards the £112 million which the State will be spending on aids to agriculture in the current year. Many, if not all of them, are very much poorer than the 9,000 farmers with rateable valuations of more than £100 and the 7,000 or so additional farmers with valuations of more than £50 and who derive income from sources other than farming. Indeed many of these workers are on a par with the agricultural workers who also pay income tax in support of the aids I have mentioned.
It is difficult to understand the mentality that would seek to achieve an aim by the destruction of an enterprice established to help the farming community and with which farmers have been identified so closely for many years. The enterprise is one that gives direct and immediate benefits to 10,000 farmers and more than 25,000 workers. These same interests were clamouring recently for a higher beet quota from Brussels. The Minister for Agriculture and Fisheries fought there long and effectively for this. As a result of his work we were allotted a sugar quota of 42,000 tons, affording farmers the opportunity of sowing almost 100,000 acres of beet, if they so wish, at a highly attractive guaranteed price, a price which was accepted by farmers' representatives in the early negotiations.
Whatever grievances certain groups have about tax, discussions regarding these grievances can be fruitful only if conducted in an atmosphere free from the threat of great harm to great numbers of people. Democracy could not survive if a Government permitted themselves to be intimidated by threats against innocent people, threats made by people who are anxious to use the defenceless to attain their own sectional ends.
Therefore I urge farmers strongly— I am sure that not all of them agree with the sort of threats that have been made—to take other counsels rather than to engage in actions which can only be injurious to themselves, to the livelihood of tens of thousands of our people and to the good name of our country.
The opportunities in agriculture are better now. Cattle prices are showing a welcome improvement and a bright outlook—improving, I hope, as the year goes on—has been predicted by a number of the authorities in the sector. In dairying, the price increases which should result from current discussions in the Council of Agriculture Ministers should improve further the attractive return to farmers engaged in this sector. This year also there should be the commencement of operation of the scheme of aids to farming in mountain, hill and less favoured areas, provision for which was included in the Book of Estimates. The benefits of this scheme will accrue mainly to farmers in the western areas who are not in a position to derive the maximum benefits from increases in product prices.
The Government will try to ensure that there will be no over-supply of the Community market for beef through a premature excessive opening of the market to imports from third countries. The Minister for Agriculture and Fisheries has been foremost in opposing that decision and in getting the Community to revise its original attitude.
When I spoke in October on the Confidence Motion, I said we had a clear choice facing us as a community. I said it was a choice between higher money incomes eroded by higher prices and high unemployment, or a reasonable level of income and employment maintained at as high a figure as possible in the prevailing world conditions. I went on to say that good wage agreements are of no value if the firm goes out of business —or if there is nobody to pay what has been negotiated.
Since then, unemployment has increased. If we are to begin to reduce again the level of unemployment, if the measures taken in the budget are intended to have this expansionary effect, it is vital that all sections of the community exercise restraint in seeking increases in incomes this year. I may say in this connection that the Government's Freedom of action in the budget was to a considerable extent contained by the impact of the very large increases in incomes under the current National Wage Agreement. This impact was both direct and indirect. The massive increases in the cost of providing existing services ate into the resources which would otherwise be available and prevented us from allocating as much as we might have wished to the public capital programme. It is therefore essential that there should be a moderation in income claims so that the activity generated by the expansionary policy of the Government, and indeed the economy generally, will provide increased employment.
The Taoiseach has a little more time than he thinks. He still has a further ten minutes.
Thank you.
The Taoiseach will finish at 12.36 p.m.
I was speaking until about 11.40 a. m.
I think I am being curtailed.
The Taoiseach has another eight minutes.
Some people may be surprised at what I have just said, but it is a recognition of the inescapable fact, which I have tried to stress, that the Government alone cannot solve the problems. It requires the cooperation of everyone. To that extent the negotiations which will open on the 16th Round of wage and salary increases are of crucial importance. It is appropriate therefore to say that wage and salary adjustments which have already been negotiated will increase incomes by about 20 per cent or 25 per cent this year, before allowing for the effects of any new agreements that may be negotiated. Available estimates indicate that the total average increases will be considerably less than this in all other EEC countries with the exception of Britain. Therefore we face the problem of trying to compete on the EEC and other markets with countries like, say, Germany where wage and salary increases are at about half of this level. The forecast increases for these other countries range from 9½ to 16½ per cent. It is therefore important that we do not allow our position to deteriorate to such an extent that the advantages leak away in higher imports or that we are unable to compete with the products of other countries. Put in simple everyday language, this means that even more companies might be compelled to close and more workers could lose their jobs. In the end we would all be poorer.
I want to refer to what we have done to help the building and construction industry. Deputy Colley and others suggested that we failed to assist building societies. The State aid for building societies through concessions and subsidies is now costing £9 million annually. We have given building societies an unprecedented subsidy, costing £2.5 million annually, to keep interest rates down for borrowers and up for depositors. The Government have arranged loans of £11 million from the banks for the building societies and again are subsidising the interest rates on these loans. Also we offered to confer trustee status on the societies and are awaiting their agreement to the conditions attaching to the Government guarantee. During the last two months the Government have been meeting with the societies to work out a new arrangement to stimulate the flow of extra money to house mortgages from the societies. As soon as negotiations are completed, we can look forward to an improvement.
It is therefore important to recognise the extent to which assistance has been provided and to ensure that there has been a general acceptance of the policy laid down in the White Paper of a national partnership. It has been estimated that an across-the-board increase of 5 per cent, in addition to an adjustment of incomes in line with cost of living increase, could lead eventually to a 5 per cent increase in consumer prices, a fall of nearly 7 per cent in gross national product, with a consequent rise of nearly 18,000 in unemployment and a deterioration of almost £100 million in the balance of payments. While one might argue about the precise figures, it is possible they do not take into account the confidence factor. It is vital therefore that we should approach the wage negotiations with these facts in mind and recognise that we can achieve stability in living standards by winding down gradually the rate of inflation and continue with the export drive on which our livelihood as a nation depends.
It is customary to ask who benefits from a budget. First, the people depending on employment whose jobs are safeguarded by the general aim and stand taken in the budget and by the changes proposed in relation to the taxation of companies. This will, of course, help companies to find the money to sustain their businesses, to finance their investment in plant, in construction and in the improvement in the skill and understanding of workers, essential to our prosperity. The size and composition of the increase in the public capital programme—now standing at a figure of £460 million—will also contribute to this end. Investment is the lifeblood of the nation. The Government will endeavour to sustain it.
Next, taxpayers as a group will benefit. The changes proposed by the Minister will benefit about 750,000 people. Some of them may of course have to pay more for drink and tobacco but at least these payments will be discretionary and not compulsory like income tax. Farmers will benefit to the amount of £112 million or so to be paid directly by the State in relation to agriculture largely from contributions from taxpayers many of whom are already pressed to meet growing commitments.
The budget gives the new reliefs, to which I have referred, to business, all of which will contribute towards providing increased employment. This will be in addition to the benefits being provided by the Industrial Development Authority. Finally, the budget will help those who find themselves dependent on their neighbours in society—the old, the sick and the unemployed. Their gain will be real and substantial. We have undertaken to make further increases in October.
These benefits will accrue to a wide and representative section of our community. They will be achieved without a serious effect on the cost of living or without adding to inflationary pressures. Taken together the increases in taxation on drinks and tobacco will probably contribute no more than 1.8 per cent to the cost of living.
I started by referring to the world background to our problem. I again want to refer to it and ask what is the background. In every western country there is a combination of high and often growing unemployment, failing business confidence and a rate of inflation unprecedented in this generation. Largely but not wholly due to external factors, we are burdened with the added difficulty of a balance of payments deficit. Described in another way this amounts to the fact that we are living about 10 per cent beyond our means.
Faced with those difficulties, the Government had to make decisions. We decided to sustain and maintain employment, to assist investment, to help business to maintain its cash flow and to get the external deficit down. We have assisted the individual taxpayer and the farmer and not only protected the weaker sections from the effects of inflation but actually improved their position.
The combination of these policies, as some of the newspaper commentators say, is not without its risks. It would be the height of irresponsibility not to sound a note of warning. Of course some of the suggestions made by the Opposition are irresponsible but when you have not responsibility it is easy to be irresponsible. If any section of the community used the strength, which different sections now undoubtedly possess, to obtain for itself a privileged position as against the remainder of the community, the delicate balance of the budget could be disturbed and even destroyed and further measures, which the Government will not hesitate to take, would become necessary to preserve the economy and the wellbeing of our society.
I believe the confidence the Government have shown in the common sense and attachment of the individual to the good of the community in which he lives is not misplaced and that the benefits of the budget, in particular the maintenance or improvement in living standards, will not be dissipated in this way for short-term gain by one group or another or some temporary sectional advantage. We can all gain by an appreciation of the benefits of partnership and moderation and by a recognition that if each makes a contribution it will be possible for the country to go forward in the future with that confidence which we have in our capacity as a nation to survive and surmount this crisis.
If there is a central theme to what the Minister for Finance said yesterday and what the Taoiseach said this morning it is contained in the very first page of each of their speeches. The Minister for Finance, after the quotation from the Biblical source, said:
While there is a natural tendency to look upon the budget as the principal national corrective measures, the truth today is that a budget is but one of several economic influences, and on its own it can have but limited effect.
The Taoiseach in his first paragraph said that in his budget statement the Minister for Finance rightly emphasised that there was much more to the management of a modern economy than the package of adjustments announced amid some panoply on budget day each year.
In the light of the experience of these last months in particular we would have to agree that whether or not these statements are correct in principle they are accurate in the light of what we have gone through here in the last six months because this budget is not in the general tradition of budgets as being the annual direction, the annual book-keeping and the annual planning or readjustment of the nation's economic progress. We have a Government which in the last few months are entitled to the title "The budget-a-day bunch". We must assess this budget in the almost sure knowledge that within a few months we will have to face many different budgets, budgets which will, in fact, be designed with only one end in view and that is to add a little to the ever-diminishing till of the Government, not, as should be the case, to take periodic stock of what is happening in the business of this nation, not to readjust the course on which the ship of State is sailing but simply to stave off what would appear to be immediate disaster. There is a clear pattern of simple avoidance of disaster in what this Government have been doing particularly in the last 12 months.
There may, as the Taoiseach has now implied, be a short-term favourable response from some sectors to this budget. Very significantly the Taoiseach did not quote all of the comments. Indeed, he chose to extract portions from some of the comments he quoted. He is obviously relying on the fact that from some areas there is some favourable response to this budget. This seems to be the general aim of this Government—to get immediate favourable response. We are not concerned with immediate favourable response on the morning after. We are concerned with what will be happening in the 12 months and the two years after. When one analyses this budget one will see that whatever little support there may be for it from some sectors this morning that support will have evaporated in the midst of the confusion we will face here over the next 12 months in each sector of our economy.
The second theme that comes through in both the speech of the Minister for Finance and the Taoiseach is, if I may quote the Minister:
To introduce an element of economic planning at this stage would be tantamount to giving a long range weather forecast in the middle of a hurricane.
Almost half of the Taoiseach's speech pointed to the reality of an international hurricane. As they see it, this hurricane justifies the Government in simply sitting on deck staving off disaster, with no clear aim or direction as to how to get to calmer waters or how to reallocate the responsibility for the personnel on the ship of State so that we can see what priorities we must have if we are in the middle of a hurricane and not just say that when it is over we will start to plan again when we are in calmer waters. Surely every sector of the community is influenced by sectors outside its own control. That will not excuse them for saying they cannot control the situation, that planning is out, that statements of economic policy should be avoided because they may not meet their expectations.
This Government who are now so slow to produce a plan had no trouble in announcing a 14-point plan before they even set foot on the ship of State. That 14-point plan was simply a chart of the places to which they were going to call on the way to the destination they had not even considered. In that plan they announced certain things, one of which they tried to implement, others by which they are now embarrassed and still others which they are now recognising are impossible of implementation. One of the ports of call in that 14-point plan was the highly principled and concerned statement of intent on the part of this Government that the rich would pay and the poor would benefit. All of us would go along with that firm principle because that is what the business of Government is, provided the rich have the wherewithal with which to pay. The business of Government must surely be to encourage those who can, to achieve from their efforts the maximum advantage for the rest of the community. If you are going to discourage those who can and would there is precious little left for those who need.
Yesterday our spokesman on finance mentioned that apparently we are still ignoring the fact that to talk about a wealth tax and a capital gains tax— as the Government so bravely announced and apparently are determined to continue—is flying in the face of reality in view of the economic conditions at the moment.
The Minister spoke at some length regarding the fact that we have to raise foreign borrowing. In his statement he said:
Furthermore, the refinancing of foreign loans when they mature will become a major problem in the next few years.
Incidentally. I do not believe that this Government will have to face that situation because by that time Fianna Fáil will have to pick up the tab as usual. Of course foreign borrowing is important. However the Government are discouraging native investment— we spoke about this on last year's budget and the Minister said it had no effect, and doubtless, he will say the same thing this year—by statements of highly principled intent, as they would call them, such as the announcements of wealth and capital gains taxes and the wide range of farm tax at a time like this. As a result it is necessary to borrow more on the foreign market because native investment, which is essential to any economic programme and national confidence, is discouraged.
When we borrow abroad we have to pay high rates of interest and we are adding a real injection of inflation into an already highly inflationary condition. However the Government fail to take account of this, apparently because of some ideological hang-up that exists, probably in one element of the Government and also within some personnel of the Fine Gael element in Government. If people had the conviction and honesty to admit that what they promised two years ago might not now be in the best interests of the nation, that it might be in the best interests of the country to withdraw the promises, the people would respond. In particular the business community on whom so many jobs depend and on whom so much social welfare benefits depend, would respond with confidence and determination. However the Government have not seen it that way. I agree with the Taoiseach that the budget is only a small element in the overall economic attitude of the Government.
As I have said, the fact that there is a hurricane is no excuse for inactivity. The Minister has told us we will not have the usual statement regarding the economic outlook and review that is normally published prior to a budget. I should have thought that the purpose of the statement was to explain the Government's mind in relation to the expenditure and taxation programmes in the budget, to let the public in every sector in on the Government's attitude so that they might respond to it. However, clichés about the economic hurricane, about a national partnership, the distribution of much needed social welfare benefits and statements regarding our responsibilities are not enough to involve all the people with the future of the country in the coming years.
Because we are in stormy seas, apparently the Government have decided that now is not the time for planning. Their attitude is "Sit back in the deck-chairs boys, and wait until the storm has blown us somewhere. When the calm comes we will start to plan". In passing I would mention that there is relative calm in one area of our policy at the moment, namely with regard to the North of Ireland. We are in a period of relative calm there but what are the Government doing? What response, what leadership, what sense of urgency or direction are emerging now that we are in calmer waters? They have failed to respond in this area and when we come into calmer economic waters the Government will find some other excuse. As the Minister knows quite well, after meetings of the Government it is obvious that there are differences that are irreconcilable. As a result neither the country nor the Government have a clear sense of direction and the country has to suffer from the indecision that emerges and that is characteristic of this budget.
By force of circumstances and because of what one might call the international hurricane we have a deficit budget. The deficit was not planned or charted with confidence by the Government; it was one the Government found had happened and they were obliged to respond to it in various ways. If there is any reality in deficit budgeting surely one can relate it to the normal experience of people in everyday business. If a businessman, in planning his business, calls on his bank manager and tells him that because of his obligations and outgoings he will need, say, £50,000 or perhaps the sum required may be £60,000 or £70,000 if his employees do not respond as he would wish them, he will get short shift from the bank manager. He will be told that if he has a responsibility to control his business he will have to prove it to the manager in his request for borrowing. Otherwise it is carte blanche to the business man involved in this case and ultimately, to everyone in the community, to make any demand they wish.
In this budget we have a deficit simply due to the force of circumstances. It is implicit in the budget that if there is need for more—and it is clear there will be—the Minister will be back to us and to the people saying, "I must get more because circumstances were such that the calculations were wrong". Surely that is not the kind of planning, determination and confidence that anyone running even a henhouse should have at a time like this.
A characteristic of Fianna Fáil budgets—it was picked up by commentators quite frequently and they were right to do it—was that during the budget debate one or two Fianna Fáil speakers made what was called "the confidence speech"; they pointed out the elements in the budget that would renew the confidence of the people in the Fianna Fáil Administration. They would tie it up with budgets in previous years and, thus, generated a sense of confidence.
Sometimes it was said they were a bit glib in their forecast. I wonder who will make the confidence speech from the Government on this occasion? If some person is designated for that thankless task, on what basis will he make it? What will his terms of reference be when he comes to make that confidence speech in the light of the fact that the Minister for Finance and the Taoiseach have said that they have no plan at this stage, that they will respond to the circumstances as they emerge but they will wait for calmer times and clearer waters before they chart a real course for the nation's economy?
What happens if the deficit during the year seems to be turning out a lot more than the Minister apparently estimates? This budget, of all budgets, is really a guestimate rather than an estimate. What happens if it turns out to be more? We will have the Minister back here again and again. He does not have to come back with a budget because he has his own precedent for that either in the way of health contributions, a statement to the House on increased petrol charges or something else like that.
The Leader of the Opposition was right. If a budget does not call for planning, as is now the case, what is the purpose of it when you can come in here any week you wish, in any guise you wish and increase taxation for any purpose you wish? Why are we here discussing the budget if it does not represent, as well as taxation and allocation, a statement of Government planning? One of the problems may be that the Government are meeting late hours, two days a week, three days a week and sometimes four days a week. They seem to be meeting more often, more urgently and in a more pressing fashion than any Government that went before them.
That is because we are working.
I have my comment on that working. Each of them is too anxious to be doing the other fellow's business. They are not concerned to recognise that each of them has a responsibility in his own Department. We recall a time a few months ago when we had a number of spokesmen on Northern Ireland. When things were going well you could multiply it by three, four or five. In the Sunningdale time we had Government meetings on Northern Ireland and we had a range of spokesmen in the Government in relation to that area. It is in the area of some of those spokesmen that the biggest problems have arisen. Those who have most time to devote to other people's business have least time to devote to their own. None of us, however intellectually endowed we may be and whatever talents we may have, that have been so widely acclaimed before we came into office, can do without the basic discipline of looking after our own jobs, checking our own Departments and cutting down our own spending. This apparently is something this Government do not regard as being a major priority.
I suppose if you are going to have a deficit by accident, as distinct from design, there is no real reason why Ministers should cut back in the activities of their Departments. There is no real reason why a Labour Minister for Industry and Commerce or a Fine Gael Minister for Agriculture should have to say to his Government: "I will not be obliged to cut back on this programme. It may not be immediately important. I will not be obliged to do that when we will run a deficit in any event. I will go right through with this one. If I cut back why should I be obliged to justify what the Government have forced me to do by force of circumstances". The reality seems to be that no Minister has been so obliged. The money is there to be freely spent within the Departments and across a wide range of Government activity. No Minister is prepared to take responsibility for his own particular area.
We have been told in the budget speech that there is an increase in the Estimates of £67 million for public service pay and that the actual personnel in the public service has gone up 18 per cent in three years. I am not suggesting that the public service pay should not be treated in the same fashion as any other. If it is in accordance with national agreements and the need to maintain an adequate and effective public service you must not do that, no matter whether you are talking about the Garda or the Civil Service generally.
When one looks at the fact that the personnel in the public service has gone up 18 per cent in the past three years some questions should be asked. If there are so many people so busily engaged it might be no harm if the managing director of each Department was there some times to see what they are doing. I intend to put down a parliamentary question immediately in relation to this. What increase has there been in the personal staff of the Ministers and Parliamentary Secretaries in the last 12 months? From the few I know of there has been an increase in the personal staff of at least 50 per cent and in some cases 100 per cent to ensure that these energetic and heavily worked Ministers will have somebody to take the load from them, having regard to the fact that they have to be about other business. The Minister for Defence's Department is not one of those I know about but when I get the answer to my parliamentary question we will find out where he stands.
It is exactly as it was the day I went into office.
That clears the Minister. If that example is set in some Government Departments it is understandable that the people outside the Ministerial and Parliamentary Secretaries' offices would respond to that example. It may be indicative of why we have had an increase of 18 per cent in the public service personnel in the last three years.
This Government came into office with the opportunity of taking a fresh look at the whole administration of this nation. If they have taken a fresh look at it, there is no sign of it after two years in office. They inherited the Departments and the structure from a previous Administration, which had they remained in office, would by now have radically reformed many of those Departments to take account of the needs and the priorities of this time in the economic, social and other areas. The Government are still adopting the same traditional deployment of personnel they inherited two years ago. That shows a certain lack of urgency and a certain lack of direction. If they do not know where they are going they will obviously be satisfied with things as they are in terms of Civil Service administration and the allocation of responsibility.
I do not want to embarrass Ministers who are here but when we were in office we had the example of the Minister for Lands saying he thought he was redundant. If the Government were having a look at the position they might find within that Department an opportunity to better apply the personnel in other areas and not excuse themselves by allowing an increase of 18 per cent in the public sector over a three-year period. It is from this laissez faire attitude that these problems arise. If everybody else is being asked to plan and to have a clear sense of responsibility surely a Government composed of Ministers who are more concerned about other Departments than their own should at least react to their own precepts. I believe that apart from the money that might be better spent or that might be saved, the business of this nation would be better done. I could think of some Departments that are not what you would call actively involved and in some of which frustration is more a characteristic than satisfaction, and that must apply to Ministers as much as to senior staff. Our public servants deserve a little better and now that we have a Minister for the Public Service, who of course has other responsibilities as well, we would like to see some little response so that perhaps next year we shall not have this continuing increasing graph of personnel; I do not mind seeing an increase in the public service personnel provided there is an awareness and a sense of direction in the people who are supposed to be controlling them.
If the deficit turns out to be much more than the Minister has "guestimated" for, what happens? Who is responsible? What is the penalty? What is the need to plan if this is the pattern that will continue? It is fairly obvious that there is no need; there is no penalty, except for the State at large. If there had been a plan directed with confidence and even if there was a bigger deficit, there would be no harm done. A deficit is fine if one knows what one is going to do with it. If such a plan were forthcoming it would have the support not only of this House but of the productive sectors generally in the community. The building industry, which is the touchstone of our economy, and the industries dependent on it, would have responded to a real injection through the building societies and otherwise. The Government lacked confidence in that direction because they saw the bill was going high enough by accident and they were not going to add to it by design. The same applies to industry generally. The Taoiseach quoted a short extract from Donal Carroll's statement but when the Taoiseach has read the full statements from the other elements in industry he will find that what has been done here does not fulfil even half of their expectations for the generation of economic activity.
There is a little for the farmer, but as Deputy Callanan said, there is nothing at all in it for the interests that he represents—if anybody represents the small farm interest in this House it is he—and that I represent to some little extent. What is provided reminds one of Lannah Machree's dog. My colleagues on this side will recall I said at a party meeting at which we were discussing this budget in advance that it would be just that kind of budget, that there would be a little in it for everybody. But there is no determination to get the economy going. The Government want to curtail criticism from the various sectors and have not the confidence to encourage any one sector. This morning the voices may be somewhat muted but in a few months' time the silence will have broken out into deafening noise, and then the Government will come back and throw a little more into the till because it will be necessary to respond to the short-term demand.
Thinking of farming, may I say here what I have said publicly in my own constituency, that if as a representative or a Minister, one is to have a sense of urgency one must be in daily contact with the people who are in the greatest need, whether it is in regard to social welfare, farming or anything else. The composition of this Government is such that only a very small minority of them meet the small farmer at any time much less daily. None of them has to see the personification of the depression that comes every Saturday to the clinic by way of those people who come from the west or the mountainy areas of County Tipperary. It is no wonder the Government do not respond when they are not aware of the reality. I could not forget, and I am sure Deputy Callanan and other Deputies from Mayo and else where could not forget, the faces of farming people who are in extremis, men who left their store cattle in the marts on some occasions and drank their way from pub to pub up to my clinic to say: “What are you going to do?” I am not talking about hard drinking men. Perhaps if some of the Ministers in this Government met these men regularly they might have a little keener sense of awareness of what that sector is going through at present.
That sense of awareness being lacking in the Government, would obviously be lacking in this budget statement. As the Leader of the Opposition said this morning, at a time when the introduction of intervention was vitally necessary, the Government, because of the two counsels to which they are always subject and by which they are always divided, did not feel—perhaps some of them are aware of it, perhaps the Minister who is present in the House is aware of it— the need to apply for and introduce the intervention system in April or May last year. They introduced it in October when the grazing season was over. The small store man and the small calf man are supposed to benefit but that will be towards the late spring and early summer and what is to happen in the meantime? We pray for a mild winter and we give them a little by way of feed vouchers. Had that scheme been introduced in time the benefit would have been translated from the big beef man to the store man while the growing season had still not concluded. Such has not happened, and as I say, we just pray for mild weather during the winter. If we get the cold snap that is reasonably to be expected at this time of the year, while the Government sit in complacent inactivity, there will be people in the west and in the southwest and in the mountain areas of Tipperary who will be suffering a degree of hardship that the people here would not even begin to understand.
I think I have spent sufficient time indicating what to me are the broad areas where Government policies are so clearly lacking, which is so clearly confirmed by this budgetary statement. As the Minister for Finance has said, someone will have to pick up the tabs. We recognise that what the Government have done in social welfare payments is vitally necessary. I do not think there can be any dispute on that, and we support the Government on it. However, we must equally recognise it is just about keeping pace with inflation. That is not in accord with the Government's programme and statement of policy when they came into office, just to keep pace with the existing measure of payments to social welfare beneficiaries.
They started in a blaze of glory in distributing all the EEC moneys but one would not like to think what would happen if the Government had still to apply the farm subsidies that each Government up to 1973 had to apply in budgets here. If this Government had to continue those farm subsidies there would be precious little for the social welfare sector now. What is provided is not an advance but a maintenance of the status quo. While we welcome the income tax allowance we recognise that, far from being an advance, for the working population, particularly the lower paid sectors it is falling behind the ever-increasing rate of inflation. Therefore, even those who are supposed to have got some benefit from this budget, instead of moving forward are actually standing still. Some of them are moving backwards.
I have talked about planning and the lack of it in this budget. When the Taoiseach speaks in a debate like this I would hope that he would not spend half the time at his disposal adverting to external sources. We have heard enough about that. We do not have to tell the people about the oil situation and the energy crisis. They are well aware of it. They are well aware that this Government came into office at a difficult time. We are aware of that and we accept that that is so, but this should not be used as an excuse for ineptitude and a failure in planning.
All of us look for some expectation of better times. Yesterday the Minister opened his budget statement with quotations from the Bible and he finished with a quotation from a literary parliamentarian. Might I remind the House of a very beautiful ode which most of us must have learned at school in which the poet, referring to the existing misery and depression, asked: "If winter comes can spring be far behind?" Spring will come when the winter of this Government has passed.
I believe spring will come in the lifetime of this Government. We may not have too long to wait for it. These are difficult times. Unemployment is high. I hope, the Taoiseach hopes, the Minister for Finance hopes and the Government hope—indeed, they have said this—that there will be a resurgence in the not-too-distant future and that we will be on the way back to the prosperity and expansion that heralded the initial period in office of this Government. I believe that resurgence will come this year.
Deputy O'Kennedy said everybody knows about outside forces, about the oil situation and so on. Let us put the problems on the record to show that these are difficult times. Some of us have been here long enough to remember the Suez Crisis and the Korean War in 1957. The depression then was nothing to the depression now. The oil producing nations decided suddenly that they would force the more developed nations to pay vast sums by way of higher prices for oil. This has produced for this Government the most difficult economic situation ever faced by any Government since the foundation of the State.
Deputy O'Kennedy said that we were seen going into Government buildings much more frequently and holding longer Cabinet meetings; he thought this was an indication that we had no path to follow, no direction in which to move and no State policy. The fact is the problems facing us are greater and we are, as the Minister for Finance interjected, working hard. We claim no credit for that. The work is there and has to be done. We are charged with doing our best for the people and we shall do our best.
The worst crisis that could hit this country would be a crisis of confidence. Deputy O'Kennedy referred to confidence many times. Our problem in framing this budget over the past few months was to devise a budget that would be fair and expansionary and create confidence, the kind of confidence which would lead to an expansion of our economy from without, the confidence that would bring a larger volume of investment into the country and provide employment for our people. With less jobs available in Britain and more young people coming to working age we need more jobs, more than we can provide ourselves through our traditional industries and from our own resources. What is really needed is world confidence in the stability of our Government and our country and in the future of our industrial structure.
This budget produces just that. It will generate confidence. We have now a sophisticated State, with national wage agreements and arrangements with the public sector that those engaged in it will get their due increases through negotiation procedures, and with a complete absence of public unrest. The old Manchester School of Economics has been cast aside; that was the school that said that, if one did not work, one did not eat. We have succeeded in this budget, as we succeeded in the two earlier budgets, in looking after the less well off fairly and properly.
We all know there is unemployment all over Europe, but the percentage increase here, regrettable as it is, is less than it is in many far more developed and richer countries.
(Dublin Central): That is because you are starting from a higher level.
That is not so. The percentage increase here is less and we are not starting from a higher level. This budget is designed to restore confidence and I believe it will do just that. The AnCO grant for training has been increased by £4 million. That was done on the basis of solid figures produced by the Minister for Labour. More welders, more technicians, more fitters, more carpenters will be needed for the jobs that will be there for them. There will never again be anything approximating to the Potez débacle. Now when an industrial grant is over £350,000 the application is examined first by the IDA and it then goes to the Department of Industry and Commerce and the Department of Finance and both Departments prepare memoranda for consideration by the Government. That quite proper procedure was instituted by the last Government after they had seen the folly of their ways. It provides for the Ministers concerned a constant reminder of the number of industrialists coming in, the size of the industries and the numbers they will employ. Since I became a Minister not a week has passed in which there were not two or three applications involving large numbers of workers.
In the town nearest to me three new factories are in course of construction. These are the things which will help us in the not-so-distant future. The construction of these factories all over the country is helping our unemployment situation. We had to spend £4 million more—and gladly spent it—on the training of workers for new jobs in factories largely based abroad. This shows the confidence there is in this Government and this country at this time.
I should like to refer briefly to agriculture. The completely unforeseen collapse of the beef market had very bad repercussions for the small farmer in particular. It is true to say that the producer of beef who sells it at the killing stage—and I admit to being one myself—did not get out too badly. The year before last he had a good year and last year he had a bad year, but his replacement costs were so much less that, if the welcome increase in cattle price continues, over the period of three years he will get out quite well.
The unfortunate small farmer, largely in the west—and everywhere because there are small farmers in County Louth and County Meath as well as in the west—did very badly, particularly if he was relying on store cattle. The Minister for Agriculture and Fisheries very lucidly referred to the policy for 30 or 40 years which suggested to the small farmers of Ireland that they could live on the production of store cattle. Small farmers, or farmers with not perhaps the best of land such as in west Limerick, for example, who can send their milk to the creamery are doing quite all right.
The unfortunate small farmer who depended on the production of store cattle sold at a young age was really hit. That man has been looked after by this Government by the provision of feed vouchers and interest reduced loans. This was the right thing to do. It will be appreciated by those people and will help them in their present dilemma, which I believe will disappear in the months to come as the price of heavier cattle increases, as it is increasing at the moment.
The pattern of beef prices always was that when they went a bit too high the British housewife—when our main exports were to Britain— changed to something else. She had bacon one day for lunch when she might have had beef. She had pork, or chicken, or something else, and the price of beef would reduce slightly and then go up again. The pattern was the same in regard to the price of pigs. There would be an increase in the price of pigs and then it would start to fall again. That was not the pattern for the past year or so. Very good friends of mine in the trade were quite surprised that the constant increase in the price of beef was continuing. Then suddenly it dropped in a most disastrous and completely unforeseen manner. The right thing for the Government to do was to help the small farmer in this budget, and this we did.
I should like to draw attention to a few other points. For all of my working life I have been in the grain trade. I have been a Minister for less than two years. The last time I bought wheat it was £5 at 20 per cent moisture and a reasonable bushel weight per old-fashioned barrel, and it was £40 per old-fashioned ton. If the wheat was rejected and went for feed the price at 20 per cent moisture was £28 per old-fashioned ton. Last harvest the price of wheat for the newfashioned tonne, which is about 40 or 50 lbs. less in weight than the old-fashioned ton, was £56 per tonne at 20 per cent moisture and a reasonable bushel weight and ranging as high as £58.50 per tonne. If the wheat was rejected and went for feed, the price was £50 per tonne, not £28. Last harvest grain farmers did well.
I should also like to call attention to the fact that, as a result of our entry into the EEC and the work of the Minister for Agriculture and Fisheries, the price of milk is 4½p per gallon higher than it was a couple of years ago. That means that, while there were those horrible losses for the unfortunate small farmers whom this Government looked after prior to this budget by the arrangements made with the meat factories to provide feed vouchers, and now by the dual operation of extending the interest reduced loans and providing £2.2 million for the feed vouchers, while the Government have looked after that section of the farming community who are in serious trouble, at the same time the other sectors did well.
The price of beet was satisfactory and the crop of beet last year was extremely good. In a time of great difficulty for Governments I would give as a reason why in the recent Cork by-election the Government held their vote, when traditionally Governments always drop their vote, the fact that in that constituency the main operations of the farmers are in barley, beef and milk. I mentioned the price of wheat. The last time I bought feeding barley it was £43 per ton with 20 per cent moisture. Last harvest the price of barley was £50 per tonne. This Government have, perhaps, the best Minister for Agriculture and Fisheries the country ever had. The Government are working hard for the farmers and have solicitude for the farmers.
I should now like to advert to the constrictions on the Government in relation to their efforts to help the farmers. The size of the agricultural industry is such that it is physically impossible and financially impossible in certain facets of that industry for any Government to give help of real value when something goes wrong. May I advert to the disastrous price which farmers have to pay for fertilisers at the moment? At the start of the oil crisis about 18 months ago, the price of rock phosphate was 15 dollars per ton. The last I heard of it, it was 60 dollars per tonne. The universal fertiliser used, 10-10-20, has reached a retail price of between £90 and £100 per tonne. This is an outside factor about which nobody can do anything. The volume of money required to do anything of great value and great help to the farming population is such that it just is not on. All the Government can do is their very best and this they have done.
The natural protests one hears are, to some extent, helpful to the Minister for Agriculture and Fisheries in his arguments in the EEC. We have already heard criticism in the budget debate of the delay in the institution of the green £. The fact is that when the green £ was first asked for from the Government there would have been no advantage from it. It took four to five months of hard negotiation by the Minister for Agriculture and Fisheries to get to the stage where he could get the green £ on the agenda. Nothing happens in Brussels just as Ireland wants it. There are eight other partners. The performance of the Government and the Minister for Agriculture and Fisheries is commendable and has helped the agricultural industry and will continue to do so.
You need only look at State expenditure on agriculture, and realise the size of the agricultural industry, and take into account the quite understandable complaints from agricultural organisations that enough is not being done, to realise the size of the problem. State expenditure on agriculture in 1975 is estimated at £110,026,000. In the previous nine months it was £74,383,000. That should give everybody an idea that, while some of the money did come from EEC funds, to do everything one would wish to do would be totally impossible. In relation to the total expenditure in this budget the figure for agriculture is not far short of 10 per cent. When one considers that one can see the size of the problem. No subsidy from Government funds could have the effect that would be desirable at this time but one can look forward to the future because everything that can be done is being done. Great improvement has taken place.
I should now like to deal with a matter which should be considered in the course of a debate on the budget, the question of security. The Taoiseach mentioned this matter briefly. In the last year of the previous Government— taking it that we arrived within a few weeks of the end of that financial year —the expenditure on Defence was £29,584,000 while the expenditure on Justice was £23,537,000. The Estimate for the Department of Defence for 1975 is for an expenditure of £48,946,000 and for the Department of Justice of £44,500,000. In the case of the Department of Defence that represents an increase of £25 million and in the case of the Department of Justice an increase of £19 million, a total increase of £44 million.
As the Taoiseach stated, this is a load around the neck of any Government and something that has to be faced. One does not find these matters debated in the House in detail and there are sound reasons why this is so. The Opposition spokesman on Defence, I feel sure, agrees with this reasoning because he never asked questions or made statements which would have an effect on the security situation. There are many things bound up in that increase of £44 million which we cannot talk about. However, it is an extra expenditure of £44 million, an increase of two-thirds, and the highest increase for any Department of State. That all has to do with the troubles in Northern Ireland. Pray God now they will go away or at least be of smaller magnitude.
However, we should face the fact that this Government had to provide that additional money. Every Member of this House, certainly 99 per cent of them, and 99 per cent of the people want that expenditure and want that security. They want us to see to it that the dreadful dangers that could occur if there was a doomsday situation or any kind of a holocaust must be well guarded against. That should be taken into consideration when people pay taxes on their various luxuries. They should realise that when they pay taxes on these luxuries they are paying gardaí who may be doing 16 or 18 hours duty per day, are giving a very small extra allowance to soldiers and are paying for extra soldiers who are on Border duty and security duty at various institutions.
These are sad facts. The disincentive to expansion in trade that comes from our present security situation is something that can be of a dreadful magnitude but cannot be measured. Nobody can say how many boards of directors in London, New York and elsewhere decided not to come to Ireland. That is something we are not told. If they wish to manufacture inside the Common Market and not pay the external tariff on their goods they can choose any country in the EEC. In my view if they come here they will get the best labour force in the Common Market but if they feel there is a security risk, if they hear of a bombing in Belfast, it makes them think there is danger in Cork. That is the way people outside think of our country. We cannot guess how many did not come but we do know that the behaviour of this Government since they came into office, and the behaviour on the security front which is one of the main planks in this, has meant that many have come and that many millions of pounds will be paid out in grants in coming years to employ people in factories set up by foreign industrialists notwithstanding the serious disincentive of security problems.
Two days before introducing his budget the Minister for Finance said that it would be a reflationary budget and this was so. A reflationary budget was extremely necessary. One of the things adverted to by a well-known accountant in the firm of Craig Gardner & Company in the Irish Independent of today is the question of the postponement of the payment of tax. It is true that when prices go up we get into a very grave liquidity situation. One may have the best customers in the world and a very good collection service, one may have quite short periods of credit but if the product one is selling costs double as much between the stocks and the ledger one will need twice as much liquid money. A clear example of that would be fertilisers where the price would have increased in many cases from £40 per ton to £90 per ton. If one deals in 5,000 tons of fertilisers one needs more than twice as much money to give credit to the farmers to allow them to put it on the land.
Therefore, the postponement of the payment of tax in this case is a great help. There is no doubt that it will help people to carry the stocks and to give the necessary credit. This will also help builders. One of the features of building has been that builders' providers have given credit while contracts were being completed and houses being constructed until the money arrived from the local authority or the purchaser of the house. This is one of the important ones. It was interesting to see how keenly this was admired by the commentator in the Irish Independent today.
The continuation of the 100 per cent allowance on machinery is of great value. A company which must buy new machinery and is paying tax gets an allowance of 100 per cent on machinery and this is very valuable. It will help people to expand and give them confidence to buy that new machinery with the aid of generous re-equipment grants from the IDA to meet up with the challenge that the Common Market will bring as tariffs decrease. In the case of the new building that would house the machinery all that was afforded by the previous Administration was 20 per cent of an initial allowance and 2 per cent per annum afterwards, but the figure now is 50 per cent and 4 per cent per annum afterwards. It does not take great business acumen or experience to consider that 20 per cent and 2 per cent per annum was small. On the building one received tax allowance for the next 40 years of 2 per cent but by the time half of the 40 years were up and inflation had dealt with the value of the building 2 per cent of the actual cost was a very small alleviation. Fifty per cent now and 4 per cent means that it will be something that will yield an advantage over a much shorter period, and a much greater advantage. This will allow an alleviation of tax—as long as the expenditure is incurred by the company—to allow for the preservation of jobs as well as the creation of new jobs. The cost of that aid to industry is £12 million in 1975.
One of the things that this Government had to consider and why those long meetings which Deputy O'Kennedy did not seem to like had to take place, why the hours of toil were so necessary, was that we had to select the things we could do that would give the best improvement in employment and confidence to the business community in the future. There were many alternatives but the ones selected, namely, liquidity improvement and the increase in the allowance for buildings, were the ones we thought would give an immediate result. I have no doubt it will help many firms at present in grave difficulty. In addition to that, it will mean that people who were wondering whether or not to invest in new machinery and new buildings can now do so. The construction of the buildings will help the building industry; it will mean there will be more people employed and the new machinery will mean they will be better equipped to meet the challenge of the Common Market.
I would describe the social welfare payments as generous but necessary. The 14-point programme on which we were elected is being adhered to. We are making the maximum payments that could wisely be made. When April comes—and it is a shorter wait than used be necessary under the previous Administration, as they never granted increases until 1st October—it will mean that old people, the needy, the unemployed and those who are sick will get compensation for the increase in the cost of living. They will get a little more too, not a great deal more but the generous increases granted will afford them a little more than the increase in the cost of living. Furthermore, the fact that in six months' time there will be a review and they will be compensated for any further increases in the cost of living is something quite unique as far as thinking in this country is concerned. This is necessary because the period of raging inflation we have experienced has been unparalled and it would be totally unfair to proceed with the old-fashioned Fianna Fáil method of granting an increase on 1st October, meaning that it constituted something which existed for the first part of the year, and with inflation, had disappeared before it arrived.
The 14-point programme also took into account personal tax reliefs. I was somewhat amused and amazed when I heard Deputy O'Kennedy say that these tax reliefs were insufficient. The real truth is that for years Fianna Fáil granted no increase in personal allowances. Their line was—and I heard it defended across the House from this side many times—that it was so expensive it could not be afforded. We have consistently increased personal allowances, as we said we would in the 14-point programme, and we will continue to do so. The only regret we have is that they are not greater reliefs. But, at the same time, if a man has to pay 3p extra for his pint or 2½p extra for his half one, one can consider that if he was married without children he would have £31.20 on an income of £1,000; on an income of £2,500 he would have an advantage of £42 which, mind you, will pay a fair number of six pences on a packet of cigarettes, a fair number of 2½ pences on a half glass and a fair number of three pences on a pint. I think he would need to be indulging himself were he to exceed £42 in the year.
I have not worked it out mathematically but it seems to me that a man on a fixed income—and particularly a married man with children—has been treated in a reasonable manner. Again, I would wish that it were more but, in this time of economic hurricane, we did that. We succeeded in producing a balanced situation in which fair play was afforded to all. At the same time we kept the ship of State sailing on a correct course. As well as that we have built up the confidence which will mean that, if God spares me, I will be seeing on the Cabinet table in the months to come more and more grant applications of more than £350,000 being discussed and passed for more jobs, because this budget is one of confidence. That is what the desire was and is precisely what has been done.
I afforded myself the opportunity last evening of watching the "7 Days" programme on RTE and of listening, as I drove home, to a radio programme on the budget in which the Minister for Finance and Deputy Colley participated. I should like now to give an estimation of what Deputy Colley's suggestion—which I presume is the official Fianna Fáil suggestion—of a reduction of 4 per cent in VAT—would have meant. It would mean a loss of revenue of £67 million. Our increase in taxation—and there has been plenty of shouting about this from the far side of the House—is £34,500,000. That is the comparison. I would ask Fianna Fáil now: where would Deputy Colley get his £67 million if a fairy godmother arrived with a magic wand and transferred him over to this side of the House? Would he put double or treble as much again on the items we increased in respect of indirect taxation?
There is another figure which it would be interesting to consider: the effective reduction in the cost of living would be 1½ per cent, resultant on a reduction of 4 per cent on VAT. That presumes that every supermarket, grocer and manufacturer rigidly reduced prices by 4 per cent. Even considering the rounding off figure—when the National Prices Commission had to make a decision—there would be an opportunity to ensure that the full 4 per cent was not passed on. How does the Fianna Fáil proposal of a reduction of 4 per cent on VAT fall in with the fact that they, as the Taoiseach reminded them this morning, said that they would not have removed VAT from food? In fact they voted against the removal of VAT from food. How can that be consistent? As I see it, quite clearly the position is that they are grasping at straws. We heard Deputy Colley last night on radio say he would do various things for the farmers and for other people. The huge increase in costs, the huge increase in Government spending, meant that the Government had to make those decisions on the options open to them and those options were wisely dealt with.
We are talking about a budget that is of the order of £1,200 million, whereas when I came here in 1954 a budget would, possibly, have been only one-fourth of that amount, even allowing for inflation. The economic holocaust that hit the world during the past 18 months has resulted in increases in costs that would have been totally unworkable so far as budgetary policy was concerned had it not been for the Herculean efforts and the long meetings of which Deputy O'Kennedy has seen fit to complain.
The increases in indirect taxation will have no effect on business confidence. They will have no effect on those industrialists who are deciding to come here. Neither will they have any effect on the unfortunate woman who is trying to feed her children on a very small income. These increases will affect only those who can afford them. I suggest that the theme of this budget is confidence. Not only has the budget projected confidence but the fact that we have been able, wisely, to aim high in respect of foreign borrowing and, thereby, make available more capital for productive purpose indicates that the confidence is there. If we did not believe that we could borrow between £250 million and £300 million abroad this year, we would not have budgeted on the basis of such borrowing. We do not engage in this borrowing from choice but from necessity. In a crisis situation, such as obtains today, one must use one's reserves to tide one over. It is at a time like this that if people have confidence in their Government, the steps can be taken that will ensure the minimum number of people being unemployed and a maximum number being employed. This confidence ensures also that the services of the State will be continued in the very best manner.
Another factor that is contributing to this confidence is the standing of our Ministers who go to Brussels and other places on EEC business. There is high regard for our Ministers for Agriculture and Fisheries, Finance, Industry and Commerce and Foreign Affairs. This Government are enhanced by being able to send such people to the Council of Ministers.
We have been able to produce a budget which has caused nothing but chagrin and disappointment among the ranks of the Opposition. Yesterday afternoon the first political commentator to comment on the budget, Mr. Arthur Noonan, said on a television programme that Deputy Colley had an impossible job. I would not like the job of attacking this budget if I were in Opposition because it is an honest and deliberate attempt to bring this country through a most difficult time and at the same time to adhere to the promises which became undertakings when this Government came into office. If our 14-point programme could have been described as promises before the election we did what any decent Government would do and undertook, on assuming office, to implement those promises. We have been implementing them successfully at a time of the greatest economic blizzard that this country has ever experienced.
I shall turn now to the question of housing. Perhaps there are some who may think that I am going back too far when I say that the housing backlog is historic and goes right back to the time when Fianna Fáil took office in 1957. At that time there was a crisis which could be described only as minor when compared with the present situation. Fianna Fáil's method of dealing with the problem was to reduce the number of houses built to as few as 4,000 in 1958. In 1961 the number was increased to, I think, 7,000 or 8,000. Housing is not something that can be turned on and off at will. It the building industry is allowed to go down it takes years to bring it up again. While there is the desire to build the maximum number of houses possible there is a restriction in so far as there are only a certain number of people available for house building.
This Government set a target of 25,000 houses per year. I cannot forecast what will happen next year but I am sure the Government will do their best in the midst of this economic blizzard. However, I can say that during our first year in office we built 25,600 houses and that by the end of March next, which will also be the end of our second year in office, another 25,000 houses will have been built. Is that not proof of our determination to build the maximum number of houses? My hope is that we will be able to build 25,000 houses next year also. In any case, the people know that we have gone a long way towards catching up with the Fianna Fáil backlog. when we took office Fianna Fáil had built 21,000 houses during the year but they "cooked" the figures on completions. The actual number built was 18,700. This means that our increase was of the order of 30 per cent. The huge increases in cost and the non-availability of capital moneys have hit us hard and I admit that there is a large amount to be made up between the grant and loan and the cost of a modest house but we shall do our best to ensure that that gap is reduced. We shall endeavour, too, by every means possible to instil confidence in the building societies and in the building industry in general. We have not been getting much help from the Opposition in our efforts. All we have been getting is derision. Their attitude can only spread despair when the message should be one of confidence. However, that will not worry us because our record speaks for itself. This Government will continue in their efforts, will be re-elected and, perhaps, will keep Fianna Fáil out of office for as long as they kept us in Opposition.
Deputy O'Kennedy referred to the question of increases in the numbers of staff in the various Departments. The Deputy must know of the increased volume of work that has been caused by our membership of the EEC. There is no way that the work connected with such matters as the reduction of tariffs can be avoided. Despite this, we have decided against increasing staff further but we must face the fact that day by day the involvement of Government in the lives of people becomes greater and that the more involvement there is the greater will be the volume of work and when there is more work more people are required to cope with it. Every effort is being made by the Minister for the Public Service to see that staff is not increased.
There are other promises kept in this budget. The removal by successive steps of the health charges from the rates is helpful to farmers and everybody else. Even before we took office we were serious about our effort in coming together as a National Coalition. Our 14-point programme did not produce glowing promises similar to those produced by Fianna Fáil a week before the elections—after they read ours. We did not guarantee to remove all rates from dwellinghouses. We guaranteed to remove in successive slices the health charges from rates during our administration. I understand that is worth £4 in the £ today.
Rates bear lightly on poor areas because there low valuations are the order of the day and there are initial allowances under certain valuations. In Counties Louth, Meath, Kildare, Wexford, Carlow, Kilkenny, Cork and Tipperary—the Golden Vale—rates bear heavily on medium-sized and large farmers. In my county that reduction this year was worth 28p in the £. That is another promise, which became an undertaking, that we are keeping. It is another honest approach by this Government and that is the way we intend to proceed.
The week before the election Fianna Fáil promised they would remove the rates from private houses. That is like Deputy Colley's £67 million. Where would he get it? I believe our people know we have kept our promises and our word. The message is confidence. We aimed high on foreign borrowing. We are getting investments in factories from abroad. We are paying our way. We have given relief to industry. This means they will be encouraged to invest and replace old machinery and buildings. We have given social welfare recipients a fair deal at the time of greatest difficulty ever. This is a good budget which will restore confidence. It will minimise the high unemployment figure we all regret. Everyone will agree it is a fair budget.
I have never heard any Minister stressing so much the fact that they are an honest Government. It is said in my part of the country that the greatest rogue is the man who always says he is honest. I will say no more. If the Government were as honest as the Minister says he would not have to say in every second sentence: "We are honest and we will be honest for all time". That is sheer hypocrisy.
The Minister for Finance read his budget statement yesterday. As usual, I notice the Government are very thin-skinned with regard to press reports. The Irish Press said it was “Ryan's £125 Million Gamble” and the Irish Independent said “Not enough”. That sizes up this budget. The Minister budgeted for a huge deficit hoping everything would come out right. Last year he budgeted for a dificit but everything did not come out all right. If it was a simple matter of budgeting along those lines he could have had a deficit of £300, £400 or £500 million and we would have become a very wealthy country overnight. For a deficit budget to be successful, it will be necessary to know what will be done with the money, for what it is earmarked and what will happen. Further, it will depend on what the people are thinking and if they have confidence in the State.
There has been a great change in this country over the last three or four years. If one goes through the country calling into banks, one will no longer see a small farmer looking for a loan. At one time a man building a house would not go to the county council for a loan but to the bank manager. That does not happen now. The small farmer no longer goes to the bank looking for £1,000 to buy store cattle. To my mind, that is a sign of a lack of confidence in the Government.
The Minister should be concerned about gaining the people's confidence in order to half the present raging inflation which is running at 20 to 25 per cent per annum. Millions of pounds have left this country because of his proposals to bring in a wealth tax. Within the Fine Gael Party the Minister for Defence made no bones about the fact that he would oppose those proposals. A Fine Gael Deputy in Cork said at a farmers' meeting that he would resign his seat if that happened. The fact is, the money—several hundred million pounds—has now been invested abroad. If the Minister for Defence will have his officers check back on sales of property within the last 12 months he will discover that a great deal of that money has not been invested here. It has probably been invested abroad under fictitious names. It should be working to help our economy.
There is nothing in this budget for the small farmer. There is nothing in it to give him confidence in the future. There is much talk about what the big man is getting and what he will get from the EEC, but nothing about the small farmer. The man on the side of the hill or the man with the poor land, no matter in what county he lives has the same problems to face. He is almost giving away the suckling calves at the moment. He is getting nothing for store cattle. Yearlings can be bought for as little as £30 to £35. There is a queue at the meat plants to get rid of cattle because farmers say they are over-stocked. There is nothing in this budget to help that man or give him confidence. Where are the proposals to lower unemployment?
The Taoiseach's speech is in my view, completely inaccurate. When the Taoiseach or a Minister circulates a brief we expect that, with the help of their officials, every word will be true. The Taoiseach said this morning that the total number out of work on the 3rd January was 87,700. That is incorrect. I have not the latest memorandum which I get from the Department every week with me now but, to the best of my recollection the latest figures were 89,900. Last Monday it was announced on the radio that there were 96,380 unemployed. How can the Taoiseach say that on the 3rd January this year there were only 87,700 unemployed? It is accepted today, 16th January, 1975, that there are over 100,000 unemployed. If the Taoiseach's figure of 87,000 odd is correct and if there are over 100,000 unemployed now it means that 13,000 more have become unemployed within the past 13 days and that is a rate of 1,000 per day. I would like whoever is to reply from the Government benches to check on those figures because I challenge the Taoiseach's figure. I say it is misleading. It is not in line with the information Deputies get each week. If the Taoiseach's figure is wrong it is incumbent on whoever replies for the Government to set the record straight.
Somebody said to me the other day that this was the second budget of 1975, that there had been an increase of 7p per gallon on the price of petrol last Monday and that the State had got its whack out of that through VAT. Yesterday we had the big day in the financial year but now we seem to have budgets almost every day of the year. We had a huge one last December when the Minister, with just a ministerial order, got away with something in the region of £30 million by increasing the price of petrol by 15p per gallon. That is a disgrace. It is something that has crippled the worker. It really dug into his pocket.
A man who must travel 20 miles to work and 20 miles back each day uses a gallon of petrol. The Minister first took his 15p and then the increase of 7p last Monday and if that is multiplied by five one finds that that man's cost of living has gone up by £1 per week. It was estimated that the increase of 15p would raise the cost of living index by approximately 1 per cent. The additional 7p would add almost a ½ per cent to that index. The one slap of 15p was greater than what the Arabs or the petrol companies associated with them had imposed on what was already a high price. We know there must be taxation. We know that money must be found to run the country and that we must help the weaker sections of the community but the way this budget was presented to us and the way the Minister is putting it through the House is not in the best interests of the country, as time will show.
It is difficult for the Minister. There is more than one party in Government. Yesterday, as the Minister was reading his speech, I was wondering where the man with the big income was coming in. When I got the newspaper this morning somebody had it figured out for me. There is a lot of talk about the raising of the personal allowance. There was also a lot of talk about it in 1972 when Fianna Fáil presented the budget. The present Minister for Local Government, Deputy James Tully, had a lot to say. He said the smaller man was getting nothing and the bigger man was getting away with something and that there was no sense at all to it. We see from the front page of the Irish Independent today that a man who can earn £20,000 a year is getting a right bonanza out of this budget. Where is the arch-socialist, the Minister for Local Government, now? What did he have to say in the planning of this budget? It is obvious that whatever he had to say was not listened to by the Minister for Finance. According to the Irish Independent a married man with no children, earning £20,000 a year, is getting a tax relief of £1,569, almost £5 a day. A single man with no family earning £1,500 a year gets a tax saving in the region of £31.20 a year. Strange socialism, strange times and strange that a Government think they can get away with this and bluff the people. They tell us it was a budget to help the lower-paid, the underprivileged, the recipients of social welfare and those caught in the income tax net. They said they had increased the personal allowance by £75. If they have there has been a cost of living increase of around 10 per cent. There will be a further increase when the national wage agreement is negotiated, as I hope it will. The worker knows there will be more taken out of his pay packet than the benefits he will get under this budget. I am surprised that the Labour members of the Government would allow a situation where an unfortunate man who is just married and is earning £1,500 a year gets a mere £31.20.
(Interruptions.)
The Parliamentary Secretary to the Minister for Agriculture and Fisheries is no longer a socialist of any standing. He was always a very conservative, affluent member of our society. He came in here in the guise of a Labour Deputy. I will not interrupt him when he is speaking and I expect the same co-operation from him now.
The unfortunate man just settled down and earning £1,500 per annum is £31.20 better off while a person with the huge income of £20,000 a year will benefit from this budget to the extent of £1,569.
Lest the Minister for Finance did not hear what I said I should like to ask him again to check the Taoiseach's figure for unemployment on 3rd January. I think it is wrong. Unemployment is going up and up. Government Ministers and Deputies seem to take consolation from the fact that they have unemployment and financial problems in other countries. Why must we look to nations that are going downhill instead of looking at affluent societies and trying to emulate what they are doing? We always seem to be quoting the misfortunes of others to make excuses for our own. We have our own lives to live. We must import raw materials, oil and so on, but it is accepted that last year, when the rate of inflation was 20 per cent, 10 per cent was caused by external circumstances and 10 per cent by internal circumstances over which we had control. We do not seem to have done anything about improving the position. This budget will not halt the raging inflation taking place in the country.
Debate adjourned.