The Minister used these words, and they can only mean that nothing was done to organise industry. Does the Minister forget the Committee on Industrial Organisation and the industrial grants that were made available when I was Minister for Industry and Commerce? Does the Minister choose to forget the new programme under the auspices of the Committee on Industrial Organisation under Deputy George Colley when he was Minister for Industry and Commerce? It is little wonder that what the Minister says will be treated with that kind of incredulity that people have come to expect from some of the pronouncements made by him and his colleagues.
While the evasion of the Green Paper may buy a little more time for the Government and postpone the vitally needed action to save the economy, those economic problems have not diminished even since September. On the external scene we have witnessesd the further collapse of sterling, which will add more fuel to our inflation in the coming months, and at home we have been treated to yet another sorry spectacle of Coalition bungling in the handling of the tripartite talks. The Coalition's capacity for action, which was never great, appears to diminish as week follows week, so that it is increasingly driven to plead plaintively for consensus and support from all sections of the community in the hope that it will be presented in some way with proposals which have that magical property of pleasing all of these people.
I will not suggest, nor have I ever suggested, that all our economic ills are of the Coalition's making; and I will not suggest that there has not been an economic recession which has had its effect throughout the world. But the Central Bank reports repeatedly attributed up to 50 per cent of our inflationary difficulties to the Government's action and inaction. Every other country with which we have trading relationships and every other Government who operate under the same kind of democratic system as we do, have taken steps, some with great success, others with moderate success, to overcome this recession. The Coalition Government have failed to take any realistic worthwhile steps to overcome the effects of that recession in this country. By pursuing the wrong budgetary policies, as they now admit, for the past three years, and because of inaction in other vital areas, they have contributed to the deepening of that recession.
The reality of political life is that difficulties and problems have to be faced with courage and conviction and dealt with speedily and decisively. Sometimes this requires painful and unpopular action on the part of the Government, but it is foolish to pretend that the unpleasing can always be avoided. There is no point having in Government, as we appear to have, only fair weather sailors. The Green Paper is the most recent published example of this evasion of responsibility and flight from reality. The early sections of the paper admit what we in Fianna Fáil have been saying and what many people have known for a considerable time: that the Government's present policies have failed and cannot be allowed to continue. The Green Paper itself is a damning indictment of the Government's policies. Page 26 states:
To sum up, the key features of the projection of existing trends are continuing high inflation, mounting balance of payments deficits, drastic cuts in public expenditure, an unacceptable level of taxation, an impossible borrowing requirement and growing unemployment—in short an intolerable situation.
The Government say that to continue with present practices—I hesitate to call them policies—would lead to an intolerable situation. After this belated admission of their shortcomings we might reasonably expect some firm purpose of amendment and that no time would be wasted in trying to set the country back on the road towards renewed economic and social progress. Instead of any clear and forthright statement of the options now open to us, instead of any detailed examination of the merits and demerits of our policies, we are given a few skimpy pages—one year's work—made up of pious platitudes and pie-in-the-sky prospects which appear to have been culled from the backs of envelopes and from lunch-hour typewriters.
The rosy picture which is sketched on the closing pages of the Green Paper, with its suggestions of over 60,000 extra jobs by 1980 and its expectations that unemployment and inflation could be brought down to the levels that prevailed when Fianna Fáil were in Government, have no foundation in theory or in fact. Various commentators have pointed to such features in the Green Paper as the peculiar nature of the population projection needed to produce the happy prospect of an early fall in the unemployment rate. In effect there must be a slowdown in population growth or extraordinary trends must occur in the growth of output per employee in the industrial and services sector in order to produce a rapid growth in industrial employment. The Director General of the Confederation of Irish Industries said that the Green Paper suggests a labour force of 1.7 million people by 1980, while NESC suggests a much higher figure, 1.23 million at least. Thus, on NESC's figures, the Green Paper is writing down the size of the labour force by 16,000 people. This means that we might get a reasonable reduction in unemployment figures by 1980 if our population does not increase at the rate it is increasing now and therefore does not add to the available labour force.
The same applies in relation to the output per employee in the industrial and services sector in regard to the numbers to be employed. The output is expected to increase by less than the output in the services sector and only by half of the increase in the agricultural sector. This is an indication of the Government's thinking—writing down the population in order to create a better balance between the employed and the unemployed, writing down the increase that should reasonably be expected in productivity in the industrial sector in order to push up the figures of those likely to be employed by 1980.
Even more extraordinary is the belief that these improvements, which are not in fact improvements, can be achieved while Ireland continues to suffer a rate of prices and cost inflation higher than that of most if not all of our European Economic Community partners. Of course there is no need to analyse any of these estimates in detail because I do not believe any member of the Coalition Government believes them. If I am wrong in this view I would welcome some Coalition speaker who would fill in the missing details and supply the missing theories to make sense out of this Green Paper nonsense, and particularly the tables we have been given in pages 32, 33 and 34 as to prospective growth in employment and in productivity.
However, the important and urgent task is not to waste time, as this Green Paper seems to have done, on fairy tale suggestions as to what might happen by 1980. Instead, we should concentrate on what is happening now, and see what can be done to bring about a rapid improvement. It is highly revealing in this context to note that the Green Paper, despite its apparent ability to predict what will happen in 1980, has nothing whatever to say about the likely situation in 1977.
In the Fianna Fáil document published in September, we suggested that inflation might fall from 18 per cent this year to 12 per cent in 1977, and that output might grow by about 2½ per cent in 1977. Since that document was prepared and published, the fall in sterling has gone on space and this will have the effect of worsening our inflation rate and, as a side bonus, of improving our growth performance. It now seems as though inflation next year will be in the region of 14 per cent if present policies are to be continued. The fall in sterling certainly helps to make Irish exports more competitive in European and overseas markets, and this already appears to have boosted somewhat industrial exports this year. The Minister for Labour took credit for that boost but without referring to the real cause or the main cause of the boost, that is, the devaluation of sterling and the making of our goods more competitive in non-sterling foreign markets.
It now seems that output might grow up to about 3 per cent both this year and next year, but this is only a short-term improvement and it would be not only wrong but dangerous if too much were read into that short-term improvement. One reason for this diminished enthusiasm is that it will take more Irish output to buy the same quantity of imports at the new higher import prices. This adverse effect of higher import prices on the terms of trade could well swallow up the whole of any 3 per cent rise in output, so that we would be no better off here as a community. In effect, we would have to run faster just to stand still in terms of paying our way in the world.
Secondly, in relation to this output increase, there is no evidence that this slightly better output growth will do anything to ease the unemployment situation. The bulk of additional exports appear to be coming from the more capital-intensive firms, leaving the older and more labour-intensive firms still in difficulties and, indeed, having to face mounting difficulties, again, I allege because of Government inaction and a failure to take the courageous kind of steps any Government with a sense of their full responsibility to the workers should take.
The depressing conclusion is that unemployment will continue to rise rather than to fall over the coming year so that, once again, we must look forward to the grim prospect of 120,000 people out of work this winter or, more accurately, I should say 120,000 officially registered. The figure possibly goes up to 150,000 persons since the true numbers of unemployed are not known because of the fact that school leavers and other young people are not registered on the unemployed register. The figure which is widely believed to be the true figure is 150,000 when account is taken of all the school leavers and other young people.
We in Fianna Fáil say that is an intolerable situation. For three years running we will have well over 100,000 people officially out of work. This is an appalling all-time record and one which cries out for urgent and radical action. There is no sign of that urgent and radical action coming from the Coalition. There is no sign of it in the Green Paper, and no indication from the Coalition benches that it is likely to come in any event. How extraordinary and how shameful that the Labour Party—and not one member of that party is present in the House at the moment, notwithstanding the fact that the previous speaker was a Labour Minister—should support a policy which will do nothing to reduce unemployment in 1977. What a sorry, miserable state they have been reduced to, when their contribution to Government is seen not to be the provision of work for those who want to work, but the creation of record-breaking dole queues.
The Green Paper did not actually say that, even if its proposals were acceptable, employment would rise next year. It did not say anything at all about what might happen in 1977. How far from reality can this Coalition Government get? Here we are faced with a crisis level of unemployment, a terrifying inflation rate, an appalling level of borrowing, crippling taxation, all calling for urgent action. What are we told? Nothing. Not a single solitary word about the immediate action to be taken. Of course, the reason for this shattering silence is obvious. In the first place, it would need some agreement between the partners on the Coalition benches on economic fundamentals, that is, if any clear-cut action were to be taken now. That type of agreement simply does not exist in the Coalition set-up. It is not possible, as we know it now, to produce such an agreement from the ideologically divided partners in Coalition.
Instead of that, we have the Green Paper falling back on the old and welltried formula of the need to consult the social partners in the hope, of course, that the social partners would be able to tell the Government what to do, and thus avoid the need for the Government to make up their own mind. We accept the admonition of the Minister for Labour—or the excuse if you like to put it that way—that the social partners should be consulted. We have never failed to do that, but we have consulted them on the basis of being able to make up our own minds and telling them what we want done, rather than asking them what they feel we ought to do.
So we are led to the tripartite talks, and what happens? Yet another sorry spectacle of Coalition Members agreeing to disagree with each other. If I may refer to what I said at the outset and what the Minister for Labour said, the tripartite talks have just concluded and are described to us in the newspaper headings and columns, at any rate, as having been a failure. We are now told this was the termination of the preliminary series and the Coalition partners are going to discuss at employer-trade union level what arrangements have to be made for wage negotiations in the coming months, and what agreements are likely to ensure. As far as can be judged, not one positive suggestion came from the Government which was remotely acceptable to either of the social partners in the course of the preliminary series of talks. Are they to be resumed? If so, will some members of the Government tell us when?
In relation to the choice of words by the Minister for Labour, it was interesting to hear him talk about the recovery he said was taking place. As his speech developed he was becoming more and more euphoric about the recovery he seemed to have found in the state of our economy. He started by saying that over recent months the economy has been moving into the first stage of decisive recovery. These were his words as I have noted them. Then he said there was a major recovery under way, and later he referred to the turn-about that has already taken place. Does the Minister for Labour realise he is fooling nobody? Where is the evidence of this recovery? Certainly not in the spurious figures—not spurious to the extent that they were accurate, to some extent at any rate— of the growth based on a premise on which he was not entitled to rely as evidence of growth but rather as evidence of further difficulties for us. I refer in particular to the devaluation of the pound. Then, incidentally, he referred to a 2½ per cent originally rejected increase in our gross national product, then the 3½ per cent which he said the EEC or some other international body had said was possible, and he elevated that off the top of his own head to 4 per cent. If this is the kind of woolly thinking, if these are the unfounded theories of the members of this Government and especially the member of the Government sent in to lead an economic debate, it is no wonder we find ourselves in the dire condition we are in.
To come back to the tripartite talks, we will remember that the Minister for Finance was able to tell the media at the outset—although less apparently well able to tell the trade union representatives—about the gravity of the Government's financial position and about the size of the pay rises and tax cuts which could be afforded next year. Thus, we learn on the opening day of the talks, when the Minister for Finance and the Minister for Labour were both present, that two pay rises of 3 per cent each at six-monthly intervals might be acceptable to the Government and that cuts in the region of £30 million for income tax might be managed despite serious financial restrictions. But of course he said no extra money could be afforded this year so that if the unions insisted on increase of social welfare payments, which incidentally some people have thought some Ministers have promised, then there would have to be an ICTU budget. I say an ICTU budget advisedly because the Minister for Finance obviously told the members of the Irish Congress of Trade Union delegation who came to meet him that if they insisted on an across-the-board increase in social welfare payments then there would have to be a savage increase in taxation. Therefore, if there was to be such an increase in social welfare benefits, such a savage increase in taxation on the usual hardy annuals—beer, tobacco and things of that nature—then the responsibility would be that of the Irish Congress of Trade Unions and not of the Government.
Here again, I must digress to note that again on that occasion there appeared to be some more of the Alice in Wonderland arithmetic which is such an enduring, though not endearing, feature of this Coalition. To finance the modest amount needed for such improvements and benefits would call for savage rises in taxation on all the old reliables as well as heavy increases—and, mark this, as well as savage tax increases, heavy rises in the social welfare contributions of workers and/or employers.
Having delivered himself of this reasonably clear although rather peculiar statement on the shape of economic things to come, the Minister took himself off to Manila. He was doing important international work, but following his departure a rather different picture emerged. Within a week the remainder of the Government, those who were still at home, found some extra money or else held different views on financial matters, for lo and behold, some increases in welfare benefits could be made after all without any need for extra taxation to pay for them. I leave it to others to expand on the inadequacies of the increases which have been made against the promises, the firm commitments made in relation to them in the budget and subsequently by those immediately responsible for the management of our social schemes.
When the tripartite talks resumed a somewhat different picture emerged also. Almost heretically the Minister for Labour was able to make suggestions—he was apparently making suggestions anyway—which sounded very like the Fianna Fáil proposals of a month earlier, namely, tax cuts to hold down the pace of inflation accompanied by increased Government spending to give a rapid boost to employment. The only difference from our proposals was that the amounts suggested were only half of those recommended by us, but then I suppose the Coalition have always been half-hearted anyway. This is in many ways an even more interesting development than the about-face on payments of social welfare increases because of the discrepancies it reveals between the statements of senior Coalition Ministers. First there were the different sentiments in the statements of the Minister for Finance, apart from the statements at the opening of the talks to which I have already referred. He also denounced the Fianna Fáil proposals as rubbish at the time of their publication. Of course this denunciation could hardly be taken too seriously because even if the Minister had read them at the time, and I doubt that, he certainly did not have time to study them in any great detail when he made this pronouncement about their quality.
But that was not all. In one of his rare departures from pretending that the economy, much less our economic difficulties, does not exist and that if it does he has no responsibility for it, the Taoiseach delivered himself of the view that increased public spending had no part to play in the solution of our economic ills and that the country could not afford more teachers, gardaí or public employees. This view is, of course, suspect because it ignores what the situation was when Fianna Fáil were in Government. It ignored what the record shows: that the country could afford improvement in health, education and other services. As well the record shows that substantial and worthwhile improvements in these areas took place in the 1960s and 1970s and more importantly, that these improvements did not rely on borrowed EEC money or any other EEC funds but were paid for out of the higher incomes and output generated from a soundly managed economy.
Then in a different way we heard the dissenting voice of Deputy B. Desmond. Not only did the Green Paper fail, according to him, the leaving certificate, but the Fianna Fáil proposals were, to use his word, pitiful. This criticism, too, might have carried more conviction if Deputy Desmond could have pointed out the specific errors of our ways to mortals like us who perhaps are not endowed with his superior insight.
I would regard it as Deputy Desmond's duty in the national interest to tell us all where we have gone wrong. What kind of proposals for action would win his acclamation and support? In the absence of any such revelation of a new and superior economic vision, we must assume that his brief, critical reference to the Fianna Fáil proposal was simply an insurance to guard himself against any inference that he is so fed up with the Coalition bungling as to secretly support our views.
Whatever the explanation, clearly the Minister for Labour was not distracted by these criticisms, either from the Taoiseach, from Deputy Desmond or from any other source. However, before we allow ourselves to cast the Minister for Labour in the role of a brave David adopting the Fianna Fáil view in the face of the Coalition Goliath, we must pause and ask ourselves the question: was not the Minister for Labour supposed to be representing the Government at these talks and, therefore, in that capacity, was he not representing the Government's views? Was he not chairing these talks with some of his ministerial colleagues, cast in the roles of supporting actors with various walk-on and walk-off parts?
As he was the Government's representative, chairing the talks with other Ministers at his side on occasions, his views must surely have represented Government thinking on this issue and, in turn, this must represent another about-face on the part of the Government. If that is so and if they have accepted the Fianna Fáil view, then we welcome their conversion. If they have, we must hope they will not leave implementation of these proposals too late.
We all remember that when we put forward suggestions in 1974 they adopted them belatedly. The House and the country will remember that in the late autumn of 1974 we put forward certain proposals which included the provision of temporary subsidies on certain essential goods and services. If these proposals had been adopted by the Government, then they would have had the effect of keeping about 10,000 people in employment who lost their jobs and, by holding off price increases, they would have headed off the inevitable wage demands which served only to fuel inflation in the first half of 1975. Having ignored our proposals in the January budget of 1975, the Minister for Finance, obviously with the agreement of the Government, included them in his budget of June, 1975. Unfortunately, they did this belatedly and half-heartedly and by then it was too late. The cumulative effect of higher prices and higher pay demands caused the inflationary spiral to get even more out of hand and this Government have failed totally to catch up with it even since then.
We are still left with the Green Paper and there is no indication that the Government intend in any way to adopt positive policies such as we propose. If the pattern of the Green Paper is anything to go by, it will be more realistic for us to assume that the Government have not made up their minds, that they are keeping open all their options until they see what is the line of least resistance or what course of action will avoid too much unpopularity. If it will help to encourage the Minister for Labour and the Government to press ahead with what Fianna Fáil believe to be the correct action, I should like to emphasise some points.
First, the proposed tax cuts of up to £50 million mentioned in the tripartite talks are not really tax cuts. They are simply the amounts needed to prevent a rise in the real burden of income tax. The reason for this is obvious. With inflation at a rate of 18 per cent, or more this year, the real value of income tax allowances is being reduced rapidly and to compensate for this inflation a substantial increase in tax allowances is needed. For example, the allowance for a married couple would need to increase from the current £1,010 to, say, £1,200. The allowance for a single person would need to increase by about £110 and the child allowance by about £45. All of this would not improve the situation but would be an effort to keep pace with the rising rate of inflation. The cost of these improvements would be in the region of £50 million.
These improvements should be made without any suggestion that they are a concession because they are not. They are simply the amounts needed to offset the ravages of inflation. If the Government fail to make these improvements in tax allowances, they will be using inflation as a convenient method for raising the real level of income tax this year.
We should call a spade a spade. There should not be any confusing or wrong suggestions that the first £50 million of improvements in income tax allowances are real tax cuts. As I have tried to demonstrate, they are not. If the Government want to press on and make real tax cuts—and we believe and insist that they should—they must go much further than the £50 million suggested in the tripartite talks. Fianna Fáil believe that inflation must be curbed if the country is to be set on the path of recovery. Action to lower inflation here in Ireland would lead to other important long-run consequences.
The National Economic and Social Council had this to say in paragraphs 39 and 40 of their report on inflation published in June, 1975—a report, incidentally, which urged the Government to adopt the policy which Fianna Fáil at that stage had been advocating for months, namely, to make tax cuts in order to bring down prices:
39. In present circumstances, therefore, the aim must be to avoid devaluation and to create the conditions in which the link with sterling could be broken and/or the Irish pound revalued if strong inflationary trends continue outside Ireland (notably in the United Kingdom). The only way to do this is to bring the rate of inflation in Ireland down below that obtaining in the United Kingdom. This would restore the competitive advantage of Irish goods, making revaluation against sterling (and therefore better insulation of the economy against external inflationary pressures) a feasible step.
40. This cannot be achieved instantaneously but it can be done over a relatively short period. If for a few years the rate of inflation in Ireland could be kept below that in the UK (say, by 3 to 5 per centage points), and there was some prospect of this margin being maintained, then a revaluation against sterling could be contemplated and would have some prospect of being successful. Considering the likely rate of inflation in the United Kingdom, this would not imply draconian measures to reduce the Irish inflation rate. Rather it implies that if, for example, the Irish rate can be reduced successfully by domestic policy to 10 per cent (assuming a UK rate of about 15 per cent), then after a relatively short time the sterling link could be broken, and the Irish pound could be revalued against sterling, thus offsetting some of the external inflationary forces. If the efforts to restrain domestic inflation continued to be successful, and if the external inflationary forces remained strong, further periodic revaluations would be feasible and desirable.
The footnote is also worth quoting. It states:
In practice, once the link with sterling was broken, the Irish pound would probably be linked to a stronger currency or currencies. The maintenance of the new link would probably mean continuing and gradual revaluations against sterling.
This is the sort of policy which Fianna Fáil have been advocating. Our policy proposals would enable the Irish inflation rate to be brought below the UK rate by about 5 per cent in 1977, and further substantial cuts of perhaps 3 per cent to 4 per cent should be feasible in the following years. Once this trend towards falling inflation has been established, and once it was accompanied by a rise in employment—as it would be with the operation of our other policies—then Ireland would be in a position if we so decided to break the link with sterling and cut itself off from the malaise of sterling and link it with the more stable currencies of the EEC. In this way it would be possible to make sure that any initial success in curbing inflation and restoring economic progress would not be dissipated by some future bout of sickness on the part of sterling or the British economy. If we took such action it would be a logical culmination of the process which we initiated when we joined the EEC and so started to reduce our trade dependence on Britain.
That is why the recent fall of sterling, which must inevitably give a further push to price rises in the near future, should cause the Government to put a halt to the dithering and shilly-shallying and get on with the job of providing work and stable prices. Now there is an even greater need for urgency, determination and vigour in tackling those of our economic difficulties which are of our own making and which can be cured by our own action. In this respect I am appalled at what appears to be the thinking of the Minister for Labour when he refers to our capital programme and our intention to hold it in or about the same level over the next three or four years. Does the Minister realise that all employment is not generated by the capital programme? The real employment is generated by forces and resources outside the capital programme. If this is the thinking of the Minister for Labour it is little wonder that the private sector is finding itself in such dire difficulties.
It is true that the only possible difficulty or reservation which has been raised in connection with the Fianna Fáil proposals is that they would give rise to some initial increase in Government borrowing. That is a difficulty which we recognised and answered. We believe that it is possible to finance the temporary programme of action needed to set the economy on the road to recovery. Moreover, we believe this can be done by harnessing domestic savings and resources and without the need for any expensive foreign borrowing. Since our September proposals were published, events have strengthened our view. In particular it is interesting to note that for the second year running the original January budget estimates of the likely scale of borrowing needed by the Government will show an error in the region of £100 million.
Last year the final deficit, and therefore the extent of borrowing, was more than £100 million higher than the original budget expectations. This year it seems as though the reverse will be true. The trends for Exchequer revenue and spending suggest that the current deficit will be considerably less than the budget forecast of £327 million, perhaps in the region of £250 million or less. If there is indeed a cut in borrowing of, say, £75 million then that sum would be available to finance our programme. The net sum needed for our package was estimated at £100 million. The real truth of the matter is that the Government's finances are so out of control that the Minister cannot be sure even to within £100 million what the situation is from one year to another. In these circumstances it is absurd to oppose the correct economic policies, the realistic policies, which Fianna Fáil have put forward. They were opposed with arguments based on extravagant arithmetic which is certain to be proved wrong within a matter of months if not weeks.
It took less than two weeks for the arithmetic of the ICTU budget to dissolve, and for social welfare payments to be afforded. How many long political weeks will it take before the Government finally and openly admit and accept what their Minister for Labour is already halfheartedly saying to the tripartite talks, namely, that the Fianna Fáil programme of tax cuts and job creation is the correct and rapid path towards a soundly based economic recovery? I have confined myself to the broad economic issues. Other Fianna Fáil speakers will deal with other specific areas like prices, unemployment, especially youth unemployment, the decline of the building industry and so on but we will all be urging that no further time be lost. The country has already suffered from three years of wasted time since the oil crisis, three years of contradictory policies, three years of exhortations, of calls for action and three years of failure of will on the part of the Government, failure of policy, and failure of leadership. The price for that failure is there for all to see.
We entered the oil crisis in a much stronger position than many of our EEC partners. We had a large agricultural sector which is less dependent on oil and we were poised to take advantage of the higher prices and secure markets which were opened up by our membership of the EEC. We had a record influx of new industries, attracted by the combination of access to EEC markets, a skilled Irish work force and generous financial incentives and these new industries should have enabled us to offset any losses in traditional industries.
However, instead of emerging from the recession with a stronger employment and income position we, in fact, end up with the worst combination of inflation and unemployment in the entire community. Worse still, we have added to our burdens the millstone of enormous foreign debts which have been piled up on a prodigal scale with as little benefit as the prodigal son's own squandering. The time for action is running out. The problems will not go away of their own accord. There must be radical, determined, positive action to restore the economy to health and vigour and that action must be taken now. I am satisfied that that kind of action is not forthcoming from this kind of Government.
I do not delude myself, nor do I have the temerity to try to delude the public, that Fianna Fáil now promise that when returned to Government we could do all this quickly or easily. It will require courageous decisions. It will require on the part of the public as well as the Government that we face up to the realities of the need for these decisions. What Fianna Fáil promise and undertake is that we will show the initiative and have the courage to do what is necessary. We have the will and the unity of purpose to restore that most precious of all national attributes in times of difficulty and uncertainty, confidence; the confidence of our people in themselves and in their country.
