Subsidies have been regarded by all parties as a very blunt instrument. They are probably unfair to the poorer sections of the community whom the Labour Party in their motion state they are seeking to protect. I should like to give some figures to illustrate my point.
Subsidies are not selective; they are indiscriminate. The reduction of the food subsidies in January resulted in an increase of 31p per week in the cost of food to households with an income of less than £50. The saving to the Government was £22 million. If this saving had been given directly to social welfare recipients each person concerned would have received about 65p per week—more than double the extra cost of food. In fact, the increases given by the Government were far in excess of that amount. For example, an old age pensioner received an increase of £2.55p per week in the budget in February and a further increase of £1 per week since the beginning of this month, a total increase so far this year of £3.55p.
I should like to spell out the increases in real terms given to social welfare recipients under the Fianna Fáil Government. I am speaking about social welfare recipients because the cry from the Opposition is that the removal of subsidies hurts the poorer sections of the community most of all. The Government do not believe this. The advantage of direct social welfare payment over indiscriminate food subsidies can be seen even more dramatically in the case of the most recent increases. The net annual cost to the Government of the £1 per week increase in social welfare benefits paid from the beginning of this month will be £19 million per year. If this was spent on food subsidies instead, it would reduce the bill of households earning under £50 per week by about 19p per week. On that assumption it was decided to subsidise milk by 1½p per pint, butter by 6p per pound and flour by 2p per kilo. In the case of high income families earning, for instance, £180 per week these subsidies would reduce their food bill by 36p per week, which is almost twice as much as the reduction for lower income families.
From 1969 to 1973 the increase in real terms for social welfare recipients was 6 per cent and the increase during the period 1973 to 1977 under the Coalition Government, allowing for their high rates of inflation, was 2 per cent. Fianna Fáil returned in June 1977 and the budget of the following year gave increases of 6 per cent in real terms. During the period 1978 to 1979 the increase in real terms to social welfare recipients will be between 8 and 10 per cent. The removal of food subsidies put .75 per cent on the consumer price index as against 2½ per cent caused by the rise of 30 per cent in the cost of our oil imports. During the period of office of the Coalition, food prices rose higher than other items but under Fianna Fáil the reverse is true and non-food items are rising at a higher rate. We are doing the very best we can.
The former Taoiseach, Deputy Cosgrave, has been quoted ad nauseam but since this debate has come up again we should bear in mind what he said. When the 1975 packet of subsidies was being introduced by the Coalition, the Taoiseach said, as reported in the Official Report of 27 June 1975 at column 2159:
Our aim must be to reduce the rate of inflation to a single-digit figure within a reasonably short period and thus to bring about a situation where subsidies will no longer be necessary. No one believes that subsidies are a desirable method of dealing with a situation. They are justified in very exceptional and limited circumstances. It has been repeatedly said that they have many and substantial drawbacks. They are a wasteful way of helping those in need because they apply equally to everyone. They involve a substantial increase in public expenditure when its size and financing are already exerting their own inflationary pressures. They increase the proportion of public expenditure devoted to current consumption rather than to investment. In this way, they are, in the long term, inimical to employment. But in the conditions of today, which are unique in our country's history, the Government are convinced that subsidies are essential to begin to get the rate of price increases down.
The introduction of the subsidies was welcomed by the then Opposition as reported in the Official Report of 26 June 1975 at column 1993:
All of the subsidies on bread, butter, milk, CIE fares, gas, are steps in the right direction, but why so late, why when they are now costing 15 per cent more, why now when they have cost so many thousands of jobs? Why did they not do it when we told them to do it? Why did they not do it in January at the latest? We urged all of those things including the abolition of VAT on electricity, but it was not feasible or worthwhile.
The reason these subsidies were in troduced was to obviate the implementation of the second phase of the national wage agreement. The then Taoiseach in his own way said that subsidies were a blunt instrument.
Last Wednesday night the Minister for Economic Planning and Development made the point that money spent on food subsidies went in the proportion of five-sixths to the better off and onesixth to the less well off, the less well off being those with incomes of less than £50 per week in the 1977 household survey. The point can be further underlined if we take the case where a weekly income was less than £80 in 1977, about £98 in this year's terms. Included in this category are all those mentioned in the Labour Party motion, the poor, the elderly, the unemployed and the underprivileged. Of every £ spent by the Exchequer on food subsidies, only 42 pence goes to the lower income groups and the rest goes to the higher income people.
Clearly, expenditure on food subsidies is weighted in favour of the relatively affluent.
We are discussing a motion on the removal of subsidies. Of all the parties in this House the Fianna Fáil Party is the most socially conscious. These subsidies benefit the wealthier sections rather than the less well off. By increasing social welfare benefits, children's allowances, old age pensions and so on, 68p in every £ goes to the broad category of low income families, families with incomes of up to £98 per week while only 32p goes to the more affluent. There is no doubt that it is much better to assist the less privileged members of society by increasing social welfare payments than by granting blanket food subsidies.
When Deputy Enright quoted from the Official Report of 18 February 1975 he said that the Minister for Industry, Commerce and Energy was in favour of food subsidies while in Opposition. But inflation at that time was very high. During the first quarter of 1975 the rate of inflation was 23.8 per cent; during the second quarter it rose to 24.5 per cent; the food index was increasing even more rapidly at 22.7 per cent in the first quarter and no less than 28 per cent in the second quarter. In those circumstances subsidies were justified. Inflation was out of control and unemployment was growing. One must compare that with the record of this Government. When we reduced the subsidies—we did not phase them out yet and we did not say that we would do it in one, two, three or four stages—inflation had been brought down to 7.6 per cent, the single digit figures which Deputy Cosgrave referred to when he was introducing food subsidies. The rate of inflation for 1975 was 20.9 per cent, for 1976 it was 18 per cent, in 1977, 13.6 per cent and in January 1978 it had fallen to 7.6 per cent. Certainly, by all the arguments put forward by the Coalition Government of that time, the time had come to begin to phase out subsidies and this we have done. In contrast with the Coalition action while inflation was raging and unemployment growing, Fianna Fáil have created 30,000 new jobs. We have 30,000 more people at work now than we had two years ago. This year we estimate there will be 15,000 new jobs created in spite of the high rise in oil prices. This is quite an achievement when one realises how much better we are doing than some of our counterparts in Europe.
The inflation rate in 1978 fell to 7.6 per cent, the lowest annual rate of increase since 1969. During the present year, in common with most western nations, we have seen an upturn in inflation, the main cause being the increase in oil prices. While the reduction in the subsidies had the effect of putting .75 of one per cent on to the CPI the effect of the 30 per cent increase in oil prices has actually put on 2.5 per cent. To the actual food index itself it has added 2.2 per cent. The less well off section of the community, those in receipt of social welfare benefits, have been more than compensated for the phasing out or reduction of these subsidies—I find myself talking of subsidies being phased out; they have been reduced.
As the House is aware, the most important priority of a Government is the creation of employment. We adopted very ambitious targets in that regard. Not all will be reached but it is more important to have a target and a plan as to how to achieve the target than to have no plan, like Deputy Richie Ryan when he said there was no point in making any plan because conditions were changing from day to day. In 1978 we created 17,000 new jobs, the highest figure on record since the State was founded. This year, even allowing for a shortfall on our target, 15,000 new jobs will be created which is a very fine performance.
In 1977 the gross domestic product increased by 5.6 per cent. That was followed in 1978 by a figure of 6 per cent, the fastest growth in the EEC, and in fact twice as rapid as the average in the EEC and significantly greater than that achieved by almost all the development countries. This year the growth rate will be in the region of 4 per cent, 2 per cent less than our target of 6 per cent which was set before the oil crisis developed to its present extent. Even to achieve 4 per cent with all these difficulties is a great credit to the Government when you consider that this will be higher than most other countries in the western world. This is no accident; it was brought about by direct Government control.
The Government's approach to expenditure has been very different from that of the Coalition. Instead of spending most of the taxpayers' money on endless dole queues this Government have invested vast sums in the capital programme. The public capital programme rose by 21 per cent over the 1977 figure. This year's provision is £974 million, 22 per cent above the out-turn for 1978, and over 40 per cent of the programme is earmarked for directly productive purposes. We believe in planning the economy.
The people are not happy about the price increases, we all know that, but they understand that we are combating the situation far better than the Coalition did. There was a joke at the time of the Coalition that you had better do your shopping in the morning because by the afternoon prices would have gone up again. We are not witnessing anything like the rate of inflation that we saw under the Coalition. If such a situation arose and our inflation was again in the twenties and unemployment was on the increase, under such conditions the Government would increase subsidies. That is exactly what we wanted the Coalition to do they were in office but they did not so it in time and caused enormous hardship. Because of their delay more unemployment was created and inflation raged out of control; people could not cope.
My late father told a story years ago about how outside the Yellow House in Rathfarnham somebody said to him; "What about the penny on the pint?" He replied: "What about it? Is it not better to put a penny on the pint and have the money to pay for it than to take a penny off the pint and not have the money to pay for it?" I do not think there was any retort, not that my father told me. The social welfare recipients have always been better looked after by Fianna Fáil. I remember going on deputations to Deputy Cluskey, now Leader of the Labour Party when he was Parliamentary Secretary to the Minister for Social Welfare, asking him to extend the free fuel scheme to people using gas or electricity or other forms of heat apart from turf. We wasted our breath: it took a Fianna Fáil Minister to introduce such a scheme.
This year the present Minister for Social Welfare, Deputy Haughey, introduced that scheme. It has been very much welcomed. I noted many questions on the Order Paper today about fuel being made available for old people. They will always have top priority with Fianna Fáil as those less well off have always had. The record speaks for itself. The Opposition are not upset by us throwing in their faces 10p per year of an increase to social welfare recipients as was done by the National Coalition. That represented in real terms an increase in income of 2 per cent. We are all aware that stagnation followed but we do not have stagnation now, in spite of all the difficulties experienced by the Government. The Government are not sitting back and letting things happen.
It is not correct to pick out one area and say that the Government are falling down on their job. It is not correct to claim that the Government are falling down on their job because of their failure to keep food prices down. The Government adopted a comprehensive and integrated approach to economic matters. We were told in the national understanding that the proper approach was to consider together policies dealing with employment, taxation, improvement in social welfare services and other social and economic policies. When it was announced last December that there would be a reduction in food subsidies people screamed that such a move would mean the end of a national pay agreement but had we done that after negotiating such an agreement it is my view that that agreement would have been destroyed. Those who negotiated that agreement on behalf of the trade unions and employers knew the situation.
They knew that they had to take into account the fact that food subsidies would be reduced with the result that the less well-off sections of the community would be affected. In my view we more than justified the removal of those subsidies as far as the less well off sections of the community were concerned by granting increases in social welfare payments. We will continue to grant such increases to the less well off. We all hear about deficits in trade and speculations about next year's budget, but I predict that social welfare recipients will be given an increase in the budget in line with the increases granted to other sections of the community. We will grant them an increase that will enable them improve their standard of living. That has been Fianna Fáil philosophy through the years. We have always been concerned about the standard of living of the weaker sections of the community.
The Fianna Fáil mission is to ease the burden of the less well-off. One of the great mysteries of our time is that we were not told what happened to the £200,000 which the National Coalition allocated in an effort to combat poverty. That State money disappeared and we did not get anything in return. We were never told how that money was invested or what happened to it. However, those people had to wait until Fianna Fáil came to power for an improvement in their circumstances. We gave this nation back its sense of pride and gave our people employment.
It is never popular to defend price increases but, while I accept that prices are increasing they would have gone up at a greater rate under a National Coalition Government. It must be remembered that under Fianna Fáil employment has improved. When people are asked to judge us on our performance in Government in the next election I have no doubt that they will come down on our side. They will accept that, while everything was not in order during our term of Government, we brought them through difficult times and kept them in employment. We will continue along the path of progress. I have read many statements to the effect that the Government's economic policies are in tatters. That is not true. We have taken some shells broadside but have managed to withstand them; we did not fall apart and sink beneath the waves. We are still in control of the situation and making greater progress than our counterparts in Western Europe. That is the best way to judge a Government. Things would be a lot worse if we were living under a National Coalition Government.
