First of all, I should like to express my appreciation of the kind and courteous words just spoken by the Taoiseach. In turn, I congratulate him on his appointment by an tUachtarán. As I have already said, I wish him well in his high office as Taoiseach. I also extend my congratulations collectively and individually to the members of the new Government.
The people have voted and the general election is over. We must now get down to business. Today we have a new Government. Whereas I do not believe that this particular form of Coalition Government is what the majority of the voters sought, nevertheless the democratic process has given us this result. It is our duty to adapt constructively and responsibly to this new situation. It is not open to us to question the right of the people to vote in any way they wish, or even to deplore the outcome. Nor indeed do I see this as an occasion for petulance or party polemics. Therefore, I shall not indulge in personalities or comment in any way on the individual members of this new Government despite the fact that I and my colleagues have often in the past on such occasions been forced to endure much in that regard. I believe the right approach for us is to judge these individual Ministers from here on on how they perform, the policies they will bring forward, the administrative actions they will take and how they will handle their departmental portfolios both inside and outside this House.
However, I must comment on one particular aspect of these ministerial appointments and say that we see it as being of deep significance that Deputy John Bruton has not been returned to the Department of Finance. I have already challenged the Taoiseach to indicate if this is a result of an embargo on the appointment of Deputy Bruton to the Department of Finance by the Labour Party. If it is, it must be seen as a matter of deep and serious concern. It must be seen as a clear signal that the Labour Party are insisting on what has been described — I put the words in inverted commas — as "a flexible approach" to the budget and the public finances.
This I regard as potentially the most serious and most worrying aspect of this new Coalition. There is no room for hedging or ambivalence on the imperative need to bring down as quickly as possible the current budget deficit and the level of borrowing. Greater flexibility is simply a euphemism for a policy of higher spending and more borrowing. A proposal to phase out the current budget deficit over a period longer than the four years we proposed is a disastrous proposal and must be set aside. The repercussions of any departure from the rigid discipline we established in this area will be far-reaching and potentially devastating. The very fact of the general election in itself has already had an unsettling effect and detrimental repercussions.
By our control of expenditure and the publication of the Book of Estimates and by our approach to public service pay we have succeeded in bringing a certain degree of stability into a very difficult situation; but the international financial scene today is a nervous, volatile one and this must be constantly borne in mind. There can be no departure from strict budgetary and borrowing policies. The proposal to extend the period of eliminating the budget deficit from four to five years will in itself alone involve us in borrowing an extra £500 million abroad. This is a dangerous proposal and I hope when this new Government sit around the table and see the situation as it presents itself to them that that particular proposal, whatever else, will not be pursued.
I should like very briefly to outline the present state of the economy and the public finances as we see them, the progress we were able to make as a Government since we came to office last March and also the framework this new Government will inherit. Our economic and financial situation must be examined and assessed in the context of a steadily worsening international economic environment and rising unemployment on a worldwide scale.
There are five key elements in the economic situation we are handing over to this new Government. The first is our basic strategic document The Way Forward. We prepared and published that document, as we undertook to do in the general election. The plan is basically a strategy for tackling unemployment. It outlines a coherent financial and economic framework within which the management of the economy should be undertaken and it provides the fundamental guidelines for the management of our economy in the next five years. In my view the incoming Government will find that basically there is no legitimate alternative to the strategy outlined in our plan and I suggest that they will depart from it at their peril.
The second element is that we have prepared and published well in advance of the end of the year the Estimates of expenditure for the coming year, 1983, something that was never done before by any Government. Those Estimates provide a sound basis on which to bring forward a realistic budget for 1983 which can aim at a deficit of £750 million in 1983. Thirdly, we have negotiated arrangements for public sector pay which offer this new Government a solid base on which to develop public service pay policy for the coming year and which, perhaps most important of all, have brought under control the escalating costs of impending special pay awards.
Fourthly, there is our success in controlling Government expenditure in 1983 and bringing about a situation where Government Departments have been compelled by a process of rigid monitoring and control not to exceed their stipulated limits and to live within their Estimates as set at budget time. The fact that we have a budget deficit approaching £1,000 million is not attributable in 1982 to any overrun or excesses of expenditure. It is, unfortunately, due entirely to the fact that there has been a shortfall of about £325 million on the receipt side. However, we have succeeded in 1982, for the first time for a long time in the financial affairs of this country, in controlling Government expenditure and limiting it and keeping it back to the Estimates settled at budget time.
Fifthly, there is now a general acceptance of the reality that a better balance is needed in the public finances which must be obtained by reducing Government expenditure rather than by increasing taxation which, particularly in so far as the PAYE sector are concerned, affords no scope for any further increases.
These five achievements are the essential elements of the economic and financial structures that we are handing over to this incoming Government. They represent a sound contribution to the management of the economy and the finances and they provide this new Government with a realistic basic economic and financial strategy which they can, if they wish, adopt readily. Despite the widespread economic depression around the world, there have been a number of significant improvements in our domestic situation in recent months. The first, perhaps most important, of these improvements has been a major reduction in the rate of inflation. It increased for the quarter to mid-August by just over 2 per cent and the increase for the quarter to mid-November will be 1.75 per cent. This means that the year-on-year rate of inflation to mid-November 1982 will be about 12.5 per cent. Side by side with this fall in the rate of inflation there has been a substantial reduction in interest on mortgage rates, bringing relief to house purchasers and personal borrowers and considerable benefit to farmers and the industrial and business sectors. A major improvement has taken place in our balance of payments situation and our external deficit for 1982 should be down by about £400 million to £1,000 million as compared with £1,400 million in 1981, a reduction from 14 per cent to 9 per cent of GNP.
However, whatever about some particular improvements, I cannot and will not attempt to disguise my disappointment that no more than our predecessors were we able to reverse the rising trend in unemployment which represents for us, for Europe and for the US a problem of intimidating proportions. In 1981 we had some temporary, transitory success in halting the rise in unemployment by a major programme of public investment. This year we provided for as high a level of public investment as our financial resources permitted but the figures for unemployment rose inexorably. We have examined and analysed this situation and in The Way Forward we outlined how we envisaged unemployment being contained and reduced over a period of years with moderation of incomes and inflation to improve our competitiveness together with sectoral policy measures designed to give us an increase in jobs over and above the 17,000 new jobs per year we need to hold unemployment at its present level. The extended training programmes of the Youth Employment Agency certainly will assist but on their own they are a palliative, not a cure.
There is no doubt that youth unemployment confronts us all with a grave social challenge. The responsibility now falls on this incoming Government to face up to this challenge and they can be assured that we will not impede or obstruct any measures designed to tackle this social evil, however difficult they may be.
The outcome of the unusually protracted bargaining between the Fine Gael and Labour leaders is a very limp document. On the economic front I suggest that it is no substitute for The Way Forward with its clear policies and specific objectives. The very few specific proposals such as there are in the document have been manifestly hastily conceived and badly thought out. Indeed, differences in regard to some of them are already beginning to emerge between the two parties. I must also, for instance, register the gravest reservation about this foolish proposal to establish a national development corporation. It will have no useful function to perform which cannot be carried out by existing agencies or existing semi-State bodies. At best it will interpose an additional unnecessary layer of bureaucracy between the Government and the various semi-State bodies under the aegis of the Department of Industry and Energy. It could be highly detrimental to the effective operation of this set of companies. At worst it could involve the Exchequer in a massive waste of scarce capital.
The policies we put forward were honest and realistic and I believe that it will be seen in time that they were the right policies. Although we were back in office only a relatively short time, in that short period we analysed the situation carefully and anxiously, identified the problems and formulated clear, specific policies for a major programme of economic recovery. We made considerable progress, although our efforts were impeded by a very uncertain parliamentary situation, by constant political opposition at home and by, of course, an all-pervading world depression abroad.
For the time being the tiller passes into other hands and our role must be confined to vigilant, responsible and constructive criticism and opposition when opposition is necessary. That role we will discharge faithfully to the best of our ability until the time arrives for us to resume our more natural role of responsible leadership——
