In debating this measure, the Seanad is not allowed to discuss taxation. It is not allowed to discuss expenditure on particular Estimates. I propose to observe those limitations and to discuss this Central Fund Bill, which embodies the Vote on Account, by taking what I shall describe as a macroscopic view of our economic position, discussing public expenditure against the background of the general position of the country, without referring to individual items and without referring, except in a most general way, to taxation.
Any honest person who makes an objective and impartial review of the situation cannot fail to reach rather disquieting conclusions. One of the major advances we have made here in the last couple of years has been the publication of the certain documents which have had the result of educating a number of people—and will, I hope, educate more—regarding the very serious problems the country has to face in both the near and distant future.
The Supply Services amount to £115.5 million, which is £5.5 million more than last year's Estimates and £1.8 million more than last year's actual expenditure. The increase is mainly in capital expenditure, a sum of £2.11 million, accompanied by a decrease in current expenditure of £250,000. The decrease in current expenditure is, of course, a matter for congratulation. The Minister must be congratulated on having resisted the very strong pressures which have been in operation all the time to spend more money on current services.
At the same time, a further examination of these decreases shows that most of the items are what I shall describe as accidental, or adventitious, and are certainly non-recurrent. They are once and for all reductions and cannot be expected to be repeated next year or the year after. For example, the saving on wheat subsidy, the saving on the butter subsidy, are savings which, while we are glad to have them, cannot be expected to recur.
The big reduction of £1,000,000 in the Estimate for C.I.E. seems to be rather a matter of accounting and not a real economy. I may be wrong in that. My feeling is that these reductions are somewhat like the reductions in the food subsidies in 1957. They are once and for all reliefs to the Budget. By this time next year, they will have been worn out of the system. I am not saying they are not welcome, but they are non-recurrent, adventitious, almost accidental.
Looking at the other side of the account—the increases which compensate for those decreases—the increases outweigh the decreases, and these are trends which cannot be reversed. They are largely due to increases in the cost of Government services, which may be expected to continue with rising costs elsewhere, rising wages and rising prices. Furthermore, Supplementary Estimates are quite inevitable in the coming year. I do not think, therefore, it is unfair criticism to say that the end picture presented by the Estimates is not quite so satisfactory as the first sight would suggest. In saying that, I want to make it quite clear that I am not criticising any particular Vote or any particular expenditure. As I said, I am trying to take a macroscopic view of the Irish economy. I am not dealing with particular services or with a particular Vote.
Many of the increases in the Supply Services are wholly admirable. The additional expenditure on education will be welcomed by everybody. As a university representative, I should like, on behalf of my own university, to state how much we appreciate the additional funds provided for university education. Every individual increase could probably be justified, taken individually. Regarded as a whole, regarded macroscopically, taking the picture as a whole, it is very hard to resist the conclusion that the upward trend of expenditure is still continuing, that the upward trend will still continue, and that, unless the Government are to have Budget deficits, the upward trend of taxation will also continue.
The revenue figures for recent years very clearly show that upward trend. The figures I am giving is the total revenue which contains a certain amount of non-tax revenue. Here are the figures:—
1956-57
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£117,000,000
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1957-58
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£122,000,000
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1958-59
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£124,000,000
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(Budget estimate)
|
|
1958-59
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£126,000,000
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(possible outturn)
|
|
We shall not know the estimate for the coming year until the Minister introduces the Budget. The trend of these figures clearly shows that both expenditure and taxation have been rising at a steady rate.
To pass from the non-capital to the capital items in the Supply Services, each individual object of expenditure is excellent and justified. I do not criticise any single object of expenditure. I think every one is completely justified in itself. They are based on the White Paper on Economic Expansion which has figured in this debate and which, in its turn, is very largely based on a remarkable document to which I hope to refer later. These capital items in the Supply Services are all part of the Government's perfectly proper production programme. They refer to agricultural production, to industrial production, to production in fisheries and forests and to the expansions of the tourist industry. There is not one of these objects of expenditure which, individually, cannot be applauded. The fertiliser subsidy, the eradication of bovine T.B., the additional expenditure on farm buildings and on arterial drainage are all productive capital objects with which everybody must agree.
Again, taking the picture as a whole, regarding the capital programme as a whole, macroscopically, not merely by individual items, the question we have to answer is: Will the increase in production brought about by this capital programme give us in any reasonable period a sufficient increase in national income and production to bear the additional taxation which quite obviously is inevitable from the rising trend in public expenditure? That, I think, is the question to which every student of Irish public affairs should address himself today—how far this programme of capital investment, every item of which is individually justifiable, can, regarded as a whole, contribute sufficiently to the expansion of output to bear the additional taxation burdens with which the country is quite inevitably faced? The answer to that question, I think, cannot intelligently be found without referring to the remarkable document which I have already mentioned, namely, the grey book entitled Economic Development.
I suppose it is against the rules of the House to mention the name of an individual civil servant who is present. Therefore, I shall not refer any further to it beyond calling it the grey book entitled Economic Development. I cannot sufficiently praise this document. It is a comprehensive survey of the whole Irish economic system. It is based on exact statistics. It contains a great deal of wise comment, sagacious counsel and courageous criticism. The preparation of this document was a service of the highest value, obviously imbued by patriotic motives. This document is quite essential to every student of public affairs in Ireland. Every member of the Dáil and Seanad, every person who writes for the Press, every person who talks publicly or privately about Irish economic conditions, must study this indispensable document which is a combination of a national stocktaking and an examination of conscience, both of which were badly overdue.
Unfortunately, having studied this document very carefully, with great attention and growing admiration, the effect it makes on my mind is one slightly depressing for the financial position of the country. On page 2 of this document, the author states:—
"It is apparent that we have come to a critical and decisive point in our economic affairs. The policies hitherto followed, though given a fair trial, have not resulted in a viable economy. We have power, transport facilities, public services, houses, hospitals and a general ‘infrastructure' on a scale which is reasonable by western European standards, yet large-scale emigration and unemployment still persist. The population is falling, the national income rising more slowly than in the rest of Europe. A great and sustained effort to increase production, employment and living standard is necessary to avert economic decadence."
That is a very strong passage. There is one word in that passage with which, with respect to the author, I disagree—the word "viable". I think every economic system in which people are not actually faced with starvation, death from lack of food, is viable. The question is: At what level is it viable? A county may have to reduce its standard of living in the same way as a family may have to do so. If a family has to move from a big house to a smaller house, it is still viable. It has a lower standard of living but it is not daying of starvation.
This country, on the eve of the Famine, was not perhaps viable to the extent it is to-day. I take it that what the author meant as not "viable" is that it is not as progressive as some European countries. I should prefer the word "progressive". However, that may merely be a matter of definition.
This document is relevant to this debate, I suggest, because the whole Budget discussion, of which this debate is really the beginning, will largely reflect the White Paper and the White Paper obviously reflects this document. The whole corpus of financial literature must be taken together. This document aims at a certain programme. The programme aimed at in this document—page 225—is, by means of a certain amount of investment, to double the rate and so increase the national income. The relevant passage reads:—
"However, making all allowances for the indeterminacy of the available information, there is good reason to believe that, if the proposals were adopted, the rate of increase in the volume of gross national product could, in time, be doubled, which would double real national income in 35 years."
That may sound very encouraging —100 per cent. increase in the rate of progress or, in other words, a doubling. In dealing with these percentage figures, one must always try to relate them to absolute levels. The rate of progress in this country in recent years has been only 1 per cent. per annum. Therefore, to double that rate would raise it to only 2 per cent. which, as I will show later, is very low by European standards. The attainment of the whole of the programme outlined in this document on which the Government's White Paper is based would, I suggest, if successful, reach only a very modest target which would not in any way solve our long-period problems.
The assumptions underlining this programme, the conditions of its success, are that a large amount of capital must be available. There are three assumptions with regard to the availability of capital. The first is— page 37—that the existing rate of savings may be expected to increase, that there will be a progressive rise over the next five years. We are told, on page 37:—
"This would mean a progressive rise over the next five years in monetary savings from £45,000,000 per annum to £55,000,000 per annum, giving an average annual rate of £50,000,000."
The second assumption is that future issues of legal tender notes need not be fully covered by external assets and that the assets thereby released would be available for the capital programme. This is stated on pages 29 and 45. This assumption is based on the expectation that the Legal Tender Note Fund will continue to increase at a substantial rate. The Legal Tender Note Fund circulation has actually contracted in the last year and I do not believe there is any foundation for the assumption that it will increase at the rate mentioned in this document. Therefore, that second source of capital is rather questionable.
The third assumption is that abundant supplies of foreign capital will be available. On that, I wish to repeat what I have said in the Seanad many times and which I feel very strongly, that foreign capital can be of two kinds —it can either can be borrowed by Governments or private people from outside sources with contractual liabilities to repay with interest, or it can be the savings of outside people who are prepared to make risk investments in Ireland. I feel very strongly that borrowing abroad which involves contractual obligations either by public authorities or private individuals in this country should be avoided at all costs. It involves the country in future balance of payments difficulties. The experience of the Marshall Aid has not been very encouraging. I expressed that opinion many times in the Seanad and I repeat it.
I do not think that the Irish Government should, even if they could, borrow abroad from the various international lending organisations, all of which charge high rates of interest and all of which are rather selective regarding the people to whom they lead. Even assuming that the Irish Government could borrow abroad, I do not think they should borrow abroad. I feel that very strongly. There is no necessity to do it. We have abundant supplies of capital at home. Therefore, to borrow abroad with fixed interest obligations in order to attract foreign capital in that way would, in my opinion, be subjecting the balance of payments to a quite unnecessary strain.
The other method of attracting foreign capital is one, of course, of which we all approve, that is, to attract outside investors to invest their own savings in production in Ireland. Here again, I have to draw a distinction between the individual schemes and the macroscopic picture. Everybody gives full credit to the Minister for Industry and Commerce for travelling abroad, to the Industrial Development Authority for investigating possible businesses that might come in here, to the individual businessmen who have opened in Ireland—one gives full credit to all these people. But regarding it macroscopically, asking the question how much foreign capital as a whole, as a total, is likely to be invested in this country, I think the answer is, not nearly enough to meet the programme outlined in this document to which I am referring. The same distinction must be drawn that I draw with regard to capital and non-capital expenditure, that each individual item is good in itself, but one must ask what is the possibility of the total amounting to a significant figure. I hope I am wrong when I say that I do not see any sign of a volume of foreign investment adequate at all to the increase in production which is hoped for in the Government's White Paper which, as I said, is based on the document to which I am referring.
Assuming that all these assumptions are realised, that voluntary savings expand, that the Legal Note Tender Fund can be utilised and that foreign capital is available, the target to be achieved is an increase in the national income of 2 per cent. per annum. At page 11 of this document, it is stated that, between 1949 and 1956, the volume of gross national product in Ireland increased by 8 per cent. as compared with 21 per cent. for Britain and 42 per cent. for O.E.E.C. countries generally; in other words, the rate of expansion in Ireland has been very much less than that in Western European countries generally, and even if it were doubled, it still would be very much less. Even if all these assumptions were realised and if this programme all came true, Ireland would still be the least progressive Western European country and, measured by the standards of some of the non-European countries, our rate of progress would be comparatively even less.
Furthermore, as Senator Lenihan said—I agree with him—one thing about this document that we must all applaud and must all understand is that it is a production programme, not an employment programme, that this document and the White Paper based on it aim at increasing production, hoping thereby, indirectly, to increase employment. If, however, production is increased by 2 per cent. per annum and if efficiency is increased by at least 2 per cent. per annum, which is quite normal in a modern economy, the amount of employment afforded, instead of increasing, will tend to decrease. Therefore, this policy does not really hold out any hope, in the short run, at any rate, of materially increasing employment. That is made perfectly clear on page 206:—
"Throughout this study, while there have been some general references to employment, attention has been directed primarily towards productive development. This has been deliberate and has not been due to any lack of concern about unemployment. It is from productive development that the employment worth having from a national viewpoint, i.e., lasting employment, will arise, and the study advocates the maximum productive development which our financial and material resources will allow. It is possible that even this maximum development may not provide a permanent job at the wages he is prepared to accept for everyone wanting to stay in Ireland.”
That seems to me to be essential to the argument. As I said, I believe the approach is correct. I believe that to invest simply in order to make employment is doing something foolish; it is simply redistributing the national dividend in a possibly undesirable way. Therefore, I am perfectly satisfied that the aims in this document are the correct aims of economic policy.
But, what hope does this programme hold out of a reduction in taxation and expenditure? At page 21 of the document, the author states that a reduction in public expenditure is a condition of progress:—
"High taxation is one of the greatest impediments to economic progress because of its adverse effects on saving and on enterprise."
He suggests that mere specific reliefs and incentives are not enough, that there must be a general reduction in taxation. The same sentiment is repeated at page 208:—
"Fiscal policy must be in harmony with the objective of stimulating productive investment, which in our circumstances means that it should favour saving, encourage enterprise and discourage excessive consumption. High and inequitable taxation is one of the greatest impediments to economic progress... The positive objective of fiscal policy should be to arrive quickly at the point at which it will be possible to give the economy the tonic of a significant reduction in taxation, particularly in direct taxation on incomes, profits and savings."
That is, no doubt, perfectly true, but the picture presented by the Vote on Account and the Estimates this year is one of taxation rising at the rate of at least 2 per cent. per annum and therefore of the rate of taxation rising as rapidly as the maximum of production hoped for in the programme. Furthermore, if population should continue to decrease, owing to increases in the efficiency of production, it seems inevitable that the taxation per head of the population will increase and, therefore, that the aim laid down in this document as the indispensable condition to progress will hardly be realised.
The problem presented by this document and by the White Paper which is based on it is one with which every Irish Government will be faced. It will not be changed merely by a change of Government. It will not be changed merely by a change in the method of election of Governments or the Dáil. There is no use in Party recriminations. Every Party has done its best, according to its lights, to improve the condition of the country. Yet the trends exhibited in this document have continued year after year. The population trends and the other trends have continued sometimes faster than others because the condition of the country has been sensitive to outside world conditions. Wars and rumours of wars, the Korean war, the Suez crisis, have had an impact on our affairs. The terms of trade, the different price trends of imports and exports, prosperity and recession in the United Kingdom and the United States, the waxing and waning of the Free Trade Area—these are all matters which have had an effect on Irish economic conditions, but the long period trends have remained the same throughout the changes of Governments for many years.
I think that the great value of the White Paper and the document upon which it is based is that they emphasise and draw attention to the necessity for a resolute facing up to these difficulties in the country. Everybody will agree, of course, that continuity and stability of Government are essential. The Taoiseach, replying to what I said in a debate here recently, said that one reason for the proposed change in the electoral system is that it will give more stability of Government and that stability of Government is necessary for economic progress. I completely agree with that, but I should like to know what Government could be more stable than the present Government have been since 1957. Every time the Minister for Finance, has been in the Seanad since 1957, I have addressed the same appeal to him. I have asked him to make use of the stability of his Government, the remoteness of an election and the strength of his majority to produce a constructive economic policy without regard merely to votes or popularity. I said that two years ago. The election is nearer; the majority is practically the same; but the stability is, perhaps, not as great as it was when the election was two years further away.
I cannot imagine any system of election giving the Government more stability than the present Government had in 1957. Without criticising any particular measure, which I am avoiding, I do say that on the economic side, they have really only scratched the surface of the problem. No real progress has been made. Perhaps the most valuable service in the economic field that the Government have performed is the publication of these documents, because they have at least helped to educate the public regarding the state of our national concern. If I were a shareholder in a company and this document was the annual report of the company, I should not be very pleased when I read it. I should not feel that it was a particularly progressive concern. Therefore, I think that if the Government are to be congratulated on nothing else, they are to be congratulated upon having the courage to publish a document which reveals the strength of their own difficulties and the difficulties of any other Government that may succeed them in the future.
I cannot help ending on a personal or, perhaps I should say professional, note and that is that these documents have, I think, vindicated the opinions of Irish economists for the past 35 years. Many commissions since the Treaty have discussed Irish affairs. Many of these commissions contained Irish economists and foreign economists. All those commissions emphasised the difficulty of the Irish economic position. It was not the economists who held out false promises to the people. It was the politicians. The economists always directed attention to the great difficulties of the Irish economic position.
Those difficulties have now been admitted in the White Paper and in the document on which the White Paper has been based. I think that the Government, by publishing this White Paper, have committed themselves to accepting some of the slightly unpopular views which the economists in Ireland have been expressing for the past 35 years. I think it is important that the public should know that the difficult problems we have to face cannot be conjured away by wishful thinking. They cannot be solved by ill-considered experiments, by trial and error, which we cannot afford. I do not wish to cross swords with an earlier speaker, a colleague of mine, but I believe that they cannot be solved by mere experimentation in the monetary and financial field which, in my opinion—I may be wrong—is of, perhaps, secondary importance. They cannot be solved by importing batches of foreign experts from all over the world to advise us on our affairs.
I should like to end on a medical analogy because the economist is frequently likened to the doctor who attends a patient. I admit he may be a very bad doctor, but the analogy is equally valid, whether he is good or bad. Ireland might be likened to a patient with a rather weak constitution exhibiting at he moment some of the symptoms of a wasting disease. The patient will not be cured or strengthened by being told a lot of reassuring lies. He requires long-sighted, thoughtful advice based on expert knowledge of the people who know his circumstances.
This I repeat—I mentioned it also last year—I am equally sceptical of foreign capital and of foreign experts. I believe we have the capital in Ireland and I believe we have quite as good advisers in Ireland as we can get from abroad. In the case of the medical practitioner, I believe that the family doctor is usually better than the strange consultant. The family doctor knows his patient; he knows his habits, his background and his weaknesses. Therefore, I do not think that the importation of foreign advisers, who perhaps are going to secure some foreign capital and technique, will really help us very much.
We can solve our problems with our own resources, our own capital and our own experts. I think the economists in this country have done their share in educating the public and the politicians. The duty now devolves on the politicians to carry out sound policies, without regard to popularity or to the losing of elections.