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Seanad Éireann díospóireacht -
Wednesday, 6 Jul 1960

Vol. 52 No. 18

Finance Bill, 1960 (Certified Money Bill)—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

The Finance Bill, as members of the House are aware, provides the Seanad with an opportunity for discussing the economic and financial position of the country. The Bill itself incorporates in permanent legislative form the Budget proposals of the year and usually some other matters besides. I do not think it is necessary for me to enter into a detailed repetition of this year's Budget proposals or the contents of the Finance Bill.

The procedure, initiated last year, of circulating an explanatory memorandum with the text of the Bill was repeated this year because of the assistance it gives in considering the Bill. The only important addition to the Bill since its introduction in Dáil Éireann and which, therefore, was not covered by the explanatory memorandum, is the provision in relation to the agreement recently made with the United Kingdom in regard to tax avoidance. I feel I may, therefore, confine my comments on the Bill to indicating broadly what is dealt with in each of the various Parts which it contains.

There are seven Parts in the Bill as passed by Dáil Éireann, each of which deals with matters affecting a particular category of taxation—except, of course, the final or seventh Part which, as its title indicates, deals with miscellaneous and general matters.

Parts I, IV and V all deal with income taxation matters. Part I imposes income tax and surtax for the current year at last year's rates. The Finance (No. 2) Act, 1959, is referred to in Section 1. This Act, as Senators will recall, made alterations in the personal allowances and reliefs for this year in order to prepare the way for the introduction of Pay As You Earn. Part I also increases the income tax and surtax deduction for children; it broadens the tax exemption in respect of deposit interest in the case of a husband and wife, and it contains a provision designed to give relief in a type of case where rather unusual circumstances arise out of a change of residence by a taxpayer to this country.

Some benefits for industry are included in this Part of the Bill. There are additional reliefs for business losses. The benefits of Section 7 of the Finance Act, 1932, are being extended to securities of Irish manufacturing companies issued before 1932 and profits of harbour authorities are being exempted from income tax.

The final section in Part I gives the Revenue Commissioners power to obtain information as to payments in the nature of fees and commissions.

Part IV contains further tax reliefs for industry. It extends relief in respect of profits from exports to the case where Irish-made goods are exported by a company other than their manufacturer. The terminal date for "exports" relief is to be the year 1974/75 and a five-year period of tapering relief will follow the exemption period. Safeguards are included to prevent unfair advantage being taken of these reliefs.

Section 33 in this Part, combined with Section 41 in the Miscellaneous and General Part, is intended to encourage the expansion of the tourist industry. Tax allowance in respect of capital expenditure will be extended to holiday camps in the same way as hotels. Where expenditure is incurred on or after the 1st January, 1960, the annual allowance will be 10 per cent. instead of 2 per cent. As such expenditure will also qualify for the 10 per cent. initial allowance, it will, in the normal case, be written off for tax purposes over nine years. There is also a relief provided in respect of profits from the mining of gypsum. It is proposed that these will now qualify for the tax relief applicable to profits from coal mining.

The other Part of the Bill which I mentioned as relating to income taxation is Part V. This part, as its title indicates, confirms the agreement made with the United Kingdom on the 23rd June. The agreement, which is set out in the Third Schedule to the Bill, extends the anti-tax-avoidance, or anti- "dividend-stripping", agreement made on the 4th April, 1959. The Income Tax Residence Agreement of 1926 conferred on persons resident in one only of the countries exemption from tax under the law of the other. The present Agreement provides generally that, where one country introduces legislation to maintain the proper incidence of liability to income tax, or to prevent the obtaining of an undue tax advantage, and bars exemption to its own residents, the barring should extend to residents of the other country. Where, however, legislation enacted in one country is not regarded by the other as falling within the intention of the Agreement, provision is made for negotiation with a view to securing that the legislation will not affect the Residence Agreement exemptions.

Part II of the Bill relates to customs and excise duties. It is mainly concerned with the proposals in regard to those duties in the Budget Speech such as the reliefs in entertainments duty, table waters duty and the duty on hydrocarbon oils, the abolition of tobacco dealers' licences and the increase in the duties on tobacco. It also contains a section dealing with some points of motor taxation law which came to a head too late to have them included in the Finance (Excise Duties) (Vehicles) (Amendment) Act enacted earlier this year. Other matters dealt with in this Part are the administrative procedures in regard to liquor licences and hydrocarbon oils and the confirmation of four Orders relating to special import levies and miscellaneous customs and excise duties. Part III of the Bill raises the exemption limit for death duties from £2,000 to £5,000.

I have already dealt with Parts IV and V. Part VI relates to stamp duties. It provides for abolition of the stamp duty on passports and on special forms of bank draft to be used by employers in remitting income tax under Pay As You Earn, and it authorises the use of adhesive stamps, instead of impressed stamps, on copies of documents issued by District Probate Registries.

Part VII, which, except for the Schedules, concludes the Bill, deals with miscellaneous matters. The usual section relating to the Capital Services Redemption Account appears in it; other sections make certain tax reliefs available where a person was adopted informally, and extend the scope of the tax relief provided in 1956 for mines of non-bedded minerals. I referred earlier, in commenting on Part IV, to Section 41 which relates to tax relief in respect of expenditure on the construction or extension of hotels and holiday camps. The remaining sections are the usual ones in regard to repeals, care and management of taxes, and title, commencement and construction. There are four Schedules to the Bill but these hardly call for separate comment. That concludes what is a general survey of the proposals in the Bill. I shall, of course, be glad to assist Senators if they require further information.

The Finance Bill this year and the Budget related to it contain a certain amount of jam very thinly spread indeed. I am not, however, concerned with this typical example of the policy of the Government which is that you hit the economy for six and the taxpayer for six and you return them one-sixth of it, or some proportion of that sort. What concerns me, and has concerned me ever since last October and last November, when I thought about the problem for some weeks, is the astonishing unanimity of opinion that one meets from all kinds of commentators, people who call themselves economists, leader writers in newspapers, spokesmen for the Fianna Fáil Party in particular and generally speaking—leaving out the last category who, after all, are entitled to make any case they can—people who should make a serious contribution to matters of this sort. These are people such as those who write the report of the Central Bank of Ireland and people who write in the Irish Banking Review. What concerns me is the entire absence of thought in their comments. They are all descriptive; they describe what the Government are doing and say it is all for the best.

When I thought about this subject in October and November, I wanted to have a look at the situation. I did not like what I saw. I am glad to say that for once—I have been wrong frequently—I have been dead on the ball. I am still sticking to the forecast I made on the Central Fund Bill that there will be the mother and father of a financial crisis in Britain in the not so distant future. The thing has developed so closely to what I anticipated—and I admit I have not studied the subject again, having thought it out once as best I could.

Our economy benefited last year by a "slop-over" as I called it from the Stock Exchange boom in Britain and from various imports of capital, so called. I see imports of £5,000,000 in recent years to finance hire-purchase —that kind of thing. In fact, when you examine the figures, what do you find? You find, on the figures both in the Tables issued with the Budget and similarly in, the Central Bank Report —and Table 12 of the Financial Tables issued with the Budget statement is repeated exactly, figure for figure, in the text of the Central Bank Report—an increase of £45,000,000 in the gross State debt in the year 1959-60, by far the largest increase that has ever occurred in this country. not only since the war but any time previously.

To continue with the main point which I feel is of grave concern to the people, that is, the absence of serious comment or what I would regard as serious comment, on the financial trends that I see evident, with my limited information, in the economy of this country, following Britain as usual at a certain remove of time. It concerns me very seriously that the Central Bank of Ireland should in the early years of the 1950's have published report after report about the economy which were all black. In the middle years of the 1950's they began to develop a system the bulk of which was black but which was over-painted with a bit of white. Then last year it was white over-painted with only a little black and this year not alone is the report all white but the very cover is white! They could not even get a different colour for it. I shall make one forecast, that is, that it will not be all white next year. There will be very little white in the next Report.

Table 3 shows that the amount outstanding for hire-purchase in the year 1956 was £9.7 millions and do not forget that that was a time when the financial advisers of the previous Government were warning them about hire-purchase, saying it was a desperate thing and would lead the country into untold trouble. In the year 1959, £19½ million were outstanding for hire purchase. I want to be honest about this. I am not worried about the £19½ million outstanding for hire purchase but I am worried about the huge increase when a considerable part of the earlier advances represented purchases of agricultural machinery. That was at a time when farmers bought combine harvesters and a certain number of tractors—mostly combine harvesters. A combine harvester does not wear out in three or four years. Even I know that much about agriculture. In all fairness, I must say I am not worried about the £19½ million outstanding for hire purchase. That is not the point.

My point is that there is no comment whatever except matter of a descriptive nature in the Report this year. If they want to tie themselves to Fianna Fáil, that is O.K. with me. If they want to be henchmen of the Fianna Fáil Party, that is O.K. with me, but certainly I shall not allow a Report of that nature to be produced by the Central Bank without commenting upon it. It may be that the people concerned, having played ducks and drakes with the economy of the country on two occasions in the 1950's, had a change of heart in the year 1958 when they saw the frighteningly real economic effects of their policy recommendations. That may be the case. That may be the position and I notice that Senator Lahiffe enjoys the thought.

I could quote example after example from the Report including this egregious example—this is a comment on Page 37 of the Central Bank Report:

Moreover, the study does not take fully into account the developments of the last two years which so far as this country is concerned changed to a material degree the whole economic picture.

Reference is made right through the Report to the Programme for Economic Expansion. For personal reasons, I refrained from making any comment on the preliminary report but I am entitled to say that there was no constructive central idea in either the Programme for Economic Expansion or the preliminary document which was prepared by the Civil Service except the suggestion that the number of milch cattle should be increased from 1,200,000 to 1,500,000. But I believe there is not a hope in the world of that happening. We know that figures are produced by the Central Statistics Office giving the numbers of cattle in the country and showing a considerable increase in the number of in-calf heifers but I think we shall be extremely lucky if at the end of the five year period, in 1964, we have as many milch cattle in the country as we had in 1959. There is no question about it and anyone who has any connection with agriculture knows that is true. If that was the main central idea of this document or if that was the constructive idea, I think there is no hope whatever of its coming to fruition.

That there have been some kind of developments in the past two years which have changed to a material degree the whole economic picture is a comment in the report of one of the European organisations. Apart from anything else, these reports are not prepared solely by O.E.E.C. people or E.C.E. They do not send independent people here, although we did get one independent man who reported on agricultural credit, in spite of efforts which were made to get him to report otherwise. These people send draft reports for observations by the establishment here and they alter them in accordance with the comments of the establishment. Therefore, they are not independent reports at all and it is only a pretence to say they are.

At several points throughout the Report of the Central Bank of Ireland for the past year, the word "dangerous" is used and on every occasion it is used, to the best of my recollection, it relates to the position from 1951 to 1957. At no time does it occur in relation to the present situation. This Report reminds me of the saying that those whom the gods wish to destroy they first make mad! I cannot understand the idea of producing this kind of a Report at this stage of our development when the writing is plainly to be seen on the wall in relation to what has happened in our economy.

Mr. Gibson read a paper some years ago on the Central Bank arrangements and referred to the desirabality of getting all our reserves into the hands of the Central Bank and not allowing them to remain partly in the hands of the commercial banks. That is a view I agree with on the whole. I think if our reserves are dissipated around many different banks, there will be squawks from the commercial bankers the moment their liquid assets in London tend to go down. They will then squawk to high heaven. The Minister for Health has very wisely built up a nice little nest-egg to be used in such circumstances by not building two hospitals, the new maternity hospital or the new St. Vincent's Hospital, the foundations for which were laid four or five years ago and are several feet above the ground. He has this nest-egg put aside in an official fund and, in the past couple of years, he has built up a sum which I take it is now probably around £8 million or £9 million. That is a very useful defence line. I take it that when the Minister for Health sees the lower limit being reached he will have that Fund as a line of defence when the commercial banks again start bemoaning the decay of their assets position in London.

I do not understand why that has not been done to safeguard the whole economy and why our reserves are not put into the Central Bank. There are nine directors of the Central Bank, four of whom are commercial bankers and three of whom are civil servants, but even so, those who control the financial system will not trust the resources of this country to them. We shall have to go through the same old rigmarole again. The Germans have a saying that everything goes in three and they have another saying that the best things in life are sleeping and eating. Those sayings do not seem to agree with each other at all, but, as I say, we shall have to go through the same kind of financial clap-trap again. It will be the same old story when the time comes.

There are a number of people who believe that we shall have to step in and change the position and I believe the Taoiseach is one of them. The idea of having the Central Bank as a clearing house was suggested by the late Mr. Collins. When he died I noticed there was not a single reference to him in our main national newspaper. To my mind, he was a man who had several fertile ideas about banking in this country. If some bank director had died, a man who had contributed nothing, a whole column would have been devoted to whom he was and what he did.

The fact is we have reached the position in this country where the external assets are up and the population has dropped catastrophically. That is my information and we shall not have long to wait to find out if that information is correct because there will be a census next April. I am inclined to think that 150,000 people have emigrated in the past three years. I am told—I do not know how true it is—that along the western seaboard, the numbers emigrating have been greater in the past six months than they were previously. I personally am satisfied that there was a major emigration in 1957. As I said before, when the young people saw there was to be a change of Government, they said: "Whatever chance we have with the old crowd, we have none with the new Government, so let us get out."

We all know that if you go back over this matter, from 1946 to 1951 the population of this small country went up, despite substantial emigration at that time. Then the population went down by about 60,000 in the following five years because there was an emigration estimated at 200,000, that is, 40,000 a year between 1951 and 1956. For what it is worth, my opinion is that there will be an emigration of about 250,000 for the next period. Therefore, the population will drop about another 100,000.

It is obvious that if the population drops, then taxation per head must go up. If all the younger people are leaving the country, I do not know where you will get your real income out of which to meet this taxation. Taxation is really a transfer of benefit from a person who makes the benefit, creates the utility, to the person who enjoys it. If young people are leaving the country—the more enterprising and go-ahead of them, on the whole—I do not see how you will create a situation where, with the population going down and taxation per head going up, you can maintain the economy. Certainly it cannot be done through time.

This year, I notice an increase of about £8,000,000 in the taxation being collected into the Revenue. Let us look at it in another way. The revenue and expenditure table, in the Table explanatory of the Budget, is £136.6 million. It is only a very few years indeed since that figure remained static for some time at £120,000,000. Therefore, there has been an increase of approximately £16,000,000 over a very short period of time. It was static for a while. Now it has gone away up. It has been increased every year recently.

The Minister swallowed the food subsidies in 1957 and he was able to pretend he did not spend so much extra. He engulfed the food subsidies and he was able to make that pretence. This £8,000,000 of an increase in taxation this year represents £3 per head for every man, woman and child in the country.

Again, the Central Bank has a quotation relevant to this on page 33 of the Report. They say: "The task would seem to be within the competence of the economy provided the normal course of development continues and that there is no major upset in trading and other conditions during the year." I do not know what they mean by "the normal course of development" in that context. It would take a great deal longer than I have time here this evening to analyse that phrase.

On the exact expenditure itself, they have this comment to make and it is about the most critical comment they have to make. They say that expenditure has gone up to £136½ million—"figures formidable enough for a small economy with limited resources." There is no suggestion that they are figures that are extremely dangerous for a small economy with limited resources. There is no suggestion of that sort.

In connection with taxation, there is one obvious source of revenue in the calendar year 1960 that will not be repeated. Every salaried person will pay a half year's tax in January, a half year's tax in July and three months tax by P.A.Y.E., in October, November and December. Every salaried person and wage earner must do that. It pushes up the revenue. It is an entirely fortuitous increase. In particular, it is noticeable that certain groups are exempt from it. In other words, the managers themselves are exempt.

It is this kind of thing that causes the ordinary person to wonder about the particular outlook and advice that Ministers get from particular groups of people, when you look at that kind of result, that the ordinary man with a salary or a wage on P.A.Y.E. will pay 15 months tax in the calendar year 1960.

Let us look at it in another way. We have heard a great deal about that annus fabulus, I might call it, 1959, when the real income of the community went up three and a half per cent. We have heard a great deal about this great achievement. What does the Minister do when he looks at this? He says, in effect: “That is very good. There is an increase of three and a half per cent. in real income of the community. Let me take a seven per cent. increase in taxation. In other words, the people as a whole have got an increase of three and a half per cent. I will get seven per cent. In other words, I will double what the people have got.” He cannot do that very often. I would say that would be a “once only” operation, once and for all. It could not be repeated, I think.

I always feel that in these matters, I do not know whether other people agree with me, apart from reading one's books one should go around and see things for oneself. It is possible that my view may be exaggerated. I cannot say. However, I see evidence that the country, particularly on the west coast, is rotting visibly. I first noticed the phenomenon of families going away in 1956 in the Roundstone area where the key was turned in the lock and the last fire on the hearth and whatever furniture was there in the house was left behind. I noticed that I am not saying the area was particularly good or that the people could have a very high standard of living there. It is just a notable feature of the area.

Without question, and again anybody will notice it for himself, there has been a visible improvement in the economic situation in and around the City of Dublin in the past couple of years. However, in a few months' time, you will have the workers suffering P.A.Y.E. You will have them suffering an increase in their contributions in the Social Welfare Acts from 2/9d. a week to 4/6d. If my recollection is right, there will be an increase of 1/9d. a week on the present standard contribution. Then, if the bus hours have to be extended, in my opinion they will have to pay higher fares. And you will have them paying more for their liquid refreshment.

When all that is added together, the increase in wages which the workers got last year, a genuine increase in real income for the people concerned, will look very sick indeed when the whole operation is over. Those are the people who are working, who are producing the goods and services. I would not mind if the Minister had not had ample warning of what was going to happen. At the beginning of this year, the bank rate in Britain was four per cent. It is now six per cent. Various restrictions have been put into operation there and, in my opinion, sufficient has not yet been done. On the last occasion when there was a 7 per cent. bank rate, it lasted for fifteen months at a time when export and import prices in relation to Britain were moving extremely favourably for Britain.

The Central Bank have four paragraphs in their main Report, paragraphs 68 to 71, about developments in the United States of America. It is awfully nice of them in the phrase of paragraph 71 on page 42 to say "increased confidence in the dollar is evident both at home and abroad, and short of international complications this confidence would seem to be well placed." I appreciate to the full that kind of megalomania. I also appreciate the thought that confidence in the dollar has increased. When I think of the dollar, with the great bulk of the world's gold in the vaults at Fort Knox and elsewhere in the United States, and the United States with a more than balanced budget and its huge industrial machinery and industrial potential, it amuses me to think that a country linked with sterling, the most vulnerable currency in the world since the War, can in its Central Bank report give four paragraphs concerning itself with developments in the United States of America.

Paragraph 60 of the Report said that it is regarded as more and more dangerous for any country to succumb to inflation. That also amuses me when I think that in our community we have not succumbed to inflation in any degree, but of course our real incomes in effect for the whole of the fifties were made static by the budgetary and financial efforts of 1952. You had other countries which did succumb to inflation, for example France, which the Minister for External Affairs said was a bankrupt nation, where their national income went up in recent years by 7% each year. I have not been to France, but people who have gone there have told me that it is a really wealthy country, with genuine real incomes there, and that the people of France are well off.

A certain number of the people of this country are as well-off and perhaps better off than comparable people in any other country, but they are a very small fraction of the total population. Last year, the farmers suffered a decrease in the price of milk of Id. a gallon. The price had been fixed when the cost of living was 15% or 20% lower than it is now. These effects are visible. I cannot understand what the game is except the game of whistling to keep your courage up. There is no doubt about it, whenever I look in any current journals, in any newspaper, among people who should make serious comments, in these reports I have referred to, in the comments of the Commercial Banks Review and the Central Bank of Ireland Report and these independent bodies, they all say that everything is wonderful. As I say, I do not think they will be saying it next year.

The last time the Minister was in this House, in the course of his reply to the Debate he said that the Government were doing a lot of things and that it had even been said that they were doing them for a general election. Then he said with a quirk in his tongue "of course, there is going to be no general election". I immediately thought that there was going to be a general election. My own opinion is that if the Government were wise from their own point of view they would go to the country late this Autumn. I am convinced beyond yea or nay that the present Government will not face next year's Budget.

The Minister has said time and again that he received a mess when he got into office, and his colleague, the Minister for Local Government, talked about £1.2 million of unpaid debts. I went to the trouble of working out what the amount of expenditure on housing, and so on, by the Local Authorities was. It was about £14.4 million a year, or £1.2 million a month, so that what he found when he went into office was one month's bill, and he made this song and dance about it. I heard it in South Tipperary, and in Dáil Éireann, when the Minister for Agriculture said that the County Councils would not be able to pay their employees. If the Government think that that kind of thing is good game in politics they are welcome to it. Certainly the case as we heard it here, and it was the first time I ever heard it— but I had read it—was that on 20th March, 1957, £1.2 million was the amount they were required to pay for various items of housing and sanitary services and so on. When you examine it it turns out simply to be the amount that accumulated that month. In any event, everybody knows that these bills are always paid towards the end of March. That has been the standard practice for years. That shows the fake and fraud of this so called mess which the Minister said he was left. It shows the code of the whole thing, the pretence and mockery.

People in political life making that kind of case should be careful. When the first change of Government took place in 1948 the taxation which had been imposed was taken off immediately afterwards. Subsequently the second Inter-Party Government in 1954 made no complaint. I challenge anyone to point to a single example of any one of that group of people saying that they have been left a dirty mess by their predecessors. Mind you, the few vague remarks nowadays about a dirty financial mess are as nothing compared with the campaign in 1952.

Could we come a little closer to the problems arising out of this Finance Bill, 1960?

I think that one decade is not too long a time to take to trace what leads up to taxation amounting to £136 million in the current financial year. Obviously, apart from inflation, it must have come from somewhere. If it was imposed on, an increasing population with an expanding income, one could understand it.

Let me conclude on this note. This business of a Government coming into office and a Minister, particularly a Minister for Finance, saying that his predecessor, who in fact, left him £5 million in cash on his desk, had left him a dirty mess is using propaganda which, to use the Central Bank's phrase, is extremely dangerous. Some day, when the Fianna Fáil party goes out of office, the people who succeed them will adopt their tactics. They will proceed and certainly will not clean up the situation the way it has had to be cleaned up on two previous occasions without any of this pretence that goes by the name of finance. It will not clean the real situation without spattering a fair amount of mud over the particular people who have twice repeated that operation of throwing as much slush as they could over their predecessors. That is the kind of situation, as I think, that is dangerous— indeed, far more dangerous than inflation or anything of that sort in relation to our economy to-day.

This debate is primarily concerned with taxation in contrast to the Appropriation Bill which is primarily concerned with expenditure; but it is extremely difficult to draw a rigid line between the two because the amount of taxation in the country depends upon the amount of expenditure and each individual tax is related to the total amount of taxation required. It is the expenditure which really calls the tune to which the taxpayers must dance. It is the volume of the Estimates that determines the problems in the Budget.

The Budget in modern times performs more than one function. It is, of course, the housekeeping account of the State for a single year. From that point of view, it is important that current revenue and current expenditure should balance and that the State, like every other prudent householder, should pay its way. From that point of view, the relevant period for consideration is the financial year. But the Budget nowadays looks forward. It looks towards the general trend of the economy.

The Budget can be used, in conjunction with other measures, to regulate the pace of the economic machine. If inflationary symptoms are developing, it is possible to apply certain brakes, and if deflationary symptoms are developing, it is possible to put on the accelerator. These changes in regard to the pace of economic expansion are largely operated under the capital Budget and not under the current Budget. These short period changes must always be related to the longer period policy. In other words, the aim of the Budget in the short period is to obtain balance but the long period economic policy in every country is to try to ensure growth. Therefore, an endeavour must always be made in some way to make these two aims harmonious.

The fact of the matter is that in modern times the best financial opinion throughout the world is that there is no real antithesis between the aim of balance and the aim of growth. The maintenance of monetary stability is looked on as essential to growth; and inflation, which may seem to give a certain temporary spur to the economic system, produces such crises and the need for such corrections that in the long run it may be inimical to growth. This view is generally held to-day by the International Monetary Fund, the Bank for International Settlements and by central bankers generally.

Looked at from these points of view, the present Budget merely regarded as a household account is probably balanced. Merely regarded as the annual revenue expenditure of the State, it does meet the criterion of the State paying its way. From the point of view of influencing the pace of economic development, it is on the expansive side and not on the restrictive side. The Minister in his Budget statement in the Dáil said that the general conclusion to be drawn from a study of the current economic position and the immediate prospects was that this Budget should not be restrictive in character.

With that opinion I would agree. I think that the lack of restriction in this Budget is justified by the economic and financial background. The main feature of the economic background is the balance of payments. Although there was a deficit of £8,000,000 in the balance of payments in the year just closed, there was no loss of external reserves because there was an inward capital flow of at least the same amount. Therefore, the out-turn of 1959 did not call for anything in the way of restriction in the Budget in so far as it might be necessary to correct the balance of payments.

As regards the current year, 1960, the general forecast, as far as one can make it, is that the balance of payments will not be less satisfactory than it was last year but, of course, these forecasts are subject to a great many uncertainties. I think it is really almost one's duty to call attention to some of the dangers in the situation before a feeling of too great complacency is allowed to develop. In the first place, it cannot be sufficiently emphasised, I think, that a mere equilibrium in the balance of payments is not an aim in itself. In a country aiming at industrial expansion, based on the imports of considerable amounts of industrial raw materials, the balance of payments should be in equilibrium at a high level. As the prosperity of the country improves, as we hope it will, the necessity for more imports will grow and, therefore, the necessity for paying for them by exports will also grow. The mere balance between imports and exports, though desirable, is not sufficient in itself. It is desirable that the balance of payments should be in equilibrium at a high level and not at a low level.

Another thing we must take into account is the uncertainty regarding the future of the export market. The whole pattern of trade in Europe to-day is being altered by new economic groupings. That is a matter into which I do not propose to enter in this debate. I do not think it is altogether relevant. We can say this. The export situation for every country which is exporting industrial products is liable to be injured by these developments in the next few years. Therefore, we should make our export forecasts on the basis that we may run into unexpected developments in other countries over which we have very little control.

Another thing that must be borne in mind is that the terms of trade have been moving in our favour consistently for some years. The country has been extremely lucky. From 1957 to 1959 import prices fell quite materially, whereas export prices rose. And reversal in that trend, which would be the result of factors entirely outside our own control, could, without altering the volume of our external trade, produce a very different picture in regard to the balance of payments.

Another thing which should be borne in mind is that we cannot be sure of the continued influx of capital and that the influx of capital last year prevented us losing our external reserves. That influx of capital depends on the decisions of people outside the country which we cannot influence or control and therefore any drying up of that flow of capital might result in the loss of external reserves which would call for corrective measures.

The Central Bank refers to the satisfactory position of the balance of payments in the last three years, taking the three year over-all period. While I would be prepared to agree that, in general, there is nothing sacred in the calendar year from the point of view of measuring the balance of payments, at the same time, one cannot get away from the fact that during those three years, the trend was in an adverse direction. If that trend continues over the whole of the five or six year period, the balance of payments might deteriorate quite substantially and if it is not set off by inward capital flow, the kind we cannot control, the situation might become quite unsatisfactory. However, as I say, these are rather warning notes to counter the optimistic forecasts made by the Minister in his Budget speech and by the Central Bank.

To pass from the economic to the financial background of the Budget, the financial year which has just closed has been a very good year. The Minister deserves congratulation partly for his foresight and partly—and I hope he will not be offended by my saying this—on his good luck that the revenue was unexpectedly buoyant and that his estimate for over-estimation proved to be even short of the mark. Therefore, the financial year turned out even better than he forecast in the 1959 Budget. We certainly all hope his luck will continue in the present year. At the same time, a buoyancy of revenue cannot last for ever. The Minister himself stated in his Budget speech that he expected buoyancy to be lower this year. Many of the changes made by the Budget will not show their full effect until the full year; some of the taxation and revenue relief, some of the increased expenditure, will come home to roost only in the next financial year, not in the present one. Therefore, the picture presented in the Budget may perhaps err on the side of over-optimism. The large allowance for over-estimation in last year's Budget was more than justified, but we have no guarantee that the allowance for over-estimation in the present Budget will prove equally justified. We hope it will, but if it does not, the outcome of the Budget will not be as good as the forecast made by the Minister.

I want to make a more serious criticism of the present Budget, that is, that the surplus which has undoubtedly resulted from the last financial year should have been used to reduce taxation rather than to increase expenditure; that, if the aim of the Budget is expansion and not restriction, that expansion can be better secured by reducing taxation than by increasing expenditure. Direct taxation in this country has a disincentive effect. It is so high it reduces the power of people to save and reduces their will to save. The income tax code has been considered by a Commission, the report of which will soon appear, but we can certainly say that, whatever is in that report, income tax is full of injustices and inequities and that no reform in the income tax code which does not result in a substantial reduction in the amount of tax collected will have any really good effect on the country and on the taxpayer.

I should suggest that the outcome of the last Budget was so favourable that the Minister might have left himself some elbow room for making some adjustments in income tax, to reduce the amount of tax in anticipation of the Commission's report.

Another tax in this country which causes dissatisfaction and which is unjust is death duties. We hear people complaining that there is no taxation of capital gains. I can never understand why people say that in view of the death duties. The death duties are a very potent and perhaps unfair—it is a matter of opinion—and effective method of taxing capital gains. Death duties on top of income tax and surtax have got an extremely disincentive effect on the sections of the population who would normally provide capital for industry.

I should like to quote just one or two sentences from a book—which if I might say with respect should be required reading for the Minister for Finance—by Parkinson, "The Law and the Profits". On this very question of the effect of high direct taxation, the author says, at page 85, and I paraphrase his words, something which I think is true in this country, that is, that the code of direct taxation for income tax and death duties is so high that a number of the best brains are now employed on the side of the Revenue Commissioners in collecting tax and on the side of the legal and accountancy professions, not in trying to evade it, but to avoid it. Mr. Parkinson says that the tax has reached such heights that now a great struggle is going on between the Revenue Commissioners and the professional advisers of the public to try to ensure that during a man's life, on the one side, he has no income, nothing but capital, but at his death, that he has no capital, nothing but income. That may be a slight exaggeration but it is only a slight one. It is certain that a great deal of unproductive labour is devoted in this country to-day to dealing with direct taxation and that, owing to the economic structure of the counrty, to the lack of many rich people and the very narrow range of the number of people who pay direct taxes, the result to the Exchequer may not be worth the great amount of litigation and disturbance and disincentive that their collection involves.

I am glad to see that the present Budget raises the minimum amount of estate which is liable to death duties but that adjustment really does no more than make allowance for the change in the value of money. I would suggest that the Minister should seriously consider making broader and more far-reaching changes in the death duties. They have an adverse effect on small savings, on small businesses, and a change in the death duties might quite easily attract here a certain number of British residents. A great many people who are not prepared to advocate sweeping reforms in income tax are prepared to advocate very sweeping reforms in death duties. The disincentive effect is much greater than the yield which the Exchequer gets from them.

There is another objection to death duties—I know what I am saying now has been said over and over again for many years but it does no harm to repeat it—that they are a tax on capital and are used by the State as current revenue. From the point of view of financial prudence, in the case of an individual or a business man, nothing is more imprudent than spending accumulated capital for current revenue and yet, year after year, the accumulated savings of the people are taken at one fell blow by the Exchequer and used as current revenue. That has always struck a great many people as being extraordinarily imprudent, and as being an example of applying a different standard of financial probity to the Exchequer and to the private individual. If any private person lives on his capital, he is looked on almost as a monster of extravagance, whereas, year after year, the savings of the community are taxed heavily when people die and have to be expensively liquidated, very often at a loss, and those savings are then used for current revenue instead of being used for repayment of debt, or capital purposes which would be less objectionable.

That may not be the only example of the different standard between private and public finance. Another difference which bears, I think, on this Budget and on every Budget, is the reversal of the roles of income and expenditure. The private individual has to live within his income. He estimates what his income will be and tries to regulate his expenditure so as to be within it, but, curiously enough, the State proceeds on entirely different lines. As I said at the start this afternoon, it is the height of the Estimates that decides the problems of the Budget. The State decides how much it will spend and, having made up its mind, then decides where it will get the revenue from. If that were done in the case of a private individual, of course, wholesale bankruptcy would result. A man who tried to regulate his income to his desired expenditure would be looked on as improvident.

I do not want to weary the House but I should like to quote from the same book, which I recommend to the Minister, if he has not already read it. The quotation is:

But between governments and individuals there is this vital difference, that the government rarely pauses even to consider what its income is. Were any of us to adopt the methods of public finance in our private affairs we should ignore the total of our income and consider only what we should like to spend. We might decide on a second car, an extension of the home, a motor launch as well as a yacht, a country place in the Cotswolds and a long holiday in Bermuda. All these, we should tell each other, are essential. It would remain only to adjust our income to cover these bare necessities.

That is exactly what the Government do. They decide that they must have armies, social services and subsidies and then, having decided on these various extravagances, they decide how much income they require. And it is the taxpayer who has to find the necessary income.

I do not wish to go outside the bounds of this debate on the Budget, but, as I said, it is quite impossible to disentangle income and expenditure for the reason I stated, that the total amount of taxation depends on the total amount of expenditure: It has been agreed in every country today that the control of expenditure has got out of hand. I should like to quote from The Economist of 21st May. I think this is relevant to this country. On page 730 we read:—

...there has been a failure to restrain Government expenditure this year, at a moment of threatened inflation ... What is needed instead is a radical overhaul of the machinery, both parliamentary and administrative, for determining and timing government expenditure—a process that should require some awkward and discriminate jumping upon departmental toes.

Actually I do not think that is a fair statement in the present situation because the suggestion made there is that high Government expenditure is the result of laxity by the Exchequer or of extravagance by these spending Departments. The real fact of the matter is that the evil is much deeper and high Government expenditure is the result of demands by the public for that expenditure. In other words, that expenditure and extravagance are the result of political decisions, and these decisions are taken very largely in order either to woo the public at election time or to carry out some policy or other which the Government, rightly or wrongly, consider would be desired by the public.

I should like to refer to a very important lecture which was delivered this month to the Institute of Municipal Treasurers and Accountants in London by the Comptroller and Auditor General in Great Britain. This lecture was reported in The Times of 16th June and some of the matters in it seem to bear directly on the present debate. I do not propose to quote the whole of it. In fact, I hope to paraphrase it. The Comptroller and Auditor General said that the man in the street agrees that public expenditure is unduly high and that it is unpopular because it leads to high taxation. If he were asked what could be done about it, he would be inclined to say, first of all, that there was not enough check on it by the Treasury and, secondly, that actual expenditure itself is wasteful and that business checks on extravagance are not applied to it.

He goes on to say—and I think this explanation is the correct one—that the true explanation is that the man in the street himself is very much responsible because he wants expensive services and that to apply the blame to the Treasury for not imposing greater economies on the Departments, or to blame the Departments for wasteful administration, or to blame the Comptroller and Auditor General for not being more severe, is a rather shallow explanation of a much deeper problem. What really keeps expenditure high is the intractable nature of public expenditure itself on account of the high content of continuing long-term commitments.

These commitments are the result of policy decisions, political decisions which are themselves a result of the democratic choice of the electorate. I should like to quote from the leading article from The Times of the same date. Dealing with this lecture, the leading article says:

The truth is that in any but a narrow technical sense the only effective means of controlling public expenditure are political. The electorate will go on wanting to eat its cake and will continue to believe the cake can be made larger and larger merely by sweeping up the crumbs that are dropped in Whitehall. The fewer crumbs that are dropped there the better. Yet it is not likely that the absence of them altogether would take a penny off the income tax. Indeed, often enough all the savings painfully accumulated over a long period can be swallowed up by a single political act... The taxpayer cannot have too much private spending money in case he upsets the national economy.

That, I think, is true, and the reason I bring it in is that I think it is a political argument and that is why I address it to the Minister. High taxation is caused by high expenditure by the Government, and high expenditure by the Government is not caused by lack of effective control by the Exchequer or the Department of Finance, or by wasteful expenditure, so much as by policy decisions of the Government which, in their turn, reflect the wishes of the electorate.

It may be said that what I have been saying is relevant to other countries but not to ours. I think there can be no question that the level of public expenditure in this country is unduly high. The Minister attempted to meet this argument in the Budget speech. He said that public expenditure in this country expressed as a fraction of the national income is lower than in Great Britain, France, Switzerland or Holland. These are all much richer countries. The richer a country is, the more of its income it can afford to spend on public purposes.

A new phrase has come into fashion recently in economic literature and discussion—"the affluent society". The main complaint against the so-called affluent society as it exists in the United States is that an insufficient fraction of the national income is spent on public purposes. This has been used by socialist propagandists in other countries as a criticism of capitalism in general. A striking pamphlet was recently published in England by Mr. Crossman pointing out that in affluent societies, the private sector spends too much and the public sector spends too little.

This may or may not be true. Many countries in Europe spend a great deal in the public sector. Even if it is true, it is not a criticism of capitalism in itself. It is only a matter of shifting the margins. In England, under the influence of the Labour Party, the margin has been shifted possibly too far in the direction of public expenditure. In the United States, it may not have been shifted far enough. The only point I want to make here and the reason I mention it at all is that this is not an affluent society.

Ireland is not what it is known as an affluent society judged by any comparisons of national income. Therefore if it is correct, as the affluent society propagandists say, that the richer the country is the larger the fraction spent on public purposes should be, the opposite is equally true: the poorer a country is the smaller the fraction that should be spent. Therefore, to compare the fraction spent in this country with the fraction spent in countries such as Great Britain, Switzerland and Holland is an unfair comparison.

The fact is that it is not only in relation to wages that this country suffers from trying to keep up with richer neighbours. We discussed that recently in the Seanad, the effect of high English wages on Irish labour standards. It is equally true in relation to social services. In relation both to wages and social services, we try to keep up with a nation which is much richer than ourselves. Therefore we condemn ourselves to expenditure which possibly we cannot afford and which certainly does result in high taxation.

Therefore, I suggest to the Minister that the fact that we spend a smaller fraction than the other four countries he mentioned is not in any way conclusive. Another thing which must be remembered is that practically every other country in the world has had large expenditure on war and on defence. We have escaped a great deal of that. The figures given recently in the Dáil in answer to a Parliamentary Question revealed that out of every £ in the British Budget, 5/8d. represents army and police, whereas in Ireland the figure is ?d. In other countries there must be similarly large expenditure on the debts from the second War and on defence at the present moment.

It is also relevant to call attention to the fact that owing to—I do not like to say "stagnation"—the comparative stability of our national income, the fraction of our national income spent on taxation is actually increasing, whereas in other countries it is decreasing. For example, in Great Britain, the percentage of the national income taken by the State revenue was 37 in 1948 and in 1959, it was only 29. No similar reduction in the fraction spent has taken place here during the same period.

That brings me to the main point I am trying to make in these remarks, that is, that the current expenditure and therefore the current revenue and taxation which is the matter we are mainly debating tends to be too high because of the stagnation in our economy. Our population is not increasing. Perhaps the best way to show the lack of expansion of taxable capacity is to quote some figures given by the Minister in the Dáil on 14th June last as reported at column 1169 of the Official Debates for that day. This represents the consumption of certain dutiable commodities as a percentage of the 1953-54 figures. In 1959-60, that is, six years afterwards, tobacco, 88 per cent.; beer 99 per cent. and whiskey 93 per cent. That shows that in the course of six years the consumption of these, you might say, representative luxuries has actually decreased. That shows a lack of expansion of taxable capacity.

The population of the country is decreasing and will continue to decrease. We must face that fact. The full employment in Great Britain has caused a shortage of labour there. Everybody knows that emigration is taking place at a very high rate. Without in any way denigrating or belittling the recent industrial developments, one must accept the fact that increased employment in industry is not absorbing the people disemployed in agriculture. The industrial expansion is to be welcomed in every way. It has been of the greatest value to the balance of payments. However, it does not absorb the unemployed.

This is not a criticism of policy because it would be only a criticism if the aim of an industrial policy were to give employment quite regardless of the standard or the quality of the employment and that, as I said here recently, is a test I do not accept. Therefore, we may take it that, if the policy of industrialisation is successful, it would give highly paid employment. There is no reason to believe that the numbers displaced in agriculture will be absorbed in industry. Therefore we must look forward in the immediate future to a decrease in the population. That being so, even stationary Government expenditure increases the burden per capita. That is something which cannot be sufficiently stressed. The expenditure is increasing but the size of the population is not increasing. Therefore the per capita burden must automatically increase.

If a great deal of our Government expenditure was of a productive nature, it might perhaps be more justifiable. However, the greater part of it is of a transfer nature. The agricultural subsidies and the social services bring about a mere redistribution of income. I do not suggest for a moment they have not a social justification. However, I do assert that they add nothing to the national wealth and that the taxation which is necessary to finance these various transfers of income may have a disincentive effect. Therefore the net result of the transfer may be a reduction in the national income rather than an increase.

Nothing is more important to the Minister when framing his Budget than to try to balance the social benefit of additional expenditure against the social evil of additional taxation. Therefore, what I am trying to suggest is that it will be impossible to reduce taxation, unless an attack is made on the expenditure side. The situation might easily become dangerous if circumstances arose outside our own control. If there were a severe change in the economic climate in Britain, some of our prosperity might begin to disappear in sympathy. Furthermore, as I said already, we may experience difficulties in exports, through no fault of our own, owing to trading arrangements abroad. A change in the consumption habits of the population might affect the yield of taxation. A serious decline in the consumption of alcohol or tobacco, two items on which the Minister relies for a great deal of indirect taxation, might bring about a serious decline in the yield of taxes over and above the decline to which I have already referred which reflects the stagnation of the economy. Any decline in yields of that kind could bring about a need for higher rates of taxation, and those higher rates of taxation would have an extremely disastrous disincentive effect on the economy.

Therefore, to come back to what I said before, I suggest that the Minister has not made enough allowances, has not left enough elbow room in the Budget for disagreeable developments, that all his forecasts are on the optimistic side. We all hope that they will be justified, and nobody wishes for a moment that they will prove false, but at the same time there is an element of danger in them, and changes in the situation outside our own control could easily change some of his pluses into minuses.

The same is true of the capital Budget. While it is correct to say that there has been a shift from social to more productive investment, at the same time, a great deal of the investment from public funds still results in deadweight debt. It may be productive in the very long run, but at the same time, in the short run, it does add to the burden on the Exchequer of deadweight debt. I quote from the report of the Central Bank on page 29:

The social needs have now, to a substantial extent, been met and, as a natural consequence and a matter of deliberate policy, measures have been initiated to devote a larger proportion of public investment to productive purposes, defined in the Programme for Economic Expansion as ‘yielding an adequate return to the community in competitive goods and services'.

The programme also draws attention to the desirability of economy in the use of capital, of conserving existing capital assets and of obtaining the utmost value for new outlay. It has frequently been stated and may readily be agreed that scarcity of sound projects is a more immediate problem than scarcity of capital but this obviously does not allow of an uncritical attitude towards particular capital proposals. The State is committed to the proposition that the lack of capital will not be allowed to prevent the initiation or the success of any soundly based scheme. The requirement that a project must be soundly based should never be overlooked. Neither should it be forgotten that expenditure is not necessarily productive, in any true sense, merely because it yields a continuing return in goods and services. There is still an element of economic waste if the return is inadequate or if the goods and services produced can be made competitive only by means of permanent subsidies, open or hidden, from the community as a whole."

A good deal of the Government investment may produce a flow of goods and services, but it is only maintained by subsidy, open or disguised. That is shown by the figures in the Central Bank Report on page 14 showing that the amount charged for debt service has risen from £7.4 million in 1953 to £18.7 million in 1961. That figure must be read against the background of falling population and high rates of interest, a matter referred to already in the Seanad. We can assume that rates of interest will not be less than 6 per cent. in any European country in the '60's. There are the ever-rising claims of the Supply Services, so that both the current and the capital Budget seem to point in the direction of growing burdens on weaker shoulders.

Finally, there is a consideration that tends to be overlooked, that is that Government expenditure can be inflationary. It can affect the balance of payments quite as much as rising wages or over-expenditure on durable goods or other commodities. This has recently been admitted by the British Chancellor of the Exchequer, who has followed a series of disinflationary measures—a rise in the bank rate, compulsory deposits, and control of hire purchase—by the announcement that the Government's capital programme is going to be prevented from expanding. Assuming for a moment that the Chancellor of the Exchequer is correct in his diagnosis that an inflation is endangering Britain, that is a very proper step to take, and one from which we should learn a lesson.

We must at all costs avoid inflation, for the simple reason that the rest of the world has more or less succeeded in bringing its inflation to an end. When we were living in an inflationary world, we could afford a certain amount of inflation without getting out of step, but the world now has ended its inflationary period as far as one can judge, and therefore any individual country that indulges in inflation is exposing itself to the extremely difficult task of correcting the bad results of that inflation.

To come back to a matter which I dealt with very early this evening, that is, the possible disharmonies between a shorter period and the longer period programme, it is generally agreed now that a lack of balance in the short period may act as an impediment to growth in the long period. On that, I should like to quote the report of the O.E.E.C on Ireland. On page 26 it says:

The success of the Programme for Economic Expansion will depend not only upon completion of the specific projects it contains but also upon the maintenance of overall equilibrium in the economy. In particular great damage can be done to longer-term prospects by drastic restrictive measures which become necessary if the economy gets seriously out of balance.

That is in harmony with general thinking in the world today. Therefore it behoves us to avoid inflation not only from the point of view of the short period balance of payments problem but from the long period problem of reducing the rate of economic growth.

To conclude what I have been trying to say, in a world where inflation has been checked, each individual country must attempt to avoid inflation. Government expenditure, either current or capital, can be a cause of inflation. Therefore Governments should aim at restrictions of expenditure as an object of policy in itself. This may sound very old-fashioned and conservative, but I do not apologise for it on that account. New fashions are not necessarily good, and it must be remembered that it is the duty of the economist to speak for the community as a whole as against individual sectional interests. This is true in the case of trade in regard to protection. Every industry that wishes protection is able to make its case vocal, but the community as a whole must be represented by people who have no sectional interest, and that is why economists on the whole have always leaned in the direction of freer trade.

Similarly in regard to the Budget every individual claimant on the Exchequer is able to make his case vocally, whether it is for social services or for education, health services, pensions, or defence. Every section of the community is able to make its case. Every section of the community is able to raise its voice but the general taxpayer is represented by nobody really except by the Deputies and the Members of this House. I hope that his point of view is also put by the economists who happen to be in these two Assemblies. Both in regard to protection and to the Budget it is always necessary for somebody to raise his voice on the side—I will not say of the under-dog—but of the person who has to foot the bill for protection in one case or for increased expenditure on the other.

It must be remembered that, when one talks of public expenditure by the Government, the Government are not spending their own money. They are spending the money of other people. The Government have no money of their own, luckily for us because if they had they would inflate. When a Government are spending other people's money, therefore, the onus is on everybody who requires additional Government expenditure to justify taking more money out of the pockets of the people.

I am quite used to being called old fashioned, conservative, archaic and prehistoric. Therefore, I should like to end my contribution by quoting from a Select Committee on Public Expenditure in the year 1828, an extract which, I think, could be well taken to heart by the Minister to-day:

... No government is justified in taking even the smallest sum of money from the People unless a case can be clearly established to show that it will be productive of some essential advantage to them and of one that cannot be obtained by a smaller sacrifice... nothing requires more wisdom and prudence than to fix public expenditure at such an amount that the real wants of the People shall not be made to give way to any imaginary wants of the State.

As I said earlier, this can only be realised in a modern democracy by the people themselves. If democracies wish to enjoy low taxation, then they must not clamour for extravagant expenditure. We are not in a position in this country to tax the foreigner. We have no rich class in the community who can be further taxed. Therefore, if the general public in this community demand more services, they must be prepared to pay the necessary taxes. If people will the end of heavy expenditure, they must also will the means of heavy taxation. As I said at the beginning of these remarks, it is the expenditure which calls the tune to which the taxpayers have to dance. In a democracy the people who have to dance are the people who call the tune.

The Seanad has just heard the usual highly competent and very professional discourse on the economic affairs of our country that we have come to expect from Senator Professor George O'Brien. He has given a balanced analysis which was in rather noticeable contrast to the performance we had here from the previous speaker who is now in the Chair—the Leas-Chathaoirleach, Senator John O'Donovan. Senator O'Donovan was at pains to point out that the Central Bank in their report this year, last year and the year before were in some way more predisposed towards the present Government than the Central Bank Reports of the three previous years.

He was at pains in regard to the point that the Central Bank Report was guardedly optimistic, which it is, in its present issue. He was at pains in regard to the point that the various economic commentators were optimistic in their various comments in the newspapers. He was also at pains in regard to the data we have at our disposal from the Central Statistics Office and the data from the various international organisations like OEEC which commented on our country's economy.

In all respects these commentators are somehow all wrong. Is it not rather asking us to be a little prejudiced to accept the proposition which he put forward here with calm delivery before this House? It reminds me of an old story about a fond mother who was watching a battalion of soldiers going by among whom her eldest and dearest son was marching. Her comment on looking at this array of men was: "My God, they are all out of step except my Johnny."

I think that Senator O'Donovan's view of the various economic comments and of the various reports of our economic state is that they are all out of step except Senator John O'Donovan. Can we really accept that proposition? His contribution here roughly amounted to that. The Central Bank Report in the past year—it was published last month—is right through guardedly optimistic. Let me quote from page 27, paragraph 40:

In a number of other respects, the available statistical material indicates favourable trends and affords a reasonable basis for confidence in the future. In their Programme for Economic Expansion the Government contemplate an increase in real national income of 2 per cent. per annum. The preliminary estimate of the actual increase in 1959, in real terms, is 3½ per cent.

It concludes:

It should not, therefore, prove unduly optimistic to expect an overall economic growth to continue at or near the rate recorded for 1959, in which case the aim of doubling the national income will be achieved in a much shorter period than the 35 years referred to in the Programme.

That treatment is continued right through the Central Bank Report, assisted by all the figures and data collected by agencies at home and international agencies. They all suggest that the upward trend in regard to production, exports and employment is favourable.

Senator O'Donovan engaged in depressed economic reasoning. I was rather surprised because I felt that he was part of a progressive wing of economic thought in this country, even if he goes a little wrong at times. But here to-day he engaged in a long Jeremiad about the present state of the economy not only here but in Great Britain and the United States. He foresaw a disastrous slump in the autumn of this year in Britain. He said it was inevitable. That is the sort of economic thought we might expect from Ricardo or some of the earlier classical economists. I do not expect that we will have a slump in activity in the autumn of this year or any year. That is going back to the economists of Victorian England who thought in terms of a slump occurring in a cycle of every five years.

Here to-day Senator O'Donovan spoke about the inevitability of a disastrous slump in the autumn of this year in Britain which would adversely affect and seriously endanger this country's economy. He did not advance one iota of concrete reasoning to support the postulate of a slump in the immediate future in Britain.

Again, he spoke like a Victorian economist about the increase in the total State debt. Senator O'Brien also spoke about it. It is true that the total State debt has increased but that is an inevitable mark of progress. If you are going to have more investment and greater development in our country, inevitably the State debt will increase. The thing is to keep it under control. The fact that the trend of State debt is on the increase is by no means a factor to be taken into account. What must be taken into account is that factor in relation to the overall position of the economy as it is to-day.

When we examine the overall state of the economy there is one major criterion of economic policy which can be adopted, and adopted in this country or any other country in any year. It is whether monetary stability has been preserved, on the one hand, and whether economic growth has expanded, on the other. That is the criterion of whether a Government has managed or mismanaged a country's affairs in any given year; whether the desirable end of providing a balance on external account has been maintained, on the one hand, and on the other, whether there has been an expanding economy, with more employment and rising exports.

The tragedy for many years, until recent years, was that expansion of production, expansion of the economy, led to trouble on our external account and the endangering of our monetary system. Similarly, vice versa, when a balance in our monetary system was preserved, we then had depression and deflation. That was the pattern through various financial crises of the post-war years. It was particularly the case in the crisis which hit the previous Government in 1955, 1956 and 1957. They suddenly woke up to the fact that in 1955 our balance on external account was showing a deficit of £35.5 millions. In other words, there was economic growth but no monetary stability.

The pendulum was then hastily swung the other way in 1956 in order to rectify that and a reasonable effort was made to balance the external account which was reduced considerably. We then had a serious depression with high unemployment and you had the pendulum swinging between expansion and depression, swinging from a lack of monetary stability to monetary stability. The test and the criterion on which the present Government stand successfully is that in the year 1959, and over the past three years, they have maintained monetary stability—currency is sound; bank deposits are up; and the external account has been maintained—and at the same time, there has been this expansion of our economy which I mentioned and which is referred to in the Central Bank report.

The figures are interesting. Over the past three years, our external account has been practically balanced between deficits and surpluses and the monetary system has been consolidated. In addition to that, we have had an expansion of economic activities within the State so that we have had an expansion of real national income, which is the main criterion of economic expansion. There was an expansion of 3½ per cent in 1959 which exceeded the expectations set out in the Programme for Economic Expansion. The programme has a rational, cautious programme over 35 years, allowing for a rate of two per cent each year. That rate was exceeded by 75 per cent last year and the national income in real terms increased by 3½ per cent. At the same time, that was accompanied by the fact that the external account was balanced and monetary stability preserved.

While the previous Government were jumping from the rapids of inflation in 1955-6 to the stagnant waters of depression in 1956-7, the present Government have avoided both those dangerous extremes. They have avoided over-emphasising the balance of payments at the expense of employment and over-emphasising boom at home at the expense of our monetary system. They preserved a balance between those whereas the previous Government jumped from one to the other during the years 1955, 1956 and 1957. I think that is a fair enough picture of the situation to-day compared with the situation as it was during the period of the previous Government.

Another very good indicator of what I mean is that last year imports increased by £13.6 millions or 6.8 per cent., and in fact last year we had a record value of imports. We had £212.5 millions worth of imports. The reflection of that in the progress of our economy is that of the increase of £13.6 millions, £13.4 millions were devoted to materials for further production and capital goods equipment which can be utilised at home for further production. Practically the entire increase in imports last year was devoted to capital goods or materials for further production at home. In that example, you see the difference between the increase in imports last year and the sort of increase in imports which we had in 1955. Of course we had an increase in imports in 1955. We had a disbalance in our external account of £35.5 millions. There was a consumption boom at home but the consumption boom and the increase in imports resulted in this imbalance in our balance of payments. In 1959, we had an increase in imports of £13.6 millions but that increase is devoted entirely towards capital goods and raw materials for production at home which can result only in increased employment.

There is nothing wrong with imports or economic activity at a higher level, or with imports rising and rising, provided at the same time in these conditions of boom and economic expansion, monetary stability is preserved. We had the position in 1955 in which we were importing too much to the extent of £35.5 millions. Our whole monetary system was endangered so that panic measures had to be taken the next year which resulted in the worst slump of the decade in this country. I think that is a reflection of the sort of investment and economic conditions that the Government desire here, that its economic conditions will provide for expanding economy and at the same time preserve the financial system intact.

In the current year, there is set out in the Tables supplied by the Department of Finance in connection with the Financial Statement, the programme of capital expenditure for the year 1960-61. The total estimate of Government investment for the year stands at £54.37 millions. It is another indicator of the confidence which the Government are showing in our community that the amount is an increase of 25 per cent. on last year's public investment. An even more important factor is that a larger proportion than ever before of that £54.37 millions is going towards productive investment which will be of very practical benefit to the economy and can result only in the lowering of emigration and further employment of more people at home.

There is a reference at page 32, paragraph 53 of the Central Bank Report to the fact that:

The redirection of investment to more productive activities was one of the main reasons for drawing up the Programme for Economic Expansion and the change in allocation as between different objects of expenditure is shown in data supplied by the Minister for Finance.

Various figures are then given which are very illuminating. It states:

In the five years capital provision for agriculture, agricultural credit, forestry and fisheries has doubled, having risen from £6 million to £12 million.

In five years, the State has doubled its investment in agriculture and the ancillary industries I have mentioned and, as is pointed out in that Report, that does not show the whole picture.

In recent years, the banks have shown a real confidence in the financial and economic future of this country. There is no doubt about that, and anyone in business, or anyone who had his eyes open in the year 1956, or anyone in this House who is in business, will bear me out. The banks embarked on large-scale restriction of financial credit in 1956 and early in 1957. That cannot be denied. It was a very necessary effort on the part of the banks to preserve the financial system that was endangered by the incomsionpetence of the administration of the time. In order to preserve the financial structure of our society, the banks in 1956/57 were forced to restrict credit to an unprecedented degree.

It is only in the past two or three years, having seen the balance on our external accounts, having seen the economic growth which has taken place, that they began to take their real share in developing the economy of the State. That is particularly the case with regard to agriculture. Some two years ago, in conjunction with the National Farmers Association, the banks embarked on the heifer credit scheme. Apart from that scheme, they have never gone to very great expense. It is well known that in the past two years the banks have been very liberal with the farming community, and I think rightly so. They would never have been liberal to that extent, were it not for the fact that they have confidence in the financial structure of the country.

I shall not rely on any statement I may make, or anything I observe in the community in which I live, because we have figures which are very illuminating. If we take the figures for the month of January for the past three years, we find that bank advances to the agricultural community showed a remarkable graph. In 1958, there was £17.1 million out from the commercial banks to the farmers; in January, 1959, the figure was £22.2 million; and in January, 1960, it was £28.9 million. In other words, in the period between January, 1958 and January, 1960—a two year period—there was an increase of nearly 75 per cent. in the advances of credit by the commercial banks to the farming community. That is a very practical addition to the doubling of the State capital investment in agriculture over the past five years.

Another example of how this programme of State investment has been tilted towards projects of a productive nature is in regard to industry. The Seanad, over the past two or three years, has participated in the enactment of the Industrial Grants Act and the Industrial Credit Act, whereby increased grants and loans were made available for the promotion of home and foreign industries. The figures for these Acts, passed by this and the other House, are backed up by the financial resources of the State. They illustrate an increase of from £½ million to £6 million in industrial credit to the industrial sector of the community. The increase has been in the order of 1,200 per cent. Over the past four or five years, that increase in capital supplied out of the State capital programme to private industrialists and public industrialists has been from £½ million to £6 million. I am speaking of the increase alone and not of the figures as a whole which are very high.

The figures showing the trend in capital for public transport, harbours and airports have gone from £7¼ million to £11½ million. An examination of the tables on capital investment supplied by the Department of Finance shows that the major share of the State programme of investment in the coming year has been tilted towards private enterprise in the State and, in fact, investment has been channelled in that direction by Government policy to a considerable extent. That is a matter for congratulation, and it can only result in the objective which we all desire to achieve—a further growth of employment within the framework of an expanding economy and ultimately—not immediately but ultimately —the ending of emigration.

I shall not enter into any argument about emigration. The figures for 1961 will, I think, prove Senator O'Donovan wrong and me right. The trend in the past two years, and particularly in the past 12 months, has been towards a reduction in the figures for emigration. The disastrous period in that regard was the period from 1956 to 1957—particularly 1957. Senator O'Donovan sought to imply that more people emigrated because of the change of Government in 1957, but we could not come in with a magic wand and stop the torrent which had been started during the previous years. We did not, and the torrent continued, but I feel we have rounded the corner and that the trend in that direction is good.

In regard to providing more employment at home, we have only our home resources, but every single month since August, 1957, fewer people have been unemployed than were unemployed in the corresponding month of the previous year. That, again, is a fact which cannot be gainsaid. It is a practical achievement of Government policy and the position at the moment is that there are practically 8,500 fewer people unemployed than were unemployed this time last year, and this time last year fewer people were unemployed than were unemployed in the corresponding month of the previous year.

That upward curve in employment, that downward curve in unemployment, has been maintained month in and month out since August, 1957. That is the significant month, I suggest, and as I have already said, 1957 was the bad year for emigration when 200,000 left in the five years, 1951 to 1956. That torrent was maintained in 1957 and August, 1957, marks the turning point because since that month unemployment has continued to drop month by month and in no single month since August of that year has unemployment been greater than it was in the corresponding month of the previous year.

That practical result has been achieved in one way by the amount of State assistance I have mentioned towards industry. Industry in this country increased its exports last year by practically 50 per cent.—from £25 million to practically £35 million. That increase in exports was reflected at home in increased production and with the chain of causation, in increased employment. Between 5,000 and 6,000 more people are employed in industry than were employed in previous years.

The labour force in 1959 in industry was in the region of 156,000. The figures for the first quarter of this year show that trend continued. It is important when a trend like that starts that it should continue. If that trend continues we can look forward to increasing employment and less unemployment not reflected in more emigration but less unemployment reflected in more employment in industry here at home. It has too often been said that the reduction in unemployment is caused by increased emigration. We have shown by the trend in industrial exports and industrial employment that the reduction in unemployment does not mean that more people are emigrating but in fact means that a large proportion of them are finding productive employment in industry at home.

I do not claim that that increase is very large. An increase of 5,000 to 6,000 persons may not be an awful lot but it is the start of a trend. It means that the curve of employment, after many years of disastrous mismanagement of our finances and our economy, is going up. I would be the last to think that because we employ an extra 5,000 to 6,000 persons in industry, we have solved all our problems in this country. We have not. The returns for the first quarter of this year show that the rising trend in employment is continued. I think that inevitably we shall have to absorb the major surplus from the land in industry here at home if we are to solve the problems we are all so concerned about.

I realise that a considerable step in that direction could be taken by increased agricultural production. Inevitably, that will lead to increased savings for the farmer's pocket, increased money at his disposal and that in turn should lead to further industrial undertakings in towns in their locality and in the community. I am not decrying the agricultural efforts in this respect but whether it is increased agricultural production or increased industrial production, the savings made available to the community from those sources can be translated into more employment for our people by further industrial investment in the country.

With mechanisation and with the demand of people in rural Ireland for a higher and higher standard of living, one which they can equate with the standard of living in industry in England and in the United States, we must be in a position to provide industrial employment at good wages for the surplus people who will come off the land. That is the challenge facing the community at the moment. The trends shown by the figures for industrial exports and by the figures for industrial employment and production lie in the direction of providing to a greater extent for that inevitable surplus from the land.

It is also heartening to see that that trend is resulting in an increase in activity in food processing industries. I should like that to be developed to a greater extent. The industry is based on the products of the land—fruit, vegetables, lamb, mutton, beef. It is in that line that the greatest hope lies. Therefore, I am glad to see that the reduction in the export of store cattle was to a certain extent compensated for by a substantial increase in the region of £3,000,000 in exports of carcase and processed meat.

With respect, this has not to do with taxation, as far as I see. It seems rather a survey of industry.

I am dealing with the programme of capital expansion of the Government and the result of that programme. In particular, I am dealing with the figure of £54.37 million and the results of large State investment in the past three years.

An Leas-Chathaoirleach

The expenditure of that £54.37 million is a matter for discussion on the Appropriation Bill. What arises on the Finance Bill is the manner in which that £54.37 million will be raised.

The important thing, as set out in the Central Bank Report, is that the financial situation is now so much in order that the Government have not had the slightest difficulty in raising any money for financial projects in the past three years. That figure of £54.37 million, in the light of the confidence of the people in the present administration, will easily be raised, whether by national loan or otherwise. There is a renewal of confidence and a buoyancy of revenue. Increased revenue was obtained last year. Our national loans were successful. The fact that this increase of 25 per cent. in public investment will easily be met by the public shows there is an increasing confidence and an increasing awareness that the Government are moving in the right direction. The fact that all Government efforts to raise necessary finances for public investment in the past few years have met with success is in contrast to the failures of the Coalition Government to raise the necessary finances for projects of public importance.

I propose to make a very limited comment in relation to this Bill. Indeed, in my remarks I intend to confine myself almost entirely to the subject of incentive taxation. To my mind, the most significant and perhaps the most important features of the recent Budget are the dramatically good results that are already visible and evident from the fiscal incentives that have been put in operation in recent years.

I may be forgiven if I remind the House that for many years I thought I was boring Senators when I spoke on the subject of using taxation incentives to encourage savings, to encourage people to work harder, to encourage investment and thereby to encourage industry and exports. For a long time, nothing very much happened. The first step was taken by the Inter-Party Government in 1956 to give taxation incentives for exports. There were tax incentives for new industrial buildings and other tax incentives, with a view to getting positive results rather than using the Budget merely to collect revenue, very often regardless of the ill-effect on the industry and economy of the country.

This Government, I am glad to say, extended and increased these incentive forms of taxation with what we now see are quite dramatic and very important results in this year when, at one time, our balance of payments situation looked very uneasy indeed and was in fact very disturbing because of the fall in agricultural exports. However, to our pleasure and not to my surprise, we find that industrial exports in the past year, directly due to this use of incentive taxation, provided us with the necessary balance to make up the deficit which had occurred through the fall in agricultural exports.

I should like to comment, first of all, on the existing tax incentives which we have in operation. One which is already giving quite dramatic results is the incentive to build hotels and make improvements in them. We all know that tourism is a basic industry in this country now and it is one to which we can look to provide us with very much more invisible exports. We have talked about this on other occasions. A very great expansion in the tourist industry is possible in this country. In that, we shall get an export which we very badly need to add to our existing industrial and agricultural exports.

One has only to read the newspapers to see what is being done in the direction of improving our present hotels. There are projects for hotels involving as much as £1,000,000 in Dublin, Limerick and Cork. Depreciation allowances have been stepped up from the allowances which formerly were quite unrealistic.

The idea of incentive taxation started slowly. It was very hard to get the Revenue authorities to move. It seems very hard to get them to change their thinking on a matter like this. The original incentives to assist existing industry and to entice outside industry and capital here were quite insufficient. It was rather painful for years to see all sorts of important people, industrialists and Ministers of State, go abroad to bring back the industries we needed armed only with incentives, which, to their surprise but not to mine, could never be strong enough to attract any worthwhile industry or capital to this country.

The whole picture has now changed because of this new enlightened policy which I think is only a beginning. It has already shown that it is the way to make this country industrially prosperous and to make our population active in employment in such industries.

Senator O'Brien referred to death duties. I can never understand why something is not done about this matter. I do not think I have ever met a Minister of any Government, and a Finance Minister at that, who did not agree that death duties should be removed. Here again, we seem to be up against the insuperable barrier of the Revenue authorities who say they cannot afford to relinquish the income that comes from the breaking-up of capital savings. I cannot understand it.

Any businessman—anybody—knows that the result of the removal of death duties here will be a great influx into this country. First of all, it would preserve existing capital that would have been broken up and it would be retained here to earn income. In addition, it would undoubtedly bring into this country large numbers of people with money. Unfortunately, I know there is a political objection to bringing in people from outside which I hope we are getting over. Some people object to wealthy foreigners coming in here to buy up our land. I suggest that that should not be an insuperable barrier to the removal of death duties imposed upon our own people.

We all know the plight of the West of Ireland. The young people in particular are fleeing from the west either to other parts of the country or out of the country altogether. Governments have made many efforts to have industries established in these areas, with a view to keeping the young people there. However, apart altogether from incentives, many of these areas are unsuited for industrial production because they are uneconomically placed for one reason or another. As well as that, we cannot locate enough industries there to maintain a decent pool of employees. Therefore, something should be done for the west.

Agriculturally, the west has not very much potential; I do not think that industrially it has very much potential, either. However, it has great beauty and great space. It could be used for tourist development which already we are trying to do. I believe that is the place to which we could attract rich people to live, people who do not really want farming land but who want space and want to live spaciously. They can do so there.

Nowadays in that side of Ireland, through good roads which make places easily accessible and through its nearness to Shannon Airport, wealthy people would place themselves in an ideal situation in Ireland. They would have an expanse of beauty and plenty of land which has not been taken from people who could use it agriculturally. If some form of tax incentive could be devised whereby people in such an area—broadly speaking, west of the Shannon right down through Ireland—would perhaps be free not only from death duties but might also have some return in the standard rate, I believe it would be good business. We are not forfeiting anything we are getting already. We stand to gain very much from it in the influx not only of the capital and the money that they will bring with them but in the income tax they will pay from year to year in the area which, after all, is becoming a liability rather than an asset to our economy. I throw that out as a suggestion which should be looked into.

To come back again to the question of death duties upon our own citizens, I think the case for their removal was made very well here today by Senator O'Brien, as well as by Deputy J.A. Costello in the other House recently. I would like to add one point they did not mention. We pride ourselves on being a Christian community, and the basis of the Christian philosophy for a community is that the society is based on the individual and the family. Under the death duty code we have here at present, it is assumed that a man's family is finished and should be broken up and his goods and chattels thrown to the winds when he dies, even though he leaves a widow and seven or eight children.

I have known that to happen, and it is regarded in our community as the right thing to do. I cannot see how we can retain a tax that does such a thing, in view of the philosophy that we hold here. I add that as an extra weight to the purely materialistic considerations that have already been put up by other speakers. I hope the time is coming when this question of death duties will be seriously tackled not only from the moral and social point of view but from the purely practical point of view of not being good business for our country.

I should like to read a remark made on this question of death duties by Mr. Shiel, President of the Association of Chambers of Commerce, at their annual meeting. He said that it was a matter of great regret that the Minister did not abolish death duties entirely. Of all the taxation to which they were subjected, he thought that death duties were the most unfair in concept. Funds on which death duties were levied represented invariably the savings from income on which full income tax or surtax had been paid. Consequently, a claim for death duties was further taxation for which there could be no possible excuse or justification. He was convinced that a very considerable amount of foreign capital would be placed in Ireland if this out-of-date and inequitable taxation of death duties were abolished.

There seems to be a general consensus of opinion on this point, and it is really high time that something drastic was done in the matter. We all know that in the Budget this year there was quite a small adjustment made in the same subject of death duties, but, as Senator O'Brien has pointed out, that really only adjusted the value of money to make up for the inflationary effects that have occurred since the tax was originally instituted.

Another point on incentive taxation which I feel ought to be considered is in connection with higher incomes. Our whole idea of a high income in this country is unrealistic, and if we want to have a decent economy and an imaginative one, we shall have to think better about how we pay our people at all levels. At the top level, they are almost worse than at the low level, comparatively speaking. When we want to get the right quality, our taxation system is severely penal in the case of high income groups, and this applies to all forms of activity.

In this Budget, the Minister has told us that ways of evading income tax are being sought out and closed, so that there cannot be any deficiency. I think it is about time we got down to making it unnecessary for people to adopt all these ways of evading the tax code. The tax code is made penal undoubtedly. There seems to be no serious attempt to change it. It is admitted by everybody that it is unsuited to our particular set-up. Even England has changed the code which they left with us in many ways which we have not followed, although England is an industrial and wealthy country.

First of all, we need in this country savings which we can invest. When we invest our money, it must be put into the hands of the best people who will make the best use out of it. You will not get the best people by paying low salaries and imposing penal taxation on their salaries. In connection with salaries, I should like to instance a case. The particular example is pitched rather high in terms of salaries but it is no harm to hitch your wagon to a star. We ought to raise our sights and what I have to say now will raise not only the sights for a lot of people but will raise their eyebrows as well.

General Motors, who are the world's largest car manufacturers, last year paid ten of their top executives £100,000 in salary and bonus. It is no accident that this company ranks among the half-dozen most prosperous companies in the world. High pay for men at the top is invariably the sign of a lively, efficient company. It gets and keeps the best brains because it pays well and everyone down to the lowest apprentice benefits. People who criticise tax reliefs to higher income groups—we have a lot of them in this country—are very mistaken in their attitude, even from their own selfish point of view. A company that pays badly at any level is a company in decline. The time to worry is not when the top executives are highly paid. More often the time to worry is when they are paid too little.

Generally speaking, up to now, salaries paid to top executives in this country are inadequate and are not attractive to the right men in the numbers and quality that we urgently need. That applies not only to outsiders but to our own applicants. If we do not pay people decent salaries in this country and give them a fair crack of the whip from the point of view of income tax, we will not retain the people in this country. The best men will go abroad. I know many men who would and could be working here who are earning big money in other countries today.

In conclusion, I should like to commend the Minister for his use in the past year of these incentive forms of taxation. I think, though, that we must not assume we have now done all there is to be done in, this matter. I suggest that we are only beginning and that we have only just found out the use and the benefit of using taxation incentives. We must judge the use of these incentives in a long term rather than in a short term way. If we are to say that we cannot remove this or that because we will lose so much, we will not get anywhere. We must take a chance and look ahead in these matters.

With regard to death duties, no very big chance is being taken because the average figure is not more than £2 million, and £2 million in our Budget is becoming a more or less negligible figure. The fact that it is only £2 million is rather an adverse comment on the situation in which we find ourselves today, that we have not got any big estates and never will unless we do away with death duties. I hope the Minister will continue, to follow with more and more of these tax incentives in order to create industrial activity.

If I were Minister for Finance, I should feel happy enough at the reception the Finance Bill got in this House. There was no serious criticism of his management of affairs during the past three years. Senator O'Donovan did sound notes of warning. In doing so, he called up various dogs which refused to bark. When they do bark, it will need to be a very big woof indeed to be convincing.

He assured us that he foresaw depression, gloom and doom around the corner and that if the conditions abroad deteriorated, we would be in serious difficulties here. All I can say, in reply to Senator O'Donovan, who makes, I presume, a more serious and detailed study of those matters than I do, is that if President Roosevelt took that line of approach in the middle 1930s, the United States would not have achieved the degree of expansion it has achieved and become leader of world opinion and trade as it is today.

He then proceeded more or less to abuse the various institutions which issued reports, the various commentators and the various writers on this subject. It is not the fault of the Minister for Finance or of the Fianna Fáil Party who supports the Government or of the Government if the comments of the various periodicals are favourable. Certainly, it is not the fault of the Government if the Central Bank report is favourable or if the report in the Irish Banking Review is favourable and to a certain degree if the O.E.E.C. Report is also favourable. Despite the fact that it does sound a note of warning, it is more a precautionary note designed to steady a small economy such as ours moving in present circumstances.

There is an old saying that to travel hopefully is better than to arrive. I assume that Senator O'Donovan was travelling hopefully when he made the statement he made here this evening. There is nothing in present circumstances to suggest that we have not made a good deal of progress in the past three years. Despite the fact that the Government took over the economy of the country in 1957 in, if you like, rather weak circumstances, they can point to a degree of stability, a degree of expansion and a degree of initiative which were largely lacking in the Government which preceded them. I am not finding fault with the personnel of the Government which preceded this Government. I am not even finding fault with their good intentions but it shows that the system based on inter-Party or coalition government cannot make the progress which a one-Party Government, united in their aims and objectives, can make and do make if they get a reasonable chance.

The Minister can point to the fact for the first time in 20 years, I think, that the Budget this year showed a small surplus. The deduction to be drawn from that is that it will help at any rate to reduce unemployment and will enable us to face the years ahead with a somewhat greater degree of confidence. As was pointed out, tax revenue was buoyant and showed signs of remaining buoyant. That, in my view, denotes progress.

We must recognise that if we have fairly high taxation the objectives for which the taxation is raised are worthy objectives. We are moving in a world which refuses to stand still and for that reason if we demand higher standards, if we demand better living conditions, better roads, better housing, better services, higher output and all the rest, it stands to reason the revenue side will also show an increase. The Minister made the most of the small surplus which he had in the Budget and indeed he spread it very satisfactorily and very prudently and therefore, to my mind, disarmed a lot of the criticism which we would have had this evening but for that fact.

We must recognise that even though we were moving, if you like, on a tight footing, the Government and the Minister gave reliefs of roughly £1,000,000 in the 1958 Budget and that the total reliefs in the three years since 1957 amount to something like £3,500,000. Therefore, when we speak of revenue, we must recognise that the Government have made a certain amount of progress in that direction and that they are not unmindful of the hardships imposed by the indiscriminate collection of revenue and that they also recognise that the tempo of the progress and the rate of expansion of present life demands that they will have to raise a certain amount of revenue in order to discharge their responsibilities.

The year 1959 was a year of progress in every direction. That is one of the reasons, I suppose, why the critics of the Budget find it hard to present a good case. The Report of the Central Bank indicates that the national income increased by three and a half per cent. in real terms and five per cent. in gross terms. It shows that the national product also increased. The growth of national income went hand in hand with sound monetary policy. There is no denying that fact and therefore on those grounds the Government can claim credit.

Even allowing for the fact that exports of store cattle fell by a considerable sum, due to many causes into which I shall not go, the amount by which that trade fell was amply compensated for by an increase on the export side. Wheat imports, following the bad harvest of 1958, amounted to something over £3,500,000. Allowing for those facts the fact that we were able to make up the deficit denotes very good work indeed. For the last three or four years, trade abroad has shown a steady gain and, as the Taoiseach pointed out, now is the time if we are ever to grasp the nettle, to try to market abroad.

Now is the time to invest as far as possible in our own industries because despite the fact, and I say it with limited experience, that we even have a prejudice at home against our own products, we have made progress even in the British market. At one time it used to be said that you could not send coals to Newcastle. Strange as it may seem, we are now achieving that, not in the sense of sending coal to Newcastle but in the sense of sending other products to the British market, industrial products, and competing with the British on their own ground on the same basis and turning out a better article. To-day, strange as it may seem to members of this House, you will meet people who shout about freedom, who shout about the Border, who shout about Sinn Féin, but who will religiously go into shops and purchase the imported article in preference to the home produced article every time. If you draw their attention to that fact, they simply laugh at you, but still they pose as the ultra-patriots who are out for the freedom of the country. They do not, it appears, want it economically free; they want it free in their imagination.

An Leas-Chathaoirleach

I doubt if this is relevant.

That may be, but revenue and expenditure are so closely knitted that it is very hard to draw the line and I fear that I would not be expert enough to keep within the bounds. I know that on the Finance Bill one is strictly confined to discussing revenue, but they are so closely knitted that it is very hard to keep to the subject objectively. I was trying to make the case that the Government were taking pride in the steady progress which has obtained.

We have, again, fairly steady progress at home. More hands were employed than previously. There were more hands in industrial production in 1959 than in 1958. Speakers have mentioned emigration and have spoken of various ways and means of curbing it. I do not know what better ways and means they see than the various indices we have, the various reports. We can see that we have a sound economy, that we are making progress and that we have absorbed a certain amount of our unemployed.

The Minister for Finance pointed out in his Budget speech that emigration was greatest to England when it was slack here. Having regard to the shortness of the lines of communication and to present day circumstances, it is inevitable that people should seek higher rewards the moment they become aware of them and people who criticise the Government on those grounds must be aware of that fact. He said that when conditions were good here, emigration tended to drop, and that is understandable. When conditions in both countries were similar, the position steadied itself. When speakers denounce the Government's efforts to stem emigration, they should think of better ways and means of doing so than the Government have thought of up to date. The best ways and means we have at our disposal so far are the report of the Central Bank, the Quarterly Bulletin of the commercial banks, the articles written by economists in the daily and provincial press, the statistics and the Budget statement which show, despite what any speaker may say, our relative stability at the present time.

We can be theoretical about it; we can make hypothetical statements about it as Senator O'Donovan has done to-day and say: "I can foresee you fellows getting into difficulties in autumn, 1960. I am making that statement now and standing over it. No matter what the Central Bank Report, the Bulletin of the commercial banks or other economic writers may say, I still stand by my argument." He hopes by stating this attitude that we will run into difficulties—but no, I do not say that; I do not think he did it with intent to injure the economy, but I have heard him make that statement here before, and he seems inclined to stand by it.

This whole matter of progress lies largely in our own hands and, as the Taoiseach points out, if certain sections of the community set themselves up as pressure groups and when we have achieved something, demand a larger slice of the national income than is their right—they may be an unproductive section—then, if we come to cross purposes with them, we are going to have our difficulties. It behoves us all, as pointed out by the O.E.E.C. report and other periodicals, to watch carefully, to know that we are a democracy and to realise that we cannot have our cake and eat it, and that no matter what section of the community we may represent, we can have a slice of cake only in proportion to the effort we put into its production.

Last year, savings increased—which was a good sign. Savings showed upward signs all through last year. That in itself is a good thing which denotes, despite arguments to the contrary, that we have not the savage taxation we are alleged to have. We all of us would like to see taxation reduced, certainly. No one I know of likes to pay heavy taxes. Ratepayers object to paying heavy rates, and taxpayers object to heavier taxation, unless they see some real, tangible return for it. I suggest that the return we see here to-day is the various reports I mentioned and the Minister's Budget speech.

Business suspended at 6 p.m. and resumed at 7.15 p.m.

I was trying to make the case that, in all the circumstances prevailing, the Government have made good, steady progress during their period of office, and I was trying to emphasise the fact that all the indications point in that direction. For instance, we can say with conviction that exports this year increased by more than £5,500,000 over the same period last year, and that, at the same time, our holdings abroad held steady. I was also trying to emphasise the point that it behoves us, at this stage, to watch and guard against inflating our costs of production in view of the fact that there is this new idea of regional groupings in Europe now and no one can say with conviction what the outcome is liable to be, what the terms of trade may be, what competition we may have to meet in the export markets. We do not know what trend the markets will take. We do not know if we, with other small countries, will be able to hold our place and cater for the tastes and needs of those markets.

I was also making the point that if any section of the community persisted in making demands on the Exchequer out of proportion to their efforts, it would be injurious and harmful to our export drive, that we should find ourselves priced out of the markets abroad and that in all the circumstances those claims would militate heavily against us in view of the new alignments in Europe. In a humble way, I try to follow the trend of those events. Nobody can say with certainty what the outcome will be.

During the recent local government elections and prior to them and indeed for some time past, a number of persons have been going around the country spreading gloom. In my view, that is calculated to injure the drive towards expansion. At the best of times, it can do no good and serious harm could result from this type of talk in certain circumstances. The indications are better than those people would have us believe.

In the agricultural sector, our reserves in livestock and in breeding stock and the management of various activities such as grasslands, support prices for fertilisers, and so on, are aimed at helping the export drive. The point was made that an increasing amount of current expenditure in relation to national production was being devoted to current Government services. I referred briefly to the Minister's Budget speech. At column 156, Volume 181, No. 2, of the Official Report, he dealt very effectively with this argument. He is reported as saying:

That there is a surplus at all is attributable to two causes, one, the buoyancy of the revenue, reflecting increased economic activity, and the other, the efforts of successive administrations to keep the growth of public expenditure within bounds. Contrary to popular opinion, an increasing percentage of the national product is not being applied to current public services. The proportion which total current expenditure on Central Fund and Supply Services bears to gross national product fell from 22.5 per cent. in 1956-57 to 22.2 per cent. in 1957-58, 21.3 per cent. in 1958-59 and 20.7 per cent. in 1959-60.

He made this further point:

Measured in constant prices, total current expenditure showed a slight decrease over those years. It has recently been shown that the expenditure of public authorities as a whole—and total taxation—are lower percentages of the gross national product here than in Britain, Sweden, France and—

—many other countries. Taking present circumstances, that is not a bad effort. It does not show a bad trend that we are able to curtail expenditure in that direction.

Credit was mentioned. I think that in the agricultural and the industrial sectors, there is no cause for complaint as regards the availability of credit. We are becoming better mechanised in the farming sector and also in the industrial sector. These signs look good and they should help us towards a realisation that we are making some progress in those sectors.

It will be remembered that the Government showed some concern some months ago and before the Budget at the fact that the farmers' income failed to rise in accordance with that of some other sectors of the community. Having regard to the fact that they are primary producers, the Government took steps to ensure that as far as it lay in their power the income of farmers would reasonably be in line with their efforts. Towards that end, the Government made £2 million available by way of supports to help the farming community.

The Anglo-Irish Trade Agreement which was based on the 1938 Agreement can be considered a decent effort, on the face of it. Parity of prices for certain products is continued. It works out in our favour as regards fat cattle entering the British market. For the first time, Irish fats entering the British market will have parity in price with the home-produced cattle. The levy of 3/6d. per cwt. previously imposed on our cattle has now gone.

The Senator will avoid any detailed discussion of these matters.

Yes, but in view of the fact that the Finance Bill is tied up with fiscal policy, I thought I might refer to certain aspects of the Trade Agreement.

In general terms.

We have had some heavy criticism of it recently. I propose as far as possible to keep in line with the ruling. Taken by and large, the recent Budget was quite good. Incentive taxation was mentioned. One can discuss taxation from many angles and relate incentive taxation to reliefs for certain people in the community.

With the majority of the public, I believe that you can have incentive taxation tied up with many other supports of varied kinds and that the work of the Government during the past three years is having a good effect. It has boosted the morale of the community, and in spite of criticism and the fact that we have prophets of doom around the corner, we must still pro-u ceed towards our objective, which is the expansion of trade that we hope to achieve, with an expansion of agriculture and industry at home and increased exports abroad. If we are able to do that, we shall be able to have more people in employment, who can contribute more towards taxation, and we shall eventually come to grips with the emigration problem by good leadership, by monetary stability and by judiciously importing capital, by letting the world abroad know that we have a stable Government which is just and recognises the claims of all sections of the community, and that we are not in the habit of indulging in revolutions, for instance, like the South Americans who believe in advertising that at the moment. Taken by and large, for our size, we should make progress in the years ahead.

In discussing this Bill, we are at a disadvantage in that the relatively long debate in the Dáil has ranged over many aspects and we have to confine ourselves mainly to taxation and to the means of raising it. I take it that that does not preclude us from suggesting ways and means by which the tax burden may be lightened in the future, because that is our only hope. It is quite easy to suggest where tax reliefs can be given, but it is not easy to see and to point out where the money can be saved on the other side of the balance; in fact, it is far easier to suggest ways and means of spending additional money than to show where that money can come from. That is our problem, and the only approach to it seems to be a long term one, one where we shall, we hope, realise some of the features of an expanding economy that will continue to expand and reverse the trends of the past decade and succeed in providing more jobs for our young people.

Unfortunately the picture at present is anything but good. We must face facts, and it is no use for Senator Lenihan or anybody else to claim that we have turned the comer since 1957 or any date, because the economic statistics show how hollow such a claim is. Seeing that we must judge our efforts by our successes in providing employment for our people, how sorry the position is. The figures here show that we had in the year in which we were supposed to have turned the comer 1,136,000 people in employment. That dropped by 15,000 in the following year, and last year it dropped by 9,000. There are indications that it may have levelled, but that is not good enough. We have to reverse the trend sharply and aim at providing increased opportunities of work and thereby having increased numbers to share the burden of taxation. That is the only means of lightening the present burden. This will of course require a very long term approach, and we have to examine some of the factors likely to influence that.

We have, for instance, the peculiar dependency of our small economy in the world today, the way that a slight shift in the terms of trade can make all the difference in our position. There is no use talking about monetary stability without relating it to what monetary stability really depends on for us, that is, the terms of trade. The year 1956 has been quoted by Senator Lenihan where we had a deficit in the balance of trade of £35½ millions, but the real cause of that deficit is the shift that took place that year in the terms of trade. Imports cost more and we got less for the exports we had to sell and consequently the gap opened. Face the facts. This time 12 months, it seemed that we might conceivably be slipping into a similar situation. There was little we could do about it, but, thank God, that situation did not recur and right through the second half of last year, the terms of trade remained favourable to us and we succeeded in having a quite successful year, but let us understand the real reason behind our difficulties.

Again we had the claims made that new taxation is not necessary in that the Budget was balanced last year. We all rejoice at that, but let us not be blind to the item that balanced it, the fact that a bad summer reduced milk production so that we had no butter to export and, therefore, no subsidy necessary to make up the deficit on exports. It is a negative effect, and we would have been far better had the summer turned good, had agricultural incomes as a result been up by £8 to £10 million and had we had to face a subsidy of £2 to £3 million to sell that amount, because the addition of another £10 to £12 million to our economy last year would probably have boosted the tax yields by at least £1½ to £2 million, so that it would not be a case of paying out £3 million to sell the extra we produced last year; it would be a case of paying out the difference between £3 million and the extra taxation that would have been gathered in from the extra income of a section of our people.

We all resist very strongly increased taxes, but, on the other hand, some of our social services are far from being a credit to us, for instance, the amount given to old age pensioners. I would suggest quite seriously that if there was a case for bringing in a subsidiary Budget, surely it is a Budget that would provide specifically for such a deserving single item as old age pensions, because nobody could quarrel with the extra taxation involved for that very special project.

That is a matter that will properly arise on the next item.

I appreciate that we cannot really advocate taxation lest we put any bad ideas into the Minister's head.

There is no objection to advocating taxation. It is a question of administration that is involved in the Senator's suggestion.

Yes. We cannot really discuss taxation without discussing that. I hope I am in order in discussing what is now being used as an additional means of taxation, that is, the question of rates. The central Government is shifting more and more of its charges and responsibilities on to the county councils. It has come to the position where almost 80 per cent. of the rates estimate is actually mandatory. The local elected representatives have no say whatsoever in that and yet they are blamed for the size of the rates. If the time has come and if it was a wise move to split the Budget into two parts, a capital Budget and a current Budget, if the Government wish to proceed with using the rates for taxation, at least the public rate should be split into two parts, one central government and the other local, over which the elected representatives have control. Otherwise we are contributing to this campaign abroad to attack and belittle our representatives on local bodies who are doing a voluntary job and doing it very well. They are very much misunderstood and attacked in public on that account.

Perhaps, I had better leave any details over for the Appropriation Bill. Let us come to the national income which has been cited here as the barometer of our national health. We find that last year the national income went up five per cent.—quite a substantial increase but we should beware of the pitfalls that occur in that. For instance, had the Government last year allowed agricultural prices to increase by five per cent. at the time they gave the general increase to the other sections, then agricultural income would have gone up by five per cent. or about £6,500,000 and our national income last year would have been up by another £6,500,000. That would give us a rate of increase of 6½ per cent. rather than five per cent.

It is a question as to how much of the five per cent. was really caused by the increase in wages last year. In a recent article a well-known economist estimated that of the general increase of six per cent. about three per cent. was due to productivity and the other three per cent. was an increase in actual wage rates. That meant that, to that extent, the latter portion was a misleading addition to national income, so that we did not achieve a real increase of five per cent. The figure of 3½ per cent. for gross national product would be a more reliable one. If we can maintain a figure of 3½ per cent. over the next decade, we would be doing quite well and keeping in step with our more powerful neighbours, especially England, because, whether we like it or not, so closely is our economy linked with England that it is virtually a single labour market. We have to keep our standards of living within a certain distance of the British standards; otherwise our people will not accept the standard here and will go across.

It was quite rightly pointed out in the Minister's Budget Statement in the Dáil that we are much better off than four-fifths of the world but the unfortunate fact is that, due to our position here, being so dominated by English standards, we must, whether we like it or not, go forward and increase our standard of living. Otherwise, our people will not stay here under free democratic rule. If we could by some means or other shift our island to somewhere off the coast of Africa for the next 50 to a 100 years, we would be the envy of that part. However, we must thank Providence for what we might call our unfortunate fortunate position.

Off the coast of Africa is the Senator's habitat.

It seems that the real question of taxation and finance here all turns on how to increase our real national income to ensure at least that the attraction of increasing real national income, together with a full realisation of the advantages of living here compared with living in a much more industrialised region are sufficient to hold our population. Our people should stay here and face the facts of building up this State in the coming decade and reverse those unfortunate post-war trends of decreasing employment.

It is no use citing figures of unemployment at the labour exchanges or elsewhere. The fact is that if the numbers are not counted as being in employment, they are either in England or at the labour exchanges. In regard to increasing our real national income, I have been doing some study recently, the result of which shows that a two per cent. increase in gross agricultural output over a ten year period would contribute as much to increasing our real national income as building up here industries for export to the tune of £100,000,000. That is about the comparison between the two, as far as I can see.

I heard that sum mentioned before.

It was £100,000.

It is, of course, no small task to increase and build up an export industry of £100,000,000. Likewise, it is not a light task to increase agricultural production by two per cent., but if we are to provide increased employment, there is no other way of doing it. Actually, we have got to combine the two—increased production from agriculture and increased development of industry, especially industry for export.

We have got to guard against the swing of the pendulum, this over-enthusiasm such as we had two years ago, in 1957, when, after a very favourable year, agricultural production increased 10 per cent. Everybody claimed that we had at last broken through and were on the up-swing. The following two years showed that was not so. Likewise, while we rejoiced last year in the fact that industrial production increased some 8 per cent. or 10 per cent., we should guard against assuming that that trend can continue without great effort on our part.

In fact, a recent article by Mr. Garrett Fitzgerald suggested that, when due allowance was made for all the factors, the rate is actually settling down at 6 per cent. per annum. I have done some calculations recently and perhaps I could quote just one or two of them. They suggest that if we increased industrial production six per cent. and agricultural production two per cent. and keep that going for 10 years, we could increase our employment by only 25,000, while at the same time, giving those at present in employment an increased standard over 10 years, assuming that productivity in our factories continues to increase at two per cent. and that this remains with the workers as real wages.

Likewise, allowing for a very much needed improvement in agricultural income, as a result of increased production in agriculture, if we allow for this, which seems to be a rather difficult task, ten years, it would only increase our net employment by 25,000 or some figure close to that. Even with that, it seems that we might have to borrow a certain amount of capital to finance such a modest expansion. What we have been doing in the past decade has largely been a case of the cuckoo in the nest. Whether on the land or in the factories, people were producing more either through better equipment or greater skill, and to get value for that production they had to displace others. People had to leave the land. Others in factories producing more than was needed for the home market had either to emigrate or produce for export. That is the pattern by which we have increased our standard of living in the past ten years, at an appalling national sacrifice and a pattern that has been forced on us solely by our proximity to the British labour market.

If we take the slightly more difficult target, a four per cent. increase in agriculture maintained year in and year out over ten years, and the creation of industries for export, exporting over £10 million a year, and producing £100 million at the end of ten years, it would provide an increased standard of living for those at present here and new jobs for about 80,000 to 90,000 people. If you put another two per cent. on to the agricultural side to produce a combination of agriculture and industry, you produce openings for something like 140,000 to 150,000, which is more than we could expect to create in an additional labour force in the next decade.

That is the task and that is the only way which we can set about it, but if we are to set about it, we must organise and we must provide incentives at all levels. As Senator McGuire has rightly pointed out, tax incentives are having a beneficial effect in industry; yet there are no incentives called into play in agriculture. Some system of incentives will have to be found. It might be brought about by replacing the present system of rates on agricultural land by a system of income tax on agricultural land. Lest anybody should rejoice about income tax for farmers, it should be pointed out that under any system of collection or assessment of income tax, no family farmer under 80 acres could possibly be held as making an income which would be taxable. The wide reliefs afforded by income tax provide the means of encouraging the family man. After all, that is one of the problems of getting production in agriculture at the moment, to persuade those many bachelors holding land to get married, raise families and thereby have the urge to better their farms and increase production on their land.

I do not want to go into too much detail on this Bill but I do say that the situation is serious and that little can be gained by making Party political points. We should recognise the situation and the forces we are up against so that we may be able to tackle our problem and that when we get to the end of 1970, we may hope that we will not have the sorry tale we have today of something like 80,000 to 100,000 jobs lost in the past decade. I hope we shall revise those disastrous figures in the next decade. As well as that, we need to emphasise those real factors which go to make the standard of living which we offer here, the free clean air of the country, its unspoilt characteristics, the freedom from pressure of population, freedom to travel around and everything that makes life here so much more conducive to real living than living in overcrowded and over-populated industrial regions like England and elsewhere.

I hope our new television service will contribute to that and to show that you cannot measure everything simply by means of a hard cold index which measures the standard of the national income. That is only one factor and remember, in the last analysis, our task is to inspire our people to live here and to make their homes here and to contribute to the national effort—real practical patriotism. While we cannot match the actual material standards abroad, we shall at all times have to try to keep what we might call a real standard of living, a combination of the material and other qualities, and convince our people of that and try to get them to take a practical and patriotic view of building our country in the next decade.

On previous occasions we have been told that in the circumstances of this economy, any Government must be judged by their success or failure to provide reasonable employment for our people at home. Senator Quinlan has already referred to the documents which we received, namely Economic Statistics. Like Senator Quinlan, I must confess that I was shocked to find that in the three years comparing 1956 with 1959, there had been a decrease of 51,000 in employment. According to Table 7, the males engaged in farming work on 1st June in those years, and at work in agriculture, forestry and fishing, dropped from 445,000 to 420,000, and according to Table 16, the estimated number of people at work in the main branches of non-agricultural economic activity dropped from 718,000 to 692,000, an over-all decrease of 51,000.

We may be told that we are turning the corner, that the trend is now upwards, but this Government got into office on the promise and the understanding that they could tackle the problem of unemployment and that they intended to create 100,000 new jobs. Reference was made to 20,000 new jobs per annum. How long will we have to wait to get around this corner? How long until even 10,000 new jobs are created every year? I know that reading the Irish Press day after day, one is left with the impression that employment is booming and that new factories are being opened all round the country. You sometimes get the suspicion, however, that you have read about that particular factory before, that there is something familiar about it. You may have read about plans for the factory or that “it is intended”, that “it is hoped” to employ 200 people for a start and that “it is expected” when the industry gets into full gear, employment will be provided for another 500.

You read that sort of thing in the Irish Press day after day, but according to this Government's standard when in Opposition of what a Government should be judged on, they have lamentably failed. I am saying this in the hope that the Government can in fact redeem its election promise. I would be very pleased if next year the Minister or somebody else could crow over us and say: “Listen, we have accomplished this. We have provided 20,000 additional jobs this year and we confidently expect to provide another 20,000 next year.” I would be quite prepared to stand up here and compliment the Minister or any spokesman of the Government who could tell us that. But instead we are being given this sort of propaganda by the Party newspaper day after day.

It is in striking contrast with the sort of propaganda that newspaper engaged in when Fianna Fáil were in Opposition. We in the trade union movement know of the embarrassment created for the movement when Fianna Fáil were in Opposition: there were reports of wage claims having been lodged, of union branches having met on the previous night and having decided to put in claims for 30/- or £2 a week. That was very clever. When you investigated, you could find no grounds at all for the reports, but the impression was left in the minds of fellow workers that claims were going in from other trade unions. These men asked themselves: "Why is our union not doing the same? We must see that our union will do so."

The impression has been left that the trade unions in the past year have been able to work wonders for their members, that the standard of living of trade union employees has reached a new, all-high level, that we have never had it as well as we are having is now under Fianna Fáil. It was probably as well that the trade union journal should in a recent issue have brought our feet back to earth. It shows that in spite of all the chasing, in spite of all the work done by the trade unions, all that was accomplished in autumn, 1959, and the early part of 1960 was to recover our 1939 standard of living in relation to wage rates and retail prices.

Comparison is based on official statistics taking into account the change in indices in the meantime. That shows that wage rates—which I believe are built up on Dublin rates but are a good measurement of rates in the economy as a whole—have increased to 266 in relation to the index of 1939 and that retail prices, from an index of 100 in 1939, had in mid-February reached exactly the same point: 266. In relation to real wages, therefore, we were back exactly where we left off pre-war. But of course in the meantime there has in fact been an increase in the cost of living and in retail prices and the mid-May figure shows an increase of, I think, two points, which would bring real wages back to 99 on the basis of 100 for 1939.

I was interested to try to find out how the output of workers had changed in that same period. I am told that measurements are not very accurate over such a long period but, roughly speaking, that output per worker is 50 per cent. higher than in 1939. It is also true that earnings as apart from wage rates can be said to be 16 per cent. higher by reason of incentive bonuses in industry generally now but that increase in earnings of 16 per cent. is away behind, as you will appreciate, the increase in output per worker of 50 per cent.

In such circumstances, where wage rates are a little lower than in 1939 and output is higher, workers quite obviously have not got their appropriate compensation and trade unions must be very conscious of their obligation to their members. It is also acknowledged that the trade unions are very conscious of their responsibility to the economy as a whole. The trade unions are not concerned simply with maintaining or trying to maintain their members' standard of living, but they are very much concerned, too, to see that there is continuing employment for their members and employment available for their members' children.

We have all had the experience of people coming to us, such as fathers who have educated their sons and who are at their wits' end to know where they will get jobs for them, and wondering is there any possibility at all of their getting anything like suitable employment in their own country. Most of them have to face the shocking prospect of their children emigrating to Britain and, in those circumstances, many parents make the choice: "It is best that we all go together. We will go as a family." The man leaves his employment at home and it may be said that he leaves good employment. Largely because of the fact that there are no prospects for his children, he decides: "We will try to keep together as a family; we will go across to where there are prospects of reasonable employment for the children." That is a shocking state of affairs and I sincerely hope the Government will find it possible to rectify that situation.

It is all right for the Government to sit back and say: "We have provided all sorts of tax inducements; we have provided grants for new factories; we have invited people to set up industries and everything is set." The feast is set, but the guests apparently show no inclination to come and sit down. The trade union movement has often urged the desirability of not depending too much on private enterprise. I am not against private enterprise, but I am quite certainly opposed to the sort of idea that we should make everything available, and set everything right for private enterprise, and wait for them to settle the economy and, in the meantime, just wait and wait and wait.

The trade unions have often urged that the existing semi-State organisations should be given the task of trying to expand our economy. I must say I welcome the recent development with regard to Comhlucht Siúicre Éireann who have branched out into a completely new line. Again, I sincerely hope they will meet with success. If we look at the results of other semi-State organisations, we shall find, I think, generally speaking, that we seem to have a particular aptitude for making a success of this sort of undertakings. I think it is true—I do not know why—that as a people, as a nation, we do not seem to have any great aptitude for private enterprise. Our economy has been set fair for private enterprise, I suggest, for quite a few decades, but private enterprise has completely failed to expand, to take up the available capital or to take up the available employees. More and more, we must come to depend upon the semi-State organisations, or set up new ones, not solely as a matter of principle, but simply because private enterprise has failed up to now to avail of the opportunities that have been made available.

Another inducement which I think private enterprise would like to have at the moment, according to speeches made here, is the abolition of death duties. In this Bill, we are providing for lifting the limit for exemption from £2,000 to £5,000. There are many aspects of how that will work out which we can discuss on Committee Stage, but for the moment I want to try to deal with the general principle, or the general argument, that death duties should be abolished completely.

I was interested to look at the report of the Revenue Commissioners. The last available one is for the year ending 31st March, 1959, and I see that in that year, the net receipts from estate duties—which I think is another name for death duties, but it may not mean exactly the same—were two and one-third million pounds. Looking back over the figures given for some previous years, that seems to be a typical year. The yield from death duties is between £2 million and £3 million per annum. In other words, it provides, I think, between two to three per cent. of the tax revenue of the State. When account is taken of connected items such as probate, legacies, succession and corporation duties, the net receipts are about £3 million. That is about the average for the past three years, so we can see right away that it is a substantial revenue to the State.

I understand the cost of collection is very small, but the point I want to make is that that revenue is a pretty substantial sum in relation to tax revenue as a whole. The immediate problem which raises its head, when it is urged that that tax should be abolished, is how the loss of that £2 million or £3 million will be made up. On the other hand, it may well be that the Minister might at some stage decide that he can do without that £2 million or £3 million. If he is in that happy state, I should certainly think—and I hope he would agree—that more deserving of relief than the people who pay death duties are the old age pensioners. I notice in a recent speech the Taoiseach said that the slight improvement—he admitted, I think, that it was only a small improvement—they were able able to give to the old age pensioners in 1959, would cost £1 million in 1960.

If the Minister ever has this £2 million or £3 million which is now the revenue from death duties to spare, I would hope and urge that instead of abolishing that tax, he would make money available for the old age pensioners. If he has not got it to spare, but if on the other hand he should heed the arguments—I should not say "arguments" because that is probably a compliment—the urgings of people that death duties should be abolished, he must have regard to the fact that to do so will mean that other sections of the community will have to bear a proportionate heavier burden of taxation.

Those who advocate the abolition of death duties have not indicated where the money which would be lost could be recovered for revenue. They may be shy or they may think they would be out of order. I am sure they will all acknowledge that if there were to be that relief, there would necessarily be a proportionate increase in the tax burden for the rest of the community.

The State-sponsored companies.

That is a good idea. Maybe they could make it available out of their profits in their future enterprises, but, to use a Fianna Fáil Party expression, they will have to "get cracking." On an average, there are 30,000 adult deaths per annum. The number of estates liable to duty in 1958-59, according to this report, was 3,852. With the exemption of estates under £5,000, the number of estates which would then be liable for death duties, if the pattern remains the same, would be between 1,100 and 1,200 per annum. This is a very small number. It means that only about four per cent. of the adult deaths would bring with them death duties. However, these estates would be liable to death duties because, again on the basis of last year's figures, they represent about 75 per cent. of the wealth of the country.

According to Table 50 of that annual report, the net capital value of estates dealt with in 1958-59 totalled nearly £24 million. Only £6 million of that was embraced in 2,643 estates under £5,000 and which will now be exempt but £18 million was left by some 1,200 people with estates over that figure. To put it in a different way, about 70 per cent. of the estates which came under notice had 25 per cent. of the wealth. The remaining 30 per cent. of the estates had 75 per cent. of the wealth.

In those circumstances, I submit that estates over £5,000 can quite easily and quite properly bear death duties. I would suggest further that it is very desirable that death duties should be operated. Otherwise, you will have the situation that over a period too much capital will be concentrated in too many hands. Some of us might think that there is already too much concentration but at least death duties do something at some stage to redistribute capital, to take from the big build-up of capital on the death of the owner by way of taxation and to redistribute some of it amongst the community as a whole.

As Senator O'Brien said, death duties are a capital tax. They are the only capital tax in operation in this country. I think that in quite a number of West European countries, there are other forms of capital tax. Without being able to confirm it now, I have some recollection of hearing that in Western Germany some ten years ago there was a capital levy of 50 per cent. to be paid off over a period of 30 years. My figures may not be right but I think I am right in saying there was a capital levy in Western Germany to be paid off over a period of years. That is a capital tax. Western Germany has been booming so apparently a capital tax there has not led to a collapse of the economy.

Death duties are obviously complementary to income tax. If you have not death duties, you can have a very unfair incidence of taxation. Take, for example, a land owner in county Dublin who does nothing in particular with his land. The city grows out and about his land. Because of that, his land increases in value. He has done nothing to merit that increased value. It happened because of the efforts of the community. He does not pay income tax because the value of his land has increased by reason of the fact that the city has come out and about. Surely it is fair in such circumstances that when that person dies, the unearned increment he enjoyed should be subject to tax by way of death duties?

Again, you have the situation in respect of dividends where the profits are put away to reserve and eventually bonus shares are issued—a capital gain. Surely it is right that they should be subject to tax? The form of tax they are subject to is death duties. The argument advanced in favour of the abolition of death duties this afternoon can be put under two headings: (1) that they have a bad effect on business, particularly family business and (2) that if we abolished them completely, there would be an influx of capital as wealthy people would come here, bring in their capital, invest their money here, provide employment and, incidentally, provide other revenue by way of income tax.

I want to suggest in regard to the first argument that there is no impartial evidence that this form of tax is particularly harmful to business or family business particularly. We have the assertion from vested interests. I am not saying that in a critical way. It is understandable that they, because of their own interests in the matter. should urge that there should be this relief from taxation which they feel weighs heavily upon them. Does it in fact have a very bad effect on business? We have no impartial evidence here, but we have statements of two commissions at least in Britain, where death duties are on higher level than here, and they did not think that they were particularly harmful to business.

The first one I quote is a committee which reported in 1926. The quotation is:—

"The burden of estate duty does not appear to be a major factor tending towards the disintegration of private businesses, whether carried on by sole or partnership traders or through the medium of joint companies."

There is a more recent report, a statistical investigation by the Board of Inland Revenue published in June, 1951, which says:—

"Nevertheless, the general picture which is presented is clear enough. In this connection it is worth noting that the public discussion has not so far resulted in the production either to the Chancellor of the Exchequer or to the Board of any cases in which a business has in fact been broken up by the operation of the death duties."

That is a quotation from, I presume, an impartial body examining that same sort of argument and case in Britain where, in fact, death duties are at a higher rate than they are here.

Might I say, before passing from this point, that, of course, death duties can be avoided by the person concerned simply distributing most or all of his wealth up to three years before he dies? Strangely, these people always appear to want to hold on to their wealth and are worried as to what will happen it when they have gone where they can no longer carry it.

I suggest that if death duties have no other effect than to act as an inducement to people to pass over their business to the younger generation, they should be continued and increased, because we all know and have been told that it is a very good thing for a business or a farm if the old person can be got to let go the reins and pass over control to his younger, more enterprising and more virile child or children. It would be a good thing in many of these cases that the people concerned, owners of businesses or farms, should pass over to the younger generation rather than hang on to them until the very moment they are about to pass from this life.

The second argument is the theory that the abolition of death duties would bring in wealthy immigrants who would transfer their capital and invest it in business here, and thereby provide employment and provide revenue by way of income tax. One of the flaws in that argument seemed to me to be the fact that it is overlooked that death duties are already lower here than they are in Great Britain. They are less of a burden on business and wealthy people in Ireland than they are in Britain, but we have no evidence of wealthy people moving from Britain bringing their capital and investing it in industry and providing employment in Ireland.

I want to stress "investing their money in industry." We have evidence of people bringing their capital and investing it in land, buying out land here. Do we think that is a very desirable course? Surely people at that stage who feel that they are providing against death and who are trying to avoid heavy death duties when eventually they pass away would not be the bustling type who would be anxious to invest their money to set up industries and engage in enterprises here. Rather would they be the people who would want to put away a lot of their gains in land, buy up land here, and therefore less land would be available for distribution or break up by the Land Commission and less land would be owned by Irish nationals.

Is that a desirable development? I want to suggest that there is nothing desirable about it, that that sort of movement of money, and buying up of land here, adds not a penny to the wealth of the country, makes the people here no better off, and only dispossesses probably many and forces them to go across to England and earn more profit for the people who are moving in here.

This, of course, would be the second or perhaps the third conquest of Ireland. Anyway, are we in fact short of capital? Assuming for a moment that these people would be anxious to take out their investments in Britain and to invest in industry here, are we in fact short of capital? We have been told previously by the Government—I cannot quote the reference—that in fact there was no shortage of capital—that the real shortage was of ideas and enterprise. The Government could make plenty of capital available for people who wanted to set up industry who had good ideas and could provide good employment in this country. In fact we are not short of capital and there is no great need, therefore, in that sense for these wealthy immigrants.

In any case, if we adopt that line, we are in competition with other countries. This is not a new idea. The Isle of Man has no death duties, and its income tax is at the rate of 4/6d. in the £ and surtax reaches a maximum rate of 7/6d. in the £. If the absence of death duties and the low income tax can induce people to transfer themselves and their money and enterprises to another country, we might have evidence of Irish people with that wealth and enterprise moving over to the Isle of Man. If this is a good argument, that the absence of death duties is an inducement—I do not know— but it obviously does not seem to work out, because in that same territory, the Isle of Man, a commission has recently recommended that surtax should be eliminated completely so as to encourage wealthy people to come into the Isle of Man. Apparently, the abolition of death duties did not work the oracle and now they want to go further. It is recommended that they should abolish surtax completely.

Again, in the Channel Islands, there are no death duties and income tax and taxation generally, I am told, are at a very low level but can we compete for those sort of people with the Channel Islands? Without going too deeply into this, surely it is obvious that the climatic conditions here are not as good as in the Channel Islands? If those poor old rich people—that is a queer phrase—are anxious to remove their wealth and settle down in places where there are no death duties, I do not think we could compete against the Channel Islands because at that stage their blood might be running a bit thin and I am afraid they would definitely have a preference for the Channel Islands.

According to my information, the Channel Islands are inhabited by very rich and very poor. I do not think we seriously want to engage in a competition to set up that sort of economy here. I want to suggest that there is really no very good or sustainable argument in favour of the abolition of death duties in this country and I should hope that the Minister will not be stampeded by the urgings from the two major political Parties that it would be a very good thing if he abolished death duties altogether. It would, as I said, mean that there would be a substantial loss to revenue —revenue which is easily and cheaply collected at the moment. It would mean that somebody else would have to pay the piper. Somebody else would have to make up for the loss involved in abolishing these death duties.

The tendency would be—and I think Senators who have a more intimate knowledge of the country would agree with me here—for these rich people, if they decide to come at all, to invest their money in land and no matter what political Party you may favour, I do not think you would say that that is desirable. I think it would be thoroughly undesirable and I should like the Minister to think very carefully before he yields to this importuning from all sides of the House to abolish death duties.

The people advancing these arguments are vested interests. I quite understand their point of view. I am sure that if I were in their place, if I had built up wealth over the years, perhaps, by reason of protectionist policy, I would be anxious that as much as possible of that wealth could be passed on to my children. It is a perfectly human and understandable emotion but it cannot be proved that it would be good for the economy to take this course; that it would lead to a development of the economy; or, in fact, that it is any really serious embarrassment to business at the moment that these death duties are still in operation.

I hope that from the Labour Party point of view these death duties will not be abolished. There are more people deserving of relief and the money could be better spent on providing better social services. Quite frankly, while I understand these people's point of view and their approach to the matter, I am completely without sympathy for them.

This Bill contains 44 sections. It is evidence if evidence were wanted that the present taxation system is such that it is the major deterrent to the progress which could be made in the country. Many of the sections give relief to foreigners who come into this country and start business. If the conditions which would allow the local people to develop industry here were generally applied in Ireland, there would be no necessity to tax the rest of the community to allow the foreigner to start here free and have an advantage over the natives.

The IBEC services, who reported here some years ago, stressed the retarding influence of taxation on the expansion of our economy. Little or no cognisance seems to have been taken by any side of the recommendations made by IBEC. Most of the sections in this Bill are sections to give relief of some sort or another or deal in some way with the burden of taxation, whether it is the collection of tax by PAYE or otherwise. If income tax were 2/6d. in the £ instead of 7/6d., all the ideas about dividend stripping and the very raison d'être of the huge machine into which the Revenue Department is developing would almost disappear

We, with a population of 2,900,000 people, are like a small business which starts with a big set of books. Many of our institutions of State are too grandiose. If there is one disadvantage under which the British economy is labouring and which they cannot shed, it is the disadvantage of having to retain an enormous defence force and pay for the colossal debts as a result of the devastating Second World War. If we kept down our level of taxation, we would be able to redress the difference that exists in the balance between Britain and this country.

Senator Carter made reference to the higher percentage of taxation in Britain and some of the Scandinavian countries than obtains here. His reference was on a percentage basis. I believe he should have given an example of the relative per capita income. I made a simple calculation here to show what an illusion his figures could convey in practice. I think it is generally accepted here that we have a per capita income of 55 per cent. to 100 per cent. in Britain. Therefore it means that a man enjoying an income of £2,000 in Britain would enjoy £1,000 in Ireland, but if taxation in Britain were 25 per cent. and taxation here were 20 per cent. the man in Britain would have a net income of £1,500 and the man in Ireland would have £880. Therefore, the man in Britain is still considerably better off than the man in Ireland and the only way we could hope to reduce that gap is by a reduction in taxation. It is not open to Britain to reduce taxation because they are compelled to have it for a twofold reason: first, to pay their debts and secondly, to pay for their defences. We have neither of these burdens which are imposed on the British economy.

There is another impediment from which I often feel industry suffers in Ireland in the big set of books which we have here. Many of the different State Departments, often unknown to each other, take up a considerable amount of the time of industry by requiring them to fill in all sorts of forms. This is a statutory duty and if businesses do not comply with it, they are liable to a fine. This must have a decelerating effect generally on progress. Perhaps at some time some inter-Departmental commission will say what is the considered effect of this form of bureaucracy on industry in this country.

Senator Murphy in his reference to a case made by Senator McGuire with regard to the abolition of death duties made what could be called an attack on private enterprise as an institution. He said it has failed signally in this country and that maybe as a people we are not capable of standing on our own feet, that we must have a sort of paternalistic State in which we will have State-sponsored companies. I suppose these State-sponsored companies would be controlled in large measure by those who from time to time controlled the Government. I have no hesitation in saying that the incidence of death duties on the type of economy we have here is very much more corrosive and has a much more baneful effect than it would have on the type of economy they have in England where they have large joint stock public companies. Here most of the companies are small private companies and I do not think Senator Murphy, any more than Senator Carter, was prepared to work out any example to see what would be the effect of his advocacy of the retention of estate duties.

It would probably startle some Senators if I told them that a small business valued at £50,000, which would be a small industry in any economy, if it were owned by one man and that man died, would have to find £15,000 for the payment of estate duty. That £15,000 would probably remove from that business all its working capital. That was worked out on page 96 of the Report of the Revenue Commissioners for the year ending 31st March, 1959. It said that estimates from £50,000 to £55,000 shall bear a rate of 30 per cent. and that that was increased after 7th May, 1941 from 19.5 per cent.

If you take the case of a very much smaller business, which would hardly be an industry of worthwhile size at all, say, a small printing office having a capital of £25,000, it is likely to be the type of industry that would be owned by one man. There are heavy demands on a printing office for capital; machinery is very expensive and even a small business employing ten or fifteen people at a maximum would have to be valued at, say, £25,000. In that business, if there was one-man ownership, over £4,000 would fall to be paid by way of estate duty. I do not know whether all bank managers would be sympathetic enough to provide all the money that was required but I think Senator Murphy invited somebody to make a case to show why death duties could have a bad effect. Somebody at one time said that we only had one-seventieth of the wealth of Britain and you can quite easily see that you would have there large joint stock companies owned by a multiplicity of people. All that would happen there is that the death duties would be levied on the shares and there would be no retarding effect whatsoever on the industry.

Another point which is relevant to these death duties is that the concession which the Minister is giving is in respect of all estates of £5,000 and under, but as I see the Schedule, and the way in which the figures are given in the Schedule, I believe that estates of £10,000 will pay as much when this Bill becomes an Act as it would if the estate of £10,000 were liable for estate duty last year. That is one point which the Minister should consider. If he is giving a concession of £5,000, he ought to allow £5,000 to be removed from all estates before the value of the estate is aggregated. In that way, fair play would be done to all.

While on this subject, I should compliment the Minister on bringing in the £5,000 because the small farmers in the west of Ireland, and in other parts of the country where they are not so numerous, will be able to have their estates disposed of without the payment of duty, or with all this old problem of sisters in America, or nuns in South Africa, or Christian Brothers in Australia having some direct or indirect claims on the estate because administration was not taken out. It will allow the farms to be worked by somebody who knows that he or she is the owner. Perhaps at a later stage the Minister might go very much further in this respect.

If you consider the capital cost of machinery, equipment and everything else required in Irish agriculture, £5,000 is indeed a very small sum to-day. Much land is selling at as much as £100 per acre and they say in our part of the country that it costs as much to stock a farm as to provide a farm, so you can see how little in the way of agricultural development you will provide for £5,000. If the Minister allowed the first £5,000 of all estates free of this duty, he would be to some extent meeting this problem.

It is only right, while I speak of death duties, that I should give one example from my own experience. Senator Murphy spoke of a father of a family owning an estate who is holding on, who does not want to hand over his property to his children, who, as they say in the country, wants to bring it down to the grave with him. Over 28 years ago, my father died when he was a comparatively young man and I must have been very young, although I was the eldest son of the family. Although he had drawn up conditions so that a company could be formed, he died before they could be brought into effect and the Revenue Commissioners collected the full rate of duty.

The progress of that business was retarded for a decade by the amount of money that had to be paid to the Revenue Commissioners but we were undaunted. We employ in that business about 100 people, and but for the death duties, we would probably employ many more. We do not want subsidies from the State. We do not ask to be supported continuously like the State companies which Senator Murphy thinks would solve the problem of our economy and keep people working in the country. What do State companies export?

I think this would be more relevant to the Appropriation Bill.

And personal anecdotes would be more relevant there, too.

I was led up that path by the man who preceded me and the pitfall I fell into results from the trail he has blazed. We shall get an opportunity on the Appropriation Bill. We can go very much more fully at a later stage into the point which Senator Murphy was, I think, in order in stressing: that we would be better by collecting death duties from private companies and allow State companies to get on with the job.

I was surprised to hear Senator Murphy quoting from two commissions. I wonder if he ever heard of the company established in Britain ten or 15 years ago under the homely, semi-puritanical name "Edith"? It was formed to take care of private businesses that must sell to large corporations and trusts as a result of the impost of death duties. Go to the city of Birmingham, home of private enterprise, and see the portals of the big groups that have taken over the small companies that had to go out of business as a result of death duties. The result in Britain is the growth of big holding companies and groups. The corrosive effect of death duties is that huge concentration of capitalism —it would be much easier under a socialist economy to take all these over in bulk than to take them individually if they were owned by private people. It would be very much worse here because we are a small economy and private family business would be more vulnerable and it would be an enormous disadvantage to our economy.

I conclude as I began: I think the Bill shows the devices and resources to which the Department of Finance are put to devise ways and means of encouraging and stimulating enterprise by tax reliefs while we should face the problem at very source. There is far too much taxation. If it were only one-third of what it is today, a whole lot of statute law dealing with this thing and the hordes of officials employed by the Revenue Commissioners, as well as this new burden of P.A.Y.E. imposed on everyone who is trying to do anything in the country need not exist. If we are to progress, it will not be by increasing costs but by reducing costs and giving better value for money.

To give one example, I spoke some time ago to a doctor who told me what his income in Britain was and what he would earn for doing similar work here. He would be prepared to work for considerably less here in Ireland but if he could get the advantage of paying very much less income tax, that would sweeten the idea in his mind of coming home to Ireland. Maybe we could encourage many of our people to come back to Ireland if the tax disincentive were not so great.

I believe that taxation generally should be at the point of spending rather than at the point of earning. Everything should be done to encourage every entity in the economy to create as much wealth as possible and while they employed that wealth to produce more, it should be left intact, considered as something sacred but when the owner of that wealth said: "I am going to purchase luxuries; I am going on a holiday; I will waste it on gambling or anything you like other than the creation of wealth", then the Revenue Commissioners should come in to take their pound of flesh and that pound of flesh would be of benefit to all the people and would not retard progress in the country, the creation of wealth or expanded employment.

I say that in all earnestness. If that were the criterion, it would stimulate the whole field of industry and agriculture, encourage everybody to produce and earn more, make them see how they could do everything more economically so as to make more money, sure and conscious that they would pay only when they wasted that money or used it for self-gratification rather than for progress and development of business to the benefit of the whole economy.

Mr. O'Dwyer

Where death occurs in the case of two or three people within a short period and death duties have to be paid in each case, it is a very grave injustice. Very clearly it has a very bad effect on property and if the death duties are to be retained, that point should be looked into in the next Finance Bill.

Another point I want to make is that there seems to be a demand in many quarters for the extension of income tax to the farming community. I think that would be a very grave mistake. From the earliest times, farming has been a very poor occupation. Farmers are very badly paid. They are poor when compared with industrial workers and the gap between them has been widened now. That the gap is wide between the profits of the agricultural and industrial workers is proved by the fact that farmers, their sons and their daughters are leaving their own country and emigrating to industrial countries. That shows that there are no profits in agriculture. While there may have been some small improvement over the past years, 1958 was a disastrous year and there was a catastrophic drop in cattle prices. Added to that, there is a very heavy burden on farmers as against the town dwellers, so that if income tax were extended to cover the farming community, it would have a very bad effect on agriculture.

We must remember that the future of this country is bound up with agriculture. It is very good to see industry developing at the rate it has developed, but industry alone will not build up this country. It must be built on the rural community and any further burden imposed on the rural community would be disastrous.

I suppose it is valid in a very general way, and very briefly, to mention the financial pattern of political events in the past few years, and the pattern before and after the 1957 election. Prior to that election a medical pill was administered to the people as a whole. It was necessary for the economy of the country to impose levies and for the commercial banks to impose a credit squeeze and those things were done. After that election a further pill was administered. Whether we agreed or disagreed with it, the fact is that it was administered. I refer, of course, to the removal of the food subsidies.

At that stage, we had to consider what was to happen. What was to have happened was that wives were to put their husbands back to work and that we were to get cracking. We waited for that to occur. We had had our punishment, and we were waiting for our nourishment, to quote a very homely phrase. No nourishment has been forthcoming and our economy has not been an expanding economy. It has been a contracting economy. I see Senator Lenihan raising his eyebrows, and my reply to his raised eyebrows is to say that while it can be proved that our financial economy has improved in some respects in a homely way, for the workers in industry and on the land, for the small farmers and the family businessman, there has been no improvement.

It was a contracting economy because the numbers employed were contracting. The people were emigrating and it is to that homely statistic that I have recourse, not to the other statistics which perhaps might prove anything. My yardstick is the yardstick of how much employment there was in the country, and how much production there was, rather than whether or not the Central Bank of Ireland is just too pleased about the present, past, or future, as they see it.

What one might almost term a side effect of this matter of fewer people being employed was a decrease in the ratio of the workers to those dependent on them, with the inevitable result that, whatever the increase in taxation, we still had to be cruel to those members of our society who can be described as dependants. We had to give what might be termed a miserable political pittance to the old age pensioners. Why? Because there were fewer people to pay the money we had to give to the old age pensioners, because, in fact, the people who ought to subscribe to the dependants in this country were working in Birmingham and subscribing to dependants in Britain.

That is a simple solid fact, and there is no way in which it can be refuted. While politically we may charge the Government with having gone back on their promises, and with having been very clever, in perhaps a disreputable way, in producing those "Wives, put your husbands back to work" posters just two days before the election—not two weeks when they could have been answered but two days; that is an old joker in the pack and we have seen it before as I saw it last week—and while we may politically accuse the Government, we now have to examine how we are to get out of this position.

The first thing we must admit is that we have taken no steps. While certain economic figures—there is such a multiplicity of such figures that one can select from them what one wants— can be quoted to show that there is some improvement in the economy, by the yardstick I like to use, there is not an improvement but a depreciation. If one were to follow up the question of the ratio between the workers in our economy and the dependants—and the heavy charge on the Exchequer and upon the workers to provide even in the most niggardly fashion for those unfortunate dependants—one would find that the Minister for Finance is in the position of wondering what or whom is he going to rob. Is he to leave the dependants in a very poor way or is he to cut down on capital expenditure?

Twice this evening in this debate I heard a statement to the effect that there was enough money for all capital expenditure and that what we have is a dearth of ideas. I presume a Government speaker made that statement since it was not contradicted, but I regard it as a most stupid statement. Has anyone who accepts that statement any idea of the cost of capital expenditure today? Let us just consider a few things. There is the old idea that it takes £1,000 to employ a man. That figure is as dead as a dead duck. It now takes £2,000, £3,000 or £4,000 to employ a man and I challenge anyone on the far side of the House to refute that. I know it. I know from my own experience just what it takes.

There is a grave dearth of capital. Undoubtedly in certain aspects the commercial banks have been able to ease up, but there is still a grave dearth of capital, and in respect of the injection that is needed in agriculture the dearth is fantastic. Anyone who makes the statement that there is plenty of capital is, in my view, just plain stupid.

Therefore, here we are with our ratio of workers and dependants declining, and there is a necessity for capital on the one hand, and a necessity to look after the health of our people and to look after our dependants, on the other hand. One or both must go to the wall. Do not think I am advocating greater taxation. I am merely trying to explain our dilemma. We have a contracting economy and that is our dilemma. We can neither provide for our unfortunate dependants nor make the colossal capital expenditure that is required to change a contracting economy into what we all desire, an expanding economy.

In Europe today I am quite convinced the basis of exports is a good home trade. I could quote many instances but I do not want to quote individuals or name firms in those countries which depend entirely for the success of their export trade on their home trade. They find that if they can sell 70 or 80 units of production to the home trade at fixed prices, even if they are protected by a tariff wall, that trade is there for them. Some firms which are, by comparison, of small size have been able to afford national newspaper advertisements, or perhaps radio advertisements, and they have made the grade, and on that basis alone they can export very often at lower prices than they charge our own people. While we may not perhaps like that fact, there is nothing very much we can do about it because in other European countries the same thing happens and the home market is charged more for the product than the export market. Therefore, we need an expanding economy so that we can export. I am afraid the situation is, to quote a politician who is not of this country and I may get into trouble for quoting him, that we must either export or expire. It is a piquant phrase and it is true.

What is the net result? What follows if we cannot expand? We become poorer or we succeed in integrating our economy closer with Britain. If we send our people to Birmingham to work and if these are the people who should be contributing some shillings per week towards capital formation, the support of dependants and public health in this country what can we do except become a suburb of Britain if we do not succeed in expanding our economy? Whether or not we like it, whether or not it will happen, all these things I know not. However, it seems quite clear that the problem before us is that either our country declines and becomes Britain's poor neighbour or we succeed in expanding our economy.

To pot with all false promises. They are gone now. I hope that next time the position will be different but they are no good to us. On the question of agriculture and taxation, it is pretty stupid to say that the farmer is not paying his just rate of taxation. According to the latest figures I have got, the revenue from income tax last year was £25,203,000. Although I searched, and the Librarian helped me, I could not get the total figure collected for rates on agricultural land. According to my experience, I would place the figure at 30/- per statute acre.

Not taking into account marginal land, bog land and mountain land, if the oft-quoted figure of 12 million acres of arable land is taken, then the farmers, in respect of arable land, contribute a total of £18,000,000 in rates. I am taking 30/- to be the net figure after deduction of the grants for relief of rates. That compares with a figure of £25,203,000 in income tax, of which the farmer in his particular Schedule pays a share.

I put it to the House that with a declining number employed on the land—fewer than 500,000 people are engaged in farm work in a population of 2,900,000—that sort of ratio proves that the farmer is paying as much taxation as the urban dweller. The whole basis of my argument rests on the fact that the urban dweller pays rates on his house and garden, what he has for his private use. Alternatively, in relation to income, in relation to turnover, he pays a rather small rate on a business premises. The farmer pays a large rate on his lands. Having paid that rate, he then pays the ordinary rate which could be compared with that of the urban dweller with his house for private use and with his outoffices for use like the owner of a shop, factory or anything else.

The farmer is the only man who pays rates on his stock-in-trade. With the exception of his bullock walking the field the farmer pays rates on his stock-in-trade as surely as if the grocer paid rates on the goods on his shelf. Therefore, it is a different method of collecting taxation. Central Government each year puts more of what should be central governmental taxation on to the rates. Each year when we meet for our rates estimate meeting at county councils we find that 80 per cent. of the payment is statutory and that of that 80 per cent. about 40 per cent. should be, if one were to think straight, from central taxation.

Then one realises that in this rate figure on agricultural land, there is a high content of straight ordinary taxation for what should be Central Fund. Therefore, this specious argument about farmers not paying income tax is a matter of "a rose by any other name would smell as sweet." The argument is as clear as a bell and it cannot be refuted. It should be buried for all time. One of the retarding influences in this country is this matter of rural dweller versus town dweller. We must all face the fact that in industry and agriculture we must forge ahead whether we are living in the back of the bog or in Saint Stephen's Green. In this Bill we see the general pattern of the Government's idea for agriculture. All through the country there is a feeling that the Government have failed to provide an imaginative approach to agriculture. All we have heard from the Government benches over the past number of years has been that farm income dropped £7,000,000, then it went up £4,000,000, and then we say we gave a few millions more this year by way of extra subsidy.

All that, in relation to the wealth that is there on tap, is just like giving a bun to an elephant. As one drives through Ireland and sees the fields, one realises that these fields are not within 50 per cent. of their potential production. One realises that the imagination that was required has not been forthcoming and that that is why the improvement in agriculture has largely been disappointing. Another reason is that there has been no organisation for marketing. In this Bill we are raising no money for marketing. I remember that two years ago I asked the Minister about the position of agricultural marketing.

An Leas-Chathaoirleach

I am sorry, Senator—on the other Bill.

I shall ask the Minister the same question on the other Bill. I hope I shall not get the same answer. The difficulty is that the farmer everywhere believes that if he increases production, his price goes down. We can deal with it further on the Appropriation Bill.

On this question of taxation and the attraction of British industrialists, I feel that a lot more imagination and a more fluid approach to the problem in the Department of Finance could do more. About a month ago, I was about two miles outside Chester. Right around me were farms, but wherever I looked there was a factory chimney. I drove 50 or 100 miles that day and the pattern was exactly the same. There were suburbs of villages and towns, and right through on every hill, in every dale, there was a factory chimney. Not even one of the people who owned those factories came here even by accident and built here.

Let us be honest. Our whole industrial expansion over the last few decades has been the result of our protective policy. We do not know where we are now. We have the Six and the Seven vying with each other and almost at each other's throats and in between we sit untouched by either of them. That protective policy can go. The Taoiseach has stated in fact that it probably will go, and then what have we got?

Death duties have been flogged almost dead to-night, but the removal of death duties and things like that as greater incentives to British industrialists to start here would in fact have a good result. I cannot understand how some of them did not come even by accident, how some of them should not like the country. They are in an overcrowded economy with an overcrowded population and have no comfort, and yet none of them came. We did not make them very welcome, of course. We had the Control of Manufactures Act. Eventually, we grew up, but even so, that is a mystery to me. More imagination some years ago and now might have some effect.

The encouragement of private enterprise in this Bill and the advantages of State bodies were discussed. I thought the example of what happened in Britain and how the Conservatives went back into power and the Labour Party cannot even think up a new policy, produced a blueprint from which we here and most countries would decide to forget completely about nationalisation and State-sponsored companies. There is no real incentive except the private incentive, and the activities of State-sponsored companies can impinge terribly on the private incentive. For instance, if a man decided 20 years ago to set up an electrician's business and if he realised that the E.S.B. would go into this themselves, that they would instal wiring and sell electric cookers and the like, I am certain he would not have set up such a business. A State-sponsored company can charge an extra one-eighth of a penny per unit and dispose of all competition in their sphere. The first thing you have to do for private enterprise is to give it security, and with State-sponsored companies it has not got security.

Take the ordinary business to-day. We are faced with the fact that C.I.E. must pay within five years, and the ordinary businessman who might buy another lorry and employ two men because he is very far from a railway station may think twice or three times before he does so because he does not know what will be the next move by the State-sponsored company.

Take the people who manufacture grassmeal. How do they feel about Glenamoy? I do not know, but I know that the policy in Glenamoy changed like a flash from one side to another so that the man shipping grassmeal did not know what way the situation next month would be and of course that retarded his investment, his effort, his security and his belief in his own industry, which is the only basis on which anybody will proceed.

Senator Burke pointed out the difficulties for ordinary small family businesses in paying death duties. I am quite young, but from what I have been told by people older than I, I think the development of family businesses in Ireland has been quite good in the past 50 years. Take the ordinary merchant 50 years ago whose proximity to a railway station, perhaps, decided his whole business. Now it is developed on different lines and maybe it is engaged in some manufacture. We have such business all over Ireland in small towns.

That type of man has not had the opportunity of a war when the Government were buying his products at colossal prices, as happened in Britain. He had his ups and downs and is running on a big overdraft, and probably to look after his wife, is paying a huge insurance policy under the Married Women's Property Act, so that if he dies and death duties tie up the whole thing or the bank does not like what is going to happen, she will at least be all right. That sort of business can be retarded, even if it is not put out of business altogether, by the impact of death duties. While death duties may have some rectitude in an economy like Britain's at the high levels, although it would be questionable whether there is a strong case for their application in every instance, here, where most family businesses and other businesses are run on large overdrafts, hard to get, death duties are a retarding influence.

I do not like Senator Murphy's suggestion that they are a means of redistributing capital. I like to think that money was once work, that money makes work, work employs people and earns money and that is the whole basis of wealth, of an expanding economy, and of happiness, the kind of thing that allows a man to go forward and allows his workers to go forward and leaves a happy God-fearing country.

Mammon-fearing, not God-fearing.

That is a sticky one and I do not think I shall answer it.

On the question of the landowner in county Dublin, I also believe in risk capital. The ordinary man in business must take risks. Sometimes he goes "broke", not through his own fault. To-day he must be much more enterprising than he ever was before and take much greater risks, for instance, in the returns from advertising which is so expensive, and take far greater risks in investment in expensive machinery because a discerning public wants the very best product, which it never wanted before. The idea of risk capital is the whole basis of modern business, and if the landowner in county Dublin sits back and the town expands and his land becomes five times more valuable, we cannot legislate for one. We must legislate for the whole economy, and even though he got it soft, we cannot stop him from getting it, without at the same time affecting the unfortunate fellow who existed in the same period on perhaps one per cent return.

I end as I started. The economy has had its punishment. It had to take it because it needed medicine. The Government were elected in 1957 for the purpose of nourishing the economy. They gave an explicit promise of their belief that they could bring us to a buoyant expanding economy employing 100,000 people over a small number of years. They failed to do that. I feel the way to do it is by raising the imagination of the people engaged in agriculture and lessening the bonds of the people engaged in industry. If the Government can do that, they will have done a good job. This Bill does not in any way suggest that they intend to do it.

An Leas-Chathaoirleach

Perhaps Senator Ó Maoláin would indicate his wishes?

I was hoping that we might finish the Second Stage tonight.

An Leas-Chathaoirleach

I think Senator Sheehy Skeffington is the only one offering to speak. Could the Senator indicate how long he will be?

I might be 20 minutes.

An Leas-Chathaoirleach

Would the House agree to sit late and allow the Minister——

If the Minister gets in at 10 o'clock.

Might I go a little further in that regard? We have the Report Stage of the Rent Restrictions Bill which might not take too long. If we could possibly finish that tonight, it might obviate the necessity for sitting tomorrow.

An Leas-Chathaoirleach

All the amendments are to meet points which the Minister said he would consider on Committee Stage.

An Leas-Chathaoirleach

There are six of them. I think they are more or less agreed amendments.

I understand that is the position. I am quite willing.

Listening to this whole debate, I have been trying to disentangle in my mind just what differences there are between Fine Gael policy and that indicated by this Budget. There have been differences of opinion between Fine Gael and Labour and even between Fine Gael and Fine Gael. I listened to Senator Burke apparently resenting the suggestion that foreigners might be brought in here with their capital and Senator Donegan saying that we should welcome them in with their investments and so on. I did not really hear from Fine Gael at any rate just precisely what differences there would be between the Budget that we now have before us and the Budget they would introduce if they were the main element or the only element in the Government.

It seems to me that in this country— I think the Budget is a symbol of that year after year—class privilege has been growing up and increasing. To-day we are discussing not quite removing the death duties but such things as raising the point of exemption to a sum of £5,000. Goldsmith asked us to take the view:

Ill fares the land to hastening ills a prey,

Where wealth accumulates and men decay.

I think these lines apply very much to the country as we look about it today. It is quite true that some people say the thing for the whole country is the accumulation of more and more wealth in fewer and fewer hands. Any suggestion that the Budget should redistribute more than it does at present, or should be more severe in taxation, income tax or death duties and so on, is bitterly resented, on the grounds that money means happiness and money means the good of the nation and money, money, money. At the same time, speakers from Fine Gael were telling us that there are in this country no really great differences of wealth.

I have heard that kind of thing in this House time and again. You hear speakers saying that there are no privileged classes in this country and that there are no great differencs of wealth. They go out of this House and drive away in their big cars. Anybody looking round the country and this city would be very quickly convinced, if he were prepared to look, that there are very considerable differences of wealth, disparities of wealth, the sort of thing which, if they arise, I think a Budget such as this ought to make strenuous efforts to dispel.

The Government, on the other hand, are very happy and pleased with the situation. They take pride in this and that aspect of the situation. I should like to refer to some facts and figures in that connection. The Central Statistics Office issued, prior to the Budget of 1960, a publication entitled Economic Statistics. I should like to quote, first of all, a Table on page 21 of this publication. Table 6, which refers to the value and volume of agricultural output between 1953 and 1959. We find that in 1953, the value of agricultural output, including livestock changes and turf, was £149.2 million. We find that by 1959 it was £149.5 million. Before we rejoice too hastily in that very minimum increase, we should look at the figures at the side and realise that the value of money has dropped in the meantime.

We find that the index numbers of the volume of the same agricultural output was 100 in 1953 and in 1959 was 97.9, so that, as far as agricultural output goes in those years, if you look back as far as 1953, as this Table does, we find it declined in fact.

I should like to refer then to a Table on page 23 which refers to industrial production. If we take the volume index number with a base of 100 in 1953, we find that in 1959 with a figure of 106.9, we are very nearly back where we were in 1955, when we had reached the volume index number of 107.8. I do not know in relation, therefore, either to agricultural output or industrial production what all the throwing of hats in the air is about. I do not know what the Government have to feel so pleased about.

I should like to refer now to page 27 on the question of employment. I find on page 27, Table 16 which gives figures of the estimated number of persons at work in main branches of non-agricultural economic activity from 1951 to 1959. I quote the figures which are in thousands. In 1951, the total at work in non-agricultural economic activity was 723.6; in 1952 it was 717; in 1953, it was 722; in 1954, it was 725; in 1955, it was 726; in 1956, it was 718; in 1957, it was 703; in 1958, it was 692; and in 1959, it was 692, again a clear drop over that period in the number of people employed in non-agricultural employment.

To complete the picture, one turns to page 22, Table 7, which gives us the number of males engaged in farm work at 1st June in the various years 1951 to 1959. The estimated totals at work in agriculture, forestry, and fishing were as follows: 1951, 496,000; 1952, 483,000; 1953, 460,000; 1954, 460,000; 1955, 455,000; 1956, 445,000; 1957, 433,000; 1958, 429,000; and 1959, 420,000. What have we to rejoice about there? Our output has been sinking and the numbers of people employed in agriculture and cognate activities have also been dropping; yet the Government are delighted and everybody seems to think that things are going well.

In my opinion, this Budget is simply designed to keep going a system of privilege, to preserve privileges. What it should be concerned with is to reduce the incidence of exclusive privileges. I believe that the Budgets of this country are designed mainly to protect the moneyed classes. You have privileges in the realm of education, in the realm of business, in the realm of leisure and so on, all in the sacred name of money, which, according to Senator Donegan, is supposed to make us a God-fearing nation. I interjected "Mammon" because it seemed to be more closely allied to the worship of money.

I am rather puzzled by the concern of economists with the question of money. I sometimes imagine some distinguished economists being shipwrecked on an island and unable to do anything until a box of money is washed up. Before that, there is no medium of exchange, no planning, no building of shelters, and nothing can be done until one day somebody finds that a case of bank-notes or bullion has been washed up and then of course enterprise can start. There is a great deal of nonsense talked about credit, savings, money and investment. Senator Murphy very rightly in dealing with this question of death duties and the changes made in this Budget, deplored the raising of the exemption to £5,000 and also deplored, rightly, any suggestion that it should be abolished.

The suggestion here is that you do not pay death duties, unless I am misreading it, unless the estate amounts to £5,000. The amount of income which a widow may have without having to sacrifice her pension altogether is of the order of about £100 a year. A means test, and a strict means test, is applied to widows and old age pensioners but for the more moneyed classes who will have property to the amount of £5,000 or over, there is another yardstick. It would not be fair to charge death duties to these unfortunate people we are talking about who leave an estate of £3,000 or £4,000, ignoring the fact that they could have distributed their wealth among their family a little earlier in life.

There is a good deal of nonsense talked on both sides of the House about the heavy burden of taxation. Every time we have a debate like this. somebody gets up and talks about the heavy burden of taxation. The fact is our business community is overprotected and pampered and moans too easily. In fact it has suffered from over-protection and certainly not from over-taxation. Businessmen in this country never had it so good. They have had it far better than their colleagues across the water, although they had not, as Senator Donegan said, the "opportunity of a war" to make even more money, and that is the phrase he used.

It is true of course that the incidence of taxation is uneven, but to say that it is a serious disincentive is all nonsense. For large sections of our community, the system that operates is a system of under-privilege for the children of the poor. That under-privilege for the children of the poor is a serious disincentive to remain living in this country and that disincentive produces a large proportion of our emigration. We should face the fact that the incidence of income tax is uneven but we should take steps to place agriculture and the professions and the wage earners on a similar basis and distribute the benefits derived from taxation, what benefits the community can afford, to the whole community. It has been mentioned by Senator Murphy that money from stock exchange dealings is entirely untaxed. If you win anything from gambling on greyhounds or horses, you pay tax, but if you are sufficiently affluent to be able to pick up money by gambling on the stock exchange, you get your appreciated capital free of all tax.

This budget increases the tax on tobacco. I should like to suggest something which has been put before the Minister before, that is, that taxes on such things as tobacco and on drink might well be considerably increased. I know it is suggested that if you increase the tax on tobacco or spirits beyond a certain point, you will have a serious disincentive to consume and therefore the revenue will fall. The Department of Health has spent large sums of money to persuade people to smoke less and would it not be better if people did smoke and drink less, certainly the stronger types of drink? What is the Minister afraid of? If something is in favour of the better health of the nation and if the Government favour the better health of the nation, can it be said they are in favour of it provided only there is no monetary loss involved for the revenue? If there is a revenue loss, then the health of the nation must apparently be sacrificed. Those are two taxes which might legitimately be increased to the point of reducing the consumption of both.

If we look around Dublin, we see the amount of undeveloped land there is and I suggest there might be a tax on undeveloped urban land instead of allowing the city to rot around the Houses of Parliament. One has only to look in any direction to see derelict lots which are absolutely unused and which from the point of view of a planned economy would be very precious indeed. Another tax which might be increased is the one on the consumption of petrol. It has been suggested by Senator Burke—I do not know whether it is Fine Gael policy or not—that taxation should be at the expenditure end. It seems to me that the tax on petrol—not on fuel oil which is used for transport—might well be increased. That would apply, not to the business community who are already getting a tax concession and expense accounts for running a car, but to semi-luxury and to luxury driving. It would be in proportion to expenditure on petrol and the tax would similarly be in proportion.

I would look forward—perhaps a very long time forward—to a future very imaginative Budget which would set a pattern by which the entire system of production, distribution and credit would be radically altered to a structure satisfying the primary needs of our people—not to secure and bolster up the privileges of the favoured very few, the new ascendancy in this country.

The President of the Republic, Mr. de Valera, used to say a long time ago that unless we were prepared so radically to alter our system of distribution, production and credit, we should have failed and failed disastrously. Those were his words in Geneva in 1932, 28 years ago. Now we have a Labour spokesman saying that the Government should provide more work, and a Fine Gael spokesman saying that it is the Government's one problem to provide more opportunities for profit, because profit is the sacred thing. I would say that the Government's problem is to provide a fiscal, financial and credit structure which will enable that work to be tackled which, for the community's sake, is crying out to be done —not just for profit, not for jobs artificially created, but socially necessary work which must be tackled and done. I conclude with that: the Minister for Finance who introduces such a Budget of radical change in our system will be the first Irish Minister for Finance not to merit the President's condemnatory phrase that he has failed the community and failed it disastrously.

I think the old saying has been fairly well proved here tonight that figures can prove anything, and I am afraid that figures were very unscrupulously used in this debate. However, I shall be referring to that from time to time. Senator O'Donovan started by drawing attention to the fact that spending this year of £45,000,000 was the largest ever for the capital programme. Senator Lenihan dealt with that fairly well and I do not feel that I should go over it again, except to say that spending capital in itself is not wrong. It could be a very good thing. If it is a fact, as I believe it is, at the moment that the economy is expanding, it would appear to me to be a wise time to invest a certain amount of capital and that we should get a good return for it.

Senator O'Donovan prophesied that the Central Bank would produce a gloomy report. I hope he is wrong. Again he said that the O.E.E.C. report which was fairly favourable to this country—not altogether but fairly favourable—was not an independent report but built on figures supplied from here. That is quite true. Figures are supplied from here, but I take it that they are checked and cross-checked by O.E.E.C. In any case they are produced from the same type of data so that if they are more favourable this year than last year, that is all to the good.

Senator O'Donovan had some difficulty because he could not deny the existence of certain favourable trends in the economy, for instance, the 3½ per cent. rise in real national production or the growth in manufacturing exports. These are two facts anyway that are there and it is hard to explain them if you want to give a pessimistic view of the whole economy.

The Senator, I think, unfairly, criticised the Central Bank for its Report because, in particular, I think he said, they did not stress particular items which were not indeed by any means favourable to this country. Emigration was one and the exodus of people from the west of Ireland another. The Central Bank may not have stressed these in particular, but these are particular items and the Central Bank always deals with general trends of the economy. I think Senators will admit that in order to solve the emigration problem, we must get a good sound economy. If we do, I think emigration will be solved as a result. It is like trying to treat some ailment in the human body. Unless the human body is generally healthy, there is not much use in trying to cure the individual ailment.

It may be true that the Central Bank has been more optimistic about the future this year than it has been for some years back. I think it is true. I think the Central Bank would be more useful, more listened to, by being more moderate in its condemnation and in its praise of things. In the past few years, it has been tending in that direction and it will be listened to more if it wishes to condemn something or draw attention to the inadvisability of anything that is going on.

Another point, made, I think, by Senator O'Donovan, was that taxation is going up higher while young people leave the country. A number of Senators made the statement that taxation is going up, but I think that is not an altogether correct statement. If you take the last three years—they are the years I am concerned with—taxation has not increased. We have lowered taxation in certain directions like income tax; we have raised it on tobacco; lowered it on many small things like diesel oil, newsprint, bananas and other things. I have tried to get a general analysis of the general effect of taxation in the last three years. It has been brought down.

Are you counting the removal of the food subsidies?

That is not taxation. That is the other side of the balance sheet.

That is an accountant's answer.

The Senator is looking at the wrong side of it. I am talking about taxation. I shall not forget about that. If the Senator wishes, I shall deal with it, not on this Bill, but on the other Bill.

To come to taxation again: the fact that we are getting more money in does not mean higher taxation but that more money is coming from existing taxes. That means that the individual is paying more because he is smoking or drinking more or paying more income tax or doing more motoring. If it is true that we have fewer individuals in the country and are getting more taxes and taxes are at the same level, then the individual, if he likes to smoke, to drink, to motor, is enjoying himself more than he was—not that taxation has gone higher.

The Senator made the point that we shall be collecting 15 months' taxation in a year. Under Schedule E, the taxpayer up to this paid taxes, half on first of January and the other half on first of June. He will now pay half on the first of January, in the last financial year, and he will pay—or he should have paid by now if he is a good citizen because it is five days after the time—on the first of July. Then he will pay as he earns for the last six months so far as the individual paying a half year's tax under the old system on first July is concerned, he will pay the other half of the tax for the year under P.A.Y.E. for the last six months of the year, so he pays a full year's tax in the financial year 1960-61.

The only difference in his case is that, instead of paying his tax on 1st January next, it is divided into six parts and he pays those six parts through October to March, inclusive. So far as the State is concerned, far from receiving 15 months' tax we shall get only 11 months' tax this financial year as a matter of fact, because we get the half-year's tax on 1st July and we then begin to receive tax under P.A.Y.E. Under P.A.Y.E. we receive the tax for October in November, and so on down until next March which we will receive in April. Therefore, instead of Senator O'Donovan being right when he said that we will receive 15 months' tax instead of 12 months' tax, we will actually receive 11 months' tax. That is so far as the Exchequer is concerned. Still, we are facing that and we hope things will turn out all right.

Senator O'Brien pointed out, very rightly indeed, that in this balance of payments business there is always a certain amount of chance. He spoke of the uncertainty of foreign markets. It may happen that their capital will go down and not continue stable, and it may happen, as he pointed out, that the terms of trade which were favourable during 1957 and 1958, and indeed are not so favourable now, may go against us rather than in our favour in future. That is all true, but we have to take that chance, and I suppose any country would be in a certain amount of trouble if any of those things were to go against them.

In the same way, when he came to talk about the Budget, Senator O'Brien said that we should make provision for hazards which might arise. He made the point with regard to the surplus we had in the Budget last year, that we should have reduced taxation rather than increased expenditure. Of course, we did both, if you like. We reduced taxation under many headings, mostly small, if you like, and I have mentioned them already—fuel oil, and a number of import levies and import duties and so on. In fact, I think they added up to almost £2,000,000, but against that we increased taxation on tobacco and that amounted to £1,000,000.

Senator O'Brien warned against inflation, and that is something we must always keep in mind, indeed, and we must keep it in mind from the point of view that many of the bigger countries appear to have conquered the menace of inflation. It may appear again, of course, in those countries, but it looks as if they have got over it to a great extent. The fact that we are trying to build up an export trade means that we could not possibly compete in export markets if they were free from inflation and we were troubled by it. For that reason, we must watch that inflation does not appear in this country.

What are the signs of inflation? The first sign is of course in the balance of payments. So long as we can balance our payments, there is one thing certain, that is, inflation is not too bad. There may be a certain amount of it but it is not too bad if our payments are balanced. If we take the past three years, it worked out fairly well so far as the balance of payments goes. The second test of inflation is the cost of living. Taking the past two years, the cost of living has remained more or less stable. It is true that it went up two points last February, but it had come down two points over the past two years, so that taking the past two years as a period, the cost of living has varied somewhat between those two points and it is now once more where it was two years ago. We have, therefore, kept the cost of living fairly stable as a whole, and we can congratulate ourselves that we have, therefore, avoided inflation to a great extent. We must, of course, be very watchful because, as I said, our expanding economy depends to a great extent on the finding of export markets.

To provide a better standard of living for our people, we must have more exports in order to pay for more imports, so that the export market is very important and we must watch that inflation does not creep in here. Everyone indeed, whether managers of factories, people earning salaries or wages, or people in the business of distributing goods for sale, must be as careful as possible to keep the costs of production down.

A point was made by another speaker, and so far as I understood it, it was a criticism of the amount of capital provided for public enterprise, as it were, and private enterprise, and he said they were very important and that they were being starved for want of capital. I do not know if it is true that private enterprise is being starved for capital. As a matter of fact, Senator Donegan said that some other speaker had said there was plenty of capital in the country. If plenty is the same as enough, then there is plenty. I know of no enterprise myself, I must say, that failed for want of capital. Many of the projects which come along go to the Industrial Credit Company or some such body and it is never for want of capital that they fail. It is always for some other reason that the project does not go ahead, so there is no shortage of capital so far as I know. I do not know what way things may go, and if there is a big expansion of business, I do not know whether our economy is capable of dealing with it or not. If not, we will meet it, I am sure, in some other way.

Of this £45,000,000 we speak of, a lot goes actually to private enterprise. After all, the money that goes out through the Industrial Credit Company goes practically altogether to private enterprise—in fact, I think altogether. Money is given by the Agricultural Credit Corporation to private enterprise and quite a lot of that money goes out by way of help for building, housing and hotels and so on, so as far as private enterprise goes, a good proportion goes in that direction.

Senator O'Brien said that those who wanted more money spent were very vocal, but those who wanted taxation reduced were not at all vocal. That is not my experience. I received quite a number of groups before the Budget who asked for a reduction of taxation, and quite a number of them were successful—for instance, a group from the cinema proprietors, a group from the mineral water manufacturers, a group from the newspaper proprietors with regard to newsprint and fruit importers. I received other groups, who were not successful, who pleaded for a reduction in taxation. Amongst them were the distillers. However, they went away and took the law into their own hands. They diluted their whiskey and in that way effected a reduction for themselves.

Senator Lenihan was right when he made the point that an increase in imports is not doing this country any harm, provided we have an expanding economy and that the financial position both in balance of payments and in balancing the Budget is intact. I suppose it is the economic aim of any Government or any Party to improve the standard of living. We must expand our business so as to import more and have more to pay for those imports if we want to improve the standard of living all round.

Senator McGuire talked about incentive taxation. He said it has had very good results. I agree. He mentioned in particular incentive taxation as far as hotels are concerned. It would appear to be true that we are getting good results there. He spoke about death duties. Many Senators spoke about them—some for and others against. That is correct because there are many arguments both for and against.

Senator McGuire and other Senators say death duties should be removed. In fact, Senator McGuire said everybody wants them removed except the Revenue Commissioners. The Revenue Commissioners do not care. If I say to them: "Remove the death duties," they will do so but they will say: "We shall have to fill the gap with something else." If I say: "Fill the gap with this or with that" they will do it. They do not decide policy. Ministers for Finance have refused to do it up to this for the reason that, although they would like to do so, they do not know where to get the £3,000,000 required to stop the gap.

It is easier to depend on a tax that is there than on a new one, even though it might not altogether be a good tax. As I say, there are arguments for and against death duties. I do not want to go into them now except to say that it would be a good thing if we could make it a bit easier on our nationals in respect of succession duty as well as death duty and legacy duty. However, I am not dealiing with that at the moment but more with the argument that the removal of death duties might induce wealthy people to come to live here.

It must be remembered, as was pointed out by Senator Murphy, that our rate is very much lighter than the British rate. Yet we have not attracted very many wealthy persons. Our rate stops at £250,000. Anything above £250,000 is the same rate with us, that is, 53 per cent. The British rate goes up to 80 per cent. at £1,000,000. If a person knows he will die with about £1,000,000 it would pay him well to come here—but he has not come. I do not know whether, if we reduced the death rates by half, we would do very much better. Maybe we would. It might be worth while trying some time when the money is there and to spare.

If a person who has £1,000,000 in England or America or somewhere else comes here he must bring the £1,000,000 with him in order to benefit by the change. That is one of the difficulties. It is not so easy, in the first place, for a person with a lot of money to get rid of his investments, whatever they may be, in the country he is living in, or, secondly, to invest it at a profit here as he would naturally desire. Every Senator will agree that, with a big amount of money, that would be a difficult matter. It is another reason why I think the removal of death duties is not likely to have the effect of enticing a lot of wealthy people into this country.

Senator Quinlan said the adverse balance of trade in 1956 was explained by the terms of trade. That is ridiculous. It may have contributed a bit to the £37,000,000 deficit that was there at that time but everybody knows it does not explain the whole £37,000,000 or anything like it. Certainly it is pleading a cause in a very unscrupulous way to say it is entirely due to the terms of trade.

Senator Quinlan and Senator Donegan said that central Government are shifting their liabilities on to the local authorities and that they have to pay them in rates. That is not true. They have shifted nothing on to them. Anything they did in recent years was to relieve them of something.

What about the Health Act?

In 1953——

The Minister did it himself.

And I am proud of it. I am thinking of the years. It was in 1947. We are both wrong. In 1947, I brought in a law that the local authorities would no longer be asked to pay for the whole of the health services and that in future the central authority would pay half. If that had not been done, they would now be paying, between them, another £8,000,000.

May I ask a question?

No; wait until I have finished. The Minister for Social Welfare will come here with a Bill next week. He is removing a number of things from the local authorities, small things, I admit. A thing the local authority did up to now is being taken over by the central authority.

The abolition of the subsidies.

What local authority was contributing to them?

Food, drink and tobacco.

These two economists, if they got their way, would change the whole face of the country. We are taking things from the local authorities: we are not shifting things over on them. The Minister for Social Welfare will come here with a Bill next week. Senators will find he is taking more from them in that Bill than before and it is being shifted to the central authority.

He came with a simple Bill before the Government but before he left he had pushed about £250,000 from the Exchequer in order to relieve the local authorities. Senator Quinlan said national production was increased by 3½ per cent. but he said it was not a real increase. It was a real increase which had been corrected with the change in money value and, as far as it goes, that 3½ per cent. is a real increase. He then gave a most extraordinary figure which I find it hard to follow. He said that if agriculture were to increase in output by 2 per cent. per year for ten years it would be as good as £100,000,000 extra exports from industry. It is very hard to see how a 2 per cent. increase each year for ten years in agriculture could give us £100,000,000.

Industrial exports are more than half imports.

Suppose they are, and one-third or two-thirds. Agricultural output is now £150,000,000. If you add 2 per cent. for 10 years, it might come to £35 million or £40 million and how that could be as good as £100 million from industry, I find it hard to understand.

Of course, it could be. All the raw materials for industry are imported.

It is not all net output in regard to agriculture.

This is buffoonery.

Quite a lot of it is in regard to industry.

(Interruptions.)

The Minister is being interrupted by three Senators.

I did not interrupt them at all, although they spoke a lot of nonsense.

Fine Gael came back limping again. They could not get a quota in the Ennis area where they had Mr. McHugh. It is disgraceful the way the Minister is attacked in this House.

I find the same in the Dáil.

They cannot take it.

One must listen to them talking a lot of nonsense and lies and when anybody answers, they cannot take it. They interrupt all the time.

The people have found you out at last, as Carlow-Kilkenny proved.

What about Louth?

Seventy-eight votes in the Dáil—that is the result.

Senator Quinlan said that if income tax were reduced from 7/6d. to 2/6d. there would be no avoidance and the Revenue Commissioners would not be wanted. Of course, that is a ridiculous sort of figure to give. I do not know where we would find the £16 million or £17 million we would lose on that. As far as agriculture is concerned, he did suggest that if we took the rates off the farmers, we might put income tax on them. That would be a very difficult matter. Senator Donegan said that the farmers were paying £18 million in rates. If you tried to get that from the farmers by way of income tax, you would want the Revenue Commissioners back again, I can tell you. Senator Donegan said that there was an appeal made to the Irish people in 1956. It is like the case of the bad nursery maid who gives her charge a pill to make him well again. Why would the people not give him a pill after they had ruined the country? They gave him a pill but the pill did not do them very much good indeed.

It did you good. You got the benefit.

They had to wait until the new physician came to look after them.

What about the cutting of the calves' throats?

Senator L'Estrange is back to the calves. I always have to answer in the same way. If the Blueshirts had not taken the part of England in that, we would be all right. The Blueshirts, to their eternal discredit, took the side of England against us.

That is a fantastic statement.

It is perfectly true.

It is absolutely untrue and the Minister knows it is untrue.

I know it is perfectly true.

I know it is untrue and so does the Minister. I should like to get the business finished if I were allowed.

(Interruptions.)

Give them their dribbling bibs and let them go home.

Senator Donegan said that on account of the financial position, we were giving a miserable pittance to the old age pensioners. We have been in office over three years; the others were in office for three years before us. They gave an increase of 2/6. We gave an increase of 4/6, although the cost of living went up exactly the same in each case—11 points—so that if our increase is a miserable pittance, all I can say about the other one is that it was a Fine Gael pittance.

It could not be any worse.

They are both wretched.

Both of them were wretched. Still, I do not want the criticism to come from Fine Gael.

The food subsidies were worth more than 2/6.

Senator Donegan says that it took £3,000 or £4,000 to employ a man. I think that is right. In certain industries it takes more, while in others it takes less.

In Irish Shipping, it is about £5,000.

The amount is higher in some than in others. Senator Donegan wound up by saying that there should be a more imaginative approach to agriculture. That is a Fine Gael cliché. As a matter of fact, the Fine Gael speeches made here and in the Dáil were very critical of Government policy but I have never heard the slightest mention of any change that might be useful. I do not know if any Fine Gael speakers, either here or in the Dáil, could make any suggestion of a change that might be useful. They talk about imaginative approaches. They go back to Fine Gael clichés. They give a lot of wrong figures about what happened under the Coalition and what happened now and when they have done that, they are satisfied that they have done their business well.

Give me one figure which was wrong?

I have not got any figures from the Senator. The amount paid on agricultural rates is a very long piece out.

I wonder.

Senator Sheehy Skeffington asked if Fine Gael were bringing in this Budget, what change would they make. I should like to know the answer to that. They have not told me. They have not found any fault with any of the duties I took off and. strange to say, they have not criticised the penny that went on the packet of 20 cigarettes. There has been no criticism at all except for the vague general clichés that we should do something about reducing death duties. I cannot answer Senator Sheehy Skeffington's question. I suppose it would be out of order for anybody else to try to answer it. Accordingly, I am afraid the Senator will have to go without an answer from me.

The Senator said that the Government are very pleased with the state of affairs. I do not want anybody to get that impression. The Government see hope in the situation. We have good reason to see hope when we can, after all, point to the increase in national income, the increase in, exports, which were very substantial, indeed, last year and, again, for the first four or five months of this year. The balance of payments is very good and the Budget was balanced. When you can point to all these things, there is hope for the future. Never let it be said that we are satisfied or, indeed, in any way complacent. I think it would be a very bad Government, indeed, that would be satisfied, no matter what the conditions are. You can be sure that the conditions will not always be satisfactory. There will always be something to be done and quite a lot to be done, too.

With regard to economists, they must use some measure to compare economies and so forth or give examples. As a matter of fact, the Senator quoted money quite a lot in his speech. If the Senator gives a new way of comparing the output in agricultures or industry without talking about money, we will see what it is like.

It is the over-emphasis on the importance of money that I was rejecting and not the proper use of it. It is a medium of exchange.

It is a medium of exchange and I do not think the economists use it otherwise. The Senator said that with advantage to the people I might put a higher tax on tobacco and alcohol but I think the Senator's desire was that I might get less because there was less smoking and drinking. Well, as Minister for Finance I am looking for as much money as I can get and at the moment I am not concerned with the morals of the matter. I suppose if I were appointed Minister for Health, I would be concerned with the health of the people. I am not convinced that this argument about tobacco being unhealthy is true. If I am wrong I shall pay for it because I have not given up cigarettes. As far as alcohol is concerned, I am not convinced it does a lot of harm and there again if I am wrong, I shall pay for it.

Question put and agreed to.
Committee Stage ordered for Wednesday, 13th July, 1960.
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