Seanad Éireann díospóireacht -
Wednesday, 17 Jun 1964

Vol. 57 No. 14

Finance Bill, 1964 ( Certified Money Bill )— Second Stage.

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

Minister for Finance (Dr. Ryan)

The Finance Bill contains the provisions necessary to give legislative effect to the Budget. The broad scope of the various sections of the Bill as introduced in Dáil Éireann is set out in the explanatory memorandum which was circulated with the text of the Bill. Only two amendments of any consequence were made to the Bill during its passage through Dáil Éireann. These related to the proposed tax reliefs for the Voluntary Health Insurance Board and for manufacturers of milk products, other than butter, exported through An Bord Bainne. I propose to confine my remarks on the Bill on this Stage to a general summary of the matters dealt with in each of the six Parts which the Bill contains. As the Seanad is aware, detailed explanation and discussion are more appropriate to the Committee Stage.

Part I of the Bill deals with income taxation and contains twelve sections. The first section imposes income tax and surtax for the current year at the same rates as were in force last year and sections 2 to 11 carry into effect certain of the Budget proposals. Section 12, as well as section 32 in Part VI, enables interest on securities issued by the air companies to be paid without deduction of tax. The Electricity Supply Board, Córas Iompair Éireann, Bord na Móna and local authorities already have this facility. The reliefs provided for in Part I are a new form of age allowance, relief for small incomes and exemption of the business of the Voluntary Health Insurance Board from income tax. The Bill was amended on the Committee Stage in Dáil Éireann so as to provide that, while trading profits of the Voluntary Health Insurance Board will be exempt from tax, trading losses will continue to be relieved by way of set-off against the Board's investment income. The remaining measures in Part I deal with tax avoidance, tax simplification, taxation of foreign profits of companies and recovery of tax arrears.

Part II of the Bill deals with customs and excise matters, including the increases in the rates of duty on beer, imported spirits, hydrocarbon oils and tobacco which were referred to in the Financial Statement. The increased duty on imported spirits will not apply to Northern Ireland whiskey. Provision is also made for some matters which were not mentioned in the Budget. These are the revision of the rates of duty for firearm certificates, exemption from road tax for snow-clearing vehicles and provisions in relation to proceedings for hydrocarbon oil offences.

There is only one section in Part III. It exempts Government and other securities from death duties where there is a surrender of a life-interest in a trust. Such securities would not have been liable to death duties had the trust been terminated by the death of the life-tenant.

The two sections in Part IV of the Bill simplify stamp duty. The first abolishes certain duties which yield an insignificant amount of revenue. The second extends the composition arrangement for payment of stamp duty which the Revenue Commissioners are empowered to operate under section 45 of the Finance Act, 1963. It is proposed, in effect, that composition arrangements may now be made with local authorities and statutory bodies generally.

Part V contains four corporation profits tax proposals, all of which were foreshadowed in the Financial Statement. They are the carrying-forward of losses, the application of corporation profits tax to private unlimited companies, the raising of the deduction allowable in respect of directors' remuneration and the assessment and collection of corporation profits tax.

A number of miscellaneous matters are dealt with in Part VI. These are: the Capital Services Redemption Account annuities; the retention for bacon curers and for manufacturers of milk products (other than butter) of the benefit of exports tax relief which might otherwise have been lost as a result of the new compulsory marketing arrangements; the collection of the amount of income tax, surtax or corporation profits tax which is not in dispute when an assessment is under appeal; and the extension, as I mentioned earlier in connection with section 12, to securities issued by the air companies of the tax concessions given to non-resident holders of certain Irish government securities.

The remaining sections in the Bill and the Schedules do not call for specific comment at this stage.

Professor Dooge

The Finance Bill affords an opportunity to the Seanad to discuss taxation. Indeed, it offers the only real opportunity to do so, since the Budget Resolutions do not come to this House. Taxation can be reviewed at several different levels. First, we can look at the total amount of taxation, that is the burden on the community and its effect on economic growth and stability. Secondly, we can look at the structure of taxation, the different types of taxes involved, and the merits and demerits of each type. Thirdly, we can look at individual taxes and discuss their details, their form and their administration.

I intend to concentrate on the first two aspects, leaving discussion in detail on individual taxes as more appropriate to Committee Stage. If we wish to discuss the burden of taxation, one thing is necessary above all and that is, that we should be absolutely clear about the terms and definitions used. It is necessary to be absolutely clear whether we are talking of central taxation only, or of total tax revenue which comprises both central and local taxes.

When we are relating tax yields to capacity we must also be clear to what we are relating them; there is more than one type of capacity to which we can relate this burden. It can be related to national income which corresponds to the total earnings of the residents of the country arising from their economic activities. It can also be taken in relation to gross national product, which is the total output of the goods and services produced by the nation's economy before reductions for depreciation and such similar expenses. Indeed, we want also to be clear if we are talking about gross national product whether we are talking about gross national product at factor cost, or gross national product at market prices.

These distinctions are all necessary because otherwise constructive debate concerning the burden of taxation is absolutely impossible. Unless we have our terms defined it is impossible to do much else than have an interchange of conflicting figures. Therefore, we should take our taxation and relate it either to national income or gross national product, but we must be quite clear in each case as to what exactly we are doing.

Since the position is that gross national product, particularly gross national product at market prices, is higher than national income, the burden of taxation will always appear lower when taken in relation to gross national product than when taken in relation to national income. I say this because I think it is necessary, even at the risk that, speaking in another place, the Minister may again refer to my comments on these points as gibes directed at the Government.

If we want to look at the burden of taxation in this or any other country we can do two things. We can examine the burden of taxation, properly defined, comparing a given country one year with another, and see how the tendency is going. If we want to look at it from another point of view, we can for a single year compare the burden of taxation among different countries. I think it is appropriate at this time, when we are coming into the first year of the Second Programme for Economic Expansion, that we should take a close look at our total burden of taxation from both those viewpoints, to see how does Irish taxation in recent years vary. Of course, in looking at this I want to look at the total of taxation, and more particularly at the burden of taxation when we take taxation and relate it to capacity.

In that connection, I should like to quote from the debate on the Finance Bill, 1963, in this House. Senator Nash, in an able speech from the Government side of the House, on that occasion gave us a criterion which we could use in measuring this variation from year to year. I quote from the Official Report for the Seanad for 18th July, 1963, volume 56, column 1229. There, Senator Nash had this to say:

The real test is what percentage of the gross national product does our tax bear; our tax from all sources going into the National Exchequer. Is that percentage going up or going down? If it is going down, of necessity we are doing well; if it is going up we are doing badly. Let us take that basis.

Later in the same debate, I commented that when we came to judge the Budget of 1963 it would be judged properly not on the burden of taxation up to 1962 but on the burden of taxation in 1963 and particularly in 1964.

What is the position if we look now at the burden of taxation, defined as Senator Nash defined it, at the present moment? It is not necessary for me to do any calculations on this score because the calculations have been done and were given by the Minister for Transport and Power in the Dáil on 21st April of this year. In volume 209, No. 1, columns 77 to 79 of the Official Report for the Dáil, the Minister for Transport and Power gave figures for total taxation in relation to gross national product for the years 1962-63 and 1963-64, together with an estimate for 1964-65.

Let us look at these figures according to Senator Nash's criterion and ask ourselves: is the ratio going down —are we doing well—or is the ratio going up—are we doing badly. The figures quoted by the Minister for Transport and Power were: 1962-63, 22.4 per cent; 1963-64, 23.7 per cent; 1964-65, an estimated 24.3 per cent. These figures, quoted by a Minister in Dáil Éireann, can be taken as having been reliably checked. We find from these figures that between 1962-63 and 1964-65, there occurs a rise of 2 per cent in the two years.

If we look at what the Second Programme for Economic Expansion says about this we shall find that programme is based on a rise, on this same ratio, of 1 per cent or 2 per cent in seven years. This is clearly stated in Paragraph 108, page 63, of the Government White Paper on the Second Programme. Yet in contrast to what the Government envisage in their Programme of a one per cent or two per cent expansion, we find from the figures given by the Minister for Transport and Power a rise of 2 per cent in two years.

Indeed if this figure shows the same tendency for future years, we will find that the ratio of total taxation to gross national product will reach 25 per cent not in 1970 but in 1965. It would be no sign of success if this were the first target of the Programme to be exceeded. We find then, on the criterion suggested by Senator Nash and the figures given by the Minister for Transport and Power, that the burden of taxation is not only increasing but is increasing at a faster rate than the Second Programme has allowed for.

If we turn from looking at conditions in Ireland in the past few years to a comparison with other countries, we find the Taoiseach ready with a new criterion. I should like to quote what the Taoiseach said in the Dáil on 15th April, 1964, reported at column 1770, No. 1, of volume 208 of the Official Report. I quote:

By and large, our tax rates are lower than in other western European countries, indeed lower than in any other country in the world with comparable living standards. Taxation represents a smaller proportion of our national income than it does in other countries. This is not altogether attributable to restraint on the part of the Government but to the fact that we do not have to meet exceptional burdens for national defence which other Governments undertake.

It is quite clear the Taoiseach was talking in terms of national income. When questioned on it, he emphatically reiterated that he was talking about national income. Later, at column 1771, he indicated he was dealing in terms of central taxation as a ratio of national income. Again I quote:

I am talking about Government taxation. In most other countries in Europe Government taxation as a percentage of national income exceeds 30 per cent.

There we had from the Taoiseach clear, unambiguous statements that, by and large, our burden of taxation is lower than that of any other country in western Europe and lower than in any country in the world with comparable living standards.

The Taoiseach made it clear that he was talking about central taxation and national income. I was rather surprised at this flat, unequivocal statement from the Taoiseach and took the trouble to check what the position was in regard to western European countries and countries of comparable income throughout the world from data given in the UN Statistical Year Book for 1962. This is the latest publication in the series and was published in New York in 1963. I have taken as the countries in western Europe the 18 countries of the OECD, our colleagues in OECD with whom we are joined in an effort to increase national income by 50 per cent before 1970.

There are no data in the Year Book for Iceland or Luxembourg but data are available for the 16 other members of OECD. When these data are examined, we find the figure for central taxation over national taxation for Ireland at 22 per cent is not the lowest in western Europe, even if we allow for the qualifying phrase "by and large". If we examine the data and remember the definition on tax burden as central taxation over national income, the figure for Ireland is almost exactly equal to the average for the 16 countries, and there are six countries who have lower ratios than Ireland. They are Denmark, Greece, Portugal, Spain, Switzerland and Turkey.

It is not sufficient to say that four of these countries are low income countries or developing countries. We find among the countries lower than ourselves one of our greatest competitors. Denmark has a national income per head which is twice that of Ireland and yet, according to the Taoiseach's criterion, its burden of taxation is lower than ours. Switzerland has a national income per head 2½ times the national income per head in this country and its burden of taxation is lower.

The burden of taxation compared with these sixteen countries is, as I said, almost equal to the average, whereas our national income per head is only two-thirds of the average in those 16 countries. We can see here that there is no room for complacency and no room for unequivocal statements which may make good rhetoric but do not stand up to statistical examination. It is true the Taoiseach said we should be lower than other countries because we do not have high expenditure on defence in this country. About 5½ per cent of our Government expenditure goes to defence compared with 20 per cent as an average for the 16 countries which I have been examining here and for which data are available in the UN Statistical Year Book. The only other country with comparable defence expenditure is neutralised Austria.

Also when we compare the extent to which we have room for manoeuvrability without involving ourselves in a heavier burden of taxation it is well to look also to what is the position in regard to national debt. If we relate national debt to national income, we find that the burden of national debt in this country is twice that in western Europe as represented by these 16 countries. Indeed, only the United Kingdom and Belgium have got ratios of national debt to national income higher than Ireland.

Neither is the second statement of the Taoiseach supported by such data as are available. A comparison of the burden of taxation in this country with the position in comparable countries in the rest of the world does not show that we have a lower burden of taxation than these similar countries. Our figure, defined in the way in which the Taoiseach defined it, of central taxation over national income is 22 per cent. If we go to the continent of South America we find a comparable country there, Chile. The national income per head in Chile is just below ours and the ratio of central taxation to national income is 17 per cent compared to our 22 per cent. The Argentine, with a somewhat lower national income, has a burden of taxation defined in this way of 14 per cent. If we go to Asia, a continent which is developing, we find a comparable country in Japan, our colleague in OECD. Japan has got a burden of taxation, defined in the way the Taoiseach defines it, of 13 per cent compared to our 22 per cent. If we go to the continent of Africa, a comparable country here is South Africa. We find here again the burden of taxation is well below ours. It has a figure of 14 per cent. If we take the statement of the Taoiseach and examine it again with the data which are available we find that while the statements of the Taoiseach may, indeed, be good oratory there are not good statistics to back them up.

Later in that same debate the Minister for Finance gave some figures of the burden of taxation defined in a different way. Speaking in the Dáil on the 5th May of this year, Volume 209, No. 7, column 1029 the Minister for Finance gives figures for the total taxes, central and local, as a ratio of the gross national product. He gives these figures for a number of countries. It is not clear, from what the Minister for Finance says in this particular passage, what year is being dealt with nor, indeed, is it clear whether GNP is taken at market prices or factor cost, though I assume from the figures given that market prices are involved. In this particular passage the Minister for Finance says:

As a matter of fact, there are 11 countries in Europe higher than we are and only two below us in more favourable positions—Switzerland and Portugal.

The Minister gave as his reference for this the figures for national accounts published by OECD and the annual review tables compiled by OECD. If we look at the OECD publication of national accounts which end in 1961 we find there are given figures for the 18 countries of OECD. If the Minister is referring here to the 1961 values, it seems to me extremely difficult to reconcile his statement that Portugal and Switzerland are the only two countries lower than us with the figures for 1961 which would be obtained for Greece, Spain and Turkey. If, on the other hand, the Minister is taking the figures for 1962 from the annual review volume of OECD, then the material which has been deposited in the Library of this House contains for 1962 data in respect of only 11 countries and is not a complete list.

I should like if the Minister, in his reply, could indicate whether the figures he gave in the Dáil relate to 1961 or 1962 and if he will give the complete list of the values for 1961 and 1962 in relation to the burden of taxation defined in the way in which he defined it in replying to the debates in the Dáil. From my examination of the figures in the Library of this House, which I only saw for the first time yesterday, it appears to me that there are not two but five countries in Western Europe whose burden of taxation is lower than that of Ireland.

It is no good just looking at these lists of figures and saying we can claim a certain virtue because our burden of taxation is lower than that of countries like France, Germany, Sweden, Switzerland and the United Kingdom. These countries all have a national income per head far greater than ours. It seems from the figures given earlier that an effort made to increase our income per head has resulted in our burden of taxation rising rapidly. Indeed, the indications from such figures as are available are that our figures could well exceed the present figures for these high income developed countries long before we would have reached the national income for any of these countries.

Let us turn from the subject of the burden of taxation to that of the structure of our present taxation in this country. A modern Budget, which, of course, is a presentation of national accounts, is also used as an instrument of economic policy and as a means of promoting social equity. Each year there is an opportunity to review the structure of our tax system from these two points of view. From an overall point of view a balance must be struck between equity and incentive. It is important if we want to go any further to distinguish carefully between taxes on individuals and taxes on enterprises. I would suggest that, when we apply the criteria of taxation, the taxes on individuals should, above all, be equitable if the objectives of personal freedom and a wide distribution of wealth are to be reconciled. Such taxes should, if possible, also have favourable effects on economic growth and stability. They should at least be neutral in regard to these matters. When we turn to taxes on enterprises, however, we are no longer dealing with individuals who possess inalienable rights. Here we should promote, above all, the best possible allocation of resources and consequently a high rate of economic growth, while at the same time making sure that no inequities arise as between one enterprise and another.

I think the Government's tax policy in recent years, as judged by these standards, does not come out with high marks. If we look at what has happened with regard to taxation on individuals which should, above all, be equitable, what do we find? In recent years the Government have raised an increased proportion of individual taxes by indirect taxation rather than by taxes on income and wealth. Such indirect taxes are of their nature regressive and inequitable, imposing a greater burden on those least able to pay. Compensatory social welfare benefits given at the time of introduction of the taxes make a poor showing at a later period against the background of rising prices such as we are experiencing at the moment.

The supposed disincentive effects of taxes on income and wealth, of which the Government have made much virtue in recent debates on taxation policy, rest on very flimsy ground indeed. I shall return to that point later.

If we turn to the question of taxation on enterprises we find the Government have, in spite of their supposed devotion to programming and emphasis on growth, made no effort to improve our taxation system with a view to promoting a better allocation of resources by favouring efficient enterprises over inefficient ones. Reform in this direction would, I think, be very worthwhile.

In support of the plea for reform in this direction of taxation on enterprises, I would bring to the notice of the House a recent article by Professor Edward Nevin of the University College of Wales at Aberystwyth, and formerly of the Economic Research Institute here in Dublin. The article is entitled "Taxation for Growth—A Factor Tax". It is published in the Westminster Bank Review for November, 1963. Lest anyone should think that the views expressed in this article by Professor Nevin applied only to the United Kingdom, I would remind them that Professor Nevin had earlier in 1963 given a lecture to Tuairim on the subject of "The Irish Tax System", in which he had applied these ideas to Ireland and dealt with their application to this country in greater detail. I propose in what I have to say, however, to quote from the more accessible source, that is, the article in the West-minister Bank Review.

What has Professor Nevin to say about taxation on individuals? On page 16 of his article, he says:

There can be little doubt what the main function of personal income tax should be. It is generally regarded as broadly neutral so far as allocation effects are concerned —that is to say, it reduces spendable income but does not influence the distribution of consumers' expenditure between different types of commodity. One suspects that it is also neutral from the growth point of view. A good deal of righteous indignation is frequently generated about the evil influence of income tax on incentives to work and incentives to save, but the blunt truth of the matter is that the evidence on this point is scanty and ambiguous, while in terms of logical analysis the effects could work in either direction.

Here we have Professor Nevin denying that there is any economic justification, either from data or from logical analyses of the Government argument, that direct taxation would retard growth. The argument which the Government used against the legitimate objection to indirect taxation, particularly that of last year, is one for which this eminent economist finds no justification whatsoever.

If we turn to what Professor Nevin has to say about taxation on enterprises we find on page 19 of the same paper his views on how such taxes could be designed to stimulate growth. I quote:

At the present time we levy taxes on profits and taxes on goods. In both cases the tax fails to distinguish between the efficient and the inefficient producer. If the tax is levied on producers, it falls with equal proportionate weight on all, efficient and inefficient alike. If it is levied on commodities much the same is true; it does nothing to guide the public towards goods efficiently produced and away from those inefficiently produced. Suppose now that we were to tax an enterprise on the productive resources it used, rather than on its profits. The effective result of this would be that the efficient producer would be taxed at a lower proportionate rate than the inefficient; the tax system would encourage the movement of society's scarce resources into the hands of those best suited to use them, instead of (at best) being neutral in this respect as it is now.

Professor Nevin goes on to give an example to illustrate the effect of replacing a 25 per cent tax on profits by a 3 per cent. tax on the resources used by enterprises. He shows that, even if the indirect taxes affecting industry were left alone, a 5 per cent increase in productivity by a firm over the general average would reduce the effective rate of taxation on the profits of that firm from 25 per cent to 17 per cent, thus encouraging such a firm, allowing it to expand and thus directing resources into the hands of the more efficient enterprises. The advantages of a system such as this would be many—and these advantages are not necessarily confined to the scheme suggested by Professor Nevin. There are other possibilities which could and should be explored in this context.

Let us confine ourselves at the moment to the specific advantages of his particular proposals. These would be first, a powerful incentive to efficiency which would promote a proper structural change in the economy. At the moment, the Government are trying to promote such structural change by various means but one of them is the very dangerous one of unilateral tariff reduction which is eroding our international bargaining power. Surely it would be much more suitable to use fiscal methods as suggested by Professor Nevin in order to achieve the same purpose—less dangerous and probably more effective? Secondly, such a system would discourage the inflation of costs by business enterprises. Thus, excessive advertising, elaborate premises, overgenerous expense accounts and similar expenditure would now become an addition to the tax base and not something which could potentially be offset against profits in order to reduce taxation. Thirdly, the ability of efficient firms to expand would be enhanced and this would help to overcome the structural unemployment which must necessarily result in this country as we continue to move towards freer trade conditions.

If this might be thought as in some way favouring particular individuals, by lightening the tax burden on those who are earning most, it must be remembered that the salaries and distributed profits from these particular industries would still be the subject of personal income tax. If our income tax system were doing its job properly, it would adjust matters so that social equity between these persons and other individuals in the community would be preserved.

In looking, then, on the effort the Minister made in his Budget of 1964 to promote economic growth in this country, to combine growth and stability and to promote social justice, I would, in summary, say two things. First, the burden of taxation in this country is not the lowest in western Europe and not substantially lower than that of other comparable countries. While remembering this fact, we must also remember the unpleasant fact that the burden of our national debt is twice the burden of the national debt of other countries of western Europe. In the second place, the whole structure of our tax system could be improved to give, on the one hand, greater equity between individuals and, on the other hand, greater incentives to efficient enterprises.

The keynote of the Minister's Budget speech and the keynote of the Ministerial speeches throughout the Budget debate in the Dáil was one of complacency. I think that in the economic circumstances of this country at the present moment the note of complacency is a wrong note to sound. If the Minister and his colleagues continue to sound this note of complacency it might not only remain a wrong note but might indeed become a sour note.

Professor O'Brien

As Senator Dooge said this is the only opportunity we have in the Seanad to discuss taxation, which is attached to the Budget debate. We can discuss expenditure on two other occasions. First, we can discuss it in general on the Central Fund Bill—we have already done so this year—and, secondly, we can discuss expenditure on particular projects on the Appropriation Bill which will come up in the next few weeks. This debate enables us to discuss where the money is raised. That cannot intelligently be discussed without having regard to the whole economic circumstances of the country.

As Professor Dooge said in his excellent speech, the effects of taxation are very far-reaching. Therefore, it is impossible to speak intelligently about the Budget without having regard to the economic background. In modern times, a Budget must be considered in relation to three different periods. It must be considered as the annual housekeeping account of the State for the particular year to which it refers. It must also be regarded as a regulator for the cyclical condition of every country. Every country goes through periods of expansion and contraction. It is accepted by everybody nowadays that the Budget is used as a method of expansion, where a country is going too slow, and of contraction where perhaps it may be going a little bit too fast in an inflationary direction. Thirdly, the Budget must be examined from the point of view of how far it helps to implement the long-period programme of the Government in regard to economic affairs.

I do not propose to say more than a very few words about the second and third periods because, although the Budget does, in fact, refer particularly to the one year for which it is introduced, the second of these two aims, the expansion and contraction of the pace at which the economy is moving, is very much discussed in every country today. One cannot pick up a financial newspaper without coming across discussions about whether the British Chancellor of the Exchequer should not put on the brake a little bit more or whether the American Government are wise to take off the brake as much as they are doing and so on.

In order that the public finances can intelligently be used to this purpose, it has been more and more agreed in other countries today that the Minister for Finance should have a certain amount of power to alter taxation between budgets—in other words, that a certain flexibility should be allowed. In England, at present, the Chancellor of the Exchequer can vary certain taxes quite considerably without introducing a new Budget.

The consideration of the Budget as a regulator of the basic economy was clearly in the mind of the Minister in the present Budget. In the first place, I should like to quote from the White Paper entitled Capital Budget, 1964 issued with the Budget in which the following passage appears: "The appropriate method of financing the total of public expenditure, current and capital, cannot, however, be settled once and for all but must be considered from time to time in relation to economic conditions. It is rather a question of what change should be made between one year and another so as to moderate tendencies towards inflation or deflation." In the Minister's Budget the following passage occurs: "The Budget is intended to favour saving, to increase investment and to put a slight brake on consumption." Therefore, it is intended by the Budget to apply the brake gently on any inflationary tendencies which may be appearing in the economy.

When one, then, considers the Budget in relation to one single year, which is the main topic to be debated here today, the economic background of the country must be constantly borne in mind. The Budget affects the economy of the country and is affected by it in turn. They both act and react on each other, and that is why it is so important, for the Budget to be properly discussed, that there should be readily available to the public all the information necessary. I should like to congratulate the Minister on the excellent statistics which have been made available in recent years so that really nobody has any excuse now for not discussing the Budget intelligently when all the relevant figures are produced before or with the Budget and, therefore, we have got the data with which to try to make an intelligent discussion.

As regards the long period to which the Budget must be related, I want to say first that the long period programme is laid down in the Second Programme for Economic Expansion which heretofore is rather vague but I understand that more details will be forthcoming in a short period. The one thing that is clear in the Second Programme is that it cannot be a success unless exports, especially industrial exports, greatly expand. One can say fairly that there is nothing in the Budget that conflicts with this effort. I do not see anything in it which would make the export position more difficult. The inflationary tendencies in the economy arise from causes not in the Budget, although as I said there are one or two minor matters in the Budget which might perhaps have an inflationary tendency. Therefore, I think from the long period point of view there is nothing in the Budget to conflict with the Government's Second Programme for Economic Expansion.

Just as the Budget must be considered against the background of the country, the country must be considered against the background of the world. It is satisfactory to be able to say at the present time that the general international background is satisfactory. We have had evidence in the last few days of renewed efforts to link our economy with that of the European countries. The Government have been taking part in discussions regarding the development of the undeveloped areas, and there have also been discussions with regard to the improvement of Anglo-Irish trade. It is, therefore, fair to say that the external background at the moment is favourable and, to quote the Minister in his Budget speech, "as far as our principal export market is concerned it should enable us to get off to a good start with our Second Programme". That is the international background against which this Budget must be debated.

As I have said already, the economic programme itself depends for its success on moderation in costs of production. It cannot be sufficiently repeated or emphasised that production costs must be kept down. Anything in the nature of rises in costs of production could reduce our competitiveness both at home and abroad. Therefore, in considering the Budget we must have regard to the question whether it contributes anything to the other tendencies operating in the country towards raising costs of production.

When we come to the more strictly proper subject of this debate, the Budget for the present financial year 1964-65, we have to make a distinction at once between the current and the capital Budget. This may be a difficult line to draw sometimes, though in a very general way everybody is familiar with the difference between capital and current expenditure. At the same time, sometimes in dealing with the Budget certain things tend to be treated as capital expenditure which should by more strict financial accounting be looked upon as current expenditure. In the White Paper on the Capital Budget, 1964, from which I have quoted already, reference is made to the fact that "it is necessary to review from time to time the items in the public capital programme to make sure that they are genuinely of a capital nature, i.e. that expenditure which does not produce assets of lasting benefit is not being treated as capital". Several good examples of the difficulty of drawing this line are given in the White Paper. The White Paper says that "expenditure is treated as capital expenditure when it provides physical assets for the continuing use or benefit of the public". I should like to point out, as I have done in other debates, that the statistics in other years need to be qualified in some respects. There are no obvious physical assets which can be provided for by public expenditure and which can be properly regarded as capital expenditure but at the same time they differ from each other in one essential respect.

On the one hand, there are the capital assets which immediately or soon begin to bring in some return and for which borrowing can be said to be self-liquidating. On the other hand, there are other assets which are equally entitled to be described as capital assets which may involve a very long delay before the results of the investment begin to appear. Meanwhile, the interest payable on the loan and the loan itself become part of the deadweight debt of the country. Two matters which everybody agrees should be considered as capital expenditure are education and health. Here are two forms of investment which are distinctly capital in character but are not self-liquidating except in a very long period during which the capital expenditure involves the Department of Finance in increased Central Fund services and increased public debt.

To pass now from that distinction between the capital and the current Budget to the current Budget narrowly so described, there is this important respect in which public expenditure differs from private expenditure. This has been said many times in debates on this matter but it is important that it should be repeated. In the case of the private individual his expenditure is or should be regulated by his income whereas in the case of a government its income is regulated by its expenditure. In other words, the way in which the public finances are conducted is that the Estimates are passed, an estimate is made of what sums are required to pay for the Central Fund and Supply Services, and then it is the duty of the Minister in his Budget to raise that sum by appropriate taxation. It does not always follow that the amount of the expenditure and the amount of revenue are identical. If the amount of revenue is less than the amount of current expenditure, then the country is running a Budget deficit. If, however, the amount of revenue is greater than expenditure, then we are running a Budget surplus. If they are approximately the same, the Budget is said to be balanced. I shall not go into the more or less theoretical question of when a Budget deficit or a Budget surplus is justified. The usual aim of the Minister for Finance is to balance the Budget. That is certainly the aim of the Minister in this Budget, and strongly stated in his Budget speech. He said:

To leave a deficit untouched would, in present circumstances, be bad finance; it would add to inflationary pressure and widen the balance of payments gap.

He also said:

... a Budget deficit which would add to spending and widen the balance of payments gap would be indefensible.

Therefore, we can take it that the current Budget of the Minister is balanced, and there is neither a deficit nor a surplus.

As I said, the amount of revenue that has to be raised depends on the amount of expenditure. As Senator Dooge said, the amount is tending to rise in every country today. In every country in the world today Government expenditure is rising. Whether it is a larger or smaller percentage of the national income, it is always tending to rise. That is partly the result of rising costs generally. If prices and wages are rising, what the Government have to buy, and the services they have to pay for, will be more expensive and, therefore, Government expenditure tends to rise. It is also a result of the extensions in the public field. The Government are doing more and more in these modern days and, therefore, there is nothing unreasonable in the fact that Government expenditure tends to rise rapidly. Whether it rises more rapidly or less rapidly than the national income is an entirely different question. The fact is that it does tend to rise.

In considering the justification of a rise in expenditure it has been said many times before in these debates that a distinction must be drawn between each individual item of expenditure and the total expenditure as a whole. While each individual item may be justified, the total may become one which the country might find it hard to bear. There must be that distinction between individual items and the total. From the point of view of the Budget it is the total with which we are concerned.

The Minister must be congratulated on the outturn of the Budget for the past financial year. The present financial year is starting with what can be described as hope tempered by caution. The Minister expressed the hope that an even higher growth rate than 4 per cent in the national income might be achieved. He went on to warn the country of the dangers of rising costs and rising prices. He referred to the ninth round of wage increases possibly having an inflationary effect. He stressed the need for a rise in productivity, and the necessity for additional savings. It is most important at a time when wages are rising that productivity per head should also rise. There should be abundant capital available in order to introduce labour saving devices and, in that way, keep down labour costs and enable prices not to rise to the same extent as the cost of labour is rising.

The Minister referred to the necessity for always keeping a very careful watch on the balance of payments. In the past few years we have been running a slight deficit, but in view of the inward flow of capital there is not much need for alarm. Anything in the nature of recurring disequilibrium without a continuation of the inflow of reserves which we have been experiencing would call for rapid correction which would have to be done mainly with public finances through the Budget or a supplementary Budget, because in this country the corrective of higher money rates which is the usual corrective in many other countries is not available, because of our peculiar situation in regard to the sterling area.

The fact that the deficit last year was only about £2 million is, on the whole, satisfactory, especially when we take into the account the fact that the turnover tax was in operation only during part of the year. The Minister calculated that if there were no change in taxation the deficit in the present year would be £1.6 million. The reason he made such an optimistic forecast is, first, that revenue is showing signs of buoyancy and, secondly, the turnover tax will be in operation for the full financial year and not merely part of it. In making that calculation he took into account the impact of the ninth round of wage increases on Government expenditure, and also the additional subsidy of £2 million for CIE. That is an illustration of the tendency of Government expenditure to rise. It has been rising; it is now rising; and it will continue to rise. It is an inevitable tendency with which we have to live and try to deal as best we can.

In view of the outlook it is certain that Supplementary Estimates will be introduced in the course of the year. The estimates contained in the Budget will be exceeded and, in fact, the Minister faces this fact in his Budget very frankly. He made one change in his Budget this year on which I think he deserves to be congratulated. He left out errors for over-estimation. It is very often an easy way to balance a Budget, to allow a certain amount for errors of over-estimation which, perhaps, bears no relation to the facts of the situation when the time comes. Therefore, I think the fact that the Minister has omitted this sum shows that the Budget was framed on prudent and conservative lines. The Minister is probably aware there will be Supplementary Estimates and he has not dodged that by the usual device.

A certain amount of additional expenditure was, of course, foreseeable. It has been foreseen and has been provided for in the Budget. One must appreciate that the cost of running Government services is bound to increase on account of rising wages and costs. The other thing that must be appreciated is the necessity, from the point of view of social equity and also, to some extent, from the point of view of production, to increase the incomes of some of the sections of the community who have not benefited by recent increases in wages.

I do not wish to generalise on the particular objects of such increases provided for in this respect in the Budget but simply to mention some of them. The first provided for in the Budget are the farmers. There is provision in the Budget for raising farmers' incomes, but I do not wish to go into the details of that. All one can say is that the farmers in the ordinary way will not benefit by this rise in wages which has taken place. Additional incomes for farmers have been, to a large extent, achieved by increasing the price of their produce and through a certain amount of rates relief which should have some effect on the volume of agricultural production.

This increase in agricultural incomes can be justified on grounds other than those of social equity. The Budget also provides for increases in some social services and in the incomes of certain types of pensioners. There is no getting away from the fact that sums provided for this purpose appear very meagre and small, but one must remember, in considering this matter, that the Minister cannot raise the incomes of every class in the community by the same amount. If there were an effort to raise the incomes of every class in the community by the same amount, we should run into the position where the incomes of those who are in a position to exert pressure would rise still further, further increases would have to be made to farmers and to social service incomes and the result would be chaos and endless inflation. No one would like to see recipients of social services at a disadvantage but one must allow that the Minister's resources are not unlimited.

The provision of the additional expenditure faces the Minister with a deficit of £6.98 million. He has reduced than by £2 million as a result of raising postal charges. It is expected that the new rates charged by the Post Office will bring in £2 million in a year. That is a matter which is really outside the scope of this debate. What I shall say about it is, first of all, that I think it is right and proper the Post Office should pay its way, that it should not be looked on as a social service to be subsidised.

At the same time, there is no getting away from the fact, unpleasant as it may appear, that this rise in Post Office charges does inflict a considerable extra burden on certain business undertakings. It was probably inevitable, but the ordinary big business, between postal and telephone charges, spends a considerable sum every year and this increase in rates is really a form of concealed tax. However, I think it is justified if it has been found necessary to make the Post Office pay its way.

That reduces the deficit to £4.98 million, and in order to cover that deficit the Minister had to resort to some of the old and tried objects of taxation. Anything in the nature of an increase in the rate of the turnover tax would have caused a popular outcry and I do not blame the Minister for not having attempted it. It would have imposed a burden on the community which at this time would have been intolerable. Therefore, the Minister has refrained from playing that card which he may have to play in some future year. In the meantime, the objects of new taxation are the old and tried friends— petrol, beer, spirits and tobacco.

It is calculated that the additional taxes on these will provide something like £5 million in a year. That leaves very little for tax relief but the Minister has raided the Road Fund—I think that is the correct way to put it— for £200,000 and as a result of that raid he has been able to give some tax reliefs in two directions—a slight relief to certain income tax categories and a slight relief in the corporation profits tax. When all these adjustments have been made we get a Budget balanced at £215 million.

I think it is fair to say the Budget is prudent and conservative and traditional, with no striking innovation such as the turnover tax of last year. I am sorry to have to disagree with Professor Dooge about the relative effects of direct and indirect taxation. If there has to be new taxation I should prefer to see indirect rather than direct taxation. It has a less adverse effect on enterprise than has direct taxation. There is one direct tax which I have mentioned frequently before and which I think could be reduced with very good effect. It is the death duties. I have appealed to the Minister for several years to reduce the death duties which have an adverse effect on both the power and the will to save. Some reduction in death duties would more than pay its way in other directions.

However, I suppose we must be thankful for small mercies. There is no increase in direct taxation and the indirect taxes chosen were the best that could be chosen in the circumstances —mainly luxury goods of increased demand. Therefore, the cost of living is not affected to the same extent it would be by anything like the charge on the turnover tax. That is really all I have to say about the current Budget and there is very little to say about the Capital Budget that has not been said already. Capital expenditure is defined in the White Paper issued with the Budget as capital expenditure by Government Departments, State-sponsored organisations and local authorities.

Public expenditure of a capital nature, as Senator Dooge has said, has undoubtedly increased very rapidly in recent years. Since 1959, the net annual cost of services to the State increased by 57 per cent compared with a rise of only 29 per cent in gross national product. Therefore, the public debt has been rising twice as fast as national income. This is probably inevitable. I think that in every state in the world Governments and State-sponsored organisations are investing more and when they do so capital has to be found either by borrowing abroad or borrowing at home. If at home, the money has to come out of the savings of the people.

Last year the amount of capital expenditure budgeted for was not reached. The actual amount was rather less than the amount budgeted for. The amount budgeted for in the present year is £96 million of which £70 million will have to be provided from public funds. The Second Programme is very largely responsible for this. A great deal of investment in houses, schools, transport, industrial credit, industrial grants and telephone development are matters which in the long run show something for the money spent but are not liquid in the short run. A great deal of this capital expenditure will increase the public debt of the country and the Central Fund charges will have to be increased greatly every year.

I might make the same remark in regard to this expenditure that I made in regard to current expenditure and that is, while every individual item can be justified taken one by one, the total may become dangerously large. If the Minister were to ask us in the Seanad if we are against spending money on housing the poor of Dublin or against giving money for an additional hospital in such and such a place we would always say we are not against that, that we think it is an admirable object. But when all these admirable objects are added up together the total may be very large indeed. That, of course, is why such a large amount of money has to be borrowed.

As the Minister stated in his Budget speech, about £70 million will have to be found out of public funds and only a small part of that can be found by small savings. A good deal is being done in this Budget to encourage small savings. The Minister recommends that £10 million would be provided by small savings and prize bonds, £10 million from Departmental funds, leaving over £40 million to be borrowed in the market. Many steps have been taken to encourage small savings. The maximum amount of savings certificates is being increased and attractive additional prize bonds are being provided. The savings by the Post Office Savings Bank and the Trustees Savings Bank are being improved. The Minister paid a generous tribute to the work of the savings committee which organises campaigns to encourage savings by children in primary schools and groups among employees are also playing their part. These schemes are very successful and it is good to note they have had the full approval of the Irish Congress of Trade Unions.

There is no getting away from the fact that, however admirable all these objects of current and capital expenditure are, the total amounts to a very large figure. Public expenditure can in itself be inflationary and, therefore, it becomes a matter of supreme policy for the Government to check mounting inflationary forces in the economy. There are certain inflationary forces in the wages scheme in this country just the same as in every country today. Practically every country in Europe today is striving to get an incomes policy, some system of distribution of incomes which will not be inflationary. Anything in the field of distribution of income which does not appear to be inflationary should be encouraged by the Minister.

There is one particular thing which is in the hands of the Minister himself and that is short period borrowing. Borrowing from the banks by Exchequer Bills may easily have an inflationary effect. In so far as capital expenditure is met out of new saving by the public the Government expenditure is matched by a reduction in the private expenditure of those who provide the savings but borrowing from the banking system by Exchequer Bills will be creating new credits which need not necessarily be matched by any saving. Therefore, I think, the Government should be extremely cautious in regard to short period borrowing because it can have an inflationary effect.

I shall summarise what I have been trying to say. The Budget must be regarded in relation to three periods. It must be regarded in relation to the current financial year. That is the topic which forms the greater part of Budget debates and what we are having today. As regards the current financial year, one can say that the country is living rather extravagantly but, at the same time, it is paying its way. One would like to see less public expenditure but, as I say, it is very difficult to point to any particular part of public expenditure which one would like to see reduced. Therefore, as regards the single year, the Budget can be approved even by conservative standards.

As regards the second period of the trade cycle it is, to use an old-fashioned term, the period of fluctuation. It is not quite certain that the Minister might not have put on the brake just a little bit more than he has done. The general background contains certain inflationary features and I think a neutral Budget during a period of inflation may possibly encourage that inflation a little bit too much. The brakes should perhaps be put on a little bit more than the Minister has done in the present situation.

As regards the long period programme, the Second Programme of Economic Expansion, the Budget does not seem to conflict in any way with the aims of that programme. The Second Programme aims at expansion and it is fair to say that an expansionist programme should have an expansionist Budget. At the same time, the limit of prudence must be observed and if the expansion is to proceed too rapidly the balance of payments will run into deficit and the Minister will be forced to make corrections which may be painful for the country as a whole and harmful to trade.

There is just one other point I want to make before I finish. I should like the Minister to consider the suggestion I made in my opening remarks in regard to budgetary flexibility. We will not have another Budget for a year unless some unforeseen crisis looms up, whereas the application of the brake may become more urgent with the passage of time. I must say there would be nothing revolutionary in the Minister having power, similar to that possessed by the British Chancellor of the Exchequer, to make variations in certain types of taxation during the year to enable him to put on the brake or put on the accelerator rapidly and without the necessity for a long preliminary debate. One suggestion I put to the Minister is that he might consider the possibility of something in the nature of a flexible interim budgetary mechanism which would give him more control over the short run fluctuations in the economy.

Mr. Murphy

We had, as usual, an excellent speech from Senator O'Brien on the Finance Bill. If I disagree with him on most of the points he made there is nothing unusual in that either.

The point I want to make is in relation to the question of indirect as opposed to direct taxation. I made comparisons in similar debates on indirect taxation and compared them with the general picture obtaining in other western European countries. In the Budget we have no improvement whatever in that picture. In fact, we have a situation where indirect taxation is being increased by certain measures in the Finance Bill. There is no change in the rate of direct taxation. There are some easements, some of which individually may be very desirable. We have a situation now where the bulk of the revenue collected is by way of indirect taxation, without regard to the ability of the people concerned to pay. We have taxes on food, clothing, the ordinary necessaries of life, and on tobacco and drink which people consume, irrespective of whether they do so in the Gresham Hotel or in any pub.

We have not a situation whereby the weight of taxation should be shifted on to the shoulders of the people better able to pay. It is no excuse to urge, as has been urged on previous occasions, that there are not many wealthy people here so that no great amount of income can be collected by way of taxation on wealth and capital. I think the Government should have more regard to social justice. I would wish the Government to show the same regard for social justice as they show in relation to economic development. There is no necessary contradiction between the two. I should like to see the Government firing on those two cylinders instead of on one as at the present time.

I should like to come back to the question of indirect and direct taxation. I think the Budget collects some £124 million by way of indirect taxation and £58 million by way of direct taxation. In other words, to make it more readily understandable, over two-thirds is being collected with regard to the ability to pay and less than one-third on wealth. That is a bad situation and is particularly so in the present context. The Government and the Minister in his Budget speech did not have due regard to the need for substantial expenditure on social welfare and health services.

The immediate reaction of the Irish Congress of Trade Unions to the Budget speech was on this point. It was the first point they made in criticism of the Budget and they expressed great disappointment that no mention had been made of the need to reform the present system to bring the level of expenditure on social welfare and health services into line with that obtaining in Britain, Northern Ireland and the countries of the EFTA and the EEC. In saying that I am acknowledging that there has been some improvement in social welfare arising out of the Budget.

As Senator O'Brien said, and I agree with him on this point, these were meagre increases. No doubt I shall be asked by the other side of the House later on what the Labour Party did when they had power to do something about it. That is fair enough. It was mentioned in the other House that half-a-crown was given to the various social welfare recipients this year, and that the same amounts were given in other years and also when there was a Labour Minister in charge of Social Welfare.

The point has rightly been made that there is a difference between 2/6d. now and 2/6d. in former years. Not alone is there a difference in the value of money but there is a difference in the increasing wealth of the country. Surely, the people who most urgently need an increase in wealth are the people who are of necessity in receipt of social welfare benefits. In putting that in its proper perspective I should like to make the following comparisons. Social welfare expenditure in 1957 took 25 per cent of taxation. That is, 25 per cent of what was collected in taxation was ploughed back into social welfare expenditure. In 1964 the calculation is that of the amount we are collecting in the Budget 19 per cent only will be given out to the recipients of the various social welfare benefits. Again, between 1957 and 1964 taxation increased by £79 million. Social welfare expenditure increased by only £9 million.

We are talking about this again in the context of where we have this very great weight of indirect taxation. Part of the indirect taxation is the turnover tax. I am glad to see the Minister was not rash enough to increase the turnover tax in the Budget. We have a strange situation because last year in the very heated debates we had on the turnover tax we were assured by the Minister, the Government and the Minister's Party, that the traditional methods of tax collection were exhausted. They were drying up and a new form of tax had to be found. How could more money be got without increasing the tax on petrol, cigarettes, drinks and all these traditional items of taxation? Unfortunately, the miracle occurred this year. The Minister could come along again and tax these traditional items. I do not know how that is possible having regard to the fact that the Minister assured us last year he could not, without invoking disaster, increase taxation on these traditional items.

This further indirect taxation in the Budget has its effect on prices, perhaps not a very drastic effect as such but an effect whereby the keeping down of prices, the moderating of increases in prices is of urgent national importance. I do not think I need stress this point for the Minister. He must appreciate it. Speaking from the trade union point of view, I must say that the present situation is alarming. We have recently had the mid-May figure for the consumer price index and it showed an increase of 12 points over the same period last year.

Again, to try to show the extent of that increase I should like to go back a few years. We expect a rise in the consumer price index. We do not expect that prices will go down, but we certainly do not expect that the rate of increase should be so thoroughly alarming. In 1958 the figure was 144. In mid-May the following year it rose to 147. The following year it dropped back to 146. In 1961 it went up to 150 and in 1962 it was 158. At that time there was a lot of debate about it. In 1963 the figure was 159 and now we have the surprising and very big increase from 159 to 171. That is a very steep increase in prices and it cannot be shrugged off or run away from. I am afraid the Government are largely to blame for this tendency towards undue increases in prices. In selling the turnover tax to the traders, they were assured that they could recover the costs involved by passing them on to the consumer. The Government do not care too much about prices and will not be terribly upset by price increases. It is all right to pass on price increases but the Government will not do anything about it.

We had the recent ninth round of increases and the national agreement between the employers and the trade unions. Both sides accepted it would be inevitable that arising out of the 12 per cent increase in wages and salaries there would be some effect or rise in prices. Equally, it was the desire of both sides that an effort should be made to absorb the increases rather than pass them on to the consumer. There was an escape clause in that national agreement. I do not think Congress would welcome very much having to avail of that escape clause at the present time. If prices are continuing to rise like this Congress will be pushed into the situation which will not be very good for the economy. The penultimate paragraph of that agreement says: "However, in the event of very exceptional circumstances arising during the period covered by this recommendation such circumstances shall be considered by the National Employer-Labour Conference". In other words, the period to which the agreement is supposed to apply would have to be reconsidered in the event of very exceptional circumstances.

I do not wish to argue or advocate that a 12 per cent rise in the cost of living is a very exceptional circumstance. What I am trying to do is to direct a warning to the Government in this matter. It is not good enough to shrug this matter off and say, as the Minister for Industry and Commerce has been saying, that the play of free competition will take care of it. I had a recent example of this in my own office arising out of the 12 per cent increase. For a service which was necessary to the office, we suddenly found the bill was increased by 20 per cent. It was a contract price but, nevertheless, we were quoted a new bill and were told it was increased by 20 per cent because of the 12 per cent increase in wages. We were told the Association was a member of the FUE but they were increasing their price by 20 per cent. We had to pay up and smile.

I am afraid there has been too much of this happy attitude of people passing on prices to the detriment of the whole national economy. I am stressing this because, quite seriously, I regard it as a very grave danger. If prices are allowed to continue to rise at this rate our hope of making progress in the economy of the country in the normal way will be upset, and the unions as an organised movement are anxious to co-operate with the Government in developing the economy of the country. If, however, we will have a situation where prices will increase at this rate inevitably Congress will be pushed by their affiliated unions into doing something drastic about it.

With regard to the question of the attitude of the Minister for Industry and Commerce to prices, there was some sort of a situation where prices were being increased. The manufacturers or producers had to come along and justify before the public what they were doing. Now, under the new legislation, the sittings will be held in private. I suspect that no manufacturer would fear in the least having to produce evidence or to appear before a body like this which meets in private. There is not the glare of the public gaze on what is happening and, like my friend in the office, he can increase his prices by 20 per cent and get away with it.

I should like the Government to show that they are in earnest about trying to bring down prices and that they frown on a situation in which manufacturers and producers too easily and too regularly pass on their increased costs by way of increased prices to the consumer instead of trying to make economies and increase productivity. When workers want to get an increase in their wages they must invariably appear in public before the Labour Court and justify any increase which they seek. Why should it not also be possible for manufacturers and producers who want to increase their prices to appear in public and to let the public gaze be put upon them? Let them justify what they are doing instead of the present arrangement of simply passing on the cost without any regard to the public interest. That, I suppose, is enough on the vexed question of prices.

I intended to say something about the death duties mentioned in passing by Senator O'Brien. However, that issue will no doubt be raised on the relevant section on the Committee Stage.

Mr. McGuire

The Finance Bill and the Budget have been criticised very thoroughly in Dáil Éireann and already in this House from a political point of view. As on previous occasions, I propose to present, as far as I can, the views of the business community on the Government's financial policy and financial activities. After all, it is the business community that ultimately is called upon to produce the wherewithal to meet the financial requirements of the Government whether in the form of taxation taken direct from trades and industries or from the wages and salaries which are paid by the commercial community.

The national budget is an exercise on the part of the Minister for Finance of balancing his financial problems with political expediency, that is, finding revenue and, at the same time, appeasing different elements of the community and very often playing off the different elements against one another. We have had clear evidence of the way in which political considerations have been utilised in this manner in recent times. An example is to be found in last year's Budget where the Minister increased the rate of corporation profits tax from 10 per cent to 15 per cent and eliminated the margin of £2,500 in respect of the additional 5 per cent. This increase was wholly unexpected by the business community, who regard the CTP as an undesirable form of taxation at any time and had expected, if anything, that this tax would be removed. CPT is levied in addition to income tax at the standard rate so that the total impact of taxation on corporation profits is higher than on other sections of the community. As CPT cannot be recovered from the dividends paid to shareholders the full impact of this tax has to be borne out of undistributed profits. Thus if half the profits of a company are distributed in dividends the effective rate of this tax represents 30 per cent of the profit retained in the business. This rate compares, as we have already heard from Senator Dooge today, with the average rate of national taxation which is about 23.7 per cent.

The most repugnant aspect of the CPT proposals of last year was, of course, the decision to apply the tax retrospectively. It is quite obvious that this tax was imposed in order to please the labour element in the community, who I am sorry to say shortsightedly overlooked the fact that all increases in taxation on company profits reduce the amount that can be ploughed back into businesses and thus impair the national productivity and the creation of new employment for workers which is so desirable and necessary.

The Second Programme for Economic Expansion relies mainly on the industrial sector to increase our national output, and it is envisaged that industrial production should achieve an average annual growth rate of 7 per cent in the 1960's. This will demand from our industries the most unremitting efforts and they should be given every encouragement and facility to meet the impact of foreign markets. Any factor which impairs cost competitiveness should be reviewed. In this respect the pressing burden of taxation on Irish industry is an inhibiting factor. It discourages both the incentive and the capacity to undertake more productive effort, particularly in the face of increasing competition in the export markets from countries with considerably lower tax costs.

The Government make much of their reliefs and incentives to attract industry but those reliefs and incentives are, indeed, a poor substitute for a general reduction in taxation. Although I may seem to be in conflict with my colleague, Senator Dooge, I must say that I think the Minister should resist any call for increases in direct taxation in favour of indirect taxes which are mostly on consumption. The economy needs a significant reduction in direct taxes on incomes, profits and savings, and with this view Senator O'Brien has shown his agreement. This should take precedence over any reduction in indirect taxes except, perhaps, on food and necessaries of life. A reduction of direct taxes should also take precedence over any increase in expenditure which does not directly promote increased national output at competitive prices. Until unproductive outlay is reduced and resources set free for productive enterprises by lower taxation we can hope for very little economic progress.

One welcome feature in the present year's Budget is that there has been no increase in direct taxation. It must be added, however, that as a matter of fact there was no room for new taxation in this area, considering that the ninth round of wage increases which was caused really by Government policy and initiated and encouraged by the Government imposed on our industry an all-time high increase in labour costs. An increase in industrial productivity sufficient to absorb a 12 per cent overall wage rise is almost an impossibility, at any rate in the short term. Increases in selling prices have been the inevitable result. This is certain to affect adversely the export of Irish manufactured goods, and our industrial exporters will continue to be at a disadvantage until the wage structure in other exporting countries increases proportionately.

A most dangerous feature of our present economic and financial situation is that although both the Government and the trade unions have been acting in a manner which normally could cause an economic crisis for the nation fate has been kind and may have given the notion that inflation is only a bogey word to restrain the Government and the trade unions from being extravagant in their ideas. The fact is that a crisis has only been averted by the exceedingly favourable conditions that have been prevailing in external markets in the past year. The British economy has been booming, with an expansion at the phenomenal rate of 7 per cent per annum. Economic expansion has also accelerated on the continent. Furthermore, there has been an unprecedented inflow of capital, estimated at about £32 million to £35 million. These factors have enabled us to increase dramatically our exports and thus offset our swollen imports. We cannot, in prudence, depend upon an indefinite continuation of a private capital inflow of this magnitude and we should set about a period of building up financial reserves and savings for investment in productive enterprises.

The great task of Budget makers is to balance prudence and foresight with enterprise and progressiveness. These are the qualities that go to make for success and prosperity whether they are employed in the conduct of a private business or in the running of the State. We cannot go on having a high rate of Government expenditure and at the same time an unusually large degree of spending power injected into wage and salary packets. The two and half year agreement in the ninth round of wages should, however, give time to our industries to catch up in price competitiveness of our exports at a time when our competitors are faced with their own wage rounds. Any suggestions or threats that the 12 per cent wage agreement should be broken before the 2½ years stipulated are very irresponsible not only from the point of view of the national economy but from the point of view of every wage and salary earner.

Unfortunately, one of the difficulties in industrial life and in industrial financing is that very often nowadays industry is the plaything of politics. There are certain people in politics who say the cost of living has gone up, and so on, and that the people should be recompensed for it. Very often they are the very people who caused the increase in prices. They start the old circle again of an increase in wages, an increase in prices, an increase in wages, an increase in prices. One follows the other.

I want to refer now to a remark made by Senator Murphy about a contract with the Irish Congress of Trade Unions which was raised by 20 per cent because of the 12 per cent increase in wages. He was rather naive, I think, because 20 per cent may not have been a very big rise in the circumstances. It is not merely a question of the 12 per cent, or the 2½ per cent turnover tax being projected on to the price. There is more to it than that. We see letters in the papers saying that people are profiteering because of the 2½ per cent turnover tax, and that there should be price control because 10 per cent was being charged. Senator Murphy talks about 20 per cent, someone else talks about 2½ per cent or 10 per cent, but the fact is that there is an accumulation of costs in business.

Let me put it this way. The wage bill of the firm which charged 20 per cent to the Congress of Trade Unions has gone up by 12 per cent. Probably the price of the commodities they use in the work had gone up, and on top of that there was probably the 2½ per cent turnover tax. There is also the increase in the cost of postage, telegrams and telephones. There is the increase in the price of petrol and, therefore, an increase in the costs for delivery vans. Add up all those costs and you will see there is not much left for profit in the 20 per cent added to the bill. It is wrong for people to stand up in public and take an isolated 2½ per cent or 12 per cent or 10 per cent. If you add them together you will find that business costs are much more in the region of 20 per cent than the 2½ per cent or the 10 per cent about which we hear so much talk.

The Chamber of Commerce journal for April in the course of its leading article stated that the commercial community is gravely concerned at the continued rise in Government spending and resultant taxation which goes on increasing each year. It states that State expenditure on current and capital transactions has increased almost five times since pre-war, and that even in the past decade there has been a rise of over 50 per cent. It goes on to say that furthermore in the latter period a series of budgetary deficits were incurred and the total adverse balance on current and capital items amounted to £341.7 million. Those difficulties were made up by borrowing. From 1953 to 1963 additional public debt was created to an amount of £1,252.2 million, of which £911.4 million was used in debt redemption, so that the net increase in Government debt in this decade was £340.8 million. Half the net increase in public debt incurred in this period represents budget deficits on current transactions.

Current expenditure should be kept in balance with current receipts. If I remember correctly, the Taoiseach adumbrated this policy when he was in Opposition during the inter-Party regime. This is particularly necessary in a period of economic and international stability. Obviously the State must honour its obligations either immediately or in the future, but it seems unfair that a later period, and possibly another generation, should be called upon to make good budget deficits incurred on current outlay. This year the Minister has, in fact, striven to avoid a budget deficit.

It must be said that this matter of the increase in the national debt is of particular importance having regard to the proposals contained in the Second Programme for Economic Expansion whereby further capital spending in the public sector is envisaged on a scale even greater than hitherto. It is essential that all expenditure under this head should be restricted to items which are economically productive, that no current expenditure is included, and that all Government and semi-State borrowings are adequately covered by sinking fund provisions over reasonable periods.

It will also be necessary to ensure that the amount of Government borrowing each year is related to the funds available. For many years past public borrowing has absorbed too high a proportion of funds available for investment, to the detriment of the private sector. If Irish industry is to continue to expand, it will be necessary to ensure that adequate funds are available for investment in its equity capital, and it will thus be essential for the Government to arrange both the volume and the timing of their borrowing so that the private sector can secure its own capital requirements without difficulty.

As we all know now, Irish industry will have to carry the main momentum for economic advance in the coming years and, although Irish industry has made excellent strides in recent years, and is showing itself capable of penetrating deeply into the export markets, it can only continue to do so provided it receives the fullest co-operation from the Government and the trade unions. Failure to grapple with the problem of inflation will inevitably bring a balance of payments problem that would stultify all our efforts at expansion of the economy.

It is being suggested in some quarters that price control will stem or even stop inflation. This is a fallacious argument because rising prices are a symptom and not the cause of inflation. Rising prices here today are caused by rising taxation and rising costs and, generally speaking, not by profits. This fact is clearly exemplified for all to see in the State operated bodies such as the Department of Posts and Telegraphs and CIE. In the former, the Department of Posts and Telegraphs, the penny postage is now 5d; the 9d telegram is 5/-; and telephone charges are up by 50 per cent. In the case of CIE, ever-increasing fares never succeeded in producing a profit. In both cases it is rising costs, and not profits, that cause increases in their price structure.

In this context it is interesting to note that the Central Statistics Office in reporting a 4 per cent increase in the consumer price index on 13th June, attributed the increase to the Budget impositions, the 12 per cent national wage increase, and the European meat shortage.

It should be clear that inflation will not be cured either by price controls or by further increasing wage and salary costs on the business community. Inflation can only be contained by a concentration by all concerned on increasing national productivity in all departments of the national life, both in the public and the private sectors.

The turnover tax is proving most burdensome on distributive trades. The turnover tax and the effect of the 12 per cent increase in wages have caused serious problems. The financial difficulties involved are bad enough for the business community without their having to contend also with the mostly unfair and unfounded criticisms by the public, and by some political elements, of the inevitable and necessary price increases which these taxes and wages impositions entail. The ironical part is that many of the criticisms come from those elements who themselves are mainly responsible for the price increases and who would seem to be poising themselves to create further price costs in the near future.

A point that may be overlooked, perhaps by the Government themselves, is that inflation not only robs individuals of the benefits of wage and salary increases but it denies the Government the benefits of receipts from extra taxation. This was clearly exemplified in 1963-64, when most of the revenue from the turnover tax was absorbed by higher wages and higher prices. The result has been that this year in spite of the buoyancy of the revenue from PAYE, retrospective turnover tax, corporation profits tax, increased taxes had to be imposed on the old reliables, on spirits, tobacco and petrol.

One sometimes hears criticism of alleged lack of contributions from leaders of industry to constructive economic comment on national affairs. I feel this is due to the fact that such contributions frequently pass unnoticed. Before I finish, I should like to quote just a few comments on national affairs from leading business sources, many of them, I might add, supporters of the Government. I shall quote first the President of the Dublin Chamber of Commerce, Mr. T.C. Lenehan, in his presidential address on Monday, February 24th last:

We are all being exhorted to save and effect economies in our own field of business endeavour. What happens if we do so? The Government come along and take our savings which are invested in our own businesses and which, if left in our own industries, would show a far greater return than through Government administration of the funds.

The current number of the journal Irish Industry comments:

The problem facing the producer is, of course, that if he is to continue to compete successfully in world markets, his selling prices must bear a realistic comparison with prices ruling in other countries. The rising cost of living at home, helped considerably by shortsighted Government policy as witnessed in the recent Budget increases, can only lead to a dangerous position.

Mr. T.V. Murphy, Chairman of Independent Newspapers Limited, addressing the shareholders this year, said:

I have appealed to the Government to show more example by cutting down State spending which results in higher taxation, but alas to no avail. In fact, the mad race continues and inflation is rampant. The Government pour out millions of the taxpayers' money. We know the appalling cost of the Avoca Copper Mines. Last year, Irish Steel Holdings got a further £1¼ million in addition to the original State investment of £3½ million. Verolme dockyard got a further £1 million following previous State commitments of £4¾ million. These cases of continuing massive injections of public money must give rise to uneasy feelings. We are not so wealthy a country as to view with equanimity the number of cases where many millions of public moneys are poured out without considering the day of reckoning.

Mr. C.N. Kelly, Chairman of the Hibernian Bank, addressing the annual meeting of the bank said:

Government spending, both on current and capital account, the public debt and debt service charges have all expanded at a rate far in excess of the rate of growth in the gross national product. It is opportune at this time to express concern that the increasing burden of Government borrowing is exacting too great a strain on the resources which should ordinarily be available for productive business development.

I might add that the Royal Bank, and, indeed, the Central Bank, have criticised the near monopoly of Government agencies in the mopping up of savings and investing them in projects more suited to private industry.

The primary aim of Government policy should be the building of a society where as many people as possible are employed at a comfortable standard of living rather than a society where there is prosperity for the comparatively few. At present we seem to be developing a society which provides a higher and higher standard of living for a limited number of persons who are already in good employment. The trade unions have an important part to play not only in securing a comfortable standard of living for wage and salary earners but also in seeing that their demands do not cause reductions in the number of persons in employment.

The employers' contribution to the national economy should be to provide capital and efficient, progressive management of trade and industry which will produce the finances to meet the economic and social requirements of a prosperous and contented Ireland. As for the Government, taxation and expenditure is now pre-empting close to 30 per cent of the total income of the nation. Taxation and expenditure have been steadily and alarmingly increasing year by year. It should be the objective of the Government to arrest this upward tendency when its inflationary effects are so detrimental to national progress.

It may be said the Opposition are continuously calling for more expenditure for purposes of one kind or another and that, therefore, the Government are justified in their spending. This, however, is to overlook the function and the responsibility of being in Government, of being in control of the welfare of the citizens. It is the function of the Opposition to advance propositions of all kinds, for every kind of purpose. It is for the Government to select wisely when and how to spend the national income and to invest national capital to the best advantage.

Mr. McAuliffe

When speaking against the imposition of the turnover tax last year, I made a statement, and the first thing I wish to do now is to say I was completely wrong when I forecast then what would happen. I said there would very likely be a reduction in income tax as a result of the turnover tax. I also said the Minister would receive more from the turnover tax than he expected at the time. That has proved to be the case: there has been a bigger amount from the turnover tax than the Minister expected.

I am disappointed that in the Finance Bill the Minister has not made any concessions to single persons in respect of income tax liability. The allowance of £6 5s. per week to a single person for income tax purposes is entirely inadequate. In this context I instance workers like farm labourers, bog workers, county council employees, forestry and Land Commission workers. All those unskilled workers have come into the income tax code while, at the same time, we see people with de luxe cars, nice farms with plenty of cattle who do not have to complete an income tax form. It is time the Minister did something to increase the allowance for single people.

I also think the Minister should consider allowing workers their travelling expenses. At present, most rural workers travel long journeys, sometimes 15 or 16 miles, to and from work. Instead of giving them some allowance for travelling expenses, the Minister has put an extra 3d per gallon on petrol. A car is an absolute necessity for a worker at the present time. Some people would not get to work at all if they had not a car. It is a pity the Minister saw his way to increase the price of petrol and at the same time not give these people, who have a genuine case, some relief in income tax when they are filling up the forms for their allowances.

There is another tax and I should like to know what the Minister gets from it. It is the tax under Schedule D on premises. The majority of the cases I know about relate to premises which were the property of a person who died intestate. They are usually business premises and the families have gone abroad. They are followed by the Revenue Commissioners for tax under Schedule D. I know of even one case where a girl went to England and married a Scotsman. He refused to pay the tax but they put such pressure on him that he had to declare the property part of his income in spite of the fact that he never took one penny from it because it was left to the widow who required every penny she could get to live on.

I notice in Dáil Éireann there was a move, with which I agreed, to give allowances to people who suffer from some chronic illness. I have many such cases in mind and it would not cost the Minister much to give a personal allowance for costly drugs where there is an illness which cannot be covered by the Voluntary Health Insurance Board, because they will not accept these people into their schemes. I would ask the Minister to give consideration to these people. I am quite certain that it would not amount to very much in the course of the year.

We find the Minister came back again in 1964 to impose new taxes on beer and cigarettes. Last year we were told by every speaker on the other side of the House that these two items had been taxed to the limit. The Minister is a very good psychologist because he does not come two years in succession to collect tax off the same items. It is more than likely he will not look for an increase in the tax on beer and cigarettes next year but he will come back to the one he was on last year. Perhaps if he is £7 million short he will impose another 1¼ per cent on the existing purchase tax.

As regards tobacco it is difficult to know what the Minister really means to do. The Minister for Health tells us we should cease smoking yet the Minister for Finance finds it a very good method of getting revenue. People are being told not to smoke and if the Minister is helping by putting extra taxes on tobacco, perhaps, it would not be a bad thing at all.

I am in full agreement with the Minister taxing imported spirits. It was high time that the people of Ireland should at least support home industries. I am also in agreement with him when he did not tax whiskey manufactured in Northern Ireland. It is a question of goodwill and thought to the North and I am glad that the Minister saw fit to put section 15 into the Bill.

We note there has been a great expansion in industrial exports and this is all to the good. Yet, it is only a minority of firms that export anything at all in this country. There are numerous firms who, in spite of all the encouragements given, have made no attempt at all to export goods. We note the national debt is increasing. According to Senator O'Brien it is increasing rapidly every year. We know the answer to that is to export more and that some firms do their best in this matter is a good thing. It is a source of worry to the Minister and against the interests of the community that some firms have not bothered to export at all. Córas Tráchtála have done a very fine job. They have given plenty of encouragement to firms to export goods and they deserve very great credit for the work they have done.

The Minister has told us when dealing with increases in prices for various commodities, that the reduction in tariffs would lead to a decrease in the price of imported goods. Recently the tariff on imported clothing was reduced by 20 per cent which is quite a lot on the type of fairly expensive clothes which are imported, yet we can see no sign of a decrease in the price of these goods. The Minister should give some reason why there has not been a decrease in the price of these goods despite the fact that he has been telling us that there is machinery for price control. I should like to know the type of investigation he has made into the increases and what he intends to do about it in the future.

We know the cost of living has gone up 12 points in the last 12 months. That is a serious increase. If it continues to go up a further 12 points in the next 12 months it will mean that you will have the trade unions and the workers looking for further increases in wages which will eventually mean new taxes. We know that the Minister has given reliefs to some people under the Budget. We know he has given relief to the farming community and we are glad he has done so. These increases are not consistent because people who come in with money to buy land in this country buy up quite a lot of our more extensive and valuable farms. At the same time, we should not be asked to subsidise the first £20 of valuation to the extent of 80 per cent and the balance of our rates as to 33? per cent. That is not consistent and it is not fair to the people who pay the majority of the taxes.

It is not fair to the urban dwellers. If the Minister had given some concession as regards grants towards Health Act charges then that would have meant relief for all sections of the community We would not have minded an increase of 25 per cent in the grant. That would mean a reduction in the rates of 7/8d. in the £. I do not know what it would mean in Dublin. It would probably mean much more. I can assure the Minister that the people who have bought their new houses and the people who are living in the towns are very hard hit at the moment not only as regards the cost of living but as regards repayments for loans on new houses which they built and on the payment of rates. The valuations are very high in the towns. The valuations in the towns may be changed any day in the week that there is any improvement made to the premises. That has been happening and there have been increases in valuation all over the place, and in every town in the country and these people have been asked to pay increases in rates and at no time have they got any concession from the Minister.

I do not wish to delay the Minister any longer, except to say that the increase in postage and telephone charges will in my opinion be a very great hardship on the business people of the country. In spite of the fact that we would all like to see the Post Office paying, I think the Minister is moving too quickly to achieve that end. It could be done slower. I am completely against the new rates for postage and telephones.

Mr. L'Estrange

The Budget before us today is a cruel, harsh and unjust one. On top of the turnover tax last year on the necessaries of life, this Budget imposes 3d. on 20 cigarettes, bringing the price to 4/- per packet; 3d. on the gallon of petrol; 1d. on the pint and an increase of from 25 to as much as 50 per cent in some cases on letters, parcels, telephone calls, and so on.

On the other hand, the increases given to those in receipt of social welfare benefit are pitifully unjust in view of the steep rise in the cost of living and the record high cost of living figure we have today. The 2/6d. per week increase to the old age pensioner will not go very far towards buying the few modest comforts he or she may like to enjoy. This is an outrageous Budget because too little is given to the sections of the community who are most in need. As Senator McGuire said, the attitude seems to be to make the poor poorer and the rich richer.

The postal increases and the increases on petrol are very serious for workers and business people especially when taken in conjunction with the 10 per cent reduction in tariffs. They may have a disastrous effect on many of our industrialists.

Business people and farmers, on whom the Government depend to increase production, are being crushed by increased rates, increased taxation and soaring costs. There is very little left to plough back into their respective industries. Incentives are required to enable people to face the competitive years ahead.

People have become so used to mounting taxation and mounting rates under Fianna Fáil that they seem to be like punch-drunk boxers who can absorb punishment without seeming to be affected by it. The trouble is that they are seriously affected. They seem to have lost the initiative and the competitive instinct and to have become like punch-drunk boxers by reason of the two-fisted pummelling of rates and taxes which are increasing heavily each year and there is no denying that already the bad effects of Fianna Fáil's ill-conceived policy are apparent to all. Last year, we were told by many Fianna Fáil speakers that the cost of living would not increase but, as everybody knows, it certainly has increased.

This record Budget of £215.13 million is imposing a blister on the lowest population we have ever had in this country of 2.8 million people. It is bound to interfere with the stability required for real progress. Over the past few years, there has been a relative degree of co-operation in unity of purpose between industry, management and workers which is essential for the prosperity of all concerned and for the future of our country.

The increased costs arising out of the turnover tax last year and the increases brought about by this Budget on the necessaries of life are bound to kindle the flames of inflation with all their harmful effects. The people are being ground down by local and national taxation and is it, therefore, any wonder that our statistics show they are still flying, especially from the land?

We on this side of the House have for a long time advocated the adoption by the Government of basic principles and policies which would lead to national stability in the economic and social spheres. We are proud to note that some of these principles are gradually being fruitfully adopted but, so far, many have fallen on deaf ears.

Deputy Dillon and Deputy Sweetman in the Dáil and some members of this House warned the Government that the path they were taking by imposing taxes on the necessaries of life would lead to an inflationary spiral with all its attendant ill-effects. That warning was not heeded and we now have the results.

The concluding paragraph of the Minister's statement reads as follows:

The Budget, therefore, is intended to favour saving, to increase investment and to put a slight brake on consumption,

Why was it necessary to put that brake on consumption? As reported in the Official Report volume 209, No. 5, column 715, Deputy de Valera said in relation to that quotation which I have just read out:

And the Budget framer with that aim in view, was conditioned by the particular circumstances which we have at the moment and which were more fully dealt with by the Taoiseach in his speech.

The Fianna Fáil Government never seem to feel sure of themselves or where they are going. In the Spring of 1963 they had a Wages Standstill Order. They were Closing the Gap. Then, in the 1963 Budget, they introduced the turnover tax—a tax for the first time in the history of this country on the necessaries of life—and they told the people there would be no increase in prices. In the Autumn of 1963 they gave the green light for increased wages and some Fianna Fáil speakers informed the country that the economy could afford an increase in wages of 8 or 9 per cent. The representatives of labour and the employers met and agreed to a 12 per cent increase all round.

In their eagerness to win two by-elections, the Government told wage earners they would get a 12 per cent increase in wages which was much bigger than the 2½ per cent turnover tax and that, therefore, there would be no increase in the cost of living. Unfortunately, the people voted for the Government candidates and are now paying dearly for it. Prices, in some cases, have increased anything from 20 to 50 per cent.

The Government will now take corrective action to remedy their mistakes. They are now trying to stop a runaway horse which they prodded into running away in order to win two by-elections and for political expediency. They were not thinking of the national interest. Eight months earlier, they announced in their pamphlet Closing the Gap that the country could not afford any wage increase.

We are entitled to ask where the extra taxation is getting us. The people's money is being spent recklessly by an incompetent Government. Last year, we pointed out that an increase in the cost of living would bring about severe hardship to the householder and would increase the costs of production in our export industries at a time when we should be vigilant to keep costs at the lowest possible level in order to compete effectively on the export market. The Government heeded not that warning. Today, some of our industries seem to be in peril. They claim they are finding it hard to pay all the increases and the taxation imposed on them by the present Government.

Fianna Fáil have pointed out that they must tax the essentials of life— food, fuel and clothing—in order to get the money to pay for social services. The Fianna Fáil turnover tax last year increased the price of beer by 1d per bottle and cigarettes by 2d for 20. It imposed 2d on the glass of whiskey and 1½d. on the gallon of petrol. If we had no turnover tax last year and these increases were imposed as ordinary excise duty they would yield more than £6 million per annum, which is substantially more than the social service increases paid out last year.

In the increase in the record cost of living figure we have today brought about by the Fianna Fáil turnover tax plus the recent taxation in the Budget the purchasing power of social service payments has been reduced so that the 35/- the old age pensioner received will buy no more than the 10/- bought pre-war. The pound that was worth 20/- pre-war was worth 11/9 in 1947 and 6/9 in 1963. Today it is reckoned to be worth about 5/6d. If I am wrong the Minister will have the correct figure. Fianna Fáil say that the Government must get the money some way. The Government are collecting from the taxpayers of Ireland over £108 million more today than it took to run the country in 1956.

What have we got for that extra taxation in the way of more jobs and more families living at home in their own country? Even if a place can be made for extra taxation there is no reason for taxing the essential commodities of life—the food, fuel and clothing of the people—and less reason for the Government to try to shuffle the blame on to others. The responsibility for the increasing cost of living and for the high taxation the Government have imposed, as well as for the turnover tax, rests alone on their shoulders. It is completely wrong in the country or anywhere else to try to shift the blame on to the manufacturers, the shopkeepers or any other section of the community. If the Government impose taxation and the blisters of taxation have to be paid by somebody the money must come from somewhere, and the people have no crock of gold, as the present President of Ireland told us at one time, to put their hands in when demands are made on them.

Business suspended at 6.5 p.m. and resumed at 7.15 p.m.

Mr. L'Estrange

In dealing with the sum of £215 million which is before us tonight, I think we are entitled to ask what is the position in regard to employment. Taxation has increased by roughly £108 million in the past six years, and by almost £140 million in the past 12 years. I have with me the booklet Economic Statistics, compiled by the Central Statistics Office, and issued prior to the Budget of 1964. At Table 15 there is a heading “Estimated total labour force and number of persons at work in main branches of economic activity in April, 1951 to 1963.” Under that heading we find that the total labour force in 1951 stood at 1,261,900. In 1963, the total number in employment was 1,113,000, a reduction of 148,000 in 12 years, despite the fact that taxation has increased.

We heard a lot, and we still hear a lot about our unemployment and emigration. The Taoiseach expressed his view about the function of the Fianna Fáil Government when he said in Dáil Éireann, as reported at column 1144. volume 161 of the Official Report of 14th May, 1957:—

... I and my colleagues have no doubt in our minds that we became the Government because the people expected us to work determinedly and intelligently to bring about a situation in which employment would expand, in which the twin problems of unemployment and emigration would be vigorously tackled.

Bearing those words in mind we are entitled to ask how they have worked "determinedly and intelligently" since the Taoiseach spoke those words in 1957. I admit they have worked intelligently, because through propaganada, through the Press, through the radio, through television, and through Ministers' speeches, they have painted a rosy picture. Many people will tell you that the people were never better off and never had it so good. However, if we look at the figures again in this booklet, published prior to the Budget of 1964, we find that in April, 1957, a month before the present Taoiseach spoke, there were 1,162,000 people employed and that in April, 1963, six years later, the figure was 1,113,000, a reduction of 49,000 people in the numbers employed.

Those are the figures Senator Ó Maoláin asked me to produce during a debate here last March. I was unable to produce them then. I am producing them now and they are the Minister's own figures. In the past the Minister has accused me of using Hume Street statistics, figures issued by the Fine Gael organisation. The figures I now produce were issued by the Minister himself prior to the Budget this year. They show how Fianna Fáil have determinedly and intelligently kept to the promises to give full employment to our people. Is that the way Fianna Fáil keep promises—instead of bringing about full employment they produce a situation where 49,000 fewer people are employed and have to pay double taxation? Added to that, 265,000 of the cream of our boys and girls have been driven from the land of their birth since that statement was made on 14th May, 1957, by the then Minister for Industry and Commerce.

So instead of the 100,000 new jobs they promised, there are 49,000 fewer people employed in Ireland today than in 1957 and 265,000 have left on the emigrant ship. On top of that, we still have 50,000 unemployed. Are we not, therefore, entitled to ask what the people of Ireland are getting for this crippling taxation of £215 million? The Government must realise that were it not for the safety valve of emigration we would have today 315,000 people unemployed in Ireland. It is a situation no Government could face up to.

We remember the promises and the exhortations: "Wives, send your husbands to work". They were plastered on the walls all over the country. Unfortunately, the people believed Fianna Fáil at the time. Since then Fianna Fáil have increased taxation by £108 million and instead of sending their husbands to work, the wives have sent them to Liverpool, Birmingham and Coventry. According to the statistics I have quoted, we still have 50,000 people unemployed.

What do the Government intend to do with the proceeds of the increased taxation? Do they intend to provide full employment for all our people at home as they promised. I suggest there should be less talk about plans. We have had so many Fianna Fáil plans in the past that if plans helped to make people wealthy we would be the richest nation in the world today. What the country needs is an increase in the number of boys and girls in employment in their own country. The yardstick by which any Government should be judged is the number of boys and girls and families living in their own country in frugal comfort, earning their own living. If we judge this Government on that basis they have been a failure.

Many figures are given about population trends. Some months ago we were told only 12,500 people emigrated last year. Then they discovered there was a mistake, that the figure should have been 25,000. Will we be told next that even that was a mistake, that the figure should have been 50,000? In churches throughout the country one will see nobody but old men and women and children because all the young boys and girls between 18 and 35 years have been driven out.

The only time the population increased in this country during the past 40 years—Fianna Fáil were in power for 27 of them—was between 1946 and 1951, when they were not in power, when the population increased by 5,486. If anybody doubts that figure he can find it in the official statistics, according to which in 1946 the population was 2,955,107. In 1951 it was 2,960,593, an increase of 5,486. Immediately afterwards the Fianna Fáil Party came back to power. They brought with them an increasing burden of taxation and as well, in 1961, the population was 2,814,703, a drop of 83,941, the lowest number ever recorded.

Despite that, there was increased taxation every year and they tell the people—unfortunately the people believe them—that the extra taxation is needed to give more jobs to our own people at home. That is what they are telling the people of Roscommon and Leitrim and what they told the people in Cork and Kildare. The figures are there. The extra taxation is not providing more employment for our own people. There is definitely something wrong with the Fianna Fáil policy and the Government. They are getting money from the people. They are certainly spending it but it is not being spent in the proper way because the proper returns in employment for our own people are not there. The Taoiseach said at one time that was the acid test for any Government. The Taoiseach and Fianna Fáil have definitely failed in the acid test of Government.

The small shopkeepers, the business people, the small farmers and those on fixed incomes, due to the increased burden of taxation which is put on them by the Government, are being unfairly penalised. This is caused by the turnover tax and this year's imposition as set out in the Finance Bill. The farmers have got a certain relief in rates. We had the Minister for Lands making a statement a week or two ago about the ranchers and the graziers. They were trying to stop him doing his work in certain regards. There is no use denying that the ranchers and graziers are getting the relief in rates at the present time but the small farmers are getting very little. They are only getting a relief of 1/- and 2/- while there are others coming into this country buying up big tracts of land and getting relief in rates of as much as £100 and £200.

The people in the towns and urban areas are getting no relief at all. They are also entitled to relief. I believe the Government are committing a grievous error in saying that taxing capacity can be adequately measured by the fact that a man can actually find the money required. Provision should be made to ensure that such payments will not so weaken his resources as to put him in danger of lapsing into the class which cannot pay at all. That is the danger with certain types of people. The class with the least capacity for paying is also the class which has the least power in this country. They have to pay higher prices for their goods because they have to purchase them in very small retail quantities. This is particularly true since the introduction of the iniquitous turnover tax. That was pointed out by other speakers today and the point has now been reached when the swing in taxation may reflect the real gravity of the situation.

Nobody in 1956 would have believed that taxation would increase by £108 million in seven years. It has been doubled since 1956 and if that trend continues the present Government, or whoever is in power by 1970, will be introducing a Finance Bill for over £430 million. Let us face facts. If the same trend we had in the past six years continues taxation will be doubled again in the next six years and we will be faced with a bill of £430 million. It was never more important in the history of this country, or more desirable or necessary, than it is at the present time to have a period of stability in the country so that producers, whether they be farmers or industrialists, can prepare and equip themselves for the more competitive period which undoubtedly lies ahead, whether we enter the Common Market or not.

There is no denying the fact that we are in a freer trade era which, undoubtedly, if we enter the Common Market, will have serious repercussions on all the industrialists and the workers of this country. Due to the recent visit of a particular Minister from another country we may be nearer to entering that competitive period than many people, up to last week, were inclined to believe. I believe there is a relative degree of co-operation and unity of purpose between industrialists, managers and workers. I believe that is necessary and that it is essential for the future prosperity of all concerned.

I hope that any agreements entered into in the last five or six months will be completed. It is in the interests of all concerned that those agreements should be completed. I believe it is in the interests of industrialists and, ultimately, it will be in the interests of the workers and of everybody in this country if those agreements are completed. We all sincerely hope, no matter what Government are in power, that the people will live up to their responsibilities and their obligations.

For seven years we have been hearing, not only from objective commentators, but from Government spokesmen as well, that the burden of taxation was close to the endurable limit. I quoted the present Taoiseach on what he said in the past. I am not going to quote him again. Deputy MacEntee, the Tánaiste, also spoke on a number of occasions about five years ago on the same trend. What is happening today with public expenditure and local expenditure despite all that was said by the present Taoiseach, the Tánaiste and other members of the Government when they were in Opposition and also when they came back to power? Public and local expenditure has been careering upwards and the rate of the growth in current public expenditure on non-productive capital items, in the opinion of some people, is shaping the real growth of the economy as a whole. That would be serious for the country if it continued. There is a record of taxation at the present time of almost £85 per head in respect of every man, woman and child in the country. What is happening is that a dwindling population is being asked to carry a heavier burden each year. The danger is they cannot continue to do that. A record taxation—I think it was referred to by Senator McAuliffe—to the tune of £25 million will be collected from the people of Ireland this year. These taxes—£215 million plus the £25 to £27 million collected in local rates—no doubt are inflicting a crippling burden on the people of the country.

The only way in which tax revenue can be increased without causing inflation and increases in the cost of living, as we have at the present time, or causing bad relations between management and labour is by a growth in the national production which will produce larger taxable incomes, or by new forms of taxation on luxuries, fur coats, dances and other things like that. Statistics published by international organisations indicate that Ireland is amongst one of the most heavily taxed of all countries with a comparable stage of economic development in relation to its national resources.

The inescapable fact which the Government must know is that if public spending maintains its upward trend we will have a record Budget by 1970 of over £430 million. If it continues as it is at the present time there is no doubt but it will outstrip the real growth of the economy. The only alternative then will be increased demands on the taxpayer, which will have their own adverse effects on economic progress in this country.

There is no denying the fact that the recent taxes imposed in the last Budget on petrol, stamps and Posts and Telegraphs plus the turnover tax of last year, which is still there, will have an adverse effect. These taxes are affecting everybody. They are affecting the necessaries of life and they will have a distinct impact on national economic growth. This also may lead to a curbing of public consumption. I think the record cost of living figure we have at the present time is bound to do that.

Last year, before the turnover tax was introduced Deputy Brian Lenihan reassured his listeners that any taxes which the Government would introduce would be on furs, jewellery and expensive motor cars and that food and clothing would not be interfered with in any way. A short time before that the Taoiseach introduced a White Paper in which he stated there would have to be a standstill in wages. Those were two clear-cut statements, one by the Taoiseach and the other by a member of the Government. Last year the Minister for Finance introduced the turnover tax but he did not, as the Parliamentary Secretary had said, impose a tax on "furs, jewellery and expensive motor cars". He went further, as we all know, and said he would have to impose it on all commodities. I quote from the Minister's speech at column 82 of volume 202 of the Official Report for the 23rd April, 1963:

It is not safe to rely for substantially increased revenue on the duties on only four commodities — tobacco, beer, spirits and oils—the yield from which is liable to be seriously affected by changes in demand.

Instead of the old reliables, the Minister gave us the turnover tax because these four commodities were taxed to saturation point. According to the Minister and Fianna Fáil speakers from the Dáil and the Seanad, they got the turnover tax geared and working smoothly and then he comes this year, and taxes the four commodities he said he could not touch last year— tobacco, beer, spirits and oils.

Can the Minister tell us why such a change occurred inside one year? What has happened during the past year? It is hard for the people of Ireland to plan ahead when, in fact, we have a Government in power who change their minds from day to day and from hour to hour, a Government that have failed to look ahead and plan for the future. We have a Government who put a levy on milk today and when the pressure becomes too hot they take it off and put it on cigarettes. This year they introduced the Budget at 4 o'clock in the afternoon and the same night introduced another Budget by the Minister for Posts and Telegraphs.

The Minister referred to the need for future saving. I believe any policy that will lead to future saving will be a godsend to this nation. The Government must set the example because faith without good works is of no avail. I think that our percentage of savings, that is 12 per cent, is very low in comparison with other European countries, which average from 18 to 20 per cent. I believe a better balance between saving and investment is required. Due to the fact that Government expenditure has been increasing year after year many people thought there might be a change this year because of the promises of Fianna Fáil in the past.

We were told last year that the turnover tax was to be a tax for all time. Once the turnover tax was introduced and working it would bring in money for everything and anything and there would be no necessity for any further taxes. Therefore, people got a great fright this year. There is no denying the fact that the small businessmen in the cities and towns and the rural villages expected some relief in this year's Budget. The farmers got it in the past and those people expected it this year but, so far, they have got nothing. They are disappointed at the Government's failure to give them relief. The Government also have given the green light to foreign supermarkets to come in and operate against the small grocer and businessman in the towns of Ireland. Those people have given valuable service in the past, and the Government have failed to give them any relief in this year's Budget. The Government have told many of those people that their days are numbered.

There is no denying that the present Government seem to have a vested interest in increasing prices. On account of the turnover tax they know that revenue will increase and prices will increase. I believe the 2½ per cent turnover tax would have been increased this year to 3½ per cent, 4½ per cent or five per cent but for the strong opposition the Government met last year, not alone from the Opposition Parties but from the country as a whole.

The Minister thought it wiser not to introduce the turnover tax this year but to fall back on the old reliables of petrol, cigarettes, beer and spirits— which they told us last year had reached saturation point from the point of view of taxation—and they allowed prices to increase and the cost of living to soar sky-high. By allowing prices to increase as much as 20 to 25 per cent, the Government are getting the same amount in revenue as if prices had remained the same as last year and they had increased the turnover tax to 3 per cent.

Last year, on goods sold at £100, the Government got £2.10.0 by reason of the turnover tax. Anything that sold for £100 last year is costing at least £120 this year and, on that, the Government are getting £3. Therefore, by allowing prices to increase, the effect is the same as if the Government increased the turnover tax to 3 per cent.

The Government are not annoyed about increased prices. They seem to have a vested interest in increased prices and are permitting them despite what they said in the past. We do not hear them say a word now but they are allowing them to increase sky high because it is in their own interest.

In the second Budget, introduced by the Minister for Posts and Telegraphs, the cost of a postage stamp for a letter has been increased to 5d, which is probably the highest rate in Europe. With an increase of 2/6d per week, the old age pensioner will have to pay it. The cost of the telephone call will be increased by 50 per cent and the cost of sending a telegram will be increased from 3/- to 5/- for 12 words. The contribution by employers and employees for social insurance stamps has increased from £5.5 million per annum to £13 million per annum at present. On top of all that, we have new taxes on cigarettes, beer, petrol and diesel oil. All of these taxes will bear heavily by way of increased costs on business and industry.

So far, there have been no Government speakers to this debate but on occasions, when in Opposition, Fianna Fáil supporters have been concerned about increased prices. However, when they are in power they do not seem to be in the least concerned about any of the Department of Posts and Telegraphs increases.

The increase of 3d per gallon on petrol is an increase of approximately 5 per cent. This tax will cause widespread hardship and nearly every section of the community will be affected. It will hit the small shopkeeper who keeps a van. It will affect the cost of collecting and delivering milk and foodstuffs. Workers who have to travel long journeys to work will be affected. Many of them have their own cars—more luck to them; they are entitled to them—and they will grievously be affected by this increase. So, likewise, will taxi-drivers and taxi-owners. The hardest hit of all will be our manufacturers and industrialists in their export drive. The Government should have some regard for these people.

The present tax on petrol and diesel oil is most unwise. Many workers who purchased a car to get to work are finding it difficult to keep the car on the road. Others have cars to bring their wives and families to Mass on Sundays or perhaps out at weekends. This tax may put many of those people off the road.

The tax of 3d per packet of 20 cigarettes may be good in so far as it may deter people who smoke excessively and thus protect their health. I do not want to delay the House unduly but I have quotations here from Fianna Fáil speakers when they were in Opposition and when cigarettes were only half their present price. They shed crocodile tears because they alleged in those days that cigarettes had become more and more essential to the community. They pointed out that though they may not be included in reckoning the cost of living index figure cigarettes were regarded as essential at that time even in country districts. Fianna Fáil shed crocodile tears when there was an increase of 2d on cigarettes at a time when they were only half the price they are today.

The tax on imported spirits or Scotch whisky may induce more Irish people to consume Irish whiskey instead of Scotch whisky. I was surprised to hear Senator McGlinchey state last year that, for every one bottle of Irish whiskey, he sold 9 bottles of Scotch whisky. It should be the other way round. A good Irishman like him should push the sale of Irish whiskey.

Mr. McGlinchey

I have to please the customer.

An Cathaoirleach

I would draw attention to Standing Order No. 27. The Senator has his copy of the Standing Orders.

Mr. L'Estrange

Like a lot of people, I suppose, he does not read everything he gets. Is Irish whiskey not good enough for our people now, or are they suffering from an inferiority complex or is it that, having become a little better off, the consumption of Scotch whisky is a form of snobbery? I have to admit that, as well as other things, I am ignorant of that. We should induce our whiskey distillers to introduce a blend of whiskey here similar to Scotch whisky to attract the custom of people who normally drink Scotch whisky. The present tax on whisky, from that point of view, may do a certain amount of good.

While this Budget has been called a farmers' Budget, there is really nothing in it for the farmer or his worker. Their incomes have lagged behind those of the rest of the community. The whole economy of the country depends on them. They are the hardest worked and yet they are still the worst paid section of the community. From the national, social and economic points of view, they have been in the front trenches. All they want is a fair return for their labour, which they are not getting. They produced in the past and are producing at present 75 per cent of our total exports. They are not getting a fair crack of the whip. Yet, the prosperity of the nation depends on them. Despite all the talk of progress and programmes the net output of agriculture stood in 1963 at almost precisely the same figure at which it stood in 1957. If we take a base of 100 in 1953 it was 106.6 in 1957 and 107 in 1963, an increase of 4 per cent in 6 years.

We are glad to see that some little relief is being given in the Finance Bill to the people on the land and that the incomes of those on the land, estimated to be £107.8 million in 1963 which was a decline of £1 million compared with 1962, are to get some slight concessions in this Budget by a very small increase of 2d a gallon on creamery milk. It should be remembered that the Minister not so long ago increased the levy by 1.8 pence so that the net increase is very small while the farmer's expenses and costs have increased and he has to give increases to his labourers. I still argue as I did in the past that the agricultural labourer is not being properly treated, and there is nothing in this Bill to put the farmer in a position to pay him properly. The agricultural labourer is of far more importance than the bus driver or anybody like that, yet the bus driver or a person in a similar position has at least twice the wages of the agricultural labourer and works not much more than half the hours. That is completely wrong in an agricultural country. The farmers, the principal producers, should be put in a position that they can live in ordinary frugal comfort and can pay their labourers a fair and just wage. There is nothing in this Bill to say that the farmer will be put into a position to pay his labourer a fair and just wage. Unless farm labourers are properly paid they will run away from the land of Ireland. The young people today are not prepared to put up with the drudgery that their fathers and mothers did, and good luck to them.

The pig breeders are to get a miserable increase of 8/- a hundredweight. This does not make up for the reduction of 5/- a hundredweight which was imposed about four years ago on bacon pigs, and the standards have been set so high in the past year that only sixteen per cent of pigs last year qualified for the top price, whereas in 1959 67 per cent qualified. Even with this 8/- per hundredweight increase, due to the fact that the prices of feeding stuffs are increasing, the pig breeders and farmers will be worse off than they were a few years ago.

You may say that that is all Fine Gael propaganda, and there is no denying that the Minister for Finance in his reply will, as he has done so often in the past, tell me that nobody has done anything for the farmers except Fianna Fáil. It might be no harm to quote Deputy Martin Corry who we thought at one time would have been Minister for Agriculture. Perhaps, he would have done too much for the farmers. Speaking in this year's Budget debate he said, as reported in volume 208 column 1833 of the Official Report: "Money is required if we are to make progress. The last man to be looked after is the farmer." That is not a Fine Gael Senator making that statement against a Fianna Fáil Minister, but a member of the Minister's own party.

I continue to quote from Deputy Martin Corry:

We have seen the drain year after of the lifeblood of the agricultural community, owing to the barrier, the differential, between the £6 or £7 on one side and the £12 and £14 on the other. We have lost every skilled worker we had on the land——

If I had made that statement I do not know what would be said. I never went so far as Deputy Corry though I said that the number had decreased by 80,000 or 90,000 but he said that we have lost every single skilled worker we had on the land. There is at least one member of the Fianna Fáil Party who seems to be alarmed at the drain year after year of the lifeblood of the agricultural community. It is unfortunate that the Minister does not think the same way as Deputy Corry. If he did there might be something done for the small farmers, particularly in counties like Roscommon and Leitrim, and their labourers who have been so neglected over the past few years.

Deputy Corry is well worth quoting and he continues:

We lost them through that difference. The sooner we get down to this problem, the better. If we are to keep the rural community on the land, they must be at least somewhere near the level of their brothers in industry.

That should be admitted by everybody and it is a pity that the whole Cabinet when they came to produce their Budget for this year and their Financial Statement did not think, as Deputy Corry seemed to be thinking, because if they did something worthwhile might have been done for the farmers. Deputy Corry also said:

I think the sooner the problem of the rural community is tackled the better for everybody. A time will come if these conditions continue when there will be no skilled man left on the land.

I said on the last day—and do not like to quote something I said before, since Senator Ó Maoláin does not seem to like it at times—that St. Patrick banished the snakes, Brian Boru banished the Danes, and the Taoiseach and the Fianna Fáil Government are banishing the farmers and agricultural labourers from Ireland. As Deputy Martin Corry said, unless the trend is reversed no one will be left on the land of Ireland. I have hopes that the Minister will pay more heed to Deputy Corry's words. In any case, I do not regard this as a farmer's Budget because despite the fact that this year we had the record taxation of £215 million, another record of £30 million imposed on rates, and all the Fianna Fáil taxation and all the money they are taking from the people, our national debt stands at over £530 million. What the people fail to realise is that that money will have to be paid back some time and it is costing almost £25 million to service that debt, or more than twice as much as it was costing to run the country when Fianna Fáil first came into office in 1932 after then promising to reduce taxation by £2 million. We are entitled to ask ourselves where all this extra taxation is going. Despite that extra taxation, our cost of living stands at an all time high record. Our adverse trade balance for the year ending April, 1964 stood at £118 million. If I am wrong the Minister can correct me. That is not a very nice picture to have to paint, and it is time that the Government realised that, despite their taxation programme, the country is not prospering as it should. On the other side, we have a record low population of 2.8 million people. A record 215,000 people emigrated in the past 7 years and there are 49,000 fewer people employed in Ireland today than 1957. We have the further record that Ireland's total population today per square mile of agricultural land is the lowest in Europe, and our rural population per square mile of agricultural land is also the lowest in Europe.

Alone among the nations of the world today we have a dwindling population, despite all the extra taxation. I believe the people are entitled to ask these questions. I do not think there is anything in the Budget to increase production, or to get increased production from the land. I said in the past that it was the inter-Party Government in 1956 that gave concessions in a Finance Bill inviting in foreign industrialists with the technical knowhow. It was Deputy Sweetman and the late Deputy Norton who invited them here to start industries. The Taoiseach bitterly opposed that Bill and said that when he came back to power he would do away with it. He said he had no belief in it, but he is working it now and it is successful.

We on this side of the House have always believed in supporting the industrial arm, but we also believe that the agricultural arm should be helped at the same time. It is not being helped through tax incentives or inducements as it should be helped. It was pointed out in the past that if agricultural production were increased in the next six months, and if £50 million extra worth of agricultural production were exported, we would get back £48 million or £49 million in profit. We might have to pay out £1 million or £2 million for such things as cotton-seed cake which we do not produce, but we would get back £48 million or £49 million net profit. If we exported an extra £50 million worth of industrial production, the reverse would be the case. We would probably get back only £1 million or £2 million in profit, because we would have to import the raw materials from the ends of the earth.

We believe in building up the industrial arm, but we also believe in giving more encouragement to agriculture, because we believe that more of our people could be employed on the land, and kept at home in Ireland. We disagree entirely with the concept of Fianna Fáil policy in the Second Programme for Economic Expansion that another 60,000 people must be driven from the land between now and 1970. If there is a proper programme for agriculture, the farmers will increase their output. If they are given a chance, and if they have the proper markets for their produce, they will increase their output. I believe more incentives should be given in this Budget to the people on the land to increase exports.

Of course, the Government are very lucky at the moment because, were it not for the fact that cattle are selling at almost £9 a cwt., our adverse trade balance would be gone haywire. As I say, the Government are very lucky because cattle are selling at such a good price. We may not have them next winter and there are many economists who are wondering what might happen then. In any event, cattle are selling at that price and there are markets for them.

I am very surprised that no one has spoken from the other side of the House. Perhaps it is because the Government's case is so bad that they are afraid to get up and speak on their behalf. I do not know. It is no wonder that "Backbencher" commented last Saturday that the majority of Senators were not doing their homework and were not worth an increase in their allowances. I cannot understand why the people on the other side of the House have not spoken so far.

There is nothing in this Budget for education, despite what was said by the Fianna Fáil Party in the past. The country is awaiting concrete evidence and practical examples of good government. Increased taxation is not proof of good government. I want to see an easing of this strangling taxation, and a reduction in unproductive public spending which too often means money down the drain. The Government can no longer drift along. We are all patiently awaiting signs of a planned approach to organising the nation's energies and to developing our national resources. Agriculture has been neglected by this Government. That was stated by Deputy Corry in the Dáil, and it cannot be denied by any speaker here. All around us we see the fruits of past disorganised effort such as unqualified emphasis on increased agricultural production with little concern for the elementary necessity of organising markets.

An Cathaoirleach

The Senator is now going into matters of administration.

Mr. L'Estrange

When the Government call for saving they should themselves set an example. They are not setting an example, and they have not set an example for the past seven years.

Mr. Nash

I propose to confine myself to the application of some of the fundamental economic principles of the Bill that we are considering today, and to see from the application of those principles whether we are going in the right direction. If I quote anything, I do not propose to quote from political speeches. I prefer to confine myself exclusively to completely impartial sources.

The first economic principle which I propose to take is that in this country, as in any other, if our gross national product is to be increased, it must be done by the development of our industries and an increase in their productivity. It must be done also by an increase in our exports. The May Banking Review states that the rapid development of industrial exports is the backbone of the Second Programme for Economic Expansion. Senator McGuire quoted the same fundamental principle, but he went a step further and said that a Finance Bill and the balancing of a Budget are frequently matters of political expediency. In that regard I should prefer to quote from the OECD Observer of this month. It states:

The five years 1959 to 1963 witnessed the finest growth in 20th century Irish history. How Ireland managed to achieve this is explored by the OECD Economic and Development Review Committee in its newly issued study of the Irish economy.

I happened a few weeks ago to be in the office of a very large firm of London stockbrokers. I was handed a copy of the Stock Exchange Gazette for 8th May, 1964. It is a journal issued by businessmen for businessmen. It advises people how to invest money, where they can safely invest money and why they should invest it. I quote:

Businessmen and investors would do well to take an increased interest in the affairs of the Republic of Ireland, especially in targets outlined in the Second Programme for Economic Expansion which seem within the economy's reach.

It goes on:

Our own impression from recent visits to Ireland is of a once closed economy now outward looking, a Government with new men at the helm and new ideas to work with.

That was not written by a politician. Neither was it written by an Irishman. It was written by an English businessman to advise English businessmen, and if we consider the return on Irish equities today, on Irish investments, we find that there is so much confidence in our economy on the part of businessmen that one gets an average of only 3 per cent today on Irish equities. On English equities one can get 4 per cent.

People do not invest money just for the good of their health. They invest in what they believe will be a growth economy, a growth organisation. It is a well-known fact to every businessman in this country that the average industry in this country, be it paper-making, engineering or what you will, has a turnover of approximately 2 per cent of the turnover of the corresponding English company. In other words, it produces in one year what an English company produces in one week. Despite that fact, people from England, from America, from the Continent are investing their money in Irish industry because they believe it is a growth industry, because it has proved itself to be a growth industry.

Between 1950 and 1963 the volume of our exports increased by 120 per cent. For every £10 million in volume we exported in 1950, we export today £22 million in volume. In cash value, the increase was 170 per cent, the reason being that there has been on the continent a general erosion in the value of money. So in cash value, for every £10 million worth exported in 1950, in 1963 it was £27 million. In 1950, industrial products formed only 7 per cent of our exports. Today they form 22 per cent of a very much higher figure.

One of the ways in which a Government must develop a growth economy is by investing their own money in many instances. We talk sometimes loosely about the national debt as if it were something thrown away. One might as well say that because a farmer took £5,000 out of the bank and bought a farm with it, or because he borrowed £5,000 in the bank, that he had a debt of £5,000. Of course, he has a farm against it. If our national debt has gone up it is because the people have confidence in themselves. It is because the Government have confidence in the people and have confidence in themselves, and are prepared to borrow money and invest it in Irish assets, and in the Irish ability to use those assets to advantage.

Where is our national debt, what has it been invested in? It has been invested in Bord na Móna, in forestry, in industry, in houses, schools and hospitals. The day before yesterday I had the pleasure of being at the opening of a factory in Thurles for the sale of Érin Products. Heretofore, despite the fact that we are an agricultural country, we imported more than £3 million worth of vegetables every year. Last year, with Érin Products running only a short time, we exported £1½ million worth of vegetables and in 1964 they expect to export £2½ million worth of vegetables.

I heard the Minister's speech at the opening of this factory. He said the Government had invested £3½ million in that item alone. Surely if £3½ million is invested in something that precludes the purchase of £3½ million worth of vegetables from outside and their import, and it is something that enables our farmers on the other hand to produce and sell for export £2½ million worth of vegetables, and give employment in Ireland, that is a good investment. The same applies to forestry and to Bord na Móna. Again, I quote from the OECD Observer for this month:

To spur private investors, the Government itself began investing. There has been more capital, more productive facilities both to expand capacity and modernise equipment. Electrical generating capacity has been increased, steel and turf production augmented, new airport runways built, jet planes purchased. Over the five years of the First Programme, public capital expenditures have almost doubled and the pattern of spending has been reappraised so that a much greater proportion is devoted to investment.

Is that our national debt? Are there assets against it? Portion of our national loan goes to build houses for our workers. In the town of Roscrea near where I live you just cannot get a workman in the town. They are being imported in vans and cars from 13, 14 or 15 miles away. Now large numbers of houses are being built for them so that they can live in the town where they work.

That is portion of the national debt. Is it money well invested? Have you assets in return for it? Drive on any road on your way to Dublin and you can see new houses being built throughout the country. Sometimes they are built with the assistance of county council loans, loans that will be repaid. That is part of the national debt. Is it money invested for the common good, is it well invested? New schools are going up all over the country because the Government believe that if we are to succeed in our industrial drive our people must be better educated—they must have more skills. Is the money so expended well invested?

New hospitals are going up to care for the health of our people because the wealth of this country lies not in our minerals, not even in our agriculture. It lies in our people themselves. Is that money well invested? Therefore, when we talk about the national debt on the one hand, let us consider on the other hand whether we have assets against it. Senator Dooge quoted a statement of mine from last year in regard to the percentage of our taxation as against gross national product. I shall take his figures as to how it compares for last year and for this year.

The figure he gives us for 1963-1964 is 23.7 per cent. I am sure he is right in that. The figure for 1964-1965 is 24.3 per cent. It went up by .6 of one per cent, that is, roughly 1d. and one ½d. on every £ in the gross national product for the year. How did that arise? Had there been no increase given to the farmers this year and had there been no increase in the Social Services, taking these two items alone, there would have been no increase whatsoever in taxation. The reason is that the income of the country went up and, therefore, in relation to their income, the people of the country were paying the same percentage. Does anyone here begrudge 1d. and ½d. of the gross national product for the increases that have been given in our Social Service and to our farmers? It is just as simple as that.

Again, quoting from the Irish Banking Review it states that when there are increases in wages if they exceed productivity there is always a possibility of inflation and that in such event it is better to apply the brake earlier and gently rather than late and severely. That is done by indirect taxation. This year the workers of this country, the teachers, the guards, the civil servants and the people generally received increases in their income, in their salary or wages of 12 per cent which is approximately one-eighth of what they had been earning. There was a danger of some of that money being spent not on things which would assist productivity but on things which would increase any deficit in the balance of payments, on tobacco, imported whiskey and petrol. Tax was put on those items only.

Senator Dooge also suggested that direct taxation should be increased and indirect taxation reduced. He referred, or if he did not someone else did, to the turnover tax as one instance of undesirable indirect taxation. Every country in Europe outside England, and also Australia, the USA, Canada and the countries of South America have got turnover tax. The strange feature about the turnover tax and about indirect taxation generally is that where you had a Labour Government the turnover tax was initiated far more easily than where you had a Conservative Government. The only country in Europe where there is no turnover tax is England, where you have had a Conservative Government for a large number of years.

The extreme Left we can take is Russia, the Soviet Union. Professor Fogarty, the Professor of Economics in Cardiff University—he is a splendid economist — states that 42 per cent of the total revenue in the Soviet Union is got by turnover tax. The one thing we have got to realise when one considers indirect taxation is that it is not really taxing the poor at the expense of the rich. The strange thing about income is that when a man gets an increase in his income his expenditure invariably rises to meet the increase. In other words, most people spend practically all their income, at least what is left of it after income tax is paid, and so the turnover tax he pays is in almost direct ratio to the size of his income.

Therefore, the more a man earns the more he spends and indirect taxation is one way of putting a curb on spending and it is the safest way. On the other hand direct taxation would kill incentive. It would damage exactly what the Government want to do. Their programme definitely is an expansionist programme which involves more work from everyone. Again, I quote from the Irish Banking Review of March, 1964:

The conclusion of this article may be accepted by stating that in the opinion of the Central Bank last year was on the whole a period of continued progress.

If that progress is to be continued anything which would damage incentive would be absolutely fatal to it.

Another Senator suggested a tax on capital profits. We in this country, which is a rapidly developing country, should remember this. If we are going to succeed, if we are going to reach the goal which we hope we shall reach, we can do so only by enthusiasm on the part of our business people, not by damaging incentive in industry but encouraging the optimism of the entrepreneur. People who are prepared to spend their money, gambling it if you like, on their own ability to make it productive should be encouraged. If we do anything to damage that initiative it would set us back to where we were in 1957 when two per cent of our entire population emigrated, that is, one for every 50 people, including the old people and the infants in the country.

We have been told here this evening something about emigration. In 1957 we reached the all-time peak so far as emigration was concerned. We had lost national self confidence completely. Again, I quote from the OECD Observer which states: “emigration has fallen from an average of almost 40,000 during the '50s”—before we got to 1957 at all—“to an average of 20,000 per year.” Surely it is not by damping the enthusiasm of the people we can get anywhere. At the moment we have a spirit of enthusiasm in this country which is shown recently by the agreement which has been made between the Federated Union of Employers and the trade unions. The National Industrial Economic Council consists of trade unions, representatives of employers and public representatives. They have come to the conclusion that the confident programme which the Government have set themselves of expanding economy at a rate of over four per cent up to 1970 is attainable. The OECD are satisfied that we can attain it. Are we going to lose faith in ourselves by talking about increasing the national debt against which there are valuable assets, by talking about increasing taxation when our only increases this year are 1d. and one ½d. on each pound of the gross national product to give increased payments to the widows, the old aged, the orphans, the sick and help to the farmers?

There are one or two things which the Minister might feel disposed to consider. I would agree that it would give a great fillip to the economy of this country if death duties were abolished. A man during his life pays income tax, surtax, corporation profits tax or be it what you will on his gross income and he is left with his net income. He has made his contribution to the State out of his earnings during his lifetime. When he does his estate is again taxed on the money which he leaves. One of the most important things for the success of our programme is increase in saving.

Death duties, I respectfully submit, are a damper on savings. Their abolition would invite much wealth to this country for investment. One further suggestion I should like to make in that direction is that more encouragement should be given to workers in factories to save some portion of their wages. I know of many factories where businessmen themselves encourage their workers to leave back at the end of the week the amount they have earned in overtime, or possibly a recent increase in wages. They allow the workers 5 per cent on the amount that is left over. I have known many of those workers to make substantial contributions towards the purchase of their own houses. Unfortunately, there is no provision for exempting those workers from tax on that 5 per cent.

I know it is difficult to legislate for everything but, perhaps, by way of a circular to the inspectors of taxes, or otherwise, the Minister would permit workers of that kind who save their money an allowance of income tax up to, say, £50 on the income from their savings.

Subject to those two comments, I should like to congratulate the Minister. I have heard it said here today that his speech was complacent. The Minister is proud of the fact that he has taken a very active part in the development and progress of this country over the past six years by the budgets he introduced, by the way he encouraged expansion and by the way he encouraged savings and thrift. He hopes to continue that for the next seven years. He is too much of a businessman to be complacent. No matter how successful progress is, he would want it still more. The only fear which some people have is that the Minister may have set too high his targets for progress. I do not think so, because like him, I have faith in the Irish people and the future of our nation.

Mr. Fitzpatrick

I propose to address my remarks on this Bill to taxation. In the 1963 Budget a new type of tax was introduced, the turnover tax. It imposes an indirect tax on everything that one has to buy, on essential foods, essential clothing, fuel and medicines. We took the view that that was an unsound system of taxation. That was our opinion then and it still remains our opinion that it is unjust and bad policy to tax the essentials of life because in so doing the cost of living will be increased and this will start off a wage increase spiral with all the ill-effects which flow from that.

Be that as it may, the Government decided to go ahead with the turnover tax without exception and to impose it on bread, butter, tea, sugar, clothing, footwear and medicines. The least that might have been expected by the people of modest incomes was that they would have been relieved from the impost of direct taxation. We were told the turnover tax was introduced to put an end to all other forms of taxation. We thought that system of taxation was wrong and we still think it is wrong. I think the people of modest incomes, the factory worker, the civil servant, the businessman in a small way of business, were entitled to expect that if they were subject to turnover tax on everything they had to buy there would have been a relief in income tax. But what has happened? There has been no relief in income tax.

I go further and say that income tax has been increased. It has been increased because personal allowances have not been increased. The value of money has decreased and the allowances for single people and married people in force several years ago still remain in force. I put it to the House that means that income tax by direct taxation, has, in effect, been increased.

The personal allowance for a married couple in 1938 was £225. The personal allowance for a married couple now is £394, but if the personal allowance now were to give the same measure of relief to a married couple as it did in 1938, when it was £235, it would now want to be £675 to catch up with the decrease in the value of money. Therefore, I charge the Government with increasing indirect taxation and increasing direct taxation at the same time.

The next point with which I should like to deal on taxation is a proposal in section 1 of the Bill to continue income tax at its present rate and to continue the income tax laws as at present in force. It has been traditional here that farmers were never taxed under Schedule D. In other words, farmers as such were not subjected to taxation on the profits they earned from their farming activities. They were charged under Schedules A and B, which were on the valuation of their land. We on this side of the House have been saying for many years that it is essential, if this country is to go ahead, that the farmers should be equipped with modern methods and provided with modern knowhow. We held that if they were to compete with their competitors on a world market they could not continue to farm as their fathers farmed and they could not continue to pursue agriculture without up-to-date knowledge and up-to-date means. It took us a long time to persuade the present Government that that was so. It took a term of office of the inter-Party Government which launched several new schemes to encourage the farmers—seed testing, liming, land reclamation. But, at last, the Government did to some extent take our advice—belatedly—and agreed that farmers should employ modern means and methods if they were to succeed on the world market. What is happening to the farmers who accept this advice and go in for intensive farming? They will not be taxed on Schedules A and B as heretofore but they will be penalised, punished and taxed under Schedule D. I refer to the form of intensive production known as broiler chickens.

The days of the woman and the flock of turkeys or the woman and the few flocks of chickens to be sold at the cross-roads are over and done with. Unless a farmer can turn out chickens for the table by the hundred or the thousand he is not in business at all. Farmers in Monaghan and Cavan, as I am sure in other parts of the country, have gone into the broiler business. However, if a farmer does that now he will be subject to income tax under Schedule D. He will be called upon to pay large sums in income tax because he is progressive and because he accepts the advice of the Government. The same thing applies to intensive pig production.

I regret to say that the day of the man buying a few bonhams and feeding and selling them is on the way out. If he is not in a position now to feed 40, 50, 100 or 300 pigs, and to turn out three lots of them in a year, he is not in business either. However, if a farmer does that, then, under the present system of income tax, he will be taxed not under Schedules A and B but under Schedule D and, again, he will be penalised because he is progressive and adding something worthwhile to the overall economy.

I do not know why the Minister did not accept an amendment in Dáil Éireann to exempt farmers from Schedule D taxation in respect of intensive poultry rearing or intensive pig production. The Minister seems to think there is some doubt about it. My information is that his Department are actively pursuing farmers engaged in the type of industry I have mentioned.

If the Minister thinks there are people who might not be farmers, properly so called, reaping the benefit from intensive poultry rearing or intensive pig production, surely he can deal with them in an amendment to the income tax laws? If some people in the town or city escape under a badly-drafted new section to the Finance Bill, there is no reason why the Minister and his advisers should not draft a proper section which will relieve the farmers of the type of discouragement I mentioned and, instead, encourage them to get on with intensive agricultural production so that they can sell on world markets at a competitive price.

I agree with the Senator who said that there is nothing worth while in the present Budget, which is being implemented by the Finance Bill, to encourage education. Of course, I was told by the Minister that there is. I was told that much more money is provided than was provided last year, but that is for an increase in teachers' salaries, and so on. There is nothing here to expand education. There is nothing in it to provide better and more education for the people who so badly need it. There is not one brass farthing in the Bill we are asked to ratify today for the comprehensive schools we were told about last year.

The Minister for Education announced he had a scheme for comprehensive schools which would provide higher education for students in parts of the country not catered for by proper technical or secondary schools. That statement, which was not followed up, is doing more harm than good. It is retarding secondary education. There are towns and surrounding areas at the moment which are not catered for with secondary schools. People are at present contemplating the establishment of secondary schools in areas but are afraid to do so, and will get no encouragement to do so, because they do not know how the promised comprehensive schools will affect the area or how the promised comprehensive schools might affect the secondary schools that might be built there. I may be bordering on administration, but it is still true to say that there is not one farthing in the Budget for the worthwhile improvement of education.

Senator Nash made a very comprehensive speech. I am sure that if we took it at its face value and accepted all the quotations he gave we should be satisfied that more people are employed in this country at present than ever before. But we know that that is not the case. Taking an overall picture of agricultural and industrial employment in this country, fewer people are employed here now than in 1956. If we accepted Senator Nash's speech at its face value we should expect the population of this country to be increasing rapidly. We know that it is not increasing and that rural Ireland is being steadily depopulated.

Those are all the remarks I wish to make in a general way at this stage. There are one or two other small points I wish to consider on the sections but I shall deal with them on Committee Stage.

Mr. Desmond

A bill of this kind is bound, of course, to give rise to the question of how to get the money and how to dispose of it. There are bound to be different views on the whole setup of the machinery. A good deal has been said in relation to the benefits derived by a large section of the community, that is, the poorer section, as a result of the increase in taxation. The Bill contains no provision for a substantial review of our social welfare system and our health services, which is now so urgently necessary. Compared with Britain or Northern Ireland, which is a portion of this country, or with the countries of EFTA or the EEC, the social welfare system here is seriously deficient in the level of benefits and the adequacy of the services provided. It is a cause of grave disappointment that no mention of the need for reforms was made in the Minister's speech. Apart from small increases in certain social welfare benefits, no provision is made in regard to the cost which the community must meet if an adequate system is to be introduced.

An Leas-Chathaoirleach

I think that this would be more appropriate on the Appropriation Bill which will come later.

Mr. Desmond

Very well, but we must have regard to what comes from taxation and how the poorer sections of our people are benefiting from the Finance Bill which has called for increased taxation. We can come to that later. It would appear that the revenue increase from PAYE was sufficient to absorb the ninth round for state employees and the increase in tax rates imposed in the Budget has been necessitated by the decision to raise substantially the assistance given to the farming community. The tax increases have been combined with the higher price for milk. Nobody can object to any relief given to the farmers. It is long overdue. The slight increase given will probably benefit mainly the small farmers who were not sufficiently catered for because they were not able to benefit from certain increases and reliefs given some time ago by the Minister for Agriculture. To benefit substantially from those one would not need to be a small farmer but a farmer with sufficient revenue to be able to avail of these benefits. Certain of the reliefs such as the relief in rates only benefit the man with a large acreage, and it is a well-known fact throughout the country that the small farmers are still, to use an old word, struggling. The bigger farmer can derive benefits from certain types of legislation brought in from time to time.

Reference was made in the debate to increased prices. Senator McGuire referred to the difficulties of keeping down prices saying that increased prices are brought about by increased wages. That is not completely correct because it has been proved and is generally admitted that there has been an increase in production which has well met the increase in wages. The increase in prices should, therefore, be very slight. Certain firms which have a very high rate of production have not in all cases increased their prices though they may have increased the rates of wages of the producer, that is, the wage earner. Our workers are well known to be efficient and can stand comparison with workers of any country in the matter of producing goods provided proper facilities are available. A certain amount of cost is incurred in modernising our factories and putting everything, including conditions, right as they should be long before now. The suggestion that all the costs which might be brought about by the ninth round of wage increases must lead immediately to higher prices is not correct. Advantage, of course, is often taken of higher costs because if you can pass on the cost of production, including the increased cost brought about by the ninth round, and add it to the cost of the article and get away with it, then, of course, the profits are bound to increase and they have increased in a number of cases. Then you wait until the annual meeting and you will get a substantially higher dividend. I, therefore, cannot agree that the increase in prices has been brought about by the increase in wages due to the ninth round.

The ninth round was brought about by the Minister when he brought in what he called a very small tax of 2½ per cent in the 1963 Budget. We know the outcome of that. The shopkeepers were entitled to pass on the 2½ per cent but it is well known that in many cases the increase passed on was 12½ per cent. I have been shown receipts in cases of goods and services given where, instead of putting 2½ per cent on the bill, 12½ per cent was added on. That may be disputed and people may ask what we can do about it. That is where a prices commission would come in. We had a prices commission but the present Government do not believe that there is any need for an active prices commission. We have a kind of an excuse for a prices commission. We have what is known as a committee set up by the Minister for the examination of certain manufactured goods, but they must confine themselves to their terms of reference in regard to the goods referred to them. There is not any general examination of the increase in prices. They cannot publish their findings. Statements are made but they must be made through the Minister, and there is no spotlight of publicity on the activities of companies in matters of that kind. We should pay attention to the increased prices which people are paying.

It is a well-known fact that in the major centres in towns when prices were increased sales dropped because the purchasing power had not changed. When the sales dropped, the companies immediately dropped the increases and sold at the old prices. Business went on very well. Of course, some shopkeepers put on not only 2½ per cent but 8½ per cent and 12½ per cent. A commodity which could be bought for 7½d in one shop was 11d in another shop. A commodity which could be bought for 9d in one shop was 1/2d in another shop, and so on. In such cases a prices commission could regulate prices if they were active, and purchasing power would be the same all round. There was no change in the cost of producing the article. That is where the difference comes in, but evidently the Minister does not agree.

Despite the fact that employment would appear to have increased the figures do not bear that out. There may be reasonably good employment in certain industries, but the total volume of employment does not appear to have risen. It may have risen as against 1953, but if we compare it with the figure for a fixed number of years, employment does not appear to have risen. The unemployment register may appear to be low, but we must balance emigration against it, although emigration appears to have dropped. Unemployment may be a bit lower than it was in 1952 and 1953, but the over-all position has not improved to any great extent. Because the cost of production has increased, that does not mean that there is room for increased employment. Having more efficient methods and modern machinery does not mean that more hands are put into employment. In certain industries there may be a little more employment.

No progress has been made towards the development of an active manpower policy. It is recognised in the recent OECD report on Ireland that it is essential that the structural adjustments necessary in the economy should be carried through with the least hardship to the workers concerned. We welcome the increase from £78½ million to £96 million in the capital programme. That is a good proposal involving as it does the building of houses, schools, hospitals, industries and the provision of transport. The State capital programme is a key element in our economic development and the maintenance and expansion of spending in this sphere is critical for the achievement of a high rate of economic growth and expansion of employment.

Taxation on spirits has been mentioned. I do not see why foreign spirits should not be taxed at a much higher rate. I do not see that there is any need for importing foreign spirits. There are many firms here producing first-class spirits. I have never met anyone who could fault them. Perhaps they are not able to supply the full requirements. Some firms are calm and conservative, and if they are selling here and exporting, they may not be so interested in further expansion. In that case there may be room for certain imports of a commodity. If we are importing a commodity which we can efficiently produce ourselves, we can easily tax it to such an extent that the home market can compete. We have the Industrial Development Authority which is a very important body and the matter could be referred to them. I am not referring now to general goods such as clothing. I am confining my remarks to spirits and, of course, I am including beer. Certain firms producing beer here have expanded and are producing sufficient beer for our own people on a fairly competitive basis.

A tax on cigarettes is always unpopular because it weighs so heavily on people in the lower income bracket. In the higher income bracket they smoke fewer cigarettes, or should I say cigars, and are, therefore, not so badly affected by an increase in tobacco tax. Workers are particularly hit in this respect because during a break in work or when their work is finished for the day they find relaxation in smoking a cigarette. The same applies to beer: the working classes are most affected by an increase in taxation. Therefore, I suggest that the Minister should have taken care to adjust taxation to ease the lot of the workers, the producers of the wealth of the country.

It has been said from the health point of view, that cigarettes are dangerous. Many people say the same about certain types of drink. As far as cigarettes are concerned, there is no unanimity among medical people and, therefore, there is no definite suggestion that they are detrimental to health. My submission to the Minister is that the tax on tobacco should be arranged so that the lower income groups would be less affected than the higher income groups. That would not be against social thinking or social doctrine. Government efforts should be directed towards distributing the wealth of the country for the good of the country. Under the Government before we achieved independence we had a system which encouraged the formation of two groups, one very rich and one very poor. If our efforts were directed towards distributing the wealth of the country more equitably we should be doing what was right.

In the ninth round of wage increases the trade union movement was activated by anxiety to improve the lot of their members, to get them their rights because of their importance in industry and to the national economy. The trade unions were very reasonable in their approach but a lot of their work has been negatived by increased prices. If the Government were to put into effect some of the controlling machinery to which I referred earlier a check could be put on increasing prices.

I have heard it stated in this House and outside, in reference to social welfare recipients, that they have been given 2/6d every year and that when a previous Government were in power they did not get even that. How will these social welfare classes meet the increased cost of living out of this 2/6d? It is a bad defence to tell a man who has done something wrong that you are doing something better even if you are still not doing right. The Government have said that through this 2/6d increase in social welfare benefits they have done better than the previous Government. It is the sort of argument that arises in assemblies outside our Parliament. It has been raised even in trade union circles but it does not get rid of the fact that the increases given to social beneficiaries will not help them to meet higher prices.

Mr. McDonald

There is just one point I should like to raise. I strongly object to the Government's policy of attributing all new tax increases to the need to subsidise agricultural production and to provide grants for farmers. I feel that the policy of dividing the rural population from the urban population in this way is wrong, that the policy of playing off one section of the community against the other is not in the national interest.

The farmers are not looking for charity and should not be classified, as the tendency seems to be, with recipients of home assistance and other social welfare groups. Farmers are prepared to work for a fair return and it is up to the Government to see they are properly paid for their labour. The fact that unemployed labourers in the country are in receipt of a higher weekly rate than the standard farmer is a scandalous anomaly. It certainly gives no incentive to the farmers. The only solution is for the Government to see that farmers are adequately paid for their industry so that they can in turn pay a living wage to their labourers related to the cost of living in 1964.

An Leas-Chathaoirleach

The Minister, to conclude.

Professor Hayes

Do I understand that the Minister is to be allowed to continue after 10 p.m.?

An Leas-Chathaoirleach

If the House agrees.

Professor Hayes

Is it intended to take the Land Bond Bill tonight?

Tomás Ó Maoláin

No.

Dr. Ryan

First of all, I shall say a few words about the basis on which our comparisons are made in regard to the incidence of taxation in this country. Senator Dooge spoke of what he called my gibes on his remarks, as did Deputy Sweetman in the Dáil. Last year Senator Dooge said I had selected gross national product as a basis because it was higher and that, therefore, the taxation percentage would look less. I referred to that as a gibe. The reason we took that basis was because it was the basis on which the OECD worked. It was the only basis which would give us a fair comparison between the incidence of taxation in other countries and in our own.

There must be some basis on which to work. To that extent I agree with Senator Dooge. We should also take total taxation, not only central but local, because we could not possibly compare ourselves with European countries if we did not do so. Recently I had cause to inquire about taxation and found that in Germany the States individually looked after education and police. If we compare our central taxation with German central taxation it would be unfair because here we pay for education and police and they do not.

Professor Dooge

In my reference to central taxation in Germany I included the State Governments and for Switzerland I included the Cantons.

Dr. Ryan

I am not saying what the Senator did or did not include. All I am saying is that this is the proper basis to work on. As far as my figures inform me, we were the third lowest in Europe in 1962. The table that was presented to me puts us in the third place. The only two countries below us are Switzerland and Portugal. That may have been only one of the tables which were published by OECD. There might be other tables in which more countries are given. I found from that table there were 11 countries above us with a higher taxation than we had.

The Senator went on to make the point that we have not as high expenditure here as other countries for defence. That is quite true. If we go into details like that I could probably make a case that they have not as high expenditure for agriculture as we have here. It can be said that the percentage we devote to agriculture is much higher than that in other countries. There is nothing to be gained by saying we have not to subscribe so much to defence and nothing to be gained on my side by my argument that they have not to devote so much to agriculture. It is better to take things as they are.

Another argument put forward by the Senator was that we have a very big national debt. Of course, if we have it is because we are providing interest and amortisation provisions and to that extent it is covered by our taxation. It is because of our more difficult economic position that we have a higher national debt than the other countries. In that connection, I should like to join with Senator Nash when he gives some instances of what the national debt is used for. I do not know whether the remarks of Senator Dooge would go to show that he disapproved of what the national debt is used for. It is used for the purpose of building up this country more than we could expect from the laissez faire policy of not doing anything. A campaign of not interfering with agriculture at all would keep down the national debt. We do not think that is the best way to proceed in the running of this country.

I should like also to give another table which was produced by our own Central Statistics Office because I think Senator Dooge gave the impression that the proportion of taxation to GNP was going up in this country. I cannot find any instance of that. The table produced by the Central Statistics Office is headed "Total Taxation as a Percentage of GNP". This also includes both central and local taxation. I find that in 1956, if we go back to a year I was not connected with, the percentage is 22.6. A later year on the table, 1962, shows that the percentage is 22.4. A remarkable thing about this table is that over 10 years, from 1953 to 1962, it was never lower than 21.2 and never higher than 22.7. We may take it that there is practically no change in the percentage of taxation to GNP in this country.

Professor Dooge

I agree with that figure but I also quoted the figures given by the Minister for Transport and Power for 1963 and his estimate for 1964.

Dr. Ryan

These are both estimates. The 1963 figure is not available yet. I can only give an estimate. We stated in our Second Programme for Economic Expansion that there is likely to be an increase in the proportion of taxation to GNP between this and 1970. That may be necessary for the future economy of this country and for general development. If it is necessary we, as a Government, are not afraid to face the fact and say what we are going to do.

With regard to the national debt, I should say that the comparisons given by Senator Dooge were rather tenuous and he was arguing much more like a politician than an economist but we will leave it at that. The Senator went on to quote an article which advocated the taxation of the inefficient rather than the efficient. I do not know how that could be done. The Senator may have meant that we should tax, say, raw materials which would give a better reward to the efficient. I could give an example, that of rates. Every farmer has to pay rates whether he is a good or a bad farmer. It should appeal to Senator Dooge that we should maintain a rates system. If he were logical, he would ask me to give no relief on those rates.

At the same time, the Senator wants social equity. He thinks that could be achieved by personal taxation. I do not know whether the Senator could elaborate on that at another time or not but I think it would be very difficult to formulate a system of taxation where you could make what was wrong right by a system of personal taxation. The Senator wound up by saying my speech in the Dáil was too complacent. In fact, he thought the Fianna Fáil speeches in the Dáil were all too complacent. I must say it is better to be a bit cheerful about things. I could join with the Fine Gael speakers and begin ullagoning about things in this country and saying things are going badly, we are going into bankruptcy and we have nothing to face in the country except bankruptcy. Why should we say that when we believe we are going to succeed? We have succeeded for the last few years and there is no logical reason why we should not continue to succeed despite Fine Gael speakers.

Senator O'Brien spoke about inflation being dangerous. After a big increase of income there is always a danger of inflation because if people get more money they are likely to spend more and if the spending of that money is not matched by the production of goods that is likely to lead to inflation and a lot of trouble. We were a bit troubled about that and, in the first place, I should say that the Taoiseach had, after we considered the matter, suggested that about 8 per cent increase would be a safer increase than anything higher. If an 8 per cent increase had been given there would be less likelihood of an increase in prices as a result of the increase in wages. His suggestion was that it would be better not to give 12 per cent now, but part of it now and the other part of the 12 per cent this time next year when it was hoped productivity would have made up for the increase given this year. I think that was good economics but, at the same time, the trade unions had their own way of looking at it. They felt compelled to try for more than 8 per cent. We have to face that now. As far as I am concerned, and I think I can speak for every member of the Government, I was delighted to see the national agreement and was quite prepared to face the economic consequences of a higher figure than we expected for the sake of the advantages of a national agreement. I hope it will turn out all right and I trust it will.

It is obvious, of course, that when a national agreement was made and when an increase in incomes was given all round that there would be certain manufacturers who were working on a tight rein, or at best were making things barely pay, who would have to put up their prices in order to meet the increased wage. There would be many more manufacturers who would take it in their stride, who were prepared to increase their productivity and give the increased wages without putting up the prices. The same would affect the traders. There may be traders who are prepared to pay this increased wage or increased income to all their employees and are able to do it without putting up prices. We know in the city of Dublin certain groups put up their prices as a result of the increased incomes. That is only to be expected, and for a while anyway those increased prices will be there. As time goes on, with productivity increases and with trade increases, prices may settle down to a more favourable level. That, however, may be regarded as a pious hope.

In my Budget speech I drew attention and appealed to everybody to increase production in order to offset the higher wages that were being granted. It is the only way it can be done. It would seem from some of the speeches from the Labour Senators here that they would hardly believe I made a second appeal in the Budget speech to employers to forgo some of their profits until things came right and then their profits would come right too. That was the most I could do at the time.

Senator O'Brien spoke about the capital programme. He talked about the remunerative side and the nonremunerative side. These two big distinctions are to be made. There are certain moneys which we raise by way of capital and which we invest in the ESB or Bord na Móna, or a few other of these paying industries where we get a return on our capital. There are, at the same time, very desirable projects which we must finance, such as education, housing and, say, health. Here there is a national asset created. I am sure all Senators know in regard to houses for the working classes a very big subsidy on the total cost was paid. Still, it is regarded as a national asset and though there is no cash return by way of remuneration for that particular capital there is a good return from the national point of view. We are not, therefore, disposed to cut down expenditure in that way.

Senator O'Brien also said something in regard to current items and I agree with him. I do not know whether I followed Senator O'Brien correctly, but I can say, at any rate, that in my Budget speech I referred to the fact that we had some items regarded as capital at the present time which really should go on the current side. This was a difficult year because we had to cover the very big increases in salaries for public servants, not only the ninth round but also what was called a status round. We found it difficult to make ends meet and I could not, therefore, start at that stage on the very desirable object of putting some of what are now regarded as capital expenditure on the current side. I hope it can be done in the years to come.

The Senator also spoke about the assets that were created. They are called national assets of which there are two kinds—economic and social. On the economic side, I would take, for instance, expenditure such as the subsidy on fertilisers that is given to farmers. That, of course, will have the effect of improving the land generally. Drainage will be another matter. But the land will be improved generally and in that way a national economic asset will be created. On the social side, I have already mentioned matters like housing, and education.

The Senator went on to talk about the balance of payments. I think I can assure the Senator that this is a matter which is being very closely watched. The deficit in the trade balance was very high. It ran to more than £100 million. On the other hand, our invisible income, as it is called, such as tourism and income from other sources, is also going up, so that we end up with an adverse balance of payments of a much more manageable figure, although still too high.

In our Second Programme for Economic Expansion we drew attention to the fact that this figure is likely to increase over the next couple of years but after that we expect it will begin to go down again. Taking the financial position into account, we think it can stand it. There is, as Senators are aware who have examined the matter, a fine reserve of funds from the Central Bank and the commercial banks. It is higher this year than at the beginning of 1963. Still, I must wind up on this particular subject by saying that the position requires to be watched closely.

The Senator made a point at the end of his speech with regard to the advisability of inter-budgetary adjustments by putting on either brakes or an accelerator between Budget times. Probably what the Senator may have in mind there is the system adopted by the British Chancellor of the Exchequer. He had a regulator and was permitted, under that regulator, either to increase or decrease certain dutiable articles by up to 10 per cent. I think he used those powers, since he took them in 1962, only once. It is hardly necessary for us to have that power. We are a small country. We are an intimate sort of Parliament. We all know one another's problems fairly well. It will be easy to bring the attention of Parliament to anything of that kind that might occur.

Senator Murphy said he approved of direct rather than indirect taxation. That stand is taken by the Labour Party generally. I must remind them that on the last occasion a Fianna Fáil Government increased income tax the Labour Party voted against it. Whether or not they have now changed their minds I do not know but I do not think so because they are inclined to vote against us whatever tax we impose.

In the Financial Times today we read that the Swedish Government set up some new sort of investigation committee which has now reported. I read only a very short report. They advised the Government to change practically entirely from direct to indirect taxation. They also advised them to change the turnover tax to some extent but principally to relieve raw materials so as to help manufacturers to carry on. They made no change as far as the tax on food and clothing is concerned. In fact, the recommendation was that, over a few years to come, it should be increased. I am telling Labour Senators about that because the Swedish Socialist Party have been in government for years and have brought Sweden to the position of being a very wealthy country. It might be well for Labour supporters to study what they have been doing. They might come back to me and say: “Maybe you were a better Socialist than we were”.

A statement by Senator Murphy annoys me. He says the Government do not care about increasing prices. That is something which the Labour Party have been saying. It seems an adopted slogan of the Labour Party. They think it may be useful to tell their followers that the Government would like to see prices go up because they get a higher yield of taxation. That is a wicked thing to say. I am sure no Labour Deputy or Senator believes it. It is said with a view to getting ignorant people to believe it. Only an ignorant person could believe it.

Take the question of the cost of living. Fine Gael Senators have been talking a lot recently about the increased cost of living. I think they believe there is an abnormal increase: there is not. I always like to go back to the period 1955-57 to see how things happened then. From mid-February, 1955, to mid-February, 1957, the cost of living went up 11 points. There was no turnover tax. There was no increase in wages or salaries at that time. It just happened. From mid-February, 1962, to mid-February, 1964, the past two years, the cost of living went up from 158 to 171, that is, 12 points. As percentages, of course, the percentage was higher at that time than it is now. There you are.

You have the Fine Gael Party and the Labour Party trying to get the people of this country to believe that never before was there an example like the present increase in the cost of living but actually it was beaten between 1955 and 1957 and the people got no advantage out of it, none whatever. They did not get an increase in wages or salaries or even the advantage of a turnover tax. They got nothing out of it. The cost of living went up by 8.7 per cent from mid-February, 1955, to mid-February, 1957, while from mid-February, 1962, to mid-February, 1964—also two years —it went up by 8.2 per cent.

Mr. L'Estrange

The Minister did not give us the figures up to the present.

Dr. Ryan

I am giving the figures up to mid-February.

Mr. L'Estrange

But it is since then——

Dr. Ryan

I listened with great patience to the Senator telling a lot of lies today.

Mr. L'Estrange

Contradict any of the figures I gave today.

Tomás Ó Maoláin

We listened for one and a half hours to Senator L'Estrange. Will the Chair please restrain him?

Mr. Fitzpatrick

On a point of order, is it permissible for the Minister to say that the Senator has told a lot of lies?

Dr. Ryan

I am afraid it is not. I withdraw it. I think that is out of order.

Mr. L'Estrange

Accepted.

Dr. Ryan

A very great part of the increase in the cost of living in recent times was due to drink and tobacco. When we are talking here about the very poor, the very poor do not smoke or drink a lot.

Mr. L'Estrange

They cannot afford it.

Dr. Ryan

If a man can afford to pay 2/- now for a pint, and has to pay 1d more, it does not make much difference to a poor man. The 2/- makes a big difference but not 1d.

Mutton and beef went up by 2.1 points. Therefore, if you take drink, tobacco, mutton and beef you have almost half of it. If a man cannot afford drink and tobacco he must do without it. I admit I should not like to do without it myself, but that is the position. Everybody knows that there is an abnormal position in regard to meat. I am sure no Senator would have the courage to say we should try to keep down the price of cattle or sheep. They might think it, but they would not say it in public, I am sure. So, that cannot be helped.

Mr. L'Estrange

We do not even think it.

Dr. Ryan

The price of beef has gone up and that is all that can be done about it. We then go on to the proposition that the Government should control prices. We have said more than once, I think, that people can do a great deal themselves by going to shops where they get better value but they have not done that. We all know that various kinds of goods can be got much cheaper in one place than another. It is not that I want to advise people to go to bigger shops rather than to small ones but I am thinking even of the form in which they take their goods. The other day I saw an example. If you take cornflour—a very simple article—in a paper bag, weighed out to you, it is half the price of what it is weighed out in the package. Most people take the package because it is so handy and convenient. If people are so particular about prices, they should try to purchase their goods in another way.

I never believed in fixing prices because I was Minister for Agriculture at the beginning of the war and price control came in. The result at that time was to put up the price of bacon and butter because the shops were operating on a small profit and when they were asked to come in and make their case they were able to make the case that they could not possibly live without an increase, so when we had fixed prices here they got more than they were getting before. When the shopkeepers come along they will make a very good case that the prices they are charging are the least that they can charge and often up will go the price.

The Minister for Industry and Commerce did examine the four essential articles—bread, flour, sugar and butter. He found in the case of bread and flour that the prices could not be regulated at a lower price and in the case of butter it was also at a fair price as far as the trade was concerned. Sugar was reduced by a 1/- a cwt. which I admit had the effect of bringing the retail price down by a ½d. Those were the items he had examined and in respect of which he did not get any great result.

I should say before I leave this question of prices that in looking over them all there are a very big number of articles going up by a slight margin and some may come back again and some may go higher. Some probably will go higher and some other things will come down. Eggs will probably go higher and tomatoes will probably come down as summer goes on. The fairly big items are the ones I mentioned—drink, tobacco, beef and mutton. Beef and mutton may come down but if they do the farmers will not be as well off so there is that disadvantage.

Senator McGuire spoke of the fact that our taxation was very high, and if I understood him rightly, he said that it was making it difficult for us to compete on foreign markets. I should like to remind the Senator that as far as foreign markets are concerned there is no tax on profits on that particular part of a business. Our Budget deficits are not so very large as the article he quoted from the Chamber of Commerce would lead us to believe. Over the past ten years the sum total of the deficits was something like £20 million.

He went on to say, and some other Senators said also, that we can thank foreign markets and foreign conditions for the great increase in economic activity in this country. To some extent we should claim part of that credit ourselves, because I want to remind Senators, going back again to the control period of 1954-57, that in that period the gross national product was increasing in England by 2.7 per cent per annum, while Ireland's went up by 7 per cent. As Senators are aware, during the last four years the increase here is as high as in England so we must, therefore, claim some credit for the better conditions we have now compared to that time.

Senator McAuliffe advocated certain concessions for income tax payers. He thought that the single man should be given a bigger allowance. He tells us, and I think he is correct, that a single man earning over £6 5s is asked to pay income tax. He also said that he should have allowances for travelling to his work and that he was hit by the tax on petrol because it was essential for the working men to have cars at the present day. That is good news anyway. I am glad to hear that they have their cars. They had no cars in 1926.

Mr. L'Estrange

Or from 1933 to 1937.

Dr. Ryan

I want to say to Senator McAuliffe that the same thing was put to me in the Dáil. Not the same concessions were asked for, but certain other concessions, and I said that we have to get a certain amount of taxes even if it is £108 million more than in 1956. If we were to give concessions to the single man for travel or something else, we would have to raise the standard rate so that everybody would be paying. In my opinion the single man is able to afford this better than the married man and the man with a family paying income tax in the higher brackets. We should, therefore, I think, stick to the conditions we have.

He also referred to persons suffering from serious illness. We had a fair lot of discussion on that in the Dáil. It was only shortly before the Budget was brought in that the idea occurred to me that we might be able to hammer out some system with the Voluntary Health organisation. We are discussing the matter with them and I hope that it may be possible for us to have a scheme for next year. We cannot afford a costly scheme. If we were to bring in a scheme without stipulating a certain number of conditions, it would be very costly, but by putting in conditions such as that they had to be rejected by the Voluntary Health organisation, that probably would make the cost quite light. We may be able to do something in that direction.

Senator McAuliffe suggested that we changed over to drink and tobacco this year and would probably change to the turnover tax next year. It had not occurred to me so far, so do not put bad thoughts into my head. A number of Senators said we stated in 1963 that we could not rely on the traditional taxes, drink, tobacco and so on and that we had to think of a new one and, therefore, we introduced the turnover tax. That was quite true. My experience going back over the taxes by and large each year and the yield from them is that if you put a tax on twice in succession it does certainly more harm than good as far as revenue is concerned. You must allow at least two years to elapse before you put a tax on the same article again. Tobacco was an exception to that but it certainly did apply to drink and it probably would apply to petrol, but I do not know about that. That is why we were right in saying in 1963 that we could not rely on the traditional taxes.

Mr. Fitzpatrick

Yet you taxed them last year and this year again.

Dr. Ryan

We brought in the turnover tax instead. I was convinced myself that the turnover tax was about the best tax the country could have. I still believe that and a lot of people in the country do now. In Sweden, when I asked the Swedish delegates about this, they said that in their case when it was brought in it was carried by one vote, but if it had to be put to Parliament now there would not be one vote to abolish it. I have quoted the report in the Financial Times today with regard to changing the system of taxation in Sweden. They do not propose to abolish turnover tax. They are making it rather an added value tax that would still apply to food and clothing.

I certainly did not say last year that there would be no increase in the cost of living. I think I said more than once that the shops could regulate their own prices to compensate them for the increase in their costs. That was plain enough. If they had to pay 2½ per cent to the Revenue Commissioners they were free to add that on to their prices. I made that very plain in any statement I made. I also want to say this, which proves the case very much better, that I brought in a whole round of increases for social welfare beneficiaries—old age pensioners, widows and orphans; everybody—and it was made for the purpose of paying the increased prices due to the turnover tax. It was made perfectly plain that it was done for that reason. Why should any Minister for Finance spend something like £5 million to compensate people for paying a turnover tax if he did not think they would pay it? I was sure they would pay it and I made that plain.

Our opponents in the Dáil said it would cost ten per cent or 15 per cent. We said it would be around 2½ per cent. As a matter of fact, so far as the turnover tax is concerned, the cost of living between mid-August and mid-February increased by less than three per cent. that was fairly close to 2½ per cent. We were right and the others were wrong.

I should like to preface my remarks on employment by saying that if Senators will examine the statistics they will find that the Statistics Office always talk about employment in industry and engagement in agriculture. They hardly regard it as employment. Opposition Deputies call it employment when they want to try to quote bad figures against us. When we came into office in 1957 we had a very bad position with which to deal. The country had gone down. The people were practically in despair. Unemployment was at the highest figure ever in this country.

Mr. L'Estrange

Nonsense.

Dr. Ryan

It was 99,000.

Mr. L'Estrange

It was 145,000 in 1937.

Dr. Ryan

It was 99,000 in 1957.

Mr. L'Estrange

Get the figures.

(Interruptions.)

Dr. Ryan

The trend in emigration at that time was very bad. For the first two years it was going against us. In 1957 it was bad and in 1958 it was worse. Let us go back to the control period.

(Interruptions.)

Seán Ó Donnabháin

If this continues there will be a row.

An Leas-Chathaoirleach

I can assure the Senator there will not be a row.

Professor Hayes

Let us hear the Minister.

Dr. Ryan

Let us get back to the control period of 1955-1957. In 1955-57, the number of people at work fell by 62,000. In the last two years it went down by 500. So our record is 500 and theirs is 62,000 so far as that goes.

Mr. L'Estrange

The figure of 49,000 is in your own book.

Dr. Ryan

That was in seven years but in two years it was 62,000, and getting worse.

Mr. L'Estrange

Nonsense.

Dr. Ryan

It was only 500 for the past two years and now it is plus, not minus. Between 1955 and 1957 the number of people out of work increased by 16,000 and last year it increased by 5,000.

Mr. L'Estrange

215,000 people have emigrated.

Dr. Ryan

We shall come to emigration. In the three years 1955, 1956 and 1957, the net emigration figure was 149,501. In the three years 1961, 1962 and 1963, the net emigration figure was 69,000, that is, less than half what it was in 1955 to 1957. In 1955-56 the population fell by 43,000 and in the two years 1962 and 1963 it increased by 23,000.

Mr. L'Estrange

Give us the figures for 1957 to 1963.

Dr. Ryan

We are told by Senators opposite that there are not half the people at work that there were ten or 12 years ago. If that is the case they must be a great deal better off because the total national income in 1955 was £460 million and now it is £677 million, an increase of 47 per cent.

Mr. Fitzpatrick

Relate the values of money at the two dates.

Dr. Ryan

Relate what you like. Let us take the figures for State aid to agriculture. We were told we did not do enough——

Mr. L'Estrange

It was Deputy Corry said that in the Dáil.

Dr. Ryan

Someone repeated what Deputy Corry said.

Mr. L'Estrange

I did.

Dr. Ryan

I do not mind contradicting Deputy Corry either.

Professor Hayes

I heard the Minister doing it a long time ago.

Dr. Ryan

I am not contradicting him now because Deputy Corry did not say anything against what I am saying now. In the past six years State aid to agriculture was doubled. It increased from £21 million to £43 million.

Some Senator said there was nothing in the Budget for education. That was also said in the Dáil, but when the Book of Estimates came out we had provided a good deal of money for education, social welfare, health, agriculture, and so on. We were told by certain Deputies who evidently had not looked at the Book of Estimates that we had done nothing for those services. I am afraid some Senators, too, did not examine the Book of Estimates very carefully or they would not make that statement. We did not leave everything for the Budget. We had provided a very big increase in expenditure in the Book of Estimates. For example, in the Book of Estimates, education was increased from £20.7 million to £24.6 million. That is a very big increase.

Mr. Fitzpatrick

How much is due to salaries?

Dr. Ryan

Not all by any means, because that is £4 million and the total increase in the salaries was not that. Social welfare went up from £31 million to £34 million; health, from £11.7 million to £13.4 million. The total of those three, which can be regarded as social services, went up from £63.5 million to £72.1 million. That was a 14 per cent increase. That was not bad for one year. It is not easy to listen to Senators who complain first that we have not done enough for agriculture, education, social welfare, and perhaps health, and then say we are taking too much in taxation. They would not allow us to tax beer, or spirits—home produced spirits anyway—or tobacco, or petrol, or the turnover tax either.

Mr. L'Estrange

Look at what has gone to Verholme in Cork. He should be in jail.

Mr. Ryan

They voted against our proposals in regard to income tax the last time too. I do not think it is fair for any Senator to adopt the attitude that we are spending too little and then refuse to tell us where we are to get the extra money from. There is not very much courage in it. Why do not Senators say: "Why not put a million pounds on a certain item and spend it in such and such a way"? Let them say: "Put a penny more on the pint", and then let them go and face the country.

Mr. L'Estrange

Why not take back the half million from Verholme?

Dr. Ryan

What half million?

Mr. L'Estrange

Read your newspapers.

Dr. Ryan

We agree he got a fair amount of money. He is employing 1,100 men.

Mr. L'Estrange

Making a ship and selling it to himself.

Dr. Ryan

It is the easiest thing in the world to adopt an irresponsible attitude like that. We gave this man the very same treatment we would give to anybody else who was bent on building an industry here and giving good employment. Would the Senator go down to Cobh and repeat what he has been saying here tonight? If he did he would need protection. Let him go down to Cobh. That is where the men are employed. Tell the men there what he has been saying here and they will soon run him out.

Mr. Fitzpatrick

In the Dáil, every Deputy from Cork spoke against it last year.

Mr. L'Estrange

And they voted against it.

Mr. E. Ryan

And they got their answer in Cork in February.

Tomás Ó Maoláin

Twenty-two thousand number ones.

An Leas-Chathaoirleach

The Minister, please, without interruption.

Dr. Ryan

If we were to listen to something as false as Senator L'Estrange's proposition——

Mr. L'Estrange

Time will tell.

Dr. Ryan

——we would be saving something like the interest on £315,000. The interest on that would be £15,000. Where would £15,000 go on, say, education or on social welfare? If the Senator suggested we should put a penny on the pint of beer, or on the packet of cigarettes, or on something from which the yield would be worth-while——

Mr. L'Estrange

I did not object to the penny on the pint.

Professor Hayes

Fianna Fáil, in Opposition, explaining what they would tax.

Dr. Ryan

I shall deal with that, too, some other time.

Professor Hayes

The Minister has got a great memory.

Dr. Ryan

I have. Seeing the way the Coalition acted when in Government, if we had not criticised them then we should never have been able to forget it, having regard to the way things turned out.

Mr. L'Estrange

The £15 for calves —to slit their throats.

Dr. Ryan

I would remind the Senator that the British adopted the Fine Gael suggestion in regard to cattle and they had to put the Blue-shirts on duty. A Labour Senator said we are giving the old age pensioners a half crown. We are, and we gave them a similar increase each year. Since I became Minister for Finance we have given them, in all, 13/6d. In their period the Senator's Party gave them 3/-. We gave other social assistance beneficiaries 13/6d. as well. The Senator's Party gave them nothing at all. There was one bit of cheer in the debate tonight and it came from Senator Nash.

Mr. L'Estrange

He was an Independent up to the last election.

Dr. Ryan

He spoke of the achievements of the Irish people, of their objectives, of their confidence in the future. Put that against the ullagoning of the Fine Gael Party. They speak about nothing but how badly things are going. They resented my speech in the Dáil because it was cheerful. It is good to have a bit of cheer from somebody in the House. Fine Gael can see Ireland only as a pauper country among nations, depending on Marshall Aid or something.

Mr. L'Estrange

You used it up very quickly when you laid your hands on it.

Tomás Ó Maoláin

Dry up.

Dr. Ryan

The essential difference between Fine Gael and Fianna Fáil is that we have confidence in the people who are building the country. They are well able to build it. Fine Gael never had hope or confidence in the people to do anything. According to them the people were not fit to build up the country. They had to get the foreigner in to do it for them.

Mr. L'Estrange

We built the foundations.

Dr. Ryan

The most outlandish thing Senators said was that the provision for rates relief is designed to cater for the bigger farmers rather than the small ones.

Mr. L'Estrange

They said it at the Fianna Fáil convention in Longford.

Dr. Ryan

Do not quote Fianna Fáil conventions to me. On valuations up to £20, the farmer is relieved of 85 per cent. Above that figure, the relief is 30 per cent. Take a small farmer with a valuation of £20. Below him, in fact, are two-thirds of the farmers of Ireland. Say the rates are 40/- in the £. He gets relief to the extent of £37 on that. Above him, it would take a farmer with a valuation of £175 to get another £37 relief. How does that show that we are favouring the bigger farmers? Let them go down the country and tell their ignorant followers that and they might be believed. They will not put it across here.

Mr. L'Estrange

The Longford Fianna Fáil convention.

Dr. Ryan

I think I shall say no more. I have said enough.

Question put and agreed to.

Committee Stage ordered for Wednesday, 24th June, 1964.

The Seanad adjourned at 10.30 p.m. until 3 p.m. on Wednesday, 24th June, 1964.