Léim ar aghaidh chuig an bpríomhábhar

Seanad Éireann díospóireacht -
Wednesday, 29 Jul 1970

Vol. 68 No. 16

Finance Bill, 1970 (Certified Money Bill): Second Stage (Resumed).

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

Last night I began my comments on the Finance Bill in the context of the Central Bank Report. There is at least some hope now that all are agreed that the major threat of inflation must be handled and handled quickly. If this calls for drastic Government action in the Fall such as the introduction of a supplementary budget, we must recognise the necessity for such action and realise that it is in the common interest that a firm stand should be made and that, if necessary, harsh measures must be taken to restore our position and to ensure that the development of the past ten years is not jeopardised by the very high demands for wage increases which are being conceded in most cases.

The Central Bank Report while it presents a frightening picture on the one hand, charts equally the measures that are required to remedy the situation. Foremost among those measures is the fact that there must be pressure on three fronts—on incomes, on public finance and on restriction of credit. In other words, they advocate the full use of fiscal and monetary measures to restore our competitiveness and so to get the economy back on a more even keel that will be more in keeping with what is happening in countries elsewhere.

Incomes is probably the most important aspect here. It is obvious that the rates of increase that have been conceded to all sections are not matched by increases in productivity. Consequently, our competitiveness is bound to deteriorate further in the present year. When we consider the situation as it is, we cannot but be impressed by the appalling waste of national assets by way of the loss of man days due to strike action. Last year the total loss was 900,000 man days. This is equivalent to more than 5,000 men working for a year and it represents a loss in national productivity of the order of £35 million or £45 million.

We must consider what the economy could have done with that amount of increase if it could have got it in any one year and ask ourselves the question as to whether we are progressing because at a time when the overwhelming majority of our people have come to realise that the gun is not the method of solving our problems or the means of re-uniting our country, so also must it be realised that the concept of the gun, as it were, in relation to strike action is not the correct or the Christian way of approaching the problem. Strike action may have been very necessary in the past but surely this is not so in our developed society when we should all be concerned with the common good in so far as this can be achieved by the pooling of resources to develop a system of arbitration that will cut drastically the unnecessary national loss through strike action.

I would suggest that the Government can use their fiscal policy very strongly in this regard. First of all, we should study carefully whether we should not have a cooling-off period as is the case in America. There, this system has worked satisfactorily under the Taft-Hardy law despite having had a stormy reception at the time by organised labour. Now organised labour in the United States realise that this has been a valuable part of industrial relations there and that it has contributed to the advancement of the general welfare of the labour forces in the States. Fiscal policy should be used because we have become sick and tired of these parlour games that are being indulged in by matadors on both sides.

Professionals on both sides in the bank dispute believe the whole economy can stand still while they work out in an eighteenth-century fashion their own game of chess and see who is going to outwit the other. I would call on the Government to see that the realities of the situation are brought home to both sides in disputes. We must get away from the idea that a strike will drag on for one, two or three months. After a short period, I would suggest a couple of weeks, Government fiscal policy should begin to bite on both sides. It should bite on the employers by drastically reducing their exemption from corporation and profits tax during the time the strike continues. The workers should also be hit through their earned income allowances which should be drastically reduced for every day the strike continues over and above the short period I suggested of a couple of weeks. This would enable the Government to put real pressure on the participants in a strike to get on with negotiations. It would also make both sides realise that concessions have to be made. Strikes cause disruption to fellow citizens and the economy as a whole.

I have detected a note of horror in those I have spoken to about the recent statement made by the official side in the banks dispute. Up to this point many people have had great sympathy with the officials and their claim but they have lost all claim to sympathy by their undemocratic action in refusing to put the generous proposals to their officials. I call on the Government to take the strongest possible action and if a Bill is necessary we shall come back here any time in the summer to see that it gets a speedy passage through the Oireachtas. We are all sick and tired of this dispute. We have not seen any of the benefits of the rationalisation of our banking system that were supposed to take place with the amalgamation of certain banks. The only outcome has been that it is now much easier to have industrial disputes and to organise militant action. Our banking system is overmanned for the present day and age when compared with the machine-type banking operations in existence in America.

The recommendations made in the Central Bank report seem sensible and reasonable. The Central Bank should have real teeth and be committed to the advancement of public good above all sectional interests. This virtually means the nationalisation of banking in this country and while I am not over-enthusiastic about nationalisation I think our banking system is a case for examination. We should ensure the chaos that the bank dispute has caused does not happen again at a time when the Government had moved to apply their control on inflation by laying down guidelines. An effort was made to reduce credit last year and thereby contain inflation but because of the bank dispute we do not know what picture will emerge when we settle down again.

While we spend all our time pressing for public expenditure and capital expenditure to be increased we must recognise that Government spending is the single most powerful inflationary influence within the community. A good many highly desirable projects and expansions will have to be curtailed until we get back again on an even keel. It is not popular or easy to say this. I hope we shall face it in the same united way as we face our political problems. I hope the Opposition will show the same sense of high concern for national welfare when it comes to tackling economic problems as they have shown when tackling national problems. When it comes to this I would suggest that in many cases work could be carried out with a larger local contribution through either local help or local financial support. We must cut out this foreign borrowing whether it is by Aer Lingus or by any others. Borrowing at this time, with interest rates at 10 or 11 per cent, is absolute lunacy. This is the equivalent of paying around 17 per cent at home. At least if one paid 17 per cent at home the money concerned would be subject to Irish tax laws and the income tax on it alone would bring back at least one-third apart from the fact that it would be circulating within our economy and would contribute to tax yields within. Whether we like it or not the Government will have to reduce considerably its financing by means of bank overdraft and foreign borrowing and replace it by more attractive saving incentives and, unfortunately, increased taxation.

When the present exorbitant wage round, which applies to all sections of the community, up to the highest, has worked itself out then I am afraid an autumn Budget will have to get back a certain amount of what has been given with one hand to try to keep both the current and the capital programmes of the Government going without having to resort to foreign borrowings. We should equally look askance at foreign borrowings by some of our major semi-State groups because that too is sending the high interest out of the country and that at this stage is something we cannot afford.

Above all, the estimates must be scrutinised very carefully so that for our spending at all levels we are certain we are getting value. We have many big items. One which comes to mind at present is the good investment the Government are making in agricultural research. We must ensure that this investment is not undermined by what are blatantly anti-democratic practices by the organisation concerned. I would ask the Minister for Finance to exercise his prerogative and to have a firm of specialist consultants look at what happened before he decides on the next grant he will make to that body. Frankly, as a scientist I am shocked by what has happened. I feel it will undermine very substantially the confidence of the agricultural community in the direction and organisation of that. I know I cannot say more on this debate but it is a financial matter and the £1.3 million that has been spent on it is a big figure. We are entitled to get value for that. Above all, we are entitled to have a headline set in accordance with the Act which was passed through this House in 1960 which set up An Foras Talúntais.

This does not arise in this Bill.

So far as the finance of it is concerned it does.

It would arise on the Appropriation Bill but not on the Finance Bill.

We can return to it on the Appropriation Bill but in the meantime we hope that sanity will have returned.

Hear, hear!

The general principles involved—if one has seven key positions to fill——

The Senator is continuing.

I am sorry. I had better leave it at that but I feel so shocked——

Please do leave it at that.

I feel so shocked by what happened that I apologise to the Chair for having dragged it in, by the hair of the head, to this debate.

Very long hair.

The authorities should know the sense of indignation we all feel about this.

Not under this Bill.

We will probably be able to get in more of it on the Horse Industry Bill.

We scrutinised the Finance Bill again for any signs of a legitimate capital gains tax but despite calls for it over the years none has appeared. In case a capital gains tax may be regarded as some evil, sinister, socialist, almost communist tax we should realise that it is a major tax in the anything but socialist United States. It is just a legitimate part of any incomes policy, in effect. One cannot expect any of us on salaries to take kindly to restraints when we have examples all round us of people who bought, say, a patch of land near the city for £5,000 and a few years afterwards sold it for £30,000 or £40,000 for building solely due to the pressures on building space or on amenity grounds. The State should go in there and get its rightful share on behalf of the taxpayers of the increase in the value that has occurred. I am asking that reasonable, legitimate gains should be allowed. I am asking for a legitimate allowance on the lines of the United States type of capital gains structure which I feel is sufficiently reasonable and probably too lenient in fact. At least we must make a start and I am heartened by the fact that the Minister has announced that next year there will be a complete change in the tax structure and that added value tax is coming in. Surely in such a context the provision of this capital gains tax must be considered and introduced.

There is of course the cry about the old dependables—drink and petrol— that they cannot stand any more taxation and that we are taxing ourselves out of the tourist market. The plain fact is that these are not the necessaries of life. They are luxuries and, therefore, if money is needed this is obviously a legitimate place to look for it. That cry precluded the Government from making some special concession to tourists. Such a concession would not cost very much. Concessions are given in other countries where special petrol vouchers are given. While that might not be possible here, perhaps it would be possible to have some system of recompense for tourists on production of the hotel bill. We should be able to improve our tourist image by allowing certain deductions to tourists by payment of subsidies to the hotels by the Government. We should not allow the damage that increased prices can do to the tourist trade to be used as a means of preventing the Government from getting increased taxes from luxury items.

The competitive position at home is being eroded by prices and by the dismal failure of the "Buy Irish" campaign. Every month it becomes more frustrating to see how little effort is made in this regard. The Minister for Finance should be in a position to make a positive contribution and to ensure that the subvention to the IDA is increased to enable them to do a good promotions job. It is not enough to have a campaign to "Buy Quality Irish". We want a campaign which emphasises the necessity to buy Irish and keep our children from emigrating. In other words, buying the article must be linked with the provision of employment at home.

The trade union movement should take a greater part and ensure that their members are aggressively conscious of the employment factor. I would welcome seeing a strike called in a store by employees if they claimed that the management were preventing them from giving Irish products their proper show on the counters, as happens in many of the chain-stores. There is necessity for a complete overhaul of the IDA work and for its enlargement to include all the groups who have a positive contribution to make. Time is running out in the case of the "Buy Irish" campaign. With the advent of the Common Market such practices will not be legitimate. While we can still do something in this regard by Government action, it should be done. Afterwards the action will depend completely on the local groups who cannot, in any conceivable situation, be controlled from Brussels or by anyone outside the country. The Government will be able to do little in promotion of this type in the future. When we are discussing the Finance Bill next year I hope we will be able to acknowledge the very solid progress made in this regard and to welcome the great increase in expenditure under this heading in that Bill.

The Minister mentioned the amount spent on agriculture. I know the sum is very substantial, but there can be grave disagreement about whether the total is legitimately charged to agriculture or not. We must look at the figures as they are. It is right that we should question whether we are getting value for our money. A certain amount represents income transferred because the wage rounds create steady inflation of values and it is only right and proper that the self-employed—those in agriculture et cetera—should have their incomes cushioned against inflation. Their position has deteriorated substantially over the past ten years despite Government action. A fair amount has been made up by increases in productivity and scientific knowledge. The real necessity at the moment is to channel the funds and to use the money to put us in a competitive position if and when we enter the Common Market. We must put the accent on quality. The Government's failure to do this is to be deplored. A penny may be put on the gallon of petrol but to try to get that tied up to quality standards has been resisted in the past.

This would appear to be a matter of administration which might arise on the Appropriation Bill.

It refers to a large item——

This is a matter of Estimates which would arise on the Appropriation Bill. This Bill deals with financial matters, taxation and expenditure and the fact that money is spent on agriculture is not relevant on this Bill.

Money should be spent to put us in the most competitive position possible with regard to the Common Market, whether we go in or not. I ask the Minister in the adjustment he will have to make in the autumn to try to restore to the agricultural community a little of what they have lost through inflation in the past year and to see that the restoration is coupled with quality and that this ridiculous type of scheme brought in 12 months ago to save money on the present Estimates——

Estimates do not arise on this Bill.

I am trying to get better value for the money.

Not on this Bill.

Another large item is the cost of Civil Service reform. It has been traditional for Ministers for Finance coming in to promise that they will engage in Civil Service reform and will try to cut the bill. This year we did not have any such statement from the Minister. I hope that the absence of such a statement does not mean that the problem has been shelved as it has in the past. I hope this means that there is now more momentum than there has been in the past to carrying out this very vital reform. We may have an opportunity at some stage, if we stay here long enough, to discuss the Devlin Report. I do not say whether we will get it in 1970 or not but it looks highly problematical.

The Senator is a pessimist.

I have had sufficient experience in this House to know the amount of dust that motions on the Order Paper can gather. I think the Devlin Report is providing no exception to that.

Do not worry, you will get it.

We will be ready for it when it comes.

Good man. That is the way I like to see you.

Finally I commend the efforts that have been made to get a voluntary prices and incomes policy. I wish the group working on it every success in their efforts, but I hope that we will get results speedily and that it will involve all classes of prices and incomes so that justice will not alone be done but will be seen to be done by all. The time has come for a re-dedication to the national effort and to the task of ensuring that the country continues to expand and develop as it has been over the past ten years, in which the record has been good, though no better than the average in Western Europe. Still for us that has been quite good, and it is a pity to think that sectional interests would be allowed to damage what has been done in the past.

I appeal then to the Government. I cannot see much holidays for them because they do have to grapple with this problem, and grapple with it fast, and I for one will be quite happy to support any legislation that will succeed in putting this country back again into a competitive position with inflation controlled so that it is at certainly not more than the average in other countries and probably a little less so as to restore our competitive position, because by and large the success of our efforts in building the country can only be measured by the numbers employed here. There is no other absolute yardstick, and if inflation threatens to cut out the numbers in employment and to reverse last year's figures where, for the first time in the last 20 years we recorded a net gain in total employment between agriculture and industry, we cannot at this stage allow that to happen.

Finally, in concluding on this Finance Bill, I would like personally to commend the Taoiseach for his very forthright and statesmanlike speeches in recent times, especially the one on the north and the message he addressed to the north and the address that he made yesterday on the problem of inflation. It is bringing a note of realism and a touch of leadership into this country that augurs well for the 'seventies.

The Minister himself has set the theme of this discussion, and he has in his Second Reading speech described the background of this year's Budget as being dominated by inflation. I want immediately to take issue with the Minister on this speech because I believe that the Minister has been deliberate and at the same time naïve in proceeding from that statement on inflation to deal with increases in wages and salaries. A fair reading of the Minister's speech would lead one to believe that the main cause of our trouble vis-à-vis inflation was due to the recent round of wage increases. I do not deny, nor can it be denied, that wage and salary increases make and have made their contribution to the present situation, but I repeat that I take issue with the Minister on what I would describe as the undue emphasis on the round of wages and salaries increases and the implication that they and they alone have contributed to the present situation.

The Minister will be well aware that the Government are very powerfully represented on the National Industrial Economic Council, and they in their report on an incomes and prices policy, and referring to the inflation which has occurred in Ireland, gave two main sets of causes, those originating abroad and those originating within our own country. The NIEC has this to say in this unanimous report: "It is not possible to measure precisely the contribution which each of these has made, and their relative importance has varied from one year to another." The same report went on to describe the contribution to an inflationary situation which is made by money prices and also amongst other things the expenditure by persons, firms and the Government. We have, if I may refer to it, the statement of the Taoiseach yesterday in the Dáil that our situation in relation to inflation is such that— and I quote the Taoiseach—"Many people, particularly the young, had no experience of any other environment in this country except continuous inflation after three decades of it." So we have the Taoiseach's own statement that we had 30 years of continuous inflation, and these are 30 years during which the present Government have been in office for most of that time.

So I make the point that at the beginning of the Minister's speech there is undue and I would submit unfair emphasis on the contribution which the recent increase in wages and salaries has made to what we are being told is the present situation.

I also want to deal, for a few moments anyway, with the question of an incomes and prices policy, and perhaps to clear up some of the confusion which surrounds that concept particularly in so far as it refers to the trade union movement, to the Irish Congress of Trade Unions. Representatives of the Irish Congress of Trade Unions signed the NIEC Report on an incomes and prices policy and one at least of those signatories makes no apology for that because he believes that therein contained is a provision representing a sane and reasonable policy for this country.

It has to be said that this report was not rejected at the annual meeting of the Irish Congress of Trade Unions. On the basis that it needed some clarification, and that certain unions and delegates were not clear on the precise details, it was referred back to the executive council. The House will be aware that this is a democratic device which denotes neither acceptance nor rejection.

It has to be said also that not the least of the important elements in that incomes and prices report is the establishment of an employer-labour conference. That conference remains in being, albeit with somewhat changed terms of reference. One of the terms of reference of the conference—this may interest the House and the Minister— is to provide a forum for the discussion of the problems attached to money incomes, prices and industrial relations, to cover the scope of national, industrial and plant level agreements, to discuss wages, prices, productivity, pensions and other non-wage benefits.

It is important that these points should be made here because the impression may have been given that the Irish Congress of Trade Unions, meeting in Cork recently, adopted a somewhat irresponsible policy and outlook. Far from it. A resolution, unanimously adopted in reference to prices and incomes, supported a proposal that there should be adequate surveillance of prices including development land and housing prices, profits and the inordinately inadequate growth of incomes. A further motion expressed recognition of the fact that indiscriminate wage claims can be detrimental to the interests of the general body of workers.

Therefore, I take this opportunity of joining in the concern that is being expressed at the prospect of inflation and what it might do to our country and to all of our people. I wish to make the point also that there are many contributing factors and that it would be unfair to single out wage and salary increases or to give them undue and inordinate significance.

It was stated by the Taoiseach that unless a general trade union agreement is achieved in a voluntary manner for a pause in wage claims, or unless there is an extension by six months or more of existing agreements, consideration will be given to statutory control of wage and salary increases. With whatever degree of responsibility I may possess, and sharing, as I have said, the concern of all for the present and potential situation, I strongly advise the Taoiseach and the Government to think very carefully before considering the imposition of statutory control of wage and salary increases.

General experience in countries which we would define as free would indicate that such a policy would fail. It would fail because in the order of human labour and in the reward which men and women get for their labour, we are in a realm that could not be likened to traffic to be controlled by Government order: we are in a realm of human relations, and free people would resist strongly any Government control of what they believe to be their rights in that direction.

As far as I am aware such statutory controls are successful only in countries which pursue an ideology which is anathema to us. If their ideology is anathema to us, we should think very carefully before we adopt any part of their way of doing things. All of us hope that the voluntary nature of these exercises, which was emphasised in the NIEC report, will form the basis of the operations and activities of the employer-labour conference and of the activities of employers and trade unions.

As I have said, the employer-labourer conference, with newly defined terms of reference, will be concerned with wages, prices, productivity, and with industrial relations, and while I would not be so foolish as to prophesy that their way will be easy, we must accept that in a free democracy the way of such things is never easy; and while there may be an immediate attraction for the Government to impose statutory control, they must ponder whether such control would not make the last state worse than the first.

Many—I would say the majority— in the trade union movement who are responsible in matters of this kind might be antagonised were the Government to adopt a policy such as was forecast by the Taoiseach yesterday. If —I hope it is not an "if" with a question mark—we are to achieve this order and sanity in industrial relations, it must be done with the free consent of all concerned, by voluntary participation and by all concerned subscribing to what we believe is in the best interests of the country, and not because it has been imposed on us. Such a policy failed in Britain and contributed to much greater industrial unrest than it was supposed to cure. That lesson should be taken into account by the Government if they are giving further consideration to such a proposal.

Governments, politicians in general, trade union officials, all have in common that they are dealing with human beings. Human beings at times may be vexatious, at all times unpredictable and at no time, thank God, set in a common mould. One thing that must be thought of in dealing with our people is that we have got to be patient. At a time like this in the history of a country's economy, it is not unusual for the trade union movement to be singled out, and I believe that is what happened in the Minister's speech and in the references made by the Taoiseach yesterday in the Dáil.

I do not deny that we are not all saints, that there are many sinners in our group, but we are all part of a whole and we should like to see more attention being paid by the Government to those other partners in industry who might require some control. I say that, even though I hope that to some extent there also agreement would be of the voluntary nature that we ourselves want. We would like to see more concern with inordinate profits where they take place.

The situation with regard to inflation in so far as workers are concerned is that they see prices spiralling all the time and they consider they have no alternative but to seek wage increases not merely to give them a comfortable way of life but to allow them to keep their heads above water. One particular aspect of social policy that appeals to me is in relation to housing. I believe that the housing situation in this country, although nobody would deny that great work has been done in that sphere, is very near a scandal. It is a scandal in particular where advantage is being taken of our people by way of the profits that are being made by land speculators and by some who are engaged in the building trade.

We must have concern and compassion for our young people starting their married life. These people find it impossible to be allotted a dwelling by a local authority with the result that they are forced either to purchase their own house or to go into these so-called furnished flats. I know that every TD, every Senator and every trade union official interviews people every day who find themselves in this tragic situation. Young people who buy their own houses do so at exorbitant prices that are dictated by the present spiralling situation in regard to housing and land. As I said recently elsewhere this is a very important, if not a major, contributing factor to the inflation that we are now experiencing. What other alternative have these young people in these overpriced houses to better themselves when they are faced with the difficulties and contingencies of married life but to seek wage and salary increases so that they might maintain even a modest standard of living?

If the Government were to tackle the housing problem and to give it priority they would be justified in declaring a national emergency and in adopting measures very near to what we would describe normally as socialist. If such measures were needed, as I believe they are, no government should be afraid to adopt them because while we may be a mixed economy—a mixture of public ownership and private enterprise—this is an area which we should not leave entirely to the private enterprise that has resulted in great hardship to many of our people.

I thought I should clear to some extent the position on the incomes and prices policy in relation to the Irish Congress of Trade Unions. The employer-labour conference is still in existence and will remain in existence. It has terms of reference that are akin to what the Minister has referred to in his Second Reading speech. To the extent that I can warn this Government against considering imposing statutory controls on wages and salaries increases, I would say that if these were to be adopted and, particularly, without similar strong action being taken in other spheres, it will be met by very strong opposition from the trade union movement and even from those who, in normal circumstances, would be described as being responsible within that movement.

Basically, the Seanad uses the Finance Bill to discuss the proposals outlined in the Budget. To my mind this Budget is little more than a lazy man's Budget—it is the Budget of a man who took the easy way out by simply increasing turnover tax to the extent of 100 per cent in order to bring in necessary revenue.

This measure took no account whatever of the many indicators of the time to the effect that inflation was rising at a rapid pace, that prices were rising out of all control and that something needed to be done urgently. What we should have had was a deflationary Budget and definite concrete steps should have been taken to cool off the economy. Instead of that, what we got in the Budget proposals and what is being given legislative form in this Bill are measures which, if anything, can only help to turn on the heat.

One must be forgiven for referring back to the crisis about which the nation was told more than 12 months ago when the former Minister for Finance called in representatives of the various trade union groups and employers and when he went on the national television network to announce his concern at the trend the economy was taking and the need for the exercise of caution on all sides. We were told that it was the intention of the Government to take firm and decisive action. However, we are still waiting for that firm and decisive action. In the interim, we have had a new Budget and we now have a new Minister but when is an attempt to be made to restrict prices and to regulate the inflation in the economy? There was hardly any indication of such attempt in the Minister's speech yesterday. Neither was there any indication in that speech to indicate that the Minister shares the concern which has been expressed by many people in this House during the past two days and by many others of eminent status outside the House in this regard.

It is interesting to take note of the present trend. It is no harm to place on the record of this House the percentage increase in the consumer price index over the past few years. In 1965 it rose by 5 per cent—it will be agreed that at that time it was somewhat abnormal; in 1966 it rose by 3 per cent; in 1967 it rose by 3.2 per cent; in 1968 it rose by 4.7 per cent and in 1969 it rose by 7.4 per cent. That was an unbelievable increase. The figures up to May of this year already show an increase of 5.6 per cent in the index this year. This means we have already outstripped the increases in 1966, 1967 and 1968. If that trend continues one shudders to think what the final increase in prices is likely to be at the end of 1970.

No firm or decisive action is being taken to regulate prices. The Budget doubled the turnover tax which can do nothing more than increase prices in itself and stimulate and provoke manufacturers to increase the prices of their finished goods and workers to demand increases in their wages to meet the additional cost of living increases which have resulted. This, in turn, will provoke and stimulate an upward trend in the retail price of manufactured goods when employers and manufacturers seek to compensate for the increased cost of production. Concern has been expressed both inside and outside this House that if this trend continues the country will be heading along the sheer and definite path of pricing ourselves out of competitive international markets. We all know just how competitive those markets are at the present time. We all know the concern being expressed by countries larger than our own and the efforts they are making to see to it that their exports compare favourably with those of other countries, but how do we stand in that regard?

In the past few days Córas Tráchtála published their annual report. Again, I do not think there is any harm in placing on the record of this House the export performance of this country compared with members of the EEC. In 1968-69 Great Britain and Northern Ireland had a percentage value increase in their exports of 13.9 per cent. Their export prices increased by 3.25 per cent. The volume increases was 10.65 per cent. Germany had a percentage value increase in their exports of 15 per cent; an export price increase of only 2 per cent, a very commendable figure, and a volume increase of 13 per cent. France had a percentage value increase in her exports of 22 per cent; an export price increase of 5 per cent and a volume increase of 17 per cent. Italy had a percentage value increase in her exports of 18.5 per cent; an export price increase of 1.1 per cent, a remarkably low figure, and a volume increase of 17 per cent. The Netherlands had a percentage value increase of 15.5; a 1 per cent increase in export prices and a volume increase of 14.5 per cent. Belgium had a percentage value increase in exports of 18.5; a price increase of 2 per cent and a volume increase of 16.5 per cent.

Ireland, tramping triumphantly into the 'seventies under the bright, shining Fianna Fáil Government had a percentage value increase in her exports of 11.1—the lowest percentage increase in export prices; an increase of 6 per cent in export prices—the highest. We are top of the league but, unfortunately, this is the league where one gets the prize for being bottom. This 6 per cent increase in export prices is almost twice the percentage increase of prices in Great Britain and Northern Ireland and with the exception of France more than three times the price increase of any EEC country. The percentage volume increase stands at only 5 per cent. It is interesting to note that in relation to all the other countries I have mentioned the volume increase percentage-wise was far greater than the figures shown for the increase in prices but in relation to this country the price increase last year was 6 per cent and the volume increase was only 5 per cent. This means we had a smaller percentage of volume increase than we had percentage rise in prices.

Further on the Córas Tráchtála report states that in 1959 total exports amounted to £129 million and in 1969 they amounted to £403 million. They go on to say that the percentage increase in exports was over 211. In other words, our exports in terms of £SD produced three times as much money as they had done in 1959. What the very laudable gentlemen in Córas Tráchtála is neglecting to do in comparing export prices for 1969 with those for 1959 is to convert the 1969 figure in real money terms to that of 1959. The fall in the value of the £ has not been mentioned. In mid-August 1969, £1 was equivalent to 13s 7d in mid-February 1959. I quote mid-August deliberately because that was close to the date of the Córas Tráchtála figures. If one converts the 211 per cent increase which Córas Tráchtála produced over the ten-year period and reduces the £ to 13s 7d in 1959 terms one discovers that the increase is 112 per cent. Exports have not trebled in real money terms over the last ten years. They have doubled.

There will continue to be a constant erosion of the value of money in real terms. If we continue to compare two years and make no effort to take the fall in money values into account we are doing nothing more than attempting to delude ourselves. The £403 million exports in 1969 represents £274 million in 1959 prices. This figure of £274 million is the one which should be compared with £129 million shown on the chart.

I hope the Senator has not neglected to do the same operation in relation to the figures of the Six in order to get the picture accurate.

The Senator has neglected to do that because the Minister has neglected to listen to the figures being read out which were in relation to percentage increase prices in one year and percentage increased volume in one year. All one can do is reconcile one year with one year and that gives constant prices.

The Senator neglected to go the next step of the way which might have revealed something interesting.

I am merely pointing out the figures outlined by Córas Tráchtála in their report and reconciling them in real money terms. I am referring to the figures quoted on page 13 of the 18th Report of Córas Tráchtála. The figures merely show the rise in money terms in Irish exports in ten years. My concern is with the exports of this country. It is fair to compare the percentage volume increase and the percentage increase in prices in one year for the Common Market countries against the figures for our country. There is no need to convert those figures back to 1959 terms because the trend is given by Córas Tráchttála to exemplify the manner in which this country is pricing itself out of the export market and failing to keep up with the percentage increase in value in other countries in one year. This is why I adverted to it and why the Minister is upset by it.

I am not in the least upset by the statistics quoted by the Senator.

Prices have increased more than three times the percentage increase of the EEC prices.

I was naïvely thinking that the Senator was concerned with giving a true picture of the situation.

One would forgive the Minister for his naïvety but advise him that in the present troubled context of the Cabinet he should shed it.

There is not a bit of trouble in the Cabinet.

I want to speak about the increased turnover tax. I understand that some Senators on the Government side of the House were gracious enough to inform the House that the people were unconcerned about this increase and that it did not upset them. We may yet be told that the people welcomed the increase in turnover tax with open arms. Perhaps it is as well that the record of this House expresses the annoyance, disgust and upset which the vast majority of the people of this country feel about the imposition of what must be one of the most unfair taxes the Government could find. It runs right across the board and is imposed on everybody from millionaire to social welfare beneficiary. It was imposed on everything from Mercedes cars to the loaf of bread. This tax means that what the Government decided to do in order to increase the social welfare benefits was to put a tax on the loaf of bread and on essential foodstuffs. In referring to the increased social welfare benefits we should remember that the pensioner may be getting more but he is paying more for basic foodstuffs that they still need to purchase to keep them living at the subsistence level that they obviously must remain on despite the increase in the pensions being paid to them, because of the spiralling rise in prices which the Minister has made no attempt to check. That is the point I am making. This is the old Fianna Fáil trick. The Minister for Finance hands an increase to the pensioner and to the widow on the one hand in grudging charity on behalf of the Fianna Fáil Party but, if he does, the Revenue Commissioners have at least two hands in both their pockets at the same time removing that increase, and very often even before it comes, as witness the present situation where the increased turnover tax started on 1st May this year and most of the increases which the pensioners are to receive will start on 1st October. The increases in prices we all know about have also had to be paid by old people and by widows, and the compensating increases in their pensions will not come for several months yet.

I want to suggest to the Minister—I was going to say if he would be introducing a budget, but all the signs are that he probably will because a budget in the autumn of this year looks a dreadful necessity at the present moment—but if he will be introducing a budget for the full financial year some time in April or May next, if he is still there and if he decides to impose tax such as turnover tax, he should at least ensure that the imposition of that tax coincides with the day on which any increase in payments to the social welfare classes comes about. The pensioner should get his increase at least on the date on which he is asked to pay more money to fund it.

There is a feeling in many parts of the country, and certainly in many parts of the city of Dublin, that this tax has been abused by retailers. There is a feeling in the minds of many housewives especially that there are many shops who heretofore had not been charging the 2½ per cent turnover tax, but were including it in their prices, but who when the turnover tax was increased put up their prices and claimed that they had been carrying the tax themselves up to this. There is absolutely no suggestion that anyone was bearing this tax himself, as the Minister and the Revenue Commissioners well know. Any trader in business is obliged to pay turnover tax. If it does not appear on the prices which are put up as his retail sale prices he is taxed on his turnover by 2½ per cent. That was the position up to the last Budget, so he was not carrying the tax. He was merely upgrading his prices without showing the prices apart from the 2½ per cent tax. He arrives now at the situation where through the lazyman's Budget he discovers that he can add a further 5 per cent and masquarade it as being turnover tax and that the additional 2½ per cent on his original price now becomes an additional profit for him. I am not saying that this is happening in many cases, not because I do not believe it is happening but because I do not know in how many cases it is happening. It is however obvious that it is happening, and if you talk to any housewife, it seems it is happening apparently to quite a considerable degree.

I urge the Minister to see to it that the most stringent steps are taken to ensure that the increase in the turnover tax alone is not just an easy way to increase prices following the Budget of this year. In this regard I would like to make a point which may not be really relevant to small priced items but which is certainly relevant to dearer items. If up to this a retailer was selling an item at £X, and £X represents his selling price plus the 2½ per cent on it, and he now imposes a 2½ per cent upon £X, it gives him a selling price of £X plus 2½ per cent and that represents the 5 per cent, but in fact the final 2½ per cent is imposed not upon £X but upon £X plus 2½ per cent. I wonder how many retailers in the country have been adding the 2½ per cent to the original price of the goods before they put on the further 2½ per cent now, giving them an additional 2½ per cent revenue which in some cases is more than 2½ per cent of the original selling price. In relation to small goods obviously this is a very small figure, but in relation to large items it could amount to a considerable amount. This is of course something that the retailer might be forgiven for doing, but the Revenue Commissioners issued some form of circular in which they actually advised them not to charge 5 per cent turnover tax but, I think it was, 5¼ per cent. It was certainly a fraction over 5 per cent, and the reason for this was to reimburse the retailer for the administrative costs of having to impose the tax, in other words a form of allowance from the Government to the retailer for being an unpaid tax collector.

That is not so.

That was the circular from the Revenue Commissioners.

The Senator is right in saying that there was a circular from the Revenue Commissioners, which said something like 5.14 per cent. It was a fraction over 5 per cent, but it was not for the reason that the Senator has said, to recoup the cost of administration, but because the additional tax had to be charged on the turnover. That is not the reason the Senator gave.

In other words it is not clear.

It is quite clear.

If that be the case there was no need for the Revenue Commissioners to advise the retailers to charge a fraction more than 5 per cent.

It was to make it clear to the retailer that he would have to charge a fraction over 5 per cent so that he would not be breaking the law.

That would have been quicker and simpler to say. It is simply a different way of putting it. The retailers were advised by the Revenue Commissioners to charge in excess of 5 per cent. The point I was going to make was that if the Minister decided to raise the turnover tax 100 per cent, that is from 2½ per cent to 5 per cent, in fact that was ensuring that prices were rising even more than 5 per cent in this way because the retailers were advised by the Revenue Commissioners to charge more than 5 per cent in order to cover themselves.

I am sorry to interrupt the Senator's speech——

If the Senator is sorry to interrupt my speech then perhaps I could help him by suggesting that he would not interrupt my speech.

We ought to see this in a proper perspective. On an item retailing at £100, 2½ per cent tax amounts to 1s 3d.

1s 3d on £100 is a matter of little concern to Fianna Fáil but it is 1s 3d which should not have been there. This is the point, and there are many much larger sums than £100 involved in the economic turnover day by day to 365 days in the year. Perhaps the financial and mathematical brain of Senator Norton would tell us how many hundred thousand pounds there are day by day by day and what that represents in terms of the financial year.

It is 12s 6d on £1,000.

Now we are having the example of Fianna Fáil backbenchers teaching lessons to the frontbenchers.

I am teaching the Senator because he does not seem to have gone beyond the infant school.

The point is this——

May I just interrupt——

Acting Chairman

The Senator may not.

I cannot resist imparting a little enlightenment.

Acting Chairman


Perhaps from his lofty perch on the other side of the House Senator Norton might also advise us, at some point when the Chair is particularly patient, at which stage the Government will ensure that this increase remains simply and solely 12s 6d per £1,000? There are many things the Government could do, but that is beside the point. I will return to the contribution I was attempting to make when the interruptions began.

The point I was coming to in relation to abuses and potential abuses in relation to prices at retail level is that there is a need felt not only by the consumer, the housewife, but also by the man behind the counter, for a definite detailed chart showing how much per 1s, per £, the Revenue Commissioners advise should be imposed on selling prices so as to recoup the turnover tax. If that chart had been made available, the many disputes which I and other Senators know about would not have happened in so many shops throughout the country. The chart could be hung beside the cash register setting out how much the increased turnover tax meant on 1s, 2s 6d, 5s and so on up to £1. It would be a simple chart and it would obviously be of great help to consumers and retailers alike. I hope that when the Minister is replying he will refer to this and give us an undertaking that the Revenue Commissioners will undertake such a task.

There are many proposals in this Bill, one of them being in relation to sub-contractors who, as the Minister said, are commonly known as "lumpers". I am a little confused as to how the Minister intends to see that income tax is levied on "lumpers". He referred in his speech to giving a certificate to sub-contractors who would have to provide their business addresses. I presume he is referring to a plasterer who would contract to plaster, say, 100 houses for a certain sum of money. When I referred to Fianna Fáil earlier the Minister interrupted me but now when I am looking for information he will not indicate——

I assumed the Senator had looked at the section. If he had he would have seen that it refers to "lumpers" and to genuine sub-contractors. The certificate would in general operate for bona fide contractors but I do not think the “lumper” would be able to qualify for that. If not, other arrangements will operate.

Then I would like to know who will pay the tax in relation to "lumpers". Will the original contractor be obliged to pay?

The man who is making the payment to the "lumper" will deduct 7s in the £ and remit it to the Revenue Commissioners.

If a contractor contracted with a "lumper" to plaster 100 houses——

The contractor would deduct it from the contract price and would pay it over.

There is one other thing about that. The Minister referred to sub-contractors but there are also "lumpers' ""lumpers". A "lumper" obviously is not going to plaster 100 houses himself. He will employ three or four men to work with him. If tax is being stopped by the contractor at 7s in the £, the "lumper" receives his contract price less that amount. That obviously is a very harsh imposition on the "lumper", granted he may have been operating for years without paying tax. There is then the fact that most "lumpers' ""lumpers" are married men, with a few children, who would not be paying 7s in the £ because the children would qualify for allowances.

I am not aware of any practice whereby a "lumper" employs people. In such circumstances, they would be paying tax on a PAYE basis. In any case of a "lumper", it is a matter of a group working as a group and dividing the money. The group would have nominated one man to represent them.

The other way also operates. Let us suppose there is a group. That group will be sharing the lump price, less 7s in the £. Many of them are married men who would qualify for allowances and who would therefore not be liable to pay the 7s in the £ on total earnings. Are we to take it that the intention in the Bill is to wipe out the "lumpers" and to bring them into the system proper?

Is it the intention of the Minister to see to it that those men will be allowed to make their normal claims in the normal way? I do not think they can do that because one cannot expect a contractor to start working out allowances.

He would not have to do that. He would deduct the total amount at 7s in the £ and remit it to the Revenue Commissioners. The people concerned would then apply to the Revenue Commissioners and under the section, as amended in the Dáil, they would get a rebate once a month.

The Commissioners would send them a cheque?

That is what would happen.

That is the old story. The cheque would come to the "lumper" and then there would be the story of Fianna Fáil being the great people. One of the things that struck me about this is that most of those "lumpers" do not pay social welfare contributions because they are not employed in the ordinary way. Perhaps they are on the "lump" because they think they will make more money in that way and avoid paying tax. Now, they will no longer be able to avoid paying tax. If the Minister is to take steps to bring these people within the income tax net—I am not objecting to that—he should also ensure that in so far as possible, steps are taken to ensure that these people will make social welfare contributions because when these people become ill they have no social welfare benefits whatever and would be relying on home assistance as administered by their local authority. These people are among a small group still in existence who, as it is said, are known neither to Church nor to State. If the State is to take 7s in the £ from these "lumpers" they should see that they contribute to social welfare. I do not know how this would be done because it would be difficult to assess income in the ordinary way and, also, they are not being paid in the ordinary way but I am sure the Minister will work out some way of dealing with this.

There is a remarkable trend in taxation increases. During the ten years to which I referred earlier in relation to Córas Tráchtála exports, the years 1958-59 to 1968-69, central government tax increased by 211 per cent. In other words, the tax in 1969 was three times the level at which it was in 1959. During the same period rates increased by 105 per cent so that in 1969 they were twice what they were in 1959. Before any of the mathematical computers from the Fianna Fáil benches start accusing me of not being consistent, I must point out that the figures I have given are percentage increases and were given either by the Minister or by his predecessor in reply to a Dáil question.

In relation to the increase in stamp duty, one of the intentions of this Bill is to take in the goodwill content of sale prices. I appreciate that up to now certain attempts were made by some people so that they might pay less stamp duty. While it is fair enough to endeavour to take steps to eliminate this, there is a case to be made for exercising such steps with a certain amount of clemency. A public house standing in a busy area with all the appointments such as lounge, fittings, goodwill content and so on, can be assessed fairly readily and that assessment would not change very much because the public house would be in a large residential area and would continue to do business. On the other hand, one might take the example of a small restaurant which was being run by a highly qualified chef. The building might be worth about £3,000 but because of the atmosphere generated and because of the type of food that was being served a very large clientele might have been built up and people might be coming from near and far to the restaurant. However, if the chef were to sell the restaurant to someone of the same rank as himself he would obviously get far more than £3,000 for it. In fact, he might get as much as £20,000 or £25,000. The goodwill in that case would have been brought about not because of the situation of the premises but by the activities of the proprietor. I suggest to the Minister that the provision in relation to goodwill should be looked at in the light of the example I have cited and that it should not be dealt with in a rigid way.

In this regard it is interesting to note that the Government published an explanatory memorandum with the Finance Bill but after the Bill had been passed by the Dáil they published a second explanatory memorandum. Anybody looking through both in a hurry might be forgiven for thinking they were virtually the same but there are some significant little changes in the second one. For instance, in Part IV, which relates to stamp duties, the original memorandum read and I quote:

Section 39 provides, with effect as from the 1st August, 1970, a new revised First Schedule to the Stamp Act, 1891, in substitution for the existing schedule. Some headings are being abolished. Under the headings which are retained the rates of duty now in force are...

and so on. In the explanatory memorandum which appeared later in relation to section 40 which, in fact, was section 39 previously, there is the following paragraph in relation to stamp duties:

Section 40 provides, with effect as from 1st August, 1970, a new revised First Schedule to the Stamp Act, 1891, in substitution for the existing schedule. The duty under many headings is being abolished. Under other headings, it is being reduced and in a few cases it is being increased, in particular, in the case of conveyances or transfers of property other than land...

Here we are told the duty under many headings is being abolished; that under other headings it is being reduced and that in a few cases it is being increased, in particular in the case of conveyances or transfers of property other than land. This is the sort of thing that we get with Bills like this. I am sure that the Minister and his advisers as well as many Members of this House will agree that such Bills are complicated and that it is difficult even for Members of this House who are acknowledged experts in the field, to read them. There are so many complicated references to sections and parts of other Acts that it is very difficult to understand and even if one were doing a proper study of them, it would take a great length of time to read them.

We are all eternally grateful for the explanatory memorandum which was published. Some of the sentences in it are far less close to the truth than the first explanatory memorandum, which states that the duty under many headings is being abolished and under other headings is being reduced; in a few cases it is being increased. This gives a far clearer picture and takes only a few seconds more to read. It conveys to the House that under some headings duties are being increased. The definition attached to the word "few" is different in the minds of the people from what it is in the minds of the Revenue Commissioners. To my mind, duty is being increased. The point is simple. When the Department of Finance are putting before the Oireachtas a complicated Bill of this nature there is a moral, and to my mind a legal obligation on them to publish an explanatory memorandum and explain adequately, properly and accurately what each section is about instead of repeating the better parts of the section presumably in the hope that it will pass through the Committee Stage without too much comment. I leave that thought with the Minister.

The economy is suffering from a serious case of galloping inflation. One could be forgiven for thinking that this disease has been brought about by the action of the Government. While Cáitlín Ní h-Uallacháin is languishing with this disease which daily becomes worse—the Minister is smiling?

I am smiling at the Senator's terms.

The only treatment the Government can devise is to administer to Cáithlín Ní h-Uallacháin serum made up of the very disease affecting her instead of trying to find some way to cool off the economy. The Government have taken steps to pour money in, put prices up and turn the heat on as witnessed by the turnover tax. The Government's cure for inflation is to inject large doses of that very disease into the bloodstream of the economy. It has not proved effective. There is a simple and definite solution open to the Government and the Minister. I am prepared to offer it to him at any time. It is obvious from the silence on the Fianna Fáil benches that Fianna Fáil Senators do know of a solution. Everyone smiles but not one of them has the courage to say what it is.

Maybe the Senator is too obvious.

The Senator has us all mesmerised.

How many old age pensions will the Senator's party reduce?

Under extreme pressure I have been doing my best to make a contribution on the Finance Bill but I have suffered a barrage of interruptions mainly from Senator Norton on his lofty perch at the rear of the Fianna Fáil benches.

All interruptions are disorderly but when interruptions are made they should be disregarded by the Senator and he should continue with his speech.

If a person who was interested in the Finance Bill came here and read the Seanad debate on the 1970 Finance Bill he would not believe that it was William Norton's son who was making the interruptions that have been made by Senator Norton during the course of my speech.

Reference to the personal background or affairs of Senators is not allowed.

My father objected to old age pensions being reduced by 1s; that is why he put Fianna Fáil into office.

Will Senator Boland proceed to speak on the Finance Bill? Old age pensions do not arise on the Finance Bill.

The Finance Bill gives the Government power to raise certain moneys and the Minister said in his Second Reading speech that approximately £20 million of it would be used to increase social welfare benefits.

Not reductions.

A suggestion has been made that I should advocate that old age pensions be decreased in the present financial year. I would certainly not advocate that old age pensions be decreased at the present time when old people, even with the present increase, will be living below subsistence level. I would contemplate reducing social welfare benefits if members of the opposition were so irresponsible as to advocate to the people that they refuse to pay their taxes this year. If that happened we might have to reduce some allowances. Indeed, if there was a world recession as there was in 1929 and allowances all over the world were being reduced and old age pensions were reduced by 2s in the £ in Great Britain as they were in 1920 or 1930 then we might have to reduce old age pensions by 1s.

A leopard does not change his spots.

I do not think this course of action would be acceptable to the vast majority of the people. I do not believe anyone would like to see anything but substantial increases for old age pensioners and widows. It is my firm belief that if the Minister were to concentrate on substantially increasing allowances to old age pensioners and widows, even at the expense of not increasing some of the allowances of other social welfare recipients, this would be welcomed by the people. If this alone necessitated extra taxes being levied most decent people would be prepared to pay those extra taxes where they believed that the extra taxes were going simply and solely to fund the increases in payments to old people and widows. I advocate to the Minister that the next time a Finance Bill is necessary this is the line he should take. The old person and the widow in this country are still living at subsistence level. The increases they are being given this year will not materially improve their position because of the price increases caused by the turnover tax and the general inflationary trend in prices. This will mean that in the course of the next 12 months these two classes of people will still be living at subsistence level. They will be no better off than they were before the Budget was introduced.

The Senator left out the deserted wife.

I do not intend to talk about deserted wives.

May I interrupt the Senator to refer to the agreement made that all Stages of this Bill would be finished to day and to suggest that the Minister be called to conclude at 5.15 p.m. on this Stage?

I presume that agreement was made before there was an understanding that the morning would be devoted to talking about another measure.

There is an agreement made between the three parties and ratified by this House and that agreement stands.

I was told that that agreement was made before this morning's business was introduced. I do not think there are many other speakers.

We must get used to the fact that the agreements made stand. We always had that tradition in this House and I should not like to see it broken. I am sure Senator McDonald would not like to see it broken either.

I am in sympathy with the view expressed by the Leader of the House. I was not present when the agreement was made. I was told that the Finance Bill would be discussed for two days—yesterday and today. Last night at 10.30 p.m. we were told that we would not be taking the Finance Bill this morning. It is indicative of the attitude of the Fianna Fáil Party that they could not tell us which Bill they were taking this morning.

I have made a proposition that the Minister be called upon at 5.15 p.m. or earlier to conclude this Stage.

Perhaps we could have an indication of how many Senators still want to speak.

It appears that three or four Senators wish to speak and we could not have three or four speakers in half an hour.

I was here last night and we were told quite clearly which Bills would be taken this morning. It was clearly stated that the Finance Bill would be taken at 2.30 p.m.

We were not told which Bill would be taken first.

The Chair feels that a discussion on the order of business should take place outside the House rather than in the House.

Will the Minister be called on at 5.15 p.m.?

No. There was no decision about that in the Order of Business.

I am suggesting now that in view of the fact that the Committee Stage, Report Stage and Final Stages of this Bill have to be taken tonight we should terminate the discussion at 5.15 p.m.

The Order of Business was agreed by the House earlier today and I do not think it can be varied at this stage.

What is the position?

It is not usual that propositions such as that made by the Leader of the House now are made.

We usually arrange the Order of Business when the House meets.

So far as the Chair is concerned the Order of Business was settled this morning when the decision was taken to take the Finance Bill at 2.30 p.m. This Order cannot be varied in this manner.

I asked when breaking for lunch what the Order of Business was for the afternoon.

The House made a decision this morning.

The House is master of its own business and can vary that business if it so decides.

Not at this precise stage.

On the point made by the Leader of the House, I am asking did he not receive great co-operation from this side of the House in dealing with the business?

I was speaking about inflation and suggesting that if the only cure which can be thought of is to inject massive doses of the disease into the economy, a simple solution is open to the Minister if he cannot find a way to take Caitlin Ni hUallacháin off her sick bed and put her back on her feet in a position where she would be able to face up to any of her competitors from the Continent both pricewise and in volume of exports. If the Minister cannot bring about a situation whereby that takes place—and this Minister was Minister for Industry and Commerce when he had this percentage rise more than three times that of other countries and twice that of Britain and he was Minister for Industry and Commerce in 1968-69 when we produced a mere 5 per cent increase in volume in our exports as compared with 14, 16 and 17 per cent in the EEC countries—and if our prices are to continue to spiral and if the consumer price index is to continue to show abnormal figures like 5 per cent for the first four-and-a-half months of this year, and if the Minister can do nothing about it the simple course open to the Minister and to the Government is the course which the people of the country are expecting. The NIEC Report on Incomes and Prices says:

Over the past year, prices and money incomes have risen faster in Ireland than in any other OECD country (except Iceland), and the external deficit on current account for 1969 was £60 million or more. The measures so far applied have not contained the inflationary pressures at work in the economy. The indications are that, if present trends continue, serious economic difficulties will arise in 1970.

I am quite sure the gentlemen of the NIEC are not very proud of it but their report has been borne out and will continue to be borne out unless the Minister does something about it. I do not believe that the present Budget is doing anything about it. It can have no more than an inflationary effect on the economy. If that is all Fianna Fáil have to offer the best thing they can do is to go quietly into the Opposition benches and review their economic and monetary policies, because these policies are in urgent need of overhaul in the world of the 1970's.

I hope to be very brief in my contribution because obviously the agreement is that we finish at 5.15, but after listening to Senator Boland for the last hour and a quarter I am a little bit bothered on one topic. I wonder if when he was in the boys' infant class he learned the rhyme in the boys' school "Inky pinky parry winky", or if he went to the girls' school he learned "Ring-aring-rosy", because he took 25 minutes here trying to work out how the Government collected 3¾ in every £25.

I certainly hope to be very brief in this debate, which has strayed in many cases from the actual Finance Bill and has been a wake for the final analysis on the Budget. There is one little point in the Budget that I would like to talk about. The reference is at column 1743 of the Dáil Debates for 22nd April, 1970. It concerns western development. There is first a phrase introduced there, and I quote: "The development of our western counties occupies a central and fundamental position in all our economic planning."

I certainly welcome this most important statement, and I say that after listening here for some time to the cry-baby attitude of the midlands— and when I say "midlands" I mean midlands including Leinster and the eastern area of our country—in which you have strife throughout industry where something in the region of 200 men can hold up an important industry for as long as they wish. I do not deny the right of those people to do that, but sometimes I feel that I should deny their right to do it for a trivial matter. In comparison to that, some time ago when the present Minister for Finance was Minister for Industry and Commerce he put into the city of Galway an industrial estate. He showed trust in the people of Galway in doing this and they certainly have appreciated what has been done. We have not yet in three and a half years of operation had one slight industrial disruption, and I say to the Minister for Finance now that our record is so good in this field that if there is to be continuous strife in other parts of the country he can always look to our area as one which will certainly appreciate all the efforts made. At column 1744 of the Dáil Debates there is the following statement concerning industrial prefabricated buildings for small industries:

Experience has shown that very often the success which has followed on the establishment of small local industries depends on the immediate availability of premises in which either staff training or the operation itself can commence immediately.

This certainly shows an interest in western Ireland, because some reasonably large industries have left small villages and towns because up to date they did not have the prospect of having a site with buildings on it for training or going into operation. I hope that this idea will be used to its utmost. We lost some small industries which would have meant a great difference to some of the smaller towns in the west. I hope that the Minister for Finance will use this idea to its utmost, because in my opinion it is very important.

Arising from that, I myself come from Tuam where there is a major industry, the manufacture of sugar by the Sugar Company, which could be further utilised. The Sugar Company in Tuam, which is a semi-State body, has since 1937 phased out investment of capital in its operational planning. Last year the Tuam factory was brought to court for a case of effluent going into the river, and this year the staff of the Sugar Company in Tuam made a budget for about £23,000 to try to stop this terrible thing. I can assure the Minister for Finance that the company have now refused to invest that small amount of money to right this. It shows the fear that is beginning to grip the people of Tuam and the west in general, that the Sugar Company are intentionally phasing themselves out of the west. I do not know whether this is because the EEC is around the corner or not but this warning is being given that this would be a tremendous blow to the west of Ireland in general and will not be accepted.

There is no point in criticising if I do not offer an alternative. Last year agricultural imports into this country amounted to something in the region of £9½ million. Here we have a sugar company with an agricultural staff in constant contact with farmers and an engineering staff spread through most of the country selling imported farm machinery, and this is shameful. I could name some, the Varsta Silage Harvester, German disc harrows, and the likes. It might sound rather trivial to mention this in the Seanad, but the company have the finest personnel and staff in the country. They have engineers of all degrees, they have the sales ability through their agricultural department to move into this business of manufacturing farm machinery. They are in actual fact at the grassroots of this industry in every aspect. If pressure were brought to bear on them now to move into this type of industry it would be a very good thing for the workers and all others interested in Tuam. Sometimes there is a sharing of blame for many things but it may be inevitable to have a phasing out of the Sugar Company when we enter the EEC. That may be through the economics of the EEC or the hard fact that perhaps the plant in Tuam may not be able to operate under those circumstances.

This is an opportunity for them to move into this line of production of farm machinery, and at the same time maintain their manufacture of sugar. I ask the Minister to view this suggestion of mine with the intention of pressurising the company and returning confidence in them by the general public in this factory area. Now is the time to move in this industry.

At the end of the Financial Statement there is reference to further incentives to industrial development in the west and it is stated that the Minister for Industry and Commerce is relaxing the conditions under which the small industries programme operates in that area; that the Minister for Industry and Commerce would shortly announce details. This we await.

He did it.

I am glad to hear it.

I did it.

Nobody in either Dáil or Seanad said a little word of praise for that item.

We did not know it.

Almost a full page has been devoted to it. This proves that there is an interest and it is beginning to show in western development. I am glad to hear that the present Minister for Finance will continue this decent outlook towards the west.

The Minister told us that he is giving £96 million to farmers in subsidies. All these subsidies are welcome. Some people think they are not sufficient and here there is a difference of opinion. Be that as it may, we can do with them. A problem is, however, that some of these subsidies are misdirected. A large proportion goes to dairy farmers for the production of milk, butter and cheese, but there is over-production of butter and cheese in all European countries where they are now stockpiling them.

The Minister for Agriculture and Fisheries initiated a scheme called the beef incentive scheme, giving a £16 grant for the rearing of calves to anybody who was solely in the business of rearing calves but who was not sending milk to the creamery. The scheme is a very good one. The reason for it was to help farmers to diversify from milk to beef. However, people in the milk business who should benefit from it cannot do so because of the way the scheme is operated at the moment. In order to benefit they would have to stop sending milk to the creamery, thereby losing their monthly cheques. If they rear calves and send milk to the creamery they will not qualify.

It is only the very wealthy farmers who can buy heifers, get calves from them and wait for 18 months for the subsidy. When the calf is 12 months they would get £85 for it including the subsidy. They are people who do not need the subsidy. The person in the greatest need of it is the dairy farmer who cannot afford to give up milk production in order to avail of this scheme. I suggest that some way could be found to enable farmers who send milk to the creamery to avail of this scheme.

Increased production of beef is very welcome because if and when we go into the EEC, beef is one product we will have no trouble in selling, unlike butter and the other products of milk. I am sure the Department of Agriculture and Fisheries are aware of the shortcomings of this scheme. I suggest that they re-examine it in order to allow farmers producing milk for sale to the creameries to benefit and to go into beef. Even if the Agricultural Credit Corporation could give such farmers loans to tie them over until the calves were ready for sale, it would benefit many farmers.

My point is that this scheme is not doing what it should be doing—helping the farmers who most need help and helping out in this process of diversifying from milk to beef. Subsidisation of milk and butter is costing the Exchequer a lot of money but the rewards are not anything like they would be if such producers were helped properly to diversify to beef. That is one subsidy which I think is misdirected. It is not getting to the source which needs it most.

There is the subsidy to meat factories for the export of beef cattle. It cost about £2 million last year. It is meant to go directly to the farmers but that is not happening. It is going to the proprietors of meat factories and this year one firm alone showed a profit of nearly £750,000 of which at least £100,000 was subsidy. The farmers, for whom the subsidy was meant, did not get one penny. That is another subsidy which is misdirected.

Another matter which concerns me and many others is our constant imbalance of trade with other countries. One begins to wonder when the bubble will burst. We cannot continue to buy more than we sell. We have been doing it for some time. I will quote some figures to show how this imbalance operates. Our trade figures with West Germany last year showed that they exported to us £42,889,986 and they took from us £10,553,887. That is an imbalance of more than £30 million with one country alone. We took from the Netherlands goods valued at £14 million and we sold to them only £7 million worth. The imbalance with Italy was £10 million as against £4.6 million; with Sweden it was £10.4 million against £2.4 million. We took £5,559,291 from Denmark as against less than £500,000. What can Denmark sell to us that we have not got ourselves? Denmark is the same type of agricultural country as ours. Do they buy cheese or butter from us? They do not, but they sell us cheese. I was in a supermarket the other day and I noted tins of Plumrose sausages on a shelf. I discovered that they had been imported from Denmark. Imagine importing pork sausages from Denmark. I understood in fact that it was illegal to import meat produce into this country because of foot-and-mouth precautions.

We imported goods from Poland to the extent of £5,453,298 as against our exports to that country of £1,131,039. What can we buy from Poland except, perhaps, coal? The other day my wife had put a jar of pickled onions on the table and to my great surprise I noticed that they had been imported from Poland. Can we not grow and pickle all the onions we need here? The figure for Canada was £9 million as against £4 million; for Japan it was £7 million as against £5 million; for Russia it was £1¾ million as against £¼ million. I suppose it is timber we import from them but we could do without trading with them. These are but some of the figures. I only have the trade figures for January and February of this year but from these I see that for the months of January and February, we imported £7,220,000 worth of goods from Germany while they took only £1,330,000 worth from us. This upward trend is alarming even on last year's figures when the ratio was about four to one whereas for the first two months of this year it is seven to one.

I was pleased to read in today's papers, however, that there are some German people here to buy meat from us but they will have to buy a lot of meat to make up the deficit in our balance of payments with them. From Sweden we imported £2 million worth of goods while they took goods from us to the extent only of £394,000. We have an imbalance with every country except Britain. What worries me is how long the Government will allow this position to continue. Have they any intention of doing anything about it? Our trading imbalance with West Germany is frightening. This country's economy is bad enough but this trend must not be allowed to continue. I have no wish to create alarm but I am frightened for the future and there are whispers of a devaluation of our £. I do not know if there is any basis for this but I am sure the Minister himself has heard it.

There is no basis whatever for it. I have heard the whispers but I have made it clear that there is no basis for this.

People can hardly be blamed for holding this fear when they study these trade figures. Perhaps if the Minister took the problem up with our ambassadors who are accredited to those countries it might help. Surely these people are aware of the situation? It is their function to promote and to negotiate equitable trade agreements between the Irish Republic and the countries to which they are accredited. As far as I can see, most of these are sitting on their fat backsides in these countries and they do not give a damn about what is happening so long as they are left there with the title of ambassador.

Officials should not be criticised. The Minister is responsible for his own Department.

The Government should do something to counteract this situation. In this context perhaps they might give some good example themselves as regards the cars they use.

Hear, hear.

As far as I know the only member of the Government who has not a German car is the Taoiseach and more power to him for that but the Minister are driving around in German-made cars. Why have a Mercedes when we can buy British cars since, in any case, Britain is buying more from us than we are buying from them? Neither do they put tariffs on our cattle. Our balance of payments with them is favourable. I do not see why we must use Mercedes, Volkswagens, Opels, Fiats or Volvos when we can buy British cars. I would not wish the House to think that I had anything against the assembler of Mercedes or Volkswagen cars; in fact, the man is or, at least, was a personal friend of mine. However, I shall leave it at that having pointed out the grave situation in relation to our balance of payments. I can only hope that the Government will do something to right that situation.

I have no desire to delay the House or the Minister but there are a few remarks I should like to make at this stage. The Minister's speech can be divided roughly into three parts—one deals with inflationary trends, another deals with concessions given in the Budget which, I take it, were given in order to help counteract the increases in the cost of living; and the third is a justification of turnover tax as a system of collecting revenue. I have not the time now to develop any of these as I would have liked to have done. I do not gloat over any of the sentences in the Central Bank Report. Neither do I gloat over the report of Córas Tráchtála or, for that matter, over the Minister's speech where he said and I quote:

The background of this year's Budget was dominated by inflation. While inflation is not of course a phenomenon confined to Ireland its pace in this country is nevertheless becoming a cause for serious concern. The main reason for the recent acceleration of inflationary pressures in our economy has been the excessive income increase which have been spreading throughout the community since 1969.

I do not wish to be disrespectful to the Minister but I would ask him what measures were taken in the Budget to curb any of these trends? What measures have been taken to promote better relations between employer and employee? The Minister gives one of the reasons for income increases as being strikes and threats of strikes. It is true that we have had too many strikes and there are threats of further strikes but it is also true that one of the strikes might have been avoided if the employers had made an offer to employees without waiting for 11 or 13 weeks to go by. Some of these bodies are State bodies and semi-State bodies but they do not make a reasonable offer to the workers in an effort to avert a strike.

In conclusion, I should like to ask the Minister what steps have been taken in the Budget—I realise that he neither prepared it nor introduced it to the Dáil—to curb inflation and what steps are being taken to see that we increase productivity, get rid of inflation and put ourselves in a position to compete with the other members of the Community we hope to join.

I should like, first of all, to thank Senators who welcomed me here in my capacity as Minister for Finance. Secondly, I should like to say, without appearing in any way to be condescending, that the debate on this Bill was impressive from all sides of the House. Perhaps, I may be forgiven for mentioning the thoughtful and able speech made by Senator Alexis FitzGerald. I was particularly impressed by it and by many of the other speeches. There were, of course, one or two exceptions, as there always are, notably Senator O'Higgins who in some kind of Rip Van Winkle style seemed to be trying to fight the last election here again on this Bill.

The main theme of the contributions, indeed the main theme of my own introductory speech, related to inflation and a prices and incomes policy. I propose to deal with that in some detail and in the course of doing so I hope to be able to answer the question I was asked at the close of the debate about what action has been taken to deal with it. There were some other points raised which I shall try to dispose of first.

Senator Owens asked if the arrangement proposed for farmers under a value added tax would mean they were excluded from sales tax. The arrangement envisaged for farmers under the added value system is designed to exclude them from the requirement of keeping accounts for the purpose of that tax. They will pay tax on what they put into production such as seeds, fertilisers and so on. But as with existing taxes, wholesale and turnover tax, the added value tax will be borne ultimately by the consumer. This is so in respect of any sales tax and it will also be the case in relation to the added value tax.

Some Senators referred to excessive price increases because of the addition to the turnover tax in the Budget. It was said that the line taken by some shopkeepers who had previously been carrying the 2½ per cent was that they were unable to carry the additional 2½ per cent and were now adding on 5 per cent. Senator Boland dealt with this very adequately. In fact, it was one of the few things he said which I agreed with. He pointed out that there is no such thing as carrying turnover tax. The shopkeeper has to pay the tax. He has to build it into the price he charges but if any shopkeeper has added 5 per cent to his prices consequent on the Budget increase, he is not entitled to do so. Any cases of that kind if reported to the Department of Industry and Commerce are dealt with quickly.

Senator Cranitch asked if an income tax allowance can be given where a son or daughter is attending an institute of higher education and the parents' income is just over the limit qualifying for a university grant at the moment. I do not know if what I am about to say answers his question but I presume the Senator is aware that income tax allowances are given in respect of all students attending a full time course in an institute of education.

Senator Prendergast talked about trade imbalance. He mentioned a number of countries and quoted figures, to show the lack of balance in our trade with them. The majority of countries with which we trade have a favourable trade balance with us. We would like to remedy this but the really important thing from our point of view is the overall balance of trade which gives a different picture. I do not want to go into details of that at present. Suffice it to say that while there are no grounds for complacency, there has been an improvement this year as against last year.

If the improvement continues, barring a prolonged British dock strike and allowing for the bank strike and the cement strike, the trend seems to indicate that there is a good chance we might reduce our balance of payments deficit to £50 million. I mentioned this when replying to the Budget debate in the Dáil as being the target we had set. If we reach that target this year, while there will not be any grounds for complacency there will be no grounds for alarm.

When the British import levy was imposed we made a special effort to get our exporters to diversity their exports away from the British market. We introduced various special measures and assistance to help to bring this about. It is paying off to some extent. Speaking from memory— I think the figures are right but I do not want anyone to take them as having full official authority behind them—since the British import deposit scheme was introduced our exports to non-British markets have been increased by 20 per cent. There is plenty of room for them to go further but this is a fairly substantial increase in a relatively short time. When we purchase from a country with which we have a poor balance of trade it is usually because that country has things we need which we cannot get cheaper anywhere else. It is not always so but it is generally the case. We have statutory authority in relation to certain eastern European countries to impose an embargo on trade in the absence of a proper balance. Even where we have this power when we go to exercise it we find the effect of it is that we are going to damage people here who are importing raw materials or consumer goods not available in this country and not available as cheaply anywhere else. Unless we can force that country to step up its purchases from us we are not gaining very much. In many cases our purchases are so small compared with the size of their markets that the leverage we have is not very great.

I want to compliment Senator Horgan who, having criticised the imposition of the additional turnover tax in the Budget, made an effort to suggest alternatives as to how this may have been done. I compliment him for attempting to do that but I cannot compliment the Senator on the suggestions he made because they are just not workable. The Senator referred to the fact that I, in speaking on Second Stage, said that nobody had produced acceptable alternatives and he questioned the word "acceptable" and asked, "acceptable to whom?" Obviously, they must be acceptable to the public in general and this is one test. Another test is that they must be acceptable in the sense of producing the revenue needed, which was £20 million in this case.

The Senator suggested certain alternatives which are not acceptable, first, because they would not yield anything like the money required and, secondly, because some of them are not practicable. One of the other Senators seemed to dispute the statement I made that to achieve the same amount of revenue one would have to increase income tax by 1s 9d in the £. In this connection I should like to quote from page 17 of the printed edition of the Budget Statement which explains some of the reasons for a reduction rather than an increase in income tax which was, in fact, effected by this Budget. I quote:

Income tax is paid by a comparatively small section of the community. Furthermore, it has changed significantly in character in recent years and can now represent a considerable burden on a wide variety of small incomes. Its weight falls on many individuals with incomes which are below the level in real purchasing power at which an income tax should normally apply. Nor does the argument which has been advanced for an increase in direct taxation on this occasion for its disinflationary effects really stand up to close examination.

Because of our system of PAYE, for most taxpayers the impact of an increase in income tax is immediately felt in the pay packet and consequently is little different in its effect on pay claims from a corresponding amount of indirect taxation. In the Budget speech last year I pointed out that direct taxes tend to discourage effort and to have widespread disincentive effect but that significant changes in our direct taxation structure could only be undertaken in the context of a comprehensive recasting of the general pattern of taxation. I am taking a considerable step in this direction this year.

I am fully satisfied, that, whatever our difficulties, some relief must be given this year to income tax payers and especially to those with small incomes upon whom it bears very heavily. The reliefs which I shall now mention have been framed as carefully as possible towards this end.

Some of the basic assumptions in Senator Horgan's alternative proposals did not take account of the facts mentioned there. The Senator referred to a capital gains tax, as did other Senators, as one line of approach. Many people do not realise that, in effect, we operate a capital gains tax in certain areas. Any dealings in development of land which is done as a business—and I understand what this could mean if one did it even once—become liable to taxation. Secondly, dealings in stocks, shares and securities in the hands of persons whose business is dealing in such property are also taxable. I think the interpretation in that case is a little less stringent than in the case of land but it is still fairly stringent. The Commission on Income Taxation examined this question of a capital gains tax very carefully and came to the conclusion that they had no option but to recommend against its introduction in this country in view of the grave disadvantages associated with it, in particular because of the disincentive effect it could have on savings, investment and economic growth. In my view the primary aim of economic policy must be growth. This must be consonant with the economy being kept on an even keel. Subject to that, the primary end in our circumstances must be growth. We must have as our primary aim the achievement of growth—in our circumstances where we have not got full employment and still have emigration. It might be a different situation if we had achieved that, but in our present circumstances a general capital gains tax would not be conducive to growth.

There is another and compelling reason why there is not much point in introducing it and why it would not help to provide £20 million. The capital gains tax in Britain yields less than 1 per cent of the total taxation. In this country it would yield relatively much less because we have far fewer people relatively who are well off and make capital gains than they have in Britain. The yield here would be relatively much smaller than that. In addition to the capital gains tax which I have mentioned, Senators will recall that there is also a duty of 10 per cent on the building of speculative office blocks and, indeed, the incidence of death duties to some extent is a capital gains tax.

I want to refer briefly to two points made by Senator Killilea with regard to the Sugar Company and to the suggestion that they should engage in the manufacture of farm machinery. The Senator knows that they engage in that operation to some extent. I agree entirely with him that our imports of farm machinery are very disappointing in a country which is so strongly agricultural.

For that reason some time ago, as Minister for Industry and Commerce, I called a number of the main people concerned together and told them of my concern in this regard and that I wanted to see, as fast as possible, getting together the establishment of a worthwhile farm machinery industry in this country which I thought would serve not only our home market but could develop substantial markets abroad. Progress is being made. The Sugar Company took charge and their representative is chairman of a group. They are in contact with the Minister for Industry and Commerce at present and efforts are being made to get such an industry going on a proper basis as fast as possible.

With regard to the reference made to the small industries scheme for western areas, I am sorry that it seems to have escaped the notice of most Senators that an announcement was made. Very briefly, the position was that heretofore, and as yet for location outside the undeveloped areas, the maximum figure for an industry to qualify by way of capital for a small industries grant was £60,000. For the western region this has now been extended to £100,000. Another test was that they did not employ more than 30 people. For the western region that has been increased to 50 people. This is basically what the announcement was.

Senator Bourke expressed the opinion, which I think some other Senators subscribed to, that the increase in social welfare benefits in the Budget did no more than offset the increase in prices of essentials arising from the turnover tax increase. The current year's increase in the non-contributory old age pension, for example, was about 13? per cent. This is more than enough to outweigh the price rise for the current year. When we go further back, between August, 1961, and August, 1970, the increase in the non-contributory old age pension will be 180 per cent while the price rise over this period will have been about 60 per cent. Or, if you take August, 1965, to August, 1970, the rise in the old age pension will be about 80 per cent over the same period while prices will have risen about 33 per cent. So while it is true, of course, that increases in prices, particularly the prices of food and essential commodities, do affect social welfare recipients and do erode increases given to them, nevertheless, it is not true to suggest that the increases given have only kept pace with the increased cost of living or, as some people have suggested, have not kept pace. Those people are affected, and God knows we would all like to see them paid more, but at least we ought to see that their real position, their position in real money terms, has improved.

One Senator asked for details of the savings scheme which is referred to in the Bill. I would suggest that that might, perhaps, be better dealt with in detail on Committee Stage, and I will do so when we come to it.

If I might turn to what I think is the main theme of this debate, the question of inflation and an incomes and prices policy and, indeed, the general policy to deal with inflation, there are some figures which I think have been quoted in this debate and are being quoted generally recently but they bear repetition because they mark out in the clearest possible way, with what are almost neon lights, what is happening to our economy. These statistics relate to productivity, to the unit costs of what we produce. In 1969, last year, our productivity in manufacturing industry rose by about 1 per cent. At the same time, weekly earnings increased by 11½ per cent, with the result that unit wage costs rose by about 10½ per cent. That is a rate that was more than double what happened in British industry in 1969, and, indeed, in a number of other countries with which we are competing, the increase in unit wage costs was very much less than in Britain. If we can realise the significance of that, of what happened in 1969, this is the root of all we have heard in this debate and elsewhere of what has been happening to our exports, about the dangers of what may happen in the future, about the threat to the employment of our workers, and it illustrates very clearly one of the enormous economic disadvantages of inflation. There is no estimate available at the moment of the trend of productivity and earnings in the first quarter of 1970 but the indications are that the deterioration in competitiveness which set in in 1969 continued in the first quarter of 1970.

Let me say, with regard to inflation generally and in particular to the references made by Senator Dunne quoting from something said by the Taoiseach yesterday about inflation having gone on for the past 30 years, that this is true, of course. It is my own belief that a certain amount of inflation is inevitable and is very possibly desirable, particularly in an economy where one is trying to achieve growth. I think it is desirable but, whether it is or not, it is inevitable. I should like Senators to understand that what we have been faced with in the past couple of years is not merely a small creeping inflation.

It is inflation at such an accelerating rate that it poses for us one of the most serious problems we could face. If it were allowed to go unchecked the rate of inflation would increase year by year and, ultimately, month by month; it could even come down to day by day, and of course, all that we have achieved in the past would simply disappear and the most widespread hardship and misery would spread throughout the community. But those who would suffer most, those who have suffered most already from what has happened, are the poor and the old and the ill and the weak sections of the community. The Budget endeavoured to try to do something to redress the balance in favour of those people, but we cannot contemplate—none of us can contemplate—with equanimity a situation in which this is going to continue, and continue at an increasing rate.

Exception was taken by Senator Owens and Senator Dunne to a statement which I made when speaking at the beginning of this debate on the grounds that it appeared to single out wage and salary increases as being the cause of inflation. I think these Senators will agree—and, indeed, I think Senator Dunne said as much—that that was not precisely what I said but that it was the implication of what I said. I want to establish, first of all, that when I referred to income increases those included income increases of all kinds. Senator Dunne is right in saying that I laid more emphasis on wage and salary increases. I did so for good reason. As he rightly pointed out, there are a number of factors involved in inflation, and certainly wage and salary increases are not the only ones, but I do not think that we ought to fool ourselves as we have fooled ourselves in the past.

I think that the time has come when we have to be realistic and honest about this. Let us say what the trouble appears to be, and that is that they are a major factor in it. While this may not be as obvious as it should be, there are certain aspects of that which I hope will demonstrate the truth of what I am saying. If we take what has been happening, all this is tied in with the fact that if you have increases in costs of any kind, whether wages, salaries, profits or anything else in Ireland, there are increases in prices. Let us take first the situation about prices. Consumer prices rose by 4.7 per cent in 1968 and by 7½ per cent in 1969. The increase in the first two quarters of 1970 was 7 per cent over the corresponding period of 1969. For 1970 as a whole it is expected that the increase will not be less than in 1969.

Now it is true that taxation contributed to some extent to these price increases, but what I want to put to the House is this, that increased taxation, in large part, has been made necessary to cover the costs of pay increases in the public sector. In line with this burden on the economy at large it has also been made necessary to provide additional State support for agriculture according as non-agricultural income rose. The Government have accepted the obligation—this cannot be disputed by anybody—to try to ensure as far as they can that the gap between agricultural and non-agricultural incomes should not be widened, and, indeed, to go further and try to achieve some kind of equilibrium.

Directly arising out of price increases comes the question of increased pay for the public service, and this covers an awful lot of people—and increased contributions to agriculture to try, as I have said, to redress the imbalance between agricultural and non-agricultural incomes to some extent. This is a direct link between price increases and taxation which may not be very clear.

This gets us back to what is causing price increases. Some may say that it is a chicken and egg situation, that it is price increases that cause increased wage and salary demands, or that it is wage and salary demands that cause increased prices. I think that is to say, as some Senators have said, that the Government have failed to control prices and that this has led to demands for increased salaries and wages, is really to fool oneself. It is ignoring the basic causes of price increases.

The truth of the matter is that price controls exercised by the Government operate in relation to manufacturing industry very stringently. I know from personal experience as Minister for Industry and Commerce that in quite a number of cases the margin of profit of some Irish manufacturers is dangerously low. When I say "dangerously low" I mean those industries are in danger, because of inroads on their markets or for other reasons, of having to close down and of putting their workers out of employment. As Minister for Industry and Commerce, I was frequently faced with the dilemma of either allowing a price increase or of refusing it altogether or of reducing it, at the risk of causing that firm to close down and put its employees out of work.

I am making this point because it is frequently thought, or appears to be thought, that most industrialists are making enormous profits. I can say that none of the Irish industrialists serving the home market—they were the things with which I was concerned—is making enormous profits. Some of them are making satisfactory or even handsome profits but many are making dangerously low profits.

We can only exercise control in relation to unjustified price increases. If we try to control price increases which are justified, we can do it for a short time, but, ultimately, if we persist, we will close down the firm concerned. We, therefore, have to get back to the basic cause. This, as far as the vast majority are concerned, is increasing costs to industrialists, and the bulk of those increased costs arise out of wage and salary claims.

There is one aspect of this that is mathematically certain and obvious and yet seems to be forgotten. It is that if you increase your production by 6 per cent and if you increase your wages by 10 per cent, the value of that increase to the recipient is not 10 per cent but 6 per cent; and to the extent that you go over your increase in productivity, automatically the adjustment is made and you will find it works out every time, that the margin which is above productivity disappears, usually by way of price increases.

I must say I welcomed Senator Dunne's contribution, particularly in regard to incomes and prices, which I will come to in a moment. I realise that he and the vast majority of his colleagues in the trade union movement are reasonable, rational men who know what is happening. Indeed, this was underlined recently by the President of the Irish Congress of Trade Unions when he said:

I am perfectly willing to accept reduced increases in basic wages provided, but only provided, I can be assured of an increase in real wages.

Therein lies the truth of where we should be going. We know from our experience some years ago that some years when there were modest increases in wages and salaries they were real increases and there was no cost inflation. We increased our productivity, we became more competitive, we sold more abroad, we created more jobs and those who were working were better off. But because somewhere along the line we lost out on this and tried to go too far ahead, we got into a spiral at such an accelerating rate that it is leading us to perdition unless we do something about it.

This leads to another point made by Senator Dunne, whose contribution, as I have said, I welcome. I was aware of the position arising out of the annual conference of the Irish Congress of Trade Unions but I think the clarification of the position by a man in Senator Dunne's job was very welcome. He made it clear that as far as the trade union movement is concerned nothing could be further from the truth than to say they have rejected an incomes and prices policy. On the contrary, they have made it clear that they are anxious to have such a policy and have supported the idea, having expressed reservations about the proposals put forward.

Senator Dunne also made a very important point which I wish to underline. It is that the employer-labour conference exists, that it is working and that it can do a great deal of the job that must be done to get an incomes-prices policy off the ground. There are aspects of the NIEC proposals which are important, particularly in view of the fact that they envisage an examination of wages and salaries in the same context as an examination of prices and profits. This is an aspect of an incomes policy which is essential. It may be that the employer-labour conference operating on its own would not be able to do that, but I wish to make it quite clear that, as far as the Government and I are concerned, while we realise the value of the NIEC, and moved immediately to try to implement the recommendations, we realise that the machinery is not the important thing. The important thing is the achievement of a workable incomes and prices policy.

If the machinery proposed is found not to be acceptable, other machinery can be devised but the important thing is that we get such an incomes and prices policy in operation. It is very important—in fact, it is crucial—that it should happen quickly because the next few months are vital in this area. There are substantial wage agreements coming to hand and unless it can be ensured that the approach to the agreements to be concluded is in line with what is required by everybody in the country and particularly by the workers concerned, that is, an attack on inflation, we are going to be in the most serious trouble in the future.

Senator Dunne and, as I say, the vast majority of his colleagues in the trade union movement are very conscious of the fact that the interests of their members are threatened. I want to suggest that the time has come when an approach on the basis of "It may be right on one side but all I know is that prices are going up and I must be compensated for this" will not do any more because each one of us has seen for himself or herself what the consequences are. The value of money is decreasing. Workers think they are getting an increase but they find they are not. People on fixed incomes and, in some cases, social welfare recipients are suffering considerable hardship as a result of what is happening. This brings me to the question of what can be done about the situation. I must say that I agree fully with almost every word that was said by Senator Dunne in his contribution on this and I should like to say also that this whole question of the problem of housing and the problem of the cost of land for housing to which he referred is one that is receiving urgent consideration by the Government at the present time.

I want to put a proposition to Senator Dunne although I agree with virtually everything he said. He said that he would advise with all the forces at his command that the Government should not embark on or contemplate an enforced or an attempted enforced control of wages and incomes by way of legislation. I want to make it clear that the Government certainly do not contemplate lightly any such action. No government would. Senator Dunne said this operates only in countries which have ideologies that are an anathema to us. He is right in that but it operates in another situation also. It operates in free and democratic societies where a country is at war or in grave emergency. I want to suggest that the inflationary situation in this country is now such that we can regard ourselves as being in a battle for survival which all must wage. We might almost regard ourselves as being at war because the consequences for this country are as bad as if we were fighting a war that we were going to lose. It affects every man, woman and child in the country. I suggest that in this battle those who are working against the national interests—and there are such people although there are not very many—should be identified and exposed. This can be done only if the rest of the community, that is the vast majority of the community, will indicate clearly that they have had enough of inflation and that they have had enough of people using brute force to jack up their position to the detriment of everybody else.


Hear, hear.

I believe that Senator Dunne and his colleagues—the vast majority of them—think on these lines but the time has come when the vast majority of trade unionists, the rational men who can see what is happening and who can recognise the dangers for themselves and their members should stand up and be counted and not allow any small group to force not only the trade union movement but the whole community into chaos.

I want to make it clear that I am dealing with this particularly for two reasons. One, as I said, is because of the vital influence of wage and salary increases and the other is because of the references made by Senator Dunne during his contribution. I shall go on to say and I do not wish that anybody would misunderstand and think that the solution to this problem of inflation lies in controlling wages and salaries themselves. That is not the case. I agree with Senator Dunne that there is no prospect of a workable incomes and prices policy whether it be voluntary or compulsory unless, at the same time, action is taken to deal with unwarranted increases in other forms of income. Anything I have said is based on the premise that I believe it is possible to work out quickly a voluntary incomes and prices policy which would be acceptable to the vast majority of our people and our trade unionists. It is possible to do it but we cannot waste any time because time is vital in this and it is also vital to ensure that when that is reached no small group of people—there are such people who would do their best to upset any such agreement—will undo this because the whole future of our country is at stake.

Let us consider for a minute the possibility that all efforts to reach such a voluntary policy might fail. Senator Dunne has warned us not to contemplate enforcing this by legislation. As I said, we do not want to do it in this way but supposing every effort fails, what else can be done? The Government cannot abdicate. They cannot stand by and see the whole economy of the country and everybody's money disappear in smoke. The people cannot allow us to do it and we do not want to do it. We do not want anything other than a voluntary approach but the time has come, as the Taoiseach indicated yesterday, when we must say that we have been looking for a voluntary approach for quite some time but there is a limit to how long the country can afford to go on without reaching an agreement on this. I believe as I believe from what Senator Dunne has said, he believes also, that it is possible to have such agreement and that it could be a workable agreement and I want to ensure that we have it as quickly as possible.

We must not run away from the issue which is: if we do not have it, what will we do? In my view, if that happens we have no choice. I know the terrible consequences which Senator Dunne had in mind but I do not want to contemplate them. In all honesty I have to say if we cannot get a voluntary policy agreed on this, then the Government have no option but to do what they can to enforce in any way they can measures that will ensure we are not going to go down to galloping inflation.

There were a number of other items in regard to inflation and so on and some details which I had contemplated giving the House, but I have already detained the House beyond its usual time. I hope I have conveyed to Senators the position which obtains. This is not a situation for panic but it is an extremely grave situation for the economy of this country. We are not talking about our balance of payments. We are not talking about abroad. We are talking about what is happening here in this country and what is being done by our own people and our Government. I believe the importance of this is such that it merits the approach I have tried to take to it and the approach which the Taoiseach took to it yesterday. I want to assure everybody, and in particular I want to assure the Irish Congress of Trade Unions, that in arriving at a workable policy on incomes and prices the Government recognises clearly that it has a part to play. It has a duty to try and create circumstances in which such a policy can work. I want to promise Congress the fullest co-operation of the Government in that and in discussing with Congress and the other parties concerned the details of such a policy and the details of how the Government can act to enforce the circumstances which will make it workable. There is no magic wand as we all know for curing this. But there is a possibility of getting a policy working which will save this country from disaster. In getting that policy on a voluntary basis, I want to assure congress of the maximum support and co-operation of the Government in doing that.

If the Minister would like to continue, we on this side of the House would be glad to facilitate him.

I do not know if I have paced myself wrongly but there were certain matters which I should have mentioned. Again, in dealing with inflation, there are certain actions, apart from the question of a voluntary policy on incomes and prices, which the Government can take to deal with inflation. I want to talk about these and the steps which have been taken. It can be tackled on three fronts: credit policy, fiscal policy and incomes policy, with which I have dealt. With regard to credit policy the developments which have occurred in the present year and the action which has been taken by the Government in the present year include the tightening up of hire purchase restrictions very considerably and the placing of a ceiling of £75 million on lending by the associated banks. It is unfortunate, to say the least, that due to the bank closure we do not know for certain whether the guidelines which have been issued are being adhered to. We shall not know this until some time after the reopening of the banks. There are indications that the guidelines are being adhered to —strangely enough. The situation is quite different from what it was on the occasion of the last bank closure. As I have said, there are indications that these guidelines are being adhered to but we cannot be sure. In fact, we may be wrong in our reading of these indications. It is clear that when the banks reopen particular attention will have to be paid to a reassessment of credit policy in the light of developments since the closure and the prospects for the rest of the year.

With regard to fiscal policy in this year's Budget, the Government contributed to an easement of inflationary pressures by moderating the rate of expansion of public expenditure both current and capital. This approach was more successful in the case of capital expenditure than it was in the case of current expenditure. The increase provided in 1970-71 in the public capital programme as compared with the 1969-70 out-turn is 12 per cent as compared with 15 per cent as between 1969-70 and 1968-69. In the case of current expenditure the increase is 15 per cent as compared with 16 per cent. We were not so successful on the current side.

There is a matter in this connection which I should like to mention in regard to action being taken by the Government. Decisions regarding public expenditure are normally made very close in time to the year to which they relate. This has a number of advantages not least of which is that at that stage commitments tend to become rigid and limit the scope for reduction. With a view to ensuring that fiscal policy makes the maximum possible contribution to easing inflationary pressures, the Government have recently made certain decisions with regard to the method of dealing with Estimates both for current and capital expenditure. One effect of this will be to advance by more than six months the time for determining next year's Estimates. On this basis provisional allocations will shortly be considered by the Government on a basis which relates much more closely to the resources available on existing rates of taxation rather than on the basis of what are the demands. It may appear to some people that this is simply a change in procedure but it could have, and in my belief it probably will have, quite farreaching effects on the control of Government expenditure in the future. This, of course, is a vital matter in dealing with inflation.

As I have already said, one of the methods of dealing with inflation is Government expenditure both current and capital. It is all very well to say that we must cut back. This can be done but in so doing enormous depression and deflation in the economy can result. This means that not alone do the Government cause enormous misery to thousands of people but economically we do not gain. I am not one who believes that in order to see a correct balance either on our external payments or in the Budget, one ought to ignore the longer term economic consequences or the shorter term human consequences for the people. I think and believe that it is the primary duty of any Government to ensure that the economy is on an even keel because without that no amount of progress already achieved or planned for the future—whether in social welfare, education or industrial development or in any field one can think of—will get anywhere unless the economy is kept on an even keel. Not alone do I believe that but the Government share my conviction and intend to ensure that the economy of this country is righted because it is going a bit out of kilter. The Government intend to right that and thereby to carry on faster, we hope, with expansion in the very desirable fields which are open in which all of us wish to see expansion taking place.

I repeat that without a basically sound economy being not cautiously, not conservatively, but prudently managed—without that kind of management being provided by the Government, we are only fooling ourselves in thinking that we will achieve any progress. For this reason we are determined to provide for the country that kind of prudent management which I have described and which we believe is the primary duty of any Government. I am confident it can be done. There are many difficulties and I do not underestimate them. One of the major difficulties lies in the fields, to which I was referring earlier, of incomes and prices but, as I have indicated, I believe this can be handled and I also believe that it has got to be handled. We have no choice.

I will conclude by saying something that may sound a bite trite. Maybe it is something that many of us have said at election meetings on occasion but I believe it and I think most of us believe it when we think about it. Many of our people can be foolish. They can be, perhaps, rapacious on occasion but taking them in general, as a people and as a group, if this country and its economy is in danger and if the danger is explained to them and if it is explained to them that action by them will cure it, our people on the whole will respond, and respond magnificently. The Government have a primary duty, but all of us have a duty to make clear to our people the danger that exists and the fact that we have a remedy in our own hands and that by exercising that restraint which is required—not to stop increases in wages but to ensure that there are regular increases in wages every year but worked in such a way that they will be a real increase—our people can avert this grave danger. If we can make this clear to our people I am certain they will respond as they have responded in the past. We can demonstrate once again, and we must demonstrate fairly fast, that this ability of our people which they have demonstrated so often in the past still exists in our people in 1970.

Question put and agreed to.
Agreed to take remaining Stages today.
Business suspended at 6.25 p.m. and resumed at 7.45 p.m.