I move:
That Seanad Éireann expresses its deep concern at the continuing economic and social crisis, the unprecedented level of unemployment and inequitable cutbacks in the social services and hereby calls on the Government to initiate proposals as a matter of urgency to deal with the grave implications of the serious deterioration in the country's economy.
The recall of Seanad Éireann is an unprecedented move under a new Standing Order. I put it to you that the collection of these 30 signatures was done because we are facing an unprecedented situation in the economy and in the unemployment situation. It will be my thesis in this debate, in the short time available to me, that the economy of the country is now in a state of chaos and is out of control. Inflation is running at 17 per cent. We have 160,000 unemployed which is nearly double the figure for August 1979. We have a trade deficit of £1,000 million. We are running a current budget deficit of approximately £900 million to £1 billion. We have a foreign debt of £5 billion which is five-twelfths of the national income.
In agreeing to the recall of the House, Senator Brendan Ryan expressed the hope that my speech should not be the sort made by stockbrokers and accountants. I hope I shall not disappoint him. However, he will forgive me for wondering why those who make their living from dealing with figures should be unable to add up the terrifying statistics of our present crisis, or what pleasure they might derive from a collapse in the economy or the prospect of living in a country whose beggary, poverty and hardship are constant reproaches to simple human decency and compassion.
I yield to nobody, including Senator Ryan, in my commitment to this society and to the people who live in it. The majority of our people will see their income fall this year by 5 per cent. For some of them there is the voice of the trade union movement but who will speak for the poor, the unemployed and the homeless? To speak for these groups has long been a privilege of the minority Protestant radical tradition from which I spring. It is not possible to live on this island whatever your class or creed and not hear the poor and the homeless cry for justice and redress.
The Independents who initiated the recall of the Seanad have very differing views about the solutions to our problems. But nevertheless we share the same very deep concern and realisation about the problems which are facing us on the precipice on which we now stand. That is why the recall of the Seanad was the least and the most that we could do at this stage. I would personally much have preferred the Dáil to have been recalled but that was apparently impossible.
I should like to open the debate by asking everybody in this House, as far as is possible, to take a non-partisan, a non-party approach because this is not an occasion for adversary politics; this is not an occasion for the parties to start declaring war on each other. The situation is too serious. I for my part will not attribute blame to one side or the other in this House, or if I do so, I will probably attribute it equally. Having said that, I welcome very warmly the decision of the Taoiseach to come in here tomorrow. Because I will not get the chance to welcome him I would like to say that now. He is taking the debate seriously and his presence will be a boost to this House.
The economy, because of some of the figures which I have given you and because of the unemployment situation, is out of control. The reason is probably because of the political constraints which have attached to both this Government and the last one. The last Government undoubtedly had the political will to attack the problems but they found it impossible to solve them or to put their ideas into action. Similarly, this Government, I think, have now found the political will to do what is necessary but, unfortunately, I do not believe that they will be able to do so because of the political situation and because they have not actually got the political muscle to do what is necessary. The economy has been rather like a poisoned chalice, passing from one side to the other with none being able to provide a practical antidote.
As a result of the fact that we are incapable now, in the present situation and in the last situation, of solving our own problems on our own, it is time — and I regret to say this: it is a bullet that is difficult for any Government to bite — that we call for international help and by that I mean that we need to call in the International Monetary Fund or FECOM at this stage to help us solve our problems. It is not a decision which any Government like taking, but Governments have successively proved that they are unable to do it and I believe that this is the only alternative now open to us.
Another reason why the Seanad should be recalled is because of the major events which have occurred in this country since the Dáil and the Seanad went into recess. The unemployment figures alone of 160,000 announced last month were a good enough reason for both the Dáil and the Seanad to be sitting. But in July we had an announcement of Government cuts. We had an announcement on public service pay. This represented a total reversal in Government thinking. The Government had decided at that stage that they were over-spending and something would have to be done about it. Let me take this opportunity of applauding this reversal in Government thinking. They are right. We should not now blame them for the deeds of the past but we should urge them to continue on this course and encourage them.
I can think of nobody better to quote than Dr. Kenneth Whitaker — unfortunately no longer a Member — who said in his speech to the Association of Development Studies last week that our problem dates back to 1972. Pre-1972 the basis of borrowing money was purely for capital expenditure and the criterion used for that was that the productivity which came from the money borrowed would at least be enough to service the debt incurred. That criterion died in 1972. For no apparent reason in 1972 we decided that we could borrow money for current purposes. We have had since then a long litany of budgets which include deficit budgeting on a scale which is getting worse all the time, to the extent that in 1982 deficit budgeting is out of control. I will give as an example — and this is not a party political point, there will be others — the estimate in this budget that the deficit on current account will be £679 million. In fact, we now know that the deficit on current account will be in the region of £1 billion this year. How on earth, in six months can that sort of estimate be so haywire? How can these sums be 50 per cent out after only three-quarters of the year? I do not believe that the Government got their sums wrong. I do not believe that this was a deliberate ploy. One can allow, as one always does, for optimism on these figures. But nobody could get their sums wrong as badly as that unless the problem was a problem which they could not estimate and unless the problem was conclusively out of control. That is why we need the International Monetary Fund to pull us out of trouble.
As a result of all this deficit budgeting, as a result of overspending every year, our national expectations as a people have become too high. Everybody expects that their standard of living should improve by a certain amount every year, and over the last ten years most people's have. We have developed a mentality which expects that we should be able to get goods which we have not paid for. This is a myth. This is something which is unsustainable and which the Government and this House, I hope, will join in destroying. Living standards must come down — that is the painful truth of the matter — and living standards will come down. If we get nothing else out of this debate than to let the people know that living standards are going to come down and must come down, then that will be an achievement. The expectation of higher living standards will have to be killed for the next few years.
Over the last four years our trade deficit, on average, has been running at 10 per cent of our national income. That is £1,100 million for this year. The only way that a trade deficit can be funded is by foreign borrowing. We have to borrow abroad to pay this difference. There is a direct relationship between the current deficit to which I was referring and the trade deficit. According to the Central Bank £100 million of current deficit incurred is equal to approximately £80 million on the trade deficit. So, if we attack the current deficit and cut spending, we will automatically bring down the balance of payments and we will automatically bring down foreign borrowing. This is the only way of tackling this problem.
There are two ways of attacking the current deficit. One is extra taxation and the other is cutting spending. I believe, and apparently the present Government also believe that there is very little to be gained from any extra taxation, direct or indirect. One has only to point out the £45 million of buoyancy which was estimated for in the budget and which has turned out to be a non-starter. There cannot be revenue buoyancy unless there is a buoyancy in the economy, which we patently do not have. If we are not going to raise any more money from taxation — and I do not believe we will or can — there is only one way of doing it and that is by cutting public expenditure. In this sense I give the Government unqualified support for their stand on public service pay in July. But the 5 per cent postponement proposed on public service pay will raise only £27 million in the last quarter of this year.
I hope that tomorrow the Taoiseach will tell us whether the Government still stand behind their end of July statement. I feel they should go much further. I would prefer that the Government called for a total pay freeze on public service pay until the end of 1983 and that there should be no special pay or catching-up awards. That is very harsh, I know. It would save approximately £350 million. I do not want in any way to denigrate the work of public servants — and I include Senators and TDs in this freeze — I do not want to denigrate the work they do, which is excellent, but we have to accept that public servants are a very privileged group in this society. Public servants have well salaried jobs, on the whole. Their pay is much higher as a group than the average in industry, in agriculture or in private sector spheres. But they also have index-linked pensions, security of tenure, totally secure and well-paid jobs. It is only right that if sacrifices have to be made they will have to be made by those who can afford them. Those who have secure, well-paid jobs must be the first to take the bite on this bullet. Nevertheless, even if we do that we will have to impose more cuts in current expenditure.
I see no reason why cuts in current expenditure are socially unfair. Cuts in current expenditure need not be socially unfair. I believe, as I have said, as much as anybody of the need to protect the under-privileged, the poor, the unemployed. But there are other ways that you can cut public expenditure. It will be the middle classes who will have to take the brunt of this and it is only right that the middle classes should do so. As a university Senator — this may not be very popular in my constituency — I must say that we could start by making third level education be paid for on an economic basis. In other words, the vast subsidies which the Government give to universities should not apply in cases where those who can afford to pay economic fees should do so. I do not want in any way to deprive those who have the academic ability to take this education or that education; that will always apply and those who are capable and those who are able enough for it should take it. But where academic ability coincides with a fat bank balance then those people and candidates should be made to pay a totally economic amount. A means test could be applied to health insurance. The same principle could be applied to secondary education. In this way huge savings could be made, nobody would be deprived but those who have most money and have most wealth would be paying for what they are getting.
Mortgage subsidies, unfortunately, I think, should be scaled down and scaled out. There is no reason why those with higher incomes should be subsidised by the Government in buying their houses. I also believe that a means test should be introduced for those in council houses. There are, of course, many people in council houses who are on the poverty line and who should be paying minute rents. But there are many people in council houses who have very large incomes paying tiny rents and who can afford to pay an enormous amount more.
I would like to speak for a moment on the item of capital expenditure. I believe that in the future capital expenditure will have to be introduced on one criterion only, that is, that on any large items of capital expenditure it should be essential that they pay their way. We have, as a nation, for too long, for ten years certainly, been thinking too big. We do not have the resources of France or Great Britain or of most of the OECD countries. There is the story which some of you may know of an American economist coming here in 1981, examining the figures and, on seeing them, he could not believe them. After he had had a heart attack, he woke up and said: "Ah, I have it — you had a massive oil find in 1977". That was the only possible explanation he could come to of the way we were behaving. The fact is that we are behaving as if we have massive resources which we do not have. We do not have oil — we have less prospect of oil now than we had three or four years ago.
I believe modern appraisal, investment techniques, should be applied to semi-State bodies, that semi-State bodies should be run on a commercially economic basis. In terms of industry and semi-State bodies, there is a good case for helping them out if they have short-term liquidity difficulties. Indeed the State agency responsible for this has been doing a very good job, but we have too many cases of semi-State bodies running to Governments for money when they are not running commercially viable operations.
Aer Lingus look for £60 million when they are running a loss of £22 million on the North Atlantic route. That is indefensible. CIE have been running a deficit of £165 million. Knock Airport, the cost of which we still do not know, certainly will not be a viable commercial operation. I am sorry that the Government are looking for £5 million from the Regional Fund for it. NET received an injection of £50 million last year. One could refer to Whitegate. The liquidator of Clondalkin Mills must have been delighted that the Government voted £2 million the other day. We buy jumbo jets, nuclear power stations, Bombardier buses, with a total disregard for profitability.
I believe the whole semi-State sector needs pruning. It needs examining. Recently we had revelations about Bord na gCapall in which most of the money received, 65 per cent, was spent in administration and only 7 per cent on taking riders and horses abroad, and they are the window of horse breeding in Ireland. Directors appear to have been involved in spending more money on their junke-teering than on the purpose for which Bord na gCapall were set up. The IDA, the ESB, CTT, Bord Fáilte—all expect the State to bail them out because they all know they do not have to run commercially viable operations. They all should be put under pressure. Modern prestige status symbols should be abandoned. Those bodies should be put on a base from which they would pay their way. If private industry was run on the same basis it would be bankrupt. Therefore, public bodies should be run on this basis until we can afford to run them in any other way.
What I have been suggesting may be described as being deflationary. It is deflationary, but the effect of doing this would be to lower domestically generated inflation and to impose competitiveness on our industry. This in itself would help exports which in turn would have the effect of helping the unemployed. It would also have the effect of reducing the trade deficit because of reduced demand for imports. Therefore, I should like the Government to consider another suggestion: they should introduce import quotas or surcharges. In the short-term it would be an immediate solution to the problem. I know there are difficulties with the EEC, but the Italians did it and we are in a crisis situation as the Italians were and we need a short-term breather to set our house in order.
One of the difficulties about introducing import quotas is that 70 per cent of our imports are raw materials for reexport after manufacture here. Of course they cannot be subjected to import quotas or surcharges, but the other 30 per cent, which is consumer durable, which includes all sorts of items, like cars, which we could do without, or selectively choose, constitute £2,360 million which is 20 per cent of national income. That would have an immediate effect on the trade deficit. It is crude but it would be effective as a crisis measure. I remind the House that in the 1930s the biggest gain in manufacturing industry and the biggest gain in employment here were under a protection regime, according to the Cambridge School of Price Economics.
The effect of the above, which I have been talking about, the measures which I think are necessary on unemployment, is very important. Unemployment I attribute to four factors. One is the world recession. The world recession is being thrown out as the reason for all our ills, but it is indeed a reason for some of them and it is a large contributing factor. The second reason for unemployment is the high inflation rate and we must bring this down. The third is the severe competition which we are receiving from the Third World; and the fourth is modern technology, by far the most important one.
As a representative of a constituency of young people I understand the utter misery of the unemployed, the soul destroying effect it has on them. I believe that the unemployment problem, because it is a world phenomenon — we are not on our own obviously, it is going up in all the western countries — should be examined on a revolutionary basis and such fundamental thought should be given to it that we should not say: "Ah, 600 people are out of work there, put down a factory. If we do not buy Clondalkin Mills we will have 100 people out of work there. If we do not support this factory and that factory and this industry and that industry we will actually have more people out of work".
That is the wrong approach. What we need is a totally revolutionary approach to unemployment because, like it or not, I believe it will increase throughout the western world in the next few years. What we need is to think about what are people going to do with this leisure time. The advent of machinery will continue, there will be less need for people to work as they are replaced by machinery. I am disappointed that no Government have given any great thought to this. What happened to the declared National Youth Policy of this Government? The last Government introduced the Youth Employment Agency which was well intentioned but had no fundamental approach to the problem at all because the Youth Employment Agency and AnCO are training people for jobs which just do not exist. I suggest as a start that this Chamber, possibly, might like to think of taking two representatives from the unemployed as part of its membership because we represent here all sorts of pressure groups and people who are nominated by different groups and vocational bodies. The unemployed of 160,000 have no representation here and I think we would be more aware of the situation if they had.
I could blame the world recession, and the Government could blame the world recession and the last Government could blame the world recession, but if we look at any of the figures we will see that we are out of line with OECD countries. While our inflation rate runs at 17 per cent Britain's runs at about 8½, which is under half ours, and the average OECD rate runs at 7¾ per cent. On every yardstick our figures are worse relatively than the OECD countries.
That is our problem, and the warning I want to give to the Government here is not a hollow one: we only have to look at Mexico and what happened there—an oil producing country which has gone bankrupt. We only have to look at Poland, and we have borrowed 2½ times as much per head, and what happened there, or Argentina, and we only have to notice as a very serious warning sign that our credit recently slipped among the international banks. We have lived in a fool's paradise for far too long, the banks are beginning to realise that we have borrowed too much and they will pull the rug. The rate at which we borrowed is now three quarters of a per cent higher than it is for Burgerland to borrow from these banks, because they realise that our situation is totally and utterly chaotic.
I would like to summarise by saying, first of all, the priority of this Government should be to protect the under-privileged. That is absolutely essential and that is behind everything that I have said. But secondly, our attitudes must change: people must accept lower standards of living. We are thinking too big. We are not as yet a rich country. The current deficit must be phased out. The economy is uncontrollable, I believe, in the political situation. That is why we need outside help. That is why we should take in the International Monetary Fund. I would like to finish by appealing once again to the parties to take this debate seriously on a unified basis and not to indulge in any in-fighting at all.