Dáil Éireann - Volume 323 - 21 October, 1980

Government's Economic Policies: Motion .

The Taoiseach: I move:

That Dáil Éireann re-affirms confidence in the economic policies of the Government and expresses approval of the measures being taken by them to mitigate the effects of the present world recession, to expand employment, to assist the agricultural industry and to promote general economic development.

I believe it would be helpful to the House and to the general public if, at the outset of our debate. I were to outline the present state of the world economy, the deep recession into which it has declined and the effect of this recession on our own economy.

For us it is the state of the economics of the 24 countries which are members of the OECD that is of primary importance. These countries represent the developed industrial world of which we are a part and it is the situation in them that affects our prospects and our progress. [347] The simple fact is that economic growth throughout this area has collapsed. Output is actually declining and in the second half of 1980 it will fall by 1.75 per cent in the OECD area as a whole and by 2.1 per cent in the European Community. It is expected that this decline in output will continue into next year and that growth will not be resumed until the second quarter of 1981.

This recession is most clearly seen in its impact on employment. There are now over seven million people unemployed in the European Community which is the highest number since the Community came into being. At the height of the previous recession the number of unemployed in the Community did not exceed five million people. In the OECD area as a whole there are 20 million unemployed compared with the highest total reached in the last recession of 15 million.

These figures indicate the extent of the disastrous decline in economic activity and employment in a world of which we are an integral part.

They show the sort of depressed world conditions in which we had to operate this year and the reality with which we had to contend in conducting our business and managing our economy. It is unrealistic for Deputies to talk about our economic situation or the Government's handling of it as if we were an economic island unaffected by developments in the outside world. We are, for instance, one of the countries in the European Community which depends most heavily on imported oil and we have therefore suffered more than most from the oil price increase. The effect of the increase on the price of oil alone will be to transfer out of our economy this year over £250 million which would otherwise have been available to be spent inside the country for our own benefit on a variety of economic and social projects.

Many of our industrial firms depend for their success on their export trade. These firms have had to try to sell into markets which were in a very depressed state. This resulted in a general falling-off in sales and output leading to widespread closures and redundancies.

[348] Agricultural output and farm incomes have been seriously affected by adverse weather conditions and rising costs.

Our tourist industry has been badly hit by the general effects of the recession and by other factors.

These are some of the elements which have affected our economic performance this year.

I mention them and the difficulties they have caused us not in any defensive spirit but in an endeavour to set this debate in a realistic context and to secure the widest possible level of understanding of our situation and an accurate appreciation of how we have been faring. I want the judgment of the House and country on our economic management to be on the basis of how we coped with the actual situation confronting us and a full understanding of the difficult and adverse factors with which we had to contend.

At the time of the budget, it was clear that this was going to be a difficult year. I said in that debate that the combination of factors confronting the Minister for Finance this year was perhaps the most difficult that any Minister has had to face in this country in modern times. But I also made clear that it was not our intention to make the changes outlined in the Budget and then leave the economy to its own devices. I gave an undertaking that, as the year unfolded, developments would be watched and assessed. I made it clear that the Government saw the management of the economy as a continuing day-to-day responsibility and that any corrective or supplementary measures which might become necessary would be undertaken.

This debate, therefore, provides a welcome opportunity for the Government to give a progress report on how that stated policy of managing the economy on a continuing basis in the interests of economic progress is being implemented.

The Budget was designed to achieve a better balance in the public finances while at the same time maintaining economic activity and employment at the highest levels possible consistent with that objective. Though it was pressed upon us from many quarters we rejected a policy of [349] deflation as being inappropriate in our circumstances.

This Government is committed to economic development and the highest possible level of employment, whatever the difficulties. We believe that our economy, with its need to absorb a steadily increasing labour force, must continue to grow if our society and its institutions are to respond to the legitimate economic and social aspirations of this and future generations.

Our young, educated population must be assured that the goal of economic and social progress will be consistently pursued. This Government, by its policies and actions and its capacity to manage the economy, is in a position to give that assurance. Our economic problems are complex and deep-seated. Failure to solve them would have serious implications for the future of our society and its institutions. They will not be solved by deflationary policies. Such policies would only intensify our economic problems and open up divisions in a society which, because of its small size and limited resources, should be united in pursuing the overall objective of the prosperity of all. The right approach is to manage the economy skillfully and sensitively to ensure continued progress and growth, even when world economic trends are adverse. This is what the Government is committed to achieving. Our objective is to come through this recession with least damage to our economy and our capacity to avail of the upsurge in Community and world economic activity when it occurs next year.

Let me turn now to assessing the performance of the economy in its different sectors and the outcome of our policy and actions. Any examination of the Irish economy must pay particular attention to the trade statistics, the balance of payments and the level of the external reserves. We have an open economy with foreign trade comprising a major part of overall economic activity. Our balance of trade, balance of payments and external reserves are therefore of special importance. Recent trends in this area are [350] encouraging. At the start of the year it was estimated that the balance of payments deficit might be in the region of £750/£800 million. However because of a considerable improvement in our balance of trade, an improvement which the trade figures for September confirm is continuing, the balance of payments deficit for the year will fall to not more than £600 million and in fact some commentators now place it at £575 million. This improvement is largely due to the fact that while imports have increased substantially there has been an even greater increase in exports which have increased by more than 20 per cent. At the same time our external reserves have been greatly strengthened. It is significant that this improvement in our balance of payments and our external reserves has been achieved in face of a major increase in the price of oil which, as I have said, costs us an extra £250 million. This is an encouraging trend. It demonstrates the underlying strength of our economy by its ability to accommodate a substantial addition to the import bill in this way.

The rate of inflation is moving downward also. The massive increase in oil prices in 1979 and 1980 generated a new round of inflation throughout the world and in line with this general international movement our rate of inflation climbed to 20 per cent earlier this year. It has now started to come down and the increase of 3 per cent in the last quarter was the lowest such increase since the November quarter of 1978. Inflation for the year as a whole will probably be around 18 per cent. If there are no new significant increases in the price of oil, inflation will continue to fall throughout next year. This downward trend in the rate of inflation can be expected to contribute to a significant improvement in our economic prospects, particularly in promoting investment confidence.

The high rates of inflation prevailing throughout the world and the balance of payments deficits which many countries were experiencing combined to increase interest rates in most countries. High interest rates penalise our economy very severely because of our exceptional need [351] for investment to improve our productive capacity and efficiency.

The Government took a number of measures to counteract the worst effects of these high interest rates by arranging exchange risk guarantee schemes which enabled farmers and manufacturers to procure low interest Euro-currency loans. Building society mortgage rates were also subsidised. Prime interest rates have been reduced by 4 percentage points since April of this year and the general future trend is likely to be downward. This lowering of interest rates can make a substantial contribution to improving the economic outlook and should help to stimulate increased investment and growth.

I have again and again emphasised the importance of industrial relations and the fact that in no other way could we contribute more effectively to our prosperity as a people than by establishing a stable industrial relations climate. The inconvenience and disruption caused to the general public are the most obvious results of industrial disputes but the actual economic loss is often of much greater significance and indeed can be incalculable. The tragedy is that if the established negotiating procedures and institutions were utilised, the loss to the workers concerned, the damage to the economy and the inconvenience to the general public could all be avoided.

It was the overwhelming need to secure industrial peace which lay behind the Government's policy of securing a new national understanding to succeed the previous understanding that ran out this year. While it may not be possible to secure industrial peace across the whole economy by the adoption of this new national understanding, it is certain that, without such an understanding, the industrial scene could very well have become chaotic.

The Government, therefore, had no doubt about what was needed. We sought to secure, if possible, a national pay agreement which would be acceptable in economic terms, give certainty about pay levels for as long a period as possible and avoid all the chaos and disruption which [352] is inevitably associated with pay bargaining at individual plant level. The pay provisions of the draft national understanding eventually arrived at can, in the view of the Government, be borne by the economy provided the understanding is made fully operative in all its provisions.

Those who criticise the draft national understanding should be clear on the fact that its terms preclude strikes or other forms of industrial action by trade unions or employees in respect of any matter covered by the agreement and it requires peaceful industrial relations procedures for any other claims arising from defined special circumstances. This is one of the main justifications for a wide-ranging national understanding such as has been drafted. Employer organisations and trade union leaders must ensure that all their members fully understand that the agreed industrial relations procedures laid down in the draft understanding on pay and conditions of employment are vital for our economic survival at this time. If they are not adhered to and in particular if unofficial disputes continue to disrupt out economic life in spite of all the commitments in the national understanding, then the whole value of future national understandings as such will be brought into question.

It is suggested in some quarters that the levels of pay in the national understanding are excessive. I want to admit frankly that they could turn out to be excessive if the national understanding is not fully and totally implemented throughout the economy in all its provisions. If, however, it is so implemented, then I have no doubts whatever about the capacity of our economy to absorb all the pay and other provisions of the understanding. In this regard, two aspects are crucial. Firstly, there will have to be full adherence to the industrial relations procedures so that disruption and damage through industrial disputes will be minimal, if not totally avoided. Secondly, there will have to be an all-out concentration on the improvement of productivity. The understanding commits both sides to a national effort to increase productivity. The Government are anxious [353] that this commitment should be effectively taken up and translated into reality. They intend to pursue with both sides of industry a realistic programme designed to eliminate all those restrictive practices and other elements which restrict output and the reduction of unit costs and thereby prevent both the workers involved and the community as a whole from benefiting fully from modern technology and improved techniques.

That we are capable of increasing productivity is shown by the fact that gross output per person in manufacturing industry in Ireland increased at an annual average rate of nearly 5 per cent between 1970 and 1977. Recent studies, however, have shown that in the mid-seventies output per person in Ireland employed in industry and agriculture was less than half that in the smaller Community countries and that output per person in the services industries was also significantly less. We cannot as a nation accept such a productivity gap and hope to maintain our living standards. The size of the gap shows how much ground we have to make up if we are to compete successfully with our trading competitors.

The 5 per cent annual increase between 1970 and 1977 shows that we can improve productivity if we decide to do so. What is required is to build on this and raise even faster our national level of productivity. Levels of productivity which in each sector and in each industry are comparable with those in other countries are essential to provide new jobs, protect existing jobs and increase our living standards. We are fortunate in having a long-established commitment by employers and workers through the Irish Productivity Centre to work together for increased productivity. The Government will examine immediately in the context of the provisions of the national understanding how major new practical efforts can be made to increase productivity positively and universally throughout the economy.

As in other countries, the greatest and most severe impact of the recession in Ireland has been on unemployment. At [354] the end of September, the latest date for which figures are available, there were 105,600 persons on the live register. This is an unacceptable level of unemployment. In comparing the growth of unemployment with that in the other Community countries—and in some of these unemployment has risen much faster than here—it must be borne in mind that our population is growing at seven times the average Community rate. We have, therefore, to provide employment for a labour force which is increasing rapidly due to high natural growth and to large numbers of people returning to live and work here. The CSO estimate for the year to mid-April 1980 shows that a net 20,000 persons returned to Ireland in that year. Many of these are being attracted back by the new highly-skilled industrial jobs which we are continuing to create in spite of all the economic difficulties,

We have been creating new jobs in manufacturing industry at remarkably high levels throughout this year. Unfortunately, job losses in our older industries have been heavy. We have made determined efforts to keep these job losses to a minimum. The Minister for Industry, Commerce and Tourism has intervened time and time again, through the various agencies at his disposal, to help industries in difficulties. A special scheme of cheap credit for working capital to be administered by the Industrial Credit Company was inaugurated last June. Additional capital funds have been provided in a number of different areas to ensure that various public work programmes were maintained at a level which would avoid lay-offs which would have added to the unemploynment total.

At the outset of the national understanding negotiations in July last, the Government committed themselves to taking a comprehensive series of measures to stimulate the provision of new jobs and to reduce job losses if the negotiations resulted in an acceptable national pay settlement. These measures have been outlined in the draft national understanding. The considerable level of public expenditure involved can only be undertaken if the income levels over the next [355] 15 months are limited to those provided in the draft national understanding. In the preparation of their plans for 1981, which are now under way, the Government intend to give special priority to the provision and maintenance of the highest possible level of employment that our economic and financial circumstances will make possible.

Agriculture has been harder hit by the recession than any other sector. Bad weather reduced output in many parts of the country and income was seriously affected by rising costs. We have watched anxiously over these developlments throughout this year and have consulted regularly and closely with the farming organisations. There is now widespread understanding of how important for general economic development a profitable and prosperous agriculture is. Many of the job losses in other sectors of the economy have been due to reduced demand for goods and services by the farming community. Because of their appreciation of the importance of a prosperous agriculture, the Government have already taken special measures to assist farming productivity and investment and to mitigate the economic difficulties facing individual farmers. These measures have been taken as part of the Government's policy of continually monitoring the economy and taking appropriate corrective and supplementary action when necessary.

The prosperity of our agriculture depends greatly on decisions made under the Community's common agricultural policy. The most important of these decisions is the level of prices. These prices effectively establish throughout the Community the prices farmers get for their products. The present situation of high inflation throughout the Community demands greater appreciatijon at Community level of the need to ensure, as the Treaty requires, that agricultural prices fixed by the Community itself give fair living standards to the farming community. The economic advantages to the Community of a prosperous agriculture are plain. It employes nearly eight million persons. This employment must be protected [356] at a time when there are over seven million unemployed throughout the Community. The Community's common agricultural policy ensures the security of its food supply and creates stability in its balance of payments. The farming industry in many parts of the Community is the major purchaser of goods and services from the other sectors. A prosperous and progressive farming community is an important stabilising and constructive influence in the evolution of society within the Community.

The Government, therefore, propose to campaign vigouously in the Community for the improvement of the common agricultural policy and its price-fixing policies to take account of the current erosion in the living standards of the farming community in many member states. We will be pressing, in the Council and with the Commission, the question of ensuring fair living standards for Community farmers, as laid down in the Treaty, and in the interests of the general economic welfare of the Community. It is my intention to have this question included on the agenda of the next European Council. The treaty has clearly already laid down an obligation to ensure a fair living standard for the farming community and we will fight to see that the Community adheres to that principle.

The Government believe in managing the economy in consultation and with the highest level of co-operation of the representatives of the different economic sectors. We maintain a continuing dialogue on economic and social progress with industry, farming and trade union representatives.

I believe in the value of this constructive participative role for the large sectoral interests in our society. I and my colleagues have, therefore, met regularly with leaders from the trade unions, employers, industrialists, farmers, fishermen, financial institutions and State-sponsored bodies. These meetings have enabled views to be enchanged about current problems and possible solutions. Government decisions can be better informed and more soundly based as a [357] result of information and views obtained in this way. I believe that the non-Government participants have found these meetings fruitful and helpful for their actions and decisions.

These meetings will continue to be held as the Government consider that economic and social progress, particularly in these difficult times, can be attained by more open, more responsive and more participative Government. We are too small a community and economic entity not to approach our problems in a united. constructive and co-operative spirit.

Because I was concerned that the semi-State sector might not be contributing as fully as it could to economic progress, I initiated a process of discussion with the heads of the principal State-sponsored bodies to see what factors, if any, were inhibiting their capacity to make the fullest contribution they were capable of to economic progress. The contribution these bodies have made to the development of the modern Ireland is significant. I am anxious that their development potential should be encouraged in every way possible. In the discussions I have had positive measures have been identified which should result in greater enterprise and initiative in this sector of our economy which at present has a turnover of nearly £1,500 million and employs over 70,000 persons. The purpose of these measures is to ensure that the State-sponsored sector can make the greatest possible contribution to our employment objectives and to general economic development.

The state of the public finances is a major pre-occupation of the Government. The Government laid down in the budget certain targets for the year in relation to public expenditure and the Exchequer borrNwing requirement. In my speech on the budget I also made clear that the retrenchment needed in public expenditure must not be to the detriment of investment, growth and employment. As the year went on and the world recession deepened and its impact on our situation became more serve, it was clear that additional public [358] expenditure was necessary if we were to avoid serious economic disruption and greater unemployment. This expenditure has covered both capital and current needs and was based on the clear-cut need to maintain employment and essential public services.

The additional capital expenditure covered needs in industry, agriculture and infrastructure. Additional current expenditure was also required urgently for farm rescue operations and for services to industry. Additional funds have also been provided to maintain health, social welfare, transport, telecommunications and other essential services.

The decision to provide these additional funds was a difficult one. It reflected the basic conflict that always exists in the area of public finance between the requirements of prudent financial management and the alternatives of unemployment and the disruption of essential services. We believe that in our economy, with its potential for growth in new efficient competitive industry and more productive farming, public expenditure constraints must be applied sensibly and with a judgment as to where the balance of economic advantage lies.

The question can often be presented in the simple form of whether it is better to expend scarce resources to maintain a particular worthwhile economic activity, and thereby keep people in employment, or expend nearly the same amount of public money paying the persons concerned unemployment benefit. The levels of public expenditure at any time should, also, be related to trends in the general economic and financial scene. These trends are now favourable as compared with the situation at the time of the budget and justify some relaxation in the interests of preserving employment and protecting our basic social fabric.

The most important need in our economy, given our stage of development, is for further economic growth and employment, and this objective must always be balanced against other economic and fiscal requirements. In the current situation of high and growing unemployment, [359] forced upon us by external factors, increased public expenditure, if sustainable, can be justified by the basic criteria I have outlined.

At what level public expenditure and public borrowing should be settled at any time is not an issue to which there is a precise objective answer. In my view, an important part of the answer lies in the composition of our public expenditure. I am increasingly convinced that our public expenditure, and particularly the Exchequer borrowing requirement percentage, is too high, partly because it contains many items of expenditure which should be financed in the private sector. This structural aspect of our Exchequer borrowing requirement is one which must be taken into account when making international comparisons about the level of Exchequer borrowing. The capital expenditure on telecommunications this year, for instance, accounts for 1½ percentage points in the Exchequer borrowing requirement expressed as a percentage of GNP. This is a commercial service giving a commercial return which in most other countries is financed outside the central Government accounts. This will occur here when the statutory corporation is established to take over the telecommunications service. But, even within the present composition of the public capital programme, there is considerable scope for private financing and funding of facilities now the subject of Exchequer borrowing. The Government is exploring a range of such possibilities with a view to a more rational structure of public finances.

The possibilities in this respect are considertable. Developments following our adherence to the EMS have brought about a situation where additional institutional and other funds in the private sector are available for long-term growth investment as distinct from short-term or medium-term fixed-interest investment.

We are looking, therefore, at the possibility of developing new financial arrangements to meet infrastructural requirements which will enable these funds to be utilised for higher levels of investment than can be obtained at [360] present.

Our need for investment is particularly great given our present state of development. We can progress to higher levels of productivity and output only if we have a comprehensive and efficient infrastructure of roads, airports, telecommunications, sanitary services and industrial facilities and if our growing population acquires the education and technological skills of modern industry and agriculture and enjoys satisfactory living conditions. We cannot compete successfully in the free market of the Community while our infrastructure is so far below the standards in other Community countries. Our infrastructure deficiencies clearly retard our economic progress. We have shown our ability to attract and develop new industrial and commercial undertakings where the necessary facilities are available. More advanced countries passed through our stage of development when infrastructure and social capital investment on the scale required today was not an essential accompaniment to industrialisation.

We cannot, therefore, escape the need for investment at levels which historically are remarkably high. We have currently the highest investment rate in the Community and one of the highest in the OECD area. That level will have to be further increased if we are to make ourselves economically competitive and prepared to take advantage of our ability to master the most advanced of modern industrial skills and to sell our products in the markets of the world.

This investment barrier to higher levels of output and productivity must be taken into account when considering the appropriate level of public expenditure at any time. We must aim to increase our productive investment so as to be in a position to profit from the recovery in Community and world markets which is expected to occur from the second quarter of 1981 onwards.

Our need for productive investment was reflected in the public capital programme provided for in the budget and will be added to by the additional capital expenditure we will undertake under the national understanding.

[361] The Government has been particularly concerned to maintain high investment levels in the current economic situation. As a result of Government policies, investment as a whole is running about 40 per cent higher than it was in the last recession. An important achievement for future growth is that this year investment in grant-aided industry is expected to increase by 10 per cent.

One of the most encouraging aspects of our current economic situation is the remarkably high level of new jobs being created in manufacturing industry. These jobs are being created at an annual rate of over 20,000 which is an exceptionally high rate. The Government's investment programmes have given special priority to manufacturing investment and to co-ordinating infrastructure investment with industrial investment. This priority is reflected by the results being achieved. These new nanufacturing jobs, generally of high technology and high productivity, give us the productive capacity to expand our exports, raise our living standards and provide employment for our educated young population.

The high level of new manufacturing jobs would be sufficient in normal circumstances to give us a significant net increase in employment. But, in common with other Community and OECD countries, our industries are suffering from the reduced demand which is at the root of the present world economic recession. As a result, job losses are more than offsetting the job gains in manufacturing industry. I might point out, however, that these jobs losses are still significantly below those experienced in the last recession.

The Government has taken and will continue to take every possible measure to assist the firms experiencing these job losses. A particular necessity is to achieve a fairer share of the domestic market for Irish firms in the older traditional industries such as food, clothing and footwear. A special campaign has been undertaken with the support of unions and employers to bring home to all concerned— consumer, retailer and wholesaler [362] —how important it is to increase the share of Irish goods in the domestic market.

The Government's high investment policies benefit all regions of the country. This Government is firmly committed to the principle that national economic and social progress is the sum of regional economic and social progress. We believe that regional disparities in income and opportunity can be removed only by making it possible for each region to contribute its resources and skill to the national effort. The regional industrial plans are bringing modern industry to every part of the country. The gap in income between the regions is decreasing and population is now growing in all regions for the first time in over 100 years. This population growth is occurring not only in the urban areas but also in the rural areas. We have recently announced our intention to decentralise central Government services to 12 regional centres. Our infrastructure investment programmes are planned on a regional basis so that each region gets its fair share of investment funds and we shall maintain this emphasis on regional development. We must mobilise the human potential and resources of all our regions in order to achieve the highest possible level of economic and social progress.

When, therefore, we examine the general state of the national economy, we should not neglect to note that one of the most dramatic changes in our economy has been its regional development. The standards available to our people in all regions have been greatly improved by the spread of economic and social opportunities beyond the major cities. This Government sets its face firmly against the once-fashionable theories that economic growth and opportunity should be concentrated in a limited number of centres. We believe in the capacity of people everywhere in this island to participate fully and creatively in the growth and expansion of our economy. Such participation has a deep social purpose and meaning. The ability to obtain satisfactory economic and social opportunities in their own community provides people [363] with a more meaningful life.

Community life and culture in many parts of our island have been disrupted and deprived for too long as the young people left in search of employment elsewhere in Ireland or abroad. This has impoverished the social and cultural life not only of local communities themselves but of the nation as a whole. We must not, in considering economic issues, forget the ultimate social purpose which economic development serves, which is to bring a fuller and happier life to all our citizens no matter in what part of our island they are born and wish to live. We must, therefore, in all our discussions of national economic issues, recognise the fundamental economic and social transformation of our regions on which national economic development depends. This is a basic objective of this Government and it is reflected in our decisions in regard to infrastructure investment, industrialisation, decentralisation of central Government services, development of educational, health, welfare and cultural facilities and aids to the farming industry.

We must also ensure a better and fuller life for those who through no fault of their own are underprivileged or handicapped in any way, and as such will not participate automatically in increasing prosperity. That is why the budget this year provided specially for social welfare recipients and brought greater equity into the tax code. In the draft national understanding, we have undertaken to continue to protect the living standards of social welfare recipients and have made important commitments to improving the content and scope of our social welfare measures. We will continue to adhere to this basic principle of equity for all in our economic and social policies.

We have had to nurse the economy through one of the most difficult years in our history. The combination of adverse factors was quite unique. We have had to husband our resources and take finely-balanced decisions between the conflicting needs of maintaining employment and controlling Government expenditure [364] at a time when our population and labour force have been rapidly increasing. We have been reasonably successful in this pragmatic approach and, as a result, we are weathering the economic storm of 1980 better than most. We are, in fact, coming through with much less disruption of our economic capacity than we might have feared. Some recent major investment decisions in the private sector are a clear indication of confidence in our economic future.

As I have indicated, favourable trends are now emerging. These give us encouragement to be more hopeful about the plans we are preparing for 1981 and to look at some more optimistic options. We want this debate to generate confidence throughout the community in the basic strength of our economy and its capacity for growth. The Ministers primarily concerned with the economy will give an outline of their plans and programmes for the different sectors and their determination to press ahead with expansionary proposals to the greatest extent possible in spite of the present difficulties and problems.

It is our determination to secure the widest possible support from all the interests involved—trade unions, farmers, employers, economic and commercial bodies, financial institutions—for our policy objectives and for our plans to attain them. In this way we will mobilise every national resource and seize every opportunity open to us to come out of this recession and to achieve new and higher levels of economic and social progress which our rapidly growing population and our social needs demand.

Dr. FitzGerald: I have listened to the Taoiseach with a growing sense of depression. He had virtually no effective Government action to report or to foreshadow. He had much complacency to express even in the face of the present disastrous situation and then we had endless waffle to spin out the time over a period of nearly one hour.

I come to this debate with an acute consciousness of the many human tragedies that are being enacted amongst us today, because of the economic situation [365] in which this country now finds itself. In my own constituency I am faced, as is every Deputy, with the demoralising effect of large-scale unemployment upon workers and their families—a demoralisation which is only very partially cushioned for many by the scheme of pay-related benefits and redundancy payments. These are intended to ease the financial consequences of unemployment in its early stages, but they do nothing to maintain the morale of a worker who has worked all his life and respects the dignity of work, nor the morale of his wife and children, and indeed provide only temporary relief from the depths of poverty to which long-term unemployment reduces all eventually.

I am brought face to face every week with the innumerable human tragedies created by the desperate shortage of housing, which forces thousands of families to live in conditions of overcrowding, inter-family tensions under the one roof, and in many cases damp and insanitary conditions which undermine the physical as well as the mental health of those affected. In my daily work as a TD I face, as so many in this House do, innumerable women who break down completely under the strains imposed by this housing crisis, for it is no less, or who keep going only with the aid of drugs used on a scale that is deeply disturbing but which offer the only relief available to their shattered nerves.

In Donegal for the past few weeks I have faced also the problems of rural poverty, with the greater proportion of the farming community living on incomes which no trade unionist would accept, and with even the larger farmers now demoralised by the collapse of the incomes in the past two years, and reduced to selling off their stock, on which not only their future prosperity but that of the nation depends.

It is against the background of these human tragedies, compounded by inadequacies in our educational system, still infected with insanitary and overcrowded schools, their authorities living from hand-to-mouth on grants that in any [366] neighbouring country would be regarded as derisory amounts on which to educate children—it is against this tragic human background that we face into this debate. As we discuss the economic situation in economists' terms, using the cold hard language of statistics, we in this House, representatives of the people, must not forget the harsh human realities which all this represents.

This debate indeed is taking place at a crucial moment in the development of the economy of this State. For the first time since its foundation, irresponsibility in government is threatening not merely the economic and social well-being of our people in the present and immediate future, but even our very economic and financial stability itself, This assessment is not mine; it is that of numerous independent economic experts, many of whom cannot on their past statements be adjudged to be apostles of a gloomy science, but who have over the years pointed the way ahead towards economic growth in encouraging and even optimistic terms. Nowhere today amongst economists, financiers, or public servants concerned for the public good can one find even a brief ray of optimism, or of hope for our future under the present dispensation.

This is not because our economy is basically unsound, or lacking in the potential for growth. On that I find myself in agreement with the Taoiseach. By any standards—and those with the relevant expertise are as unanimous in recognising this fact as they are pessimistic about our actual prospects under present circumstances—this State has a unique potential for growth and expansion, unique so far as Europe is concerned at any rate.

We have two remarkable assets either or both of which other countries in Europe lack: a land that is producing far less than its potential—probably no more than about 60 per cent of it—and a labour force available to us now and in the years ahead that is young, vigorous, and for the greater part well-educated. With these resources, anything should be possible—anything is possible—if we manage our affairs with skill and prudence; [367] if the morale of our people is maintained; if they feel they have a leadership in which they can have confidence and trust.

But these pre-conditions for a successful utilisation of these assets are now absent. Not merely are they absent, but in their place is to be found an unscrupulous concentration on the trivial and the short-term, a contemptuous dismissal if all wise advice, an arrogant disregard for the realities of the problems that face us. Never has the art of government been so debased in our State, and never have skilled management of our affairs, courageous leadership, and a concentration on the nation's long-term future even at the expense of some unpopularity in the present been more necessary in government than today, and never have they been so conspicuously and totally absent.

The gravity of our situation today was illustrated for me by the wry comment of one acute economic observer who remarked that whoever wins the next election ought to have the choice of going into opposition, and by the reflection of another who has expressed a doubt as to whether any party elected to government in the situation that has been created in the past three-and-a-half years could put the mess right in time to have any chance of winning an election even five years later.

These are the comments of non-political experts; they under-estimate the masochistic instinct of politicians. If given the chance politicians will always take on the task of government even in the most unpromising of situations, trusting in their political skills, and in their luck perhaps also, to carry them through even the most difficult of crises.

But whatever one may think of the black humour of the first comment, or of the political pessimism of the second, there can be no doubt about the depth of concern felt by all responsible and informed opinion about our present crisis—not just, or even mainly, because the problems we face are not uniquely difficult, but because they see a Government in power, and apparently capable of remaining there for a further 18 months, [368] who have shown a total unwillingness to face any reality, to take any advice, to initiate any constructive action or to do anything other than drift helplessly, and apparently uncaringly, towards a disaster which will engulf them certainly, but which could also, if they remain there much longer, frozen in their present inertia, engulf our State, our society, our community as well.

Let me first set the economic scene, with the bare bones of the facts and figures that face us. Our economy has slowed to a virtual halt. The 5 per cent growth rate achieved by the National Coalition in the most adverse conditions in 1977 has been eroded to 3 per cent last year and 1 per cent this year. But because the prices of what we import have risen by 19 per cent this year, whereas our export prices have increased by only 11 per cent, this 1 per cent increase in output is quite insufficient to provide us with the same volume of goods and services, home-produced and imported, as last year. The purchasing power of what we are producing this year, spent as it is partly on home-produced goods but to a very substantial degree on much dearer imports, is down by 2½ per cent. As a country we are quite simply 2½ per cent less well off in 1980 than in 1979.

Some of this is reflected in lower living standards. The volume of goods and services that we as private individuals can buy in 1980 is almost 3 per cent lower on average, per head, than in 1979. For some of our people, of course, the drop in living standards is far greater—especially for those on low incomes who do not pay income tax and thus benefit from no income tax relief, for people on so-called fixed incomes—including an enormous number of pensioners in the private sector who do not benefit from pay—related pensions. The same is true more generally, amongst most members of the community with incomes under £10,000 a year, who if they are average, never mind above-average, consumers of tobacco, alcohol, soft drinks, petrol or public transport, lost more on the swings of this year's budget than they gained on its roundabout.

[369] There are others, of course. Those with over £10,000 a year, and especially those with £20,000 a year and upwards. This year's budget provided reliefs for people in these income brackets which enabled some lucky individuals with £50,000 a year to achieve an after-tax benefit of no less than £10,000 a year.

But these are the happy exceptions, the beneficiaries of Ireland's first millionaire's budget. For the vast bulk of our people, workers and farmers, and farmers most of all, 1980 has been a year of falling living standards. For farmers, indeed, it has been the second such year. I should add that this year's fall in the purchasing power of farm incomes is now estimated by the Economic and Social Research Institute at 20 per cent, as against the 15 per cent drop forecast by the Central Bank less than three months ago.

But it is not only our current living standards that have been hit. The investment upon which future increases in living standards must be based has been drastically reduced—once again by far more than was foreseen earlier this year when the Central Bank prepared their annual report, published in May. Then it was thought that investment would fall only fractionally this year, by 1 per cent, although at the press conference presenting the report it was modified downwards. Several months later the Central Bank had revised its estimate to a drop of 6½ per cent. Now, three months later again, a catastrophic 11½ per cent drop in the volume of investment is foreseen by the Economic and Social Research Institute. The Central Bank's latest views on this subject will not emerge for another ten days or so, but are unlikely to differ much from this latest independent projection. Moreover, this drop in investment is taking place under both investment headings—construction, where activity has dropped 10 per cent in this year, at the cost of large-scale unemployment in this, as in so many other, industrial sectors, and machinery and equipment—the basis of future job creation. The only sector of expenditure not dropping this year is public consumption—the [370] using up of goods and services by the Government in the running of the State. In this largely, though not totally, unproductive area, and here alone, an increase of 1 per cent is foreseen.

Let us turn from this analysis of the trend of investment and consumption to that most sensitive indicator of economic welfare and social well-being—the live register of unemployment. Fianna Fáil's promises in their manifesto with respect to unemployment scarcely need repeating—they are engraved on many hearts. In the first three-and-a-half years in office they were going to reduce the numbers out of work by 80,000—5,000 in the second half of 1977, 20,000 in 1978, 25,000 in 1979 and no less than 30,000 of a reduction in 1980. What in fact has happened? On the new basis, excluding short-time working, they fell short of their 60,000 target for end-1979 by no less than 63 per cent—they achieved 37 per cent of their target. Instead of a drop of 60,000, as planned, there was a reduction of 22,000, from 107,000 to 85,000, both figures seasonally adjusted to ensure comparability between different periods of the year. This continued the decline which had begun a year earlier under the National Coalition around June 1976.

That shortfall from target was bad enough, but consider what has happened in the first nine months of the present Taoiseach's term of office. Under him unemployment, again seasonally adjusted, has risen by 26,000 within this brief period, to a level that is already 4,000 higher than when Fianna Fáil took office. All and more that was achieved—at the cost of a level of borrowing to which I shall return, under Deputy Jack Lynch in two-and-a-half years—has been lost under the present Taoiseach, Deputy Charles Haughey, in nine months. In the past six months the rate of increase in unemployment has accelerated to such a point that within this summer half-year, from March to September, the number of unemployed has risen by a quarter—an annual increase rate of 50 per cent. The best projection available for unemployment by the end of this year is now a figure of [371] 120,000 seasonally adjusted—or almost 125,000 in actual current figures by Christmas.

All this has been taking place against a background of continued establishment of new industries, and expansion of some existing ones by the IDA. We do not yet know how many new jobs the IDA will have created during the year 1980, but the Taoiseach said the number will be of the order of 20,000 and I am willing to take his word for it. Such a figure, combined with an increase during 1980 in the numbers out of work from 85,000 to 120,000, seasonally adjusted, implies that no less than 55,000 people must have lost their jobs during the first year in office of our present Taoiseach. He will certainly go down in history as the first Taoiseach in Irish history to have presided over such a massive scale of disemployment of Irish workers.

He has argued that it is not all his fault. No more is it. Part at least of this debacle owes its origins to events outside Ireland; I concede as much—which is more than he and his colleagues would do when we faced a much worse crisis, and brought the country through it, with much less damage six years ago. Part of this disaster reflects the inevitable result of the spendthrift policies pursued by the Fianna Fáil Government of which he was a senior member in the years 1977 and 1978 when the economy needed no artificial boost from extra Government spending in order to maintain a high growth rate—policies which have left the Fianna Fáil Government today with little or nothing in the kitty to boost our now stagnant economy and prevent unemployment from rising.

But the House will be conscious that when the present Taoiseach was chosen as leader of his party, and elected by a majority of its members in this House to his present office, this was on the basis of an expectation, however shakily based, that he had the capacity to lead our economy out of the difficulties into which the Government of which he had been a member had got us into in the first place. It was believed by just over half the [372] Fianna Fáil members of this House—about 29 per cent of the total membership of the House—that he would be a decisive political leader, capable of taking determined action.

How many on the benches across still believe this ten months later? To what actions of the Taoiseach can his dwindling supporters in that party point as evidence that he is the man they and the country needed? Several times he referred to action the Government had taken. I listened to him and I read his speech twice. I tried to pinpoint what the Government had done; perhaps I had missed something but I could only find three things which they had actually done—first, the exchange rate guarantee scheme, a belated effort induced after great pressure from this side of the House; second, the building society mortgage subsidy and, third, cheap credit for working capital in industry. The Taoiseach referred also to the decline in interest rates as if the Government were responsible for that. That was the result of market forces and of the deep depression on our economy which has led to available credit not being taken up. The credit due to the Government for that is that they have the economy so depressed that interest rates were lowered as a result of the failure to use the credit available.

He certainly cannot point to his budget as an achievement because it has failed on all counts. Apart from the uniquely anti-social character, to which I have referred, it was politically indecisive, falling disastrously between two stools. Last February the Taoiseach had two choices and we gave him without demur—despite some public criticism—two full months to reflect on how best to act in the situation in which he found himself. He could either have gone for a “soft” budget and a general election, in the hope of being returned to office, at which point he would then have had the opportunity of five clear years in which to take action to restore order to our finances and to place our economy on a sounder base, or he could have taken a tougher line in the budget, with the objective of getting our [373] finances into better order and our economy in better shape within two years, going to the country in 1982 on the basis of whatever these measures had achieved.

Instead—apart from his earlier climbdown from his announcement of legislative action to deal with certain industrial relations problems to which I shall refer later—it was the first clear indication of this fundamental indecisiveness when he chose a half-way-house budget, which neither gave him a political advantage sufficient to enable him to call a general election then, nor did anything to start the process that would have put our economy into better shape two years hence, to enable him to face an election then at that time. In retrospect the error will, I believe, be seen to have been a fatal one. He might perhaps have had a chance of re-election if he had made a firm choice either way, but he fumbled it and threw away both options.

I shall not dwell further on this aspect of the matter or on the details of the economic chaos that has flowed from that budget. It has proved a disaster even at the technical level of getting figures right. Borrowing is now seen as likely to exceed by £280 million, or more than 30 per cent, the figure predicted in the budget, most of the excess being on current account, where all control over expenditure has been lost, with an over-run now estimated at more than £175 million. I notice the Taoiseach's excuses for this over-run. At two points in his speech he referred to additional funds to maintain health, social welfare, transport, telecommunications and other essential services. Again, he used the word “maintain” in relation to public works activities involving an employment content. He is being honest in the use of the word “maintain” in each of these cases because even to maintain employment, which is what the budget was supposed to achieve as a minimum, it has been necessary to overspend to this extent as a result of the budget having been so wrong and so inaccurate in terms of forecasting. I do not know to what extent this inaccurate [374] forecasting was deliberate. It is not for me to judge that.

On the other side of the account there was a shortfall in the Post Office revenue of almost £60 million. Most of the much-vaunted £100 million over-flow from 1979 as a result of the Post Office strike has proved illusory as we predicted at the time would be the case. The budget was based largely on the assumption that there would be an extra £100 million coming in but this money has vanished. I do not know whether it was ever there or whether it is the case that people have given up the Post Office and have found some other way of communicating with each other.

In his speech the Taoiseach referred also to the Government's actions being justified by what he regards as favourable trends. One wonders what are these favourable trends. I have tried to find in the Taoiseach's speech any indication of where they might be. They are not in the field of agricultural output and incomes which he says are affected seriously. Neither are these trends in the industrial sector which the Taoiseach described as being badly hit. They are not in relation to unemployment either because the Taoiseach has told us that the level of unemployment is unacceptable. Where, then, are these favourable trends? I have tried to find in the speech the basis for this reference by the Taoiseach but I have not been successful. However, I have found that inflation was slightly below peak but that is because we have not had a budget in the last quarter which would have added 4 per cent to the inflation rate. Therefore, there is no great achievement in this instance.

The Taoiseach has made great play out of the balance-of-payments situation. First, he exaggerated the prospects for the deficit earlier this year by saying that it was expected to be between £750 million and £800 million. I do not think that there were expectations of anything as high as that figure but the Taoiseach went on to say then that the figure would be below £600 million. That may well prove to be correct but the achievement of a reduction in the balance-of-payments deficit is merely a function of the deep [375] depression that the Government policies have created. The reason for the balance-of-payments situation having improved is that imports are down by 7 per cent whereas if the situation in this regard had remained even static, and that in itself would involve a level of stagnation in the economy, I calculate that the balance-of-payments deficit this year would have been £950 million. It will be seen, then, that the favourable trends on which the Taoiseach is relying is the virtual collapse of the economy leading to a drop in imports without which we would have had a balance-of-payments deficit of almost £1,000 million. Is the Taoiseach relying on that depression continuing indefinitely to keep down the balance-of-payments? He has not said anything about that. Therefore, one finds on examining these favourable trends, that they evaporate, that they are simply an expression of a complacency which seems at this point of time to be incorrigible.

Political indecision and economic incompetence are the hall-marks of the Taoiseach's first budget, which his PR merchants were so anxious to impress upon us as being his work and not that of his Minister for Finance. He would have done better to have stayed out of that limelight and to have let his Minister take his responsibilities. Meanwhile in a process that is without precedent, he has centralised decision-making in his own swollen Department and then has failed to take the necessary key decisions which can no longer be taken elsewhere. We are told that all kinds of gimmicks are being thought up by fertile brains in this new empire in Government Buildings and that other Departments have been given firmly to understand that their competence is not needed. The country is now to be run from that corner of Merrion Street through which the new empire is spreading. But the gimmicks are slow in coming and when they come are unlikely to impress an increasingly cynical public opinion.

Meanwhile the country is running into debt at a staggering rate and its credit standing for the first time in 60 years, is starting to be eroded.

[376] The Taoiseach referred to the strengthening of our official reserves as if this were some kind of achievement. That strengthening of official reserves is merely a function of the extent to which the Government and under their direction, the State-sponsored bodies have borrowed abroad. It is not the level of reserves which determines the financial stability of the State. As was pointed out in a programme on RTE last evening, the determining factor in this regard is the level of net indebtedness.

When the National Coalition left office, this State's foreign borrowings exceeded its official reserves by only a couple of hundred million pounds—the excess of borrowing that had been forced on us during the oil crisis having been largely liquidated in the previous two years. But by the end of this year the excess of foreign borrowing over official reserves is expected to have attained almost £1.5 billion.

It is this prospect that has raised for the first time the question of Ireland's credit standing. This issue which in the past few days has caused the value of our pound in the EMS to falter, and has forced the intervention of the Central Bank to sustain it, was broached several weeks ago in articles by two of our most distinguished economists. Brendan Walsh and Colm McCarthy. The concern they expressed about this mounting tidal wave of foreign debt was echoed shortly afterwards by Ken O'Brien, economic commentator in The Irish Times, who raised the inevitable question of whether a continuation on the course now set by the Taoiseach might not lead us before long to the point where we would no longer be able to borrow in the ordinary way and might have to go on our knees to the International Monetary Fund, with all that that would entail in the form of deflationary policies forced on us and a further massive rise in unemployment.

Today, the same issue is raised in another way by the Economic and Social Research Institute who, as reported in The Irish Times, say that:

It would be a mistake to assume that foreigners will be prepared to lend continuously [377] if the borrowing requirement remains so high. The limits to which foreigners will lend are unknown—an unwillingness to lend could manifest itself at any time. The adjustments in terms of revenue increases and expenditure cuts would be very serious if foreign lending ceased.

The commentary continues:

The longer the adjustment measures are postponed, the greater the severity of these measures.

There is, unfortunately, no costless way of making these adjustments. If the necessary reduction in the Government borrowing requirement, from the present 14 per cent of GNP to about 5 per cent of GNP, is not achieved progressively during the next several years, there is a danger that a major deflationary shock will have to be administered at some point to achieve the same result quickly. That means that the IMF come in.

These various warnings come from sources that have never in the past been notably pessimistic, nor prone to recommend restrictive action. They reflect a concern, now becoming a deep-seated fear in responsible economic, financial and civil service circles, that we are today being governed in a manner that is irresponsible and short-sighted to the point of serious danger to the economic and social fabric of the nation. It is widely feared—I do not speak of what is felt in political circles but of what is being said in responsible circles away from the political scene—that every consideration of financial prudence may now be sacrificed in favour of the most short-term interest of political expediency; that having dithered and fallen between two stools in his 1980 budget, the Taoiseach will now pay any price in terms of possible damage to our economy and to our financial credit, in order to buy his way back into office at the next general election.

The conviction is now growing that the damage done by that exercise will be as nothing to that which may be inflicted in the period ahead by the present Taoiseach in his determination to hang on to power at all costs. I hope I am wrong and [378] that he will not drag this tragedy out to the bitter end but will make his break to the country soon on whatever gimmicks he can cobble together. This country must have decisive government now. It cannot get it from its present leadership, mesmerised by the desire to juggle its way into a favourable electoral situation. They are not even doing that competently. There may be those who, despite the evidence of the past ten months, believe that the present Taoiseach would become a new man, clear-headed and decisive, if he could but win an election and have a run of five years ahead of him. If there are enough people who believe that, perhaps he can be re-elected. If there are not, as I believe to be the case, he will leave the scene, and an alternative administration can tackle the mess left behind. But may we be preserved, at all costs, from another year-and-a-half of the kind of non-government we have experienced since last December. Whatever the outcome of the Donegal by-election, let him go to the country thereafter and give the country a chance to get itself a government. It needs one as it has never needed one before, since the earliest days of the State.

A new administration would have the task of restoring public confidence in government, of providing the political leadership that the country has been deprived of in recent years, of getting the public finances gradually back into order—before our creditors turn away from us in despair and leave us to the mercy of the International Monetary Fund—and of turning the economy around. There are the tasks of replacing decline with growth, contraction with expansion, injustice in budgetary income redistribution with a just sharing of the burden, and rising unemployment with an expansion, in productive jobs that will survive competitively, and not simply add to the burden of public consumption which already lies more heavily on the shoulders of our citizens than of those of almost any other democratic State, except for a couple of the wealthiest in Europe.

To achieve these objectives will not be [379] easy; nor will it be painless. The sacrifices and efforts involved will be undertaken by our people only if they have confidence in the integrity of the government and of its leadership. It is our task to win that confidence and to demonstrate in Opposition that we shall govern with courage and integrity.

We cannot do that by negative criticism alone. Of course it is our task, and our duty, to expose the weakness of the present Government and to point to their failures, as well as to show how the present crisis would not have arisen had the National Coalition's policies, designed in the interest of economic growth and stability rather than to catch votes, been accepted by the people in the manifesto election of 1977. But we must also address ourselves in a construvtive manner to the problems that have been created by Fianna Fáil, pointing the way ahead.

We had some measure of the kind of ruthlessness with which the Taoiseach is approaching his task in the reports in last Saturday's Irish Press and Cork Examiner of his discussions with the farming leaders—not since denied—in which these papers reported that he instructed them to have no protests until the Donegal by-election was over, and warned that there would be no more goodies for them unless they behaved themselves between now and 6 November. This is what the Taoiseach calls dialogue in his speech. From this and many other sectors come reports of similar threats and warnings and attempts to intimidate.

In the way we approach this today we have to be conscious of the fact that over the period of 18 months that may elapse before a general election some of the proposals we would make now could be outpaced by events; it was indeed one of the great weaknesses of the Fianna Fáil manifesto of 1977 that it had been prepared a year earlier, at the low point of economic recession and that such economic rationale as lay behind its crude attempt to buy votes was completely out of date by the time the election came.

Moreover, their hands tied by the [380] detailed figures for growth, inflation and unemployment that that manifesto contained, the Fianna Fáil Government continued to hang on for dear life to these fixed points in their firmament, even when the economy had moved in a quite different direction. This fixation with a programme which, even when first thought up, had been dangerously extravagant in the scale of the additional borrowing it required, but which at that time of its preparation in 1976 at least had had some relevance to an economy whose growth had been severely hit by the first oil crisis—this fixation and the failure to adjust sights to the realities of 1977, 1978 and 1979, explains much of the situation in which we now find ourselves. Fine Gael will not make the same mistake—either in trying themselves now, perhaps 18 months before an election, to fixed targets that could by then be irrelevant, nor, needless to say, by promising what cannot be achieved, or continuing the spendthrift course of the Fianna Fáil Government.

But the fact that this is not the time for us to publish our programme for the election does not relieve us of the responsibility for putting forward some constructive proposals to deal with the problems that are now immediate and pressing, and which this Government have failed to tackle, or even in some cases apparently to notice.

In putting forward some deliberately limited suggestions, confined to areas where the need for action is especially urgent. Fine Gael are conscious that the country is asking why Fianna Fáil are not acting to deal with these problems. Why, people are asking, have Fianna Fáil done nothing to deal with the problems of unofficial strikes, in respect of which the Taoiseach had, indeed, promised legislative action in his inaugural press conference? Why is nothing being done to halt the collapse of housebuilding, that mainstay of the construction industry—to which the Taoiseach made no reference in his speech—employing a high proportion of the skilled workers in that sector, and fulfilling a desperate social need in respect both of those thousands of families housed in overcrowded and insanitary [381] conditions, and in respect of young people, seeking to find a home? Why is nothing being done to give a breathing space to industry, even some temporary relief from the flood of imports that is causing a significant part of current unemployment and which accounts for a large part of our balance of payment deficit, even today, in mid-recession? Why do home manufacturers apparently have to face the burden of VAT sooner than importers, giving an advantage to the latter?

Amongst people in the financial community who are aware of the structure and scale of available sources of finance, why are the Government doing nothing to make use of the resources available for long-term finance, some of which could be use fully deployed directly in productive sectors of State activety, where at present finance is being provided out of Government fixed interest borrowing, adding to the already crushing burden of Government debt?

I should like, in respect of these issues, all of them pre-occupying our people at the present time, to put forward Fine Gael's proposals, which they will implement in government.

In respect of unofficial strikes, and indeed the general question of the reform of industrial relations, we have set out our proposals in full, in a policy document which has aroused most widespread interest within the trade union movement, amongst employers, and indeed with public opinion generally. These proposals involve a radical reform of the existing industrial relations machinery, including the Labour Court; the provision of a general licensing warrant for a group of unions with 300,000 or more affiliated members and of individual negotiating licences for other unions, and legislation to deal with unofficial strikes which together with provision of State funds would reinforce the authority of the trade unions and would withdraw the protection of the 1906 Act in respect of unofficial strikes. The policy also proposes on the employers' side a strengthening of the personnel function, the [382] weakness—or even absence—of which in many firms is a major contributory factor in many strikes and especially perhaps in unofficial disputes.

Our proposals are concrete, specific, clear. In putting them forward in a published document we were conscious of the fact that we were taking certain risks, given the controversial nature of the issues involved. But we believe, in contrast to the Government, that an honest effort to resolve these problems, prepared after careful consultation with many of the interests involved, but without engaging them in any way, was the right approach for a political party to take. Our judgment, that we should reject the advice of the faint-hearted, to stay out of this tricky area, has been well justified by the outcome, for with rare exceptions, our proposals have not been given a hostile reception, and have indeed been publicly commended by some and privately welcomed by many others on both sides of industry.

If the Government had approached this problem in the same spirit, and with the same dedication to finding acceptable solutions to these difficult problems, the country might not have had to face the kind of disruption to which it has recently been subjected.

Yet the Taoiseach at his inaugural press conference in December raised expectations of industrial relations legislative reform. By the time the Taoiseach went on radio and TV in January these suggestions of legislative action had been dropped, but expectations of industrial peace in 1980 were raised. The Taoiseach's strategy—if you can give it such a name—was apparently to assume that there could be public relations answers to industrial relations problems. The country knows better today. Does he?

High profile interventions in industrial disputes, such as we have seen in several cases recently, can be potentially disastrous in the longer term, especially when undertaken in response to contemporary public anger at a particular dispute and at the expense of the authority of the trade union movement. Solutions to industrial relations problems will not be achieved except by calm, comprehensive [383] and balanced reform of legislation, on a basis that enjoys broad support.

Fine Gael have on many occasions—most notably in recent times after the Taoiseach's January broadcast, and recently during the unofficial petrol dispute—invited the Government to seek such a consensus both inside and outside the House, for we believe and we have established that the basis for such a consensus exists. We repeat this offer—to which we have to date received not even the courtesy of a reply—to co-sponsor balanced legislative reform as an urgent pre-requisite for enduring industrial peace—itself the fundamental pre-condition for job creation on the scale required to meet the employment needs of our younger generation.

Next, I should like to deal with the problem of the collapse of house building. Cement sales in the third quarter of this year seem to have been about 20 per cent lower than in the same period of last year, and for the year as a whole the Economic and Social Research Institute estimate that construction activity will be down by 10 per cent on 1979. Another significant indicator is local authority housing starts which are sharply down as between the second quarter of 1979 and the second quarter of 1980.

This decline in house building is not inevitable. The level of housing construction attained by the National Coalition Government—26,000 houses a year—can be maintained, even in times of economic difficulty, with intelligent and imaginative policies. Fine Gael have been studying this matter for some time past and yesterday we published considered and costed proposals to harness effectively a new source of finance to the provision of housing for the social group that is hardest hit by the impact of inflation on house prices. The details of this proposal are published in the papers today. It is based on consultation with some of the financial interests concerned, and on expert advice in respect of the detailed figures.

We have established that there is an [384] annual flow in excess of £300 million going into pension funds and life assurance companies who are seeking a type of investment that will be hedged against inflation. At the same time we find that there are many thousands of couples who cannot afford the repayments that would be required on even the cheapest house now available to them in the ordinary way through a building society, or life assurance company, for in the case of a typical industrial worker, or a young clerical worker or a teacher for example, these repayments would absorb over half his income and, understandably, the existing financial agencies who provide money for housing mortgages are unwilling to lend money on such a scale, demanding such an unrealistic rate of repayment. These young couples could afford to set aside up to one-fifth of their income and many of them if given the opportunity to do so would be more than prepared to undertake such repayments. At the same time, because of the length of our housing lists after three-and-a-half years of renewed Fianna Fáil neglect of public housing, and because there are so many cases of families living in insanitary or overcrowded conditions with serious implications for the health of both parents and children, young couples at this kind of income level seeking to establish a home have little or no chance of securing a local authority dwelling to rent. They, as well as many of the families at present in overcrowded or insanitary conditions, but nevertheless low down on the interminable housing lists, are at present forced back on the private rented housing market for accommodation and in that sector demand so far exceeds supply in Dublin and in many other centres that the rents required are far beyond their means, or can be brought within their means only by settling for an entire family living in a single room, often with shared bathroom and toilet facilities.

In this situation the supply of long-term finance seeking a hedge against inflation, and the demand from families seeking houses for which they would be willing to pay a reasonable proportion of their income over a 25 year period, can and should be brought into relation with each [385] other. This can be done, as we have shown in our policy document, by bridging this gap with an agency, which perhaps only the State can effectively provide, which will sell bonds to pension funds and life assurance companies, guaranteeing them repayment of the sum lent plus inflation, and a 2 per cent margin over inflation—this to be paid at the end of the 25-year period. The scheme is based on the very conservative assumption that real incomes will not rise over this 25-year period, whereas in fact they have risen at an average rate of about 4 per cent over the past two decades, which provides a handsome cushion within the scheme. Indeed, if real earnings continued to rise at this rate, with incomes running 4 per cent ahead of prices taking one year with another, the repayments could be completed in as few as 17 years.

Of course those who take on a mortgate of this kind, in order to secure a home when they badly need one, would not benefit in the same way as present mortgages do by paying a diminishing and eventually very small share of their income at the end of the loan period, as their income rises with inflation. But only a small fraction of those who would benefit from this scheme are concerned with this unconvenated benefit of the normal building society mortgage. Many, indeed, do not even know about it. Those who are in this category and whose incomes permit them to do so might perhaps be able to arrange a combined double mortgage, partly with the new agency—which would work through the existing local authorities and their staff—and partly with the building society. It would be for the agency and the building societies to work together to facilitate such cases, and also, as our document suggests, to smooth out the ups and downs of the house building market, by transactions between themselves.

I shall not dwell further on this matter, for the full details of our proposal are set out in our policy document published yesterday which represents only a part of the housing policy which this party will be presenting at the next general election, but which we felt, in view of the [386] present disastrous situation in respect of house building, we should put forward now, when the need is greatest, rather than clutching it to our chests for some presumed electoral advantage if published for the first time as part of our election programme. The publication of this policy raises a question, however, which Fianna Fáil should be required to answer, Why have they, in government, with full access to all the data on financial flows of which we in opposition have only partial cognisance, not themselves come forward with a scheme of this kind? Why in this area, as in so many others, are they not governing? Why is it left to us in opposition to make the running?

I hope that in this as in other areas Fianna Fáil will not be deterred from serving the national interest by the fact that we have moved first and will adopt and make their own this proposal. The homeless cannot afford to wait until Fine Gael take over the reins of government, which might not be for a further 18 months, if the Taoiseach is afraid to face the nation and seek a mandate, and decides to hang grimly on to the reins of power until the bitter end. But if he does not move on this proposal, we shall do so the minute we take over government.

There are other areas where the ready availability of long-term private finance seeking at least a measure of a hedge against inflation could be called upon to replace fixed-interest Exchequer borrowing, thus helping to reduce the appalling burden of public debt and repayments that the Government have built up during the past three-and-a-half years. I note that the Taoiseach has belatedly observed this possibility in relation to the expansion of the telephone services which could be financed in large part in this way, thus providing the resources needed to complete the task undertaken by the National Coalition of catching up on the previous 16 years' of Fianna Fáil neglect of this potentially profitable sector of State activity.

As the Taioseach knows to secure access to this kind of capital for the telephone service it would have to be an independent enterprise, with a mandate [387] to catch up on the back-long of demand, and to operate profitably, as it is potentially capable of doing if run as an enterprise rather than as a subordinate wing of a government Department. Unfortunately, under the present Taoiseach progress towards this objective is desperately slow. I understand that 15 months after the decision to establish such an authority, as well as a Post Office Authority, and 15 months after the appointment of two able businessmen to chair the boards of these new concerns, the telephone enterprise has one employee, its chief executive. Discounting the suggestions that the present Minister is anxious to hang on to the kudos of running the telephone and postal services for as long as possible, one is impelled to ask, why has progress been so slow? Have the new boards, and their chairmen, whom I congratulate for the public-spirited way in which they have taken on these onerous and largely thankless tasks, been receiving the support and assistance they need from the Minister and his Department, or are they strangled with red tape at this early stage and not being given the free hand they ought to have to get on with undertaking the job in their own way, as exercises in each instance in entrepreneurship rather than in public administration.

Another area where long-term private capital might find a useful role, reducing the burden on the Exchequer, is providing part of the finance for the ESB, whose commitment to finance by fixed-interest stock only is difficult to understand, and not, I believe, in line with the methods of finance used for electricity authorities in some other countries.

In these and other areas there is an opportunity, without prejudice to retaining the public character of these enterprises, of reducing their calls on the Exchequer, and the Exchequer's calls on the fixed-interest stock market. What is needed is some imagination and the application of some economic and financial expertise, which the Government seem notably to lack, despite the illusion in some circles that the Taoiseach himself is particularly equipped in this respect. [388] Of course, measures of this kind will not solve the problem of pure excessive Exchequer borrowing requirement; they can only alleviate it, and speed up and facilitate the process of providing housing, telephones, a better postal service and electricity.

No one should pretend, and I shall not pretend, that the grave problem of financial solvency which this country faces can be resolved by measures of this kind, which will merely reduce some of the pressure. The task of getting our finances into order again will be a difficult one, to be carried out over a number of years, by a Government with a mandate to take whatever actions may be necessary towards this end, with a view to ensuring that we do not fall into the kind of situation that Britain now faces, through being forced by impending financial insolvency to call on the International Monetary Fund and to adopt its deflationary prescriptions that have left that economy in a state of chronic depression and ever-rising unemployment.

There is another area in respect of which I should like to make some constructive suggestions. As part of the European Economic Community we are committed to free trade and are, indeed, one of great beneficiaries, in the industrial as well as in the agricultural field, of the freedom to trade in a market of 265 million people. We must do nothing that would threaten that principle.

But the Community law provides for temporary measures to be taken by countries faced with serious balance of payments difficulties. We face such difficulties. Last year we spent abroad £730 million more than we earned—an overspending amounting to no less than 10 per cent of our national output. This year, though at the cost of a deep depression in trade, and a rise of 35,000 or over 40 per cent in unemployment by the end of the year, this figure is being somewhat reduced to around £575 million. But this might be described as an unnaturally low figure, attained only at the cost of almost total economic stagnation and a 7 per cent reduction in imports. And even at that it represents an enormous figure.

[389] We thus have a strong case for taking action to protect our balance of payments, the deficit in which is forcing us to borrow heavily abroad despite the availability now of resources at home, simply in order to maintain our official external reserves. That case would justify action under the relevant Article of the Rome Treaty, action which could take the form of an import deposit scheme akin to that introduced in Italy several years ago in somewhat similar circumstances.

Such a measure would have the incidental effect of giving a measure of temporary relief to many hard-pressed domestic industries which are being required to adjust to recession at a pace that is more than they can take and which is throwing out of work tens of thousands of people who, if these firms had even some temporary relief, could be kept in employment. The Government should act firmly and decisively in this area. In doing so they will have our backing.

At the same time the Government should look again at the manner in which VAT is levied on imports. I know the arguments that have been put forward by the Revenue Commissioners suggesting that under conditions where the credit period for a purchaser from a domestic manufacturer is 50 days or more imported goods enjoy no advantage. But this argument is clearly rejected by many domestic manufacturers, possibly because under present stringent financial conditions the domestic credit period is a good deal less than 50 days. I urge on the Taoiseach to re-examine this issue in response to the urgent demands of hard-pressed Irish firms, competing with a flood of imports which makes the Fianna Fáil Manifesto promise of a diversion of 3 per cent of imports to domestic manufacturers a source of hollow laughter.

I now turn to the agricultural sector. Fine Gael has already produced a range of proposals for constructive action in this hardest-hit part of our economy, covering both the immediate needs of the present crisis in agriculture, and the longer-term requirements for a planned [390] increase in output of goods that can be successfully marketed. But first I must press on the Government the need for them to take their responsibilities. It is simply not good enough that they should have spent so much of this year trying to deny that any problem exists in agriculture, with the Minister for Agriculture producing distorted figures, ignoring seasonal adjustments in a hopeless attempt to show that prices and incomes were rising, when everyone, himself included, knew they were falling rapidly. Nor is it adequate or satisfactory for the Taoiseach to be content to waffle about representations to the EEC about some agricultural policy, about dialogue and information. He had nothing else to offer in the section about agriculture beyond these three ideas, even to dignify them by that name.

The Government have before them a number of reports with concrete and specific recommendations designed to meet many of the problems now facing agriculture—Reports Nos. 40 and 41 of NESC, the detailed study on agricultural marketing by McKinsey Consultants, and the Report on Land Policy by the inter-departmental committee. But the Government have taken no decision on any of these reports. It is long past time for them to do so. As our shadow Minister for Agriculture has pointed out, for a Government which insists on farmers preparing five-year plans, it is remarkable that they have no agricultural plan of their own and show no signs even of realising the need for them.

In the external forum the Government have a vitally important task to perform in safeguarding the CAP. The Taoiseach spoke of this only in a window dressing manner: he is going to put it on the European Council meeting table. The real issue is not the common agricultural policy itself; the real issue now is the threat to it by the failure to seek, never mind to secure, agreement on the raising of the 1 per cent VAT rate through which alone the resources needed to finance a continuation of the CAP can be made available. So far the Government have failed to make use of the British re-negotiation [391] to employ available leverage with a view to securing from our EEC partners a commitment on this matter, and it would appear to have done nothing to build up alliances with other states which may have a similar interest in the expansion of the budget. All idea of a diplomatic offensive on this issue of the kind which we in Government planned and carried out with considerable success—in relation to regional and fisheries policy, for example—seems to have been beyond this Government's imagination. Indeed, the very concept of having an active foreign policy seems to have receded into a very dim background indeed.

Another defect of the Government's approach has been their failure, even at this stage of the development of agricultural markets within and outside the Community, to devote any serious attention to marketing issues. The negative discount on our carcase beef in the UK market, and the penetration of our home market by imported foods of the very kind we produce in Ireland, are evidence of this failure.

Serious consideration should be given to the establishment of an Irish Food Marketing Consortium to give Irish food exporters the strength they need to meet on anything like equal terms the bargaining power of the great supermarket chains which now exceeds by far that of many of the major food-producing multinationals in the world. There are, however, other immediate needs, which have to be met if Irish agriculture is to survive the traumatic period through which it is now passing. Farm incomes must be boosted by any available method from their present level—almost one-third lower than two years ago. One step that could be taken—small in itself, but in this grave situation we can neglect no possibility—is to seek a devaluation of the green £ to cover the divergence between the Irish green pound rate and the central rate of the Irish pound in the EMS. This would give a benefit of one and a fraction per cent to Irish farmers.

Farm family incomes are also affected by Government taxation measures. The [392] Government have belatedly, after great pressure, announced the remission of the proposed removal of derating of farms in the £40 to £60 bracket for the second half of this year. We welcome this. They have also said that they will “go easy” on farmers in difficulties so far as collecting the rates is concerned. I am not too clear what this means, as the collection of rates is not a Government responsibility and a statutory duty rests on local authorities to proceed to collect rates, unfortunately without taking any account of the financial circumstances of the ratepayer. This looks like window-dressing. If the Government are serious about it, and if some legislative measure is needed to introduce a necessary measure of flexibility into the rate collection system, we would be prepared to look at this sympathetically.

Farm cash flows could be greatly aided if the Government were to stop the practice, prevalent throughout the country and over a range of different schemes, of holding up payments of grants that have been approved, about which complaints come from every part of the country and must come to every Fianna Fáil TD as they come to every member of this party.

Mr. L'Estrange: They are being paid in Donegal now.

Dr. FitzGerald: And in Donegal alone. The major long-term problem now is to find means of securing an expansion of output. The idea, put forward by the Fine Gael shadow Minister, Deputy John Bruton, of a “performance grant”, in the form of a full relief of rates over a five-year period for farmers, outside as well as inside the EEC Modernisation Scheme, who achieve annual output targets set in agreement with their agricultural adviser, has considerable merit. I hope the Government will examine it seriously. At the same time a move to treat breeding stock as capital for income tax purposes, and not merely as trading assets, could have a major impact on breeding policy, perhaps reversing the present de-stocking, which offers such a threat to the future of farm output.

These are only some of the suggestions which Fine Gael has been putting forward [393] in the hope of influencing even this inert Government to take effective action to save our agricultural sector before irremediable long-term damage is done to it.

The House will have observed that I have devoted a considerable part of my speech to constructive suggestions as to action that might be taken to alleviate some of the more acute of the problems now facing this state. At this stage, given the gravity of the crisis, it is right that an Opposition party should do so, and it is an earnest of our intent in Government to act decisively and imaginatively to lead the country out of the situation into which it has been dragged by Fianna Fáil mismanagement. But in this debate I have been able only to touch on a few key areas. Our party's proposals for Government will be published in due course.

In the meantime we can only hope that the verdict to be delivered by the voters in Donegal will encourage, prople, precipitate the Taoiseach to the country in a general election out of which a Government would emerge—a Fine Gael Government I am confident—which would have a mandate, and a time-span ahead of it, that would permit it to tackle effectively the crisis facing the country. The Donegal by-election itself will settle nothing, but it could provide the impetus for a change of Government that would restore hope to a people who at every level—workers, farmers, employers, consumers and those with the expert knowledge to appreciate fully just how really grave our situatin now is,—are concerned about their future unless the democratic system provides them with a Government that has the will, and the skill, to act effectively in the interests of the nation.

For those reasons I move amendment No. 1:

Dáil Éireann affirms its lack of confidence in the economic policies of the Government, and particularly its concern at the rise in prices, unemployment, and public borrowing, the collapse of agricultural incomes and of tourism, the failure to provide adequate [394] funds for local services such as housing, health and roads, and the chaotic state of industrial relations.

Mr. Cluskey: I move amendment No. 2 on behalf of the Labour Party:

To delete all words after “That” and substitute

Dáil Éireann:—

—Nothing the continuing dramatic increase in unemployment;

—Nothing the Government's failure to make any significant impact on the inflation rate, currently running at almost 20 per cent;

—Noting the prospect of sharply increased foreign borrowing for purposes unrelated to productive investment;

—Noting that the problems facing some of our traditional industries have now reached crisis proportions;

—Noting the serious fall in farm incomes in the current year; and

—Noting the decline of the tourist industry

Declares:

—That the Government's mismanagement of the national economy is now a question of fact rather than of opinion; and

—That it believes a general election should be called to give the electorate the opportunity to pass judgment on the Government's failure.

I do not believe that any Member of the House, whether from here or the other side, came in here today without a feeling of deep concern about the economic situation which the country is in. I came here with such a feeling. But, having heard the Taoiseach's speech, having heard from the head of our Government a speech which contained absolutely nothing that could give us any prospect of a way out of our present difficulties, our present crisis, my feeling of concern has turned to one of near despair. If I did not believe that the Taoiseach will not be there too long, my feeling would be one of total despair.

[395] Before listing the reasons why the Labour Party submitted this amendment, I should like briefly to recall the feelings in this House last December on the election of the Taoiseach. At that time on this side of the House many political charges were laid against the Taoiseach as to his unsuitability to hold that office, and I recall that after my contribution on that occasion many people inside and outside the House came to me and said: “Fair enough, many of the things you attributed to the Taoiseach's political career up to now may have been true, but we believe one thing: the difficulties facing us are such that we believe here is a man who has economic expertise, who is decisive and who has a certain political touch.”

Above all else, one thing that has characterised the Taoiseach's term of office so far has been gross economic incompetence, indecision and political uncertainty. He has displayed none of the characteristics which people—in desperation almost—hoped he would display in an attempt to do something about the economy. To illustrate these charges I will go into the economic situation, but first of all let us look at the indecisiveness, the political uncertainty, the unsureness, the sense of insecurity in his own position that has been displayed by the Taoiseach so far.

In the budget earlier this year one of the things announced by the Minister for Finance was the resource tax. The following Wednesday, at approximately 11.30 a.m. the Taoiseach came in here and announced a qualification: it was only a temporary measure. That was the first indication of the Taoiseach's uncertainty, unsureness of himself. Then we had the announcement that school buses were to be discontinued. Approximately three or four weeks later that was reversed because of pressures from within and without his party. We now have the question of farmers' rates on which there are second thoughts because of possible political repercussions. We had the highly political matter of the notice to [396] quit served on our Ambassador in America, Mr. Donlan. That was reversed because of the political unsureness of the Taoiseach. No later than last week we had the Deputy Denis Gallagher affair. The Taoiseach, having decided to sack him, had not the decisiveness or the political courage to stand by that decision. I could list many more instances, but if ever there was a time in the history of the state when the Irish people cannot afford to have a man at the political helm who has not got political courage to stand behind his own decisions it is most certainly now.

Many times in the past we faced crises in one or other sector of the economy, in public finances or external payments. On this occasion, however, the disarray in our public finances and the crises in our external payments are accompanied by recession in each and every economic sector, by rising unemployment and by continuing high inflation. On top of all these, we appear to have entered a period of growing industrial unrest. In short, each sector of our economy is undergoing a period of downturn at the same time that the Government's and the country's accounts are in total disarray.

As far as we in this party are concerned, the most alarming of the economic problems we face is rising unemployment. The official number of those unemployed stands at 106,000. When account is taken of those not officially registered, especially young people and school leavers, the true level of unemployment is closer to 150,000. Both figures are rising at a frightening rate. On the basis of current trends it is likely that the official figure alone will exceed 130,000 before the winter is out.

But figures on there own cannot tell us the full story. Behind them lie the real facts. Unemployment on this scale amounts to a tragic waste of enormous human potential. It imposes misery on those affected by it and on their families. It amounts to the destruction of the contribution which those men and women could make to our national well-being, if they were given the opportunity to do so.

However, under this Government they [397] will never have that opportunity, because the Government are not committed to full employment as an objective of policy. Any pretence they might have had to such a commitment died with the political demise of Deputy O'Donoghue. The day the Taoiseach abolished the Department of Economic Planning and Development he sounded the death knell for whatever tentative commitment there was in the early days of this administration to undertaking the necessary steps to achieve full employment.

Linked to the problem of existing unemployment is the reality of widespread redundancies. As late as last April, the Minister for Industry, Commerce and Tourism, Deputy O'Malley, forecast that redundancies in 1980 would amount to close to 20,000 jobs lost. Now, some six months later, it seems more likely that the figure will be closer to 30,000 for the year. That is an indication of the speed with which recession has taken hold and of the Government's inability to foresee their real magnitude.

The country is going through a period when inflation is ravaging consumer incomes and destroying industrial competitiveness alike. Prices have risen by over 50 per cent since the Government took office. This year alone the value of the pound in the consumer's pocket will be cut by approximately one-fifth.

No country can sustain inflation on this scale for a prolonged period without doing serious damage to its longer-term economic prospects. Domestic inflation is cutting living standards, but more importantly for the long run, it is undermining our industrial base and retarding growth in employment. In addition, it is a profound barrier to the growth of domestic savings without which our public figures can never be put right.

These are the obvious effects of sustained high levels of inflation. I would add a less obvious one. I believe that prolonged, high inflation destabilises society. It eats away at the fabric which binds us together, and unleashes self-interest and greed in place of cohesion and moderation. We can see the signs of this break-down all around us and unless [398] inflation is brought down to a reasonable level before very much longer, I can foresee increased social unrest as group sets upon group and all groups set on the Government in a vain, self-defeating attempt to maintain living standards. That is not a prospect which anyone in this House can view without deep concern.

It has been clear for many years now that the provision of jobs for our young people, and appropriate social services and infrastructure for the entire population, would require sustained high levels of economic growth. The Government recognised this reality when they committed themselves, in the early days of this administration, to sustained high annual growth rates throughout their period in office. But it has not happened. This year, for the second year in succession, there will be virtually no growth in the economy. The prospect for next year is that once again there will be almost no growth, and all of this has happened despite the fact that the Government have spent themselves into an acute financial crisis, allegedly in pursuit of sustained high rates of growth and increasing employment.

In their manifesto, the Government stated that one of their primary objectives would be to “restore stability to the Government's own finances”. Instead, they have done precisely the opposite and to no avail.

This year, for the second year running, borrowing as a percentage of GNP will exceed 13 per cent. It will amount to close to £1,200 million in one year alone. It does not matter what Government is in power—this country simply cannot afford borrowing at this level, especially when the bulk of the money borrowed is not being used for productive investment.

The fact of the matter is that the Government have borrowed so heavily during their period in office that they have created a massive financial problem for any incoming administration. While the details are not available, the schedule of repayment of this country's debts in coming years will impose an enormous burden [399] on taxpayers. In addition, it will severely restrict our flexibility in financial policy, since debt repayment will inevitably be a very significant proportion of total Government spending in the coming years.

We in this party are not opposed to Government borrowing as such. There is clearly a place for it in national economic policy, particularly when it is used for productive investment. But what has this country to show for three years of unprecedented levels of borrowing? We certainly cannot say it has led to falling unemployment. We cannot claim it has brought us a period of high economic growth. We cannot say it has provided us with more schools or roads. It certainly has not been used to create an improved housing programme.

The answer is we have nothing to show for it, except debts which future taxpayers will be forced to repay at exhorbitant rates of interest.

Early this year, the Taoiseach brought his Ministers together in Barretstown House. The alleged purpose of that series of highly publicised meetings was to plan a financial strategy prior to the budget. Its real purpose, of course, as always, was to get the Taoiseach's photograph coverage in our newspapers.

Whatever its purpose, the end result of these meetings was a Government determined that, this year, the current budget deficit would not exceed £350 million. I am not saying whether that level of deficit was right or wrong, but clearly the intention was to convey an impression that deep reflection had suggested it and that firm management of our economic affairs was now the order of the day. The financial strategy on current account, which the Government set themselves for 1980, is in ruins despite the talks and discussions that went on on that occasion.

Despite high borrowing and a large current account deficit, the Government have this year imposed major cut-backs in vital areas of public expenditure. Local authority housing programmes have been cut to the bone. In fact, many of them will not be able to commence any new houses in 1980 because of lack of finance. [400] As a result, waiting lists, which have already intolerable long queues, will grow longer in the years ahead, with all of the human misery which that reality entails, which is not sometimes seen behind the statistics.

Road maintenance and building have been dramatically cut back. Virtually no new roads are being built, while many road authorities do not appear to be able to afford to fill pot-holes. I cannot remember a time when that situation previously existed.

School building programmes have been cut back and so has health expenditure. Everyone in this House knows that not only will there be no improvement in health care services this year, but many of them will show a deterioration. All of these cuts, and many more which I could mention, are taking place despite unprecedented borrowing and Government expenditure. There is only one conclusion that can be drawn. The Government's economic strategy is misguided and they have mis-allocated the funds available to them.

I could speak at great length about the depth of our economic crisis. I could refer in some detail to the massive cut in farm incomes which will occur again this year or to the collapse of tourism, attributable at least in part to domestic inflation. There is a crisis right across our economy reflected, not least, in the expected 7 per cent drop in investment by business this year. However, the facts are well known and do not require to be repeated in full here today.

It is my contention, as I said, that the scale of our current economic plight is due in large measure to Governmental mismanagement of our affairs. Their economic strategy has been wrong from the beginning and, in my view, has been grossly irresponsible.

It must be remembered that this strategy was first set down in Fianna Fáil's 1977 election manifesto. The central problem with it was that, first and foremost, it was designed to win an election rather than to contribute to sound economic management.

The Government felt that, if they were [401] to win, they had to offer handouts of one kind or another to almost every section of the community, irrespective of what these would cost. The manifesto was designed by market research in a wild bid for power and it was only subsequently that an economic theory was provided to try to justify it. That theory was simple and grossly misleading. The handouts were justified on the grounds that they would boost consumer demand and, therefore, lead to higher growth and employment. They could, therefore, be financed from borrowing and that borrowing could be repaid without difficulty in the high growth period which, according to the manifesto, would inevitably ensue. What the theory did not take into account of was that the economy had already recovered from recession and that the growth was already under way. The result of pumping massive handouts into the economy in that situation was simply to fuel inflation, which had been coming down, and to draw in large amounts of consumer imports, leading to balance of payments difficulties. At the same time, foreign borrowing was forced up to 11 per cent of GNP when it should have been reduced in a period of economic upswing.

The strategy had another effect. It created expectations among the electorate which could not be and have not been met. These expectations have been carried over into a period of recession and the Government themselves are feeling the full force of the demands which they themselves fuelled.

It had a third effect. It led to a widening in the gap in living standards between the best and least well-off sectors of the community because central to the Government's strategy was the belief that it should reverse the movement towards an equitable taxation system which had been begun by the last administration. It abolished wealth tax, it reduced capital gains tax and the incomes tax concessions it has made have favoured those on high incomes.

These have been the effects of the Government's economic strategy. In terms of [402] economic management, the strategy was exactly the opposite of that required. The result has been that, in the past 18 months as the economy moved into recession, the state of our public finances has been such that the Government have been forced to deflate rather than stimulate the economy, as would normally have been expected in the present situation.

I do not deny that increased oil prices and other international developments have contributed to our present difficulties. I do, however, assert that a more prudent domestic policy, had one been pursued over the past three years, would have enabled us to meet these challenges head on and to have some prospect of defeating them. As it is, we are forced to face them at a time when borrowing is already excessively high, when domestically induced inflation is rampant, when interest rates prohibit necessary investment and when expectations have been created among the electorate which could not be fulfilled even in a favourable economic climate.

Before the last election, the Government made specific commitments to the electorate. I would like to repeat some of these now, so that we can judge the full extent of the Government's failure.

According to the manifesto, unemployment in 1980 was to be of the order of 40,000. Instead it is over 106,000, or 110,000 on a seasonally adjusted basis. Inflation according to the manifesto this year was to be around 5 per cent. Instead, the best estimates suggest it will be almost four times that figure. Borrowing as a percentage of GNP, again according to the manifesto, was to be 8 per cent. Instead it will be between 13 per cent and 14 per cent for the second year running. Economic growth was to be 5 per cent. The reality is that economic growth will be nil or next to nil in this current year.

I do not repeat these commitments for the sake of repeating them, but they were freely given to the electorate in return for one thing—their votes. In a democracy, governments must be held responsible for their actions. This Government acted irresponsibly in making promises which they could not fulfil and which they knew [403] they could not fulfil with the economic strategy they had set down.

The Government deceived the electorate, wittingly and knowingly. What is more, the present Taoiseach cannot evade his share of responsibility in this regard although he has tried very considerably. He went on radio the Sunday before the last general election and supported the manifesto strategy fully and unequivocally. So, for him, there can be no excuse at this point.

In short, the Government have not only failed to meet their commitments but they have come close to bankrupting the country in pursuit of a misguided and irresponsible economic policy. The other tragedy is that three-and-a-half years have been wasted. All we have to show for them, at the end of the day, is a massive public debt and a deepening crisis in our economy.

Having failed to meet their commitments and having pursued an irresponsible economic policy, the Government should now take the only honourable course open to them. They should go to the country, though I doubt that they will do that at present.

The Labour Party should not and will not be content, during this debate, just to point to Government failure and leave it at that. We recognise that the economic situation is so serious and that its effects will be so prolonged that all parties in this House have an obligation to point the way forward. The Government may have led the country into the present economic crisis but society as a whole will have to find a way out.

So far in this debate Fine Gael, whether I agree with them or not, at least have indicated what will they do. The Labour Party now will indicate what we will do. The only one who has apparently no idea of what to do is the Taoiseach who is responsible for doing it.

Mr. Mitchell: Resign.

Mr. Cluskey: To get out of the mess that has been allowed—in fact, encouraged—to develop over the last three years will require a sustained effort by all sections of the community. It can be [404] done, but only if it is seen by all that there is a fair and equal demand made on each section of society, a demand related to the ability of those people to meet them.

As I have said about justice in the past, it must not only be done but it must be seen clearly to be done. The same applies to taxation. There will be a willing acceptance of the sacrifices necessary for recovery only if those with the ability to bear the burden are given the burden to bear. No one will offer the Exchequer revenue on his or her own initiative. It is a Government's business to impose it and to collect it with fairness and equity and with a clear set of priorities as to where that revenue will be spent.

These are the elements that have been missing over these past three years and their absence has slowly but surely brought the whole system into a state of social and economic crisis.

The new start which is required must be backed up by a programme of economic recovery which begins with a universal acceptance of two facts. The first is that the economic crisis is about as serious as we have ever faced as a people. Secondly, there are no overnight solutions to the problems which this country now faces as a result of that Government's reign of office.

We believe that the road to recovery must begin with a short-term plan based upon the following proposals:

1. There must be immediate cuts in bank interest rates so as to restore investment for productive purposes, reduce the interest burden on public borrowing and ease the outgoings of mortgage holders. No other action would have such a dramatic impact on the economy as this. The Irish people must no longer be forced to subsidise the banks' enormous profits but the banks should be required to assist the Irish people.

2. An autumn budget should be introduced immediately in the Dáil which would restore the wealth tax and other capital taxes and impose a special levy on banking profits. It is not as if we do not need the revenue, and those [405] subject to these proposals could well afford to contribute.

3. Certain imports which are destroying our traditional industries, often by illegal and indiscriminate dumping, must be restricted. This applies particularly to imports in competition with our clothing, footwear and textile industries.

4. We need a special input into the building industry which is now at its lowest point for well over a decade, not as a subsidy for Fianna Fáil or other political party financial backers, but as the means of creating employment and providing houses for the lengthening queues of homeless families. This capital injection should be matched by a Bill bringing all building land under public control so as to eliminate profiteering. The State must no longer act as the underwriter of land speculators, irrespective of what their political persuasions might be.

That is no more than an immediate short-term package of proposals designed to cut inflation, increase investment and to boost employment. It is no more than a rescue operation for an economy that is sinking in a welter of depression and distrust.

However, if we are genuinely to come to grips with the economic problems we face in a context where our population is rapidly expanding, we will need to make fundamental changes in the way in which we conduct our economic affairs. The continuation of conservative economic policies which have not worked in the past will not be a recipe for success in the future.

We must begin by committing ourselves fully and unequivocally to the concept of economic and social planning. It is simply a nonsense to believe that, in a small open economy, we can meet the requirements of full employment, high growth rates and sustained industrial development without planning. Common sense alone would suggest that.

We must put planners in places of responsibility in the public service. Government [406] itself must learn the disciplines of planning and help the electorate to understand them. One can go about planning in different ways but, in my view, the central requirement in our case is sectoral development. We must identify those sectors of the economy which offer the best prospects of rapid growth and employment creation, and we must take the necessary steps to achieve these results. Broad economic planning will also be necessary, but without a sectoral approach I do not see any planning exercise achieving the degree of success which we require, as a nation.

A central element in any approach to economic planning must be a new adequately financed and funded National Development Corporation. As Labour envisage it, its task will be to identify potential growth sectors of the economy in the context of the National Plan and to develop appropriate industries within them. It would do this either on its own or in joint ventures with the private sector, whichever is appropriate to each case.

I know that there are some people who believe that the State should not or could not engage in additional commercial enterprise, but the fact of the matter is that private enterprise alone cannot and will not provide sufficient employment or growth in our economy. If the last three years have proven anything it is precisely that. The Government's strategy was clear. It offered every conceivable incentive to the private sector to expand and develop. We know the result.

On pragmatic grounds alone, it will therefore be essential for the State to engage directly in employment creation for the foreseeable future. If there is to be a return on the investment involved, its efforts must be concentrated on developing viable commercial enterprises. Of course there will be risks involved in this, but we must be prepared to take them for the sake of our rapidly expanding young population.

And I would like to say this about State enterprise. A key factor in its success or failure is management. For this reason, we must be prepared to pay the going [407] rate for the job, but, equally, management must be prepared to face the consequences of failure as is appropriate in any commercial venture.

National planning, a Cheann Comhairle, involves massive investment. For this reason, I believe that those responsible for the plan must have control over financial institutions. Investment policy must be in conformity with national planning objectives.

Labour, therefore, have always proposed that the banking system must be brought under effective public control as an essential prerequisite of sustained long-term development.

However, even if the measures I have outlined are adopted, the fact of the matter remains that nothing of significance will be achieved as long as incomes continue to outstrip productivity. Income restraint will be essential in the future if we are to meet our objectives and that will apply whether a socialist or conservative Government are in office.

The question is how we achieve that restraint. We certainly will not do so as long as the Government fuel domestic inflation. We will not achieve it so long as our taxation system is unfair and is seen to be unfair. It cannot be achieved so long as most employees have no say in the affairs of their enterprises, have no access to company accounts and, as frequently happens, are subject to irresponsible industrial relations policies pursued by management.

Income restraint, in my view, can only be achieved in a context where every section of society is seen to bear the cost of economic recovery proportionately to their ability to bear it. This means we must have wealth and capital taxes and we must have an end to the wholesale tax avoidance and evasion which persist in Irish society.

In addition, so that our work force can be helped to come to grips with the true nature of the economic difficulties we face, the concept of worker participation in industry must be expanded into all areas of employment.

These arguments relate to economic realities, but economic realities have a [408] habit of changing when there is an election around. The run-up to the next general election has begun and we are now getting economic decisions from the Government for purely political reasons. The real danger for this country is that the longer this Government stay in office and the nearer they come to a general election the more irresponsible will be their behaviour in managing—or should I say mismanaging—our economic affairs.

There is no device too devious and no promise too outrageous which this Government or at least some of them, will not be prepared to employ in order to hang on to office. We saw the start of that when three weeks ago the Taoiseach on his first visit to his native Donegal—was it the Taoiseach's native Donegal?—said that we were on the road to economic recovery. Such a staggeringly irresponsible statement was made by the head of Government in the economic circumstances of this country. That was the first indication that the election was coming and the punters had to be given a rosy story, no matter how unrelated to reality.

We now face one of two prospects. A by-election will shortly be held in Donegal. Whoever is sent to Brussels, whether it is the Minister for Finance or some other member of the Fianna Fáil Party in this House, that will demand a by-election. Time is fast closing for the general election. The Government's options are closing rapidly. Nobody knows when the Taoiseach will go to the country, least of all himself. With by-elections occurring and with the prospect of a general election—I am not saying this just to score political points, I really mean what I say—there are dangers to our people and to the future of our country and the temptation is that the Government will not resist for political reasons to take grave economic decisions. Fianna Fáil should go now and save the country. If they come back they will have five years and the pressures will be off them to make all those nonsensical, highly dangerous decisions. If Fianna Fáil do not come back the country will have a much better chance.

[409] Professor O'Donoghue: I listened with interest and I must say a growing sense of amazement to the contributions from the Opposition side of the House. There were two amendments tabled in their names. The debate has not been sprung upon them so one would have thought they would have had some clearly worked out policy to put before the House and the Irish people.

Mr. Mitchell: We would have expected that from the Government as well.

Professor O'Donoghue: The only thing we got was what I can best describe as the usual House performance which was designed to give a superficial air of direction and purpose. When one pauses to analyse the flow of words, especially in Deputy FitzGerald's case, one sees how little consistency and how little substance there is underlying them. The inconsistency shows through in the amendment which is tabled in the name of Fine Gael. They are apparently, on the one hand, critical of the high level of Government borrowing but yet part of their motion is to condemn the failure of the Government to provide adequate funds for local services. In the Fine Gael motion we have the answer to, how will you reduce Government borrowing?—by inviting them to spend more, no doubt for a worthy cause.

We have the same sort of difficulty coming through into the suggestions from the Labour Party Leader. While he was apparently concerned also about the high level of Government borrowing and a few other complications of that kind, when we get to his actual proposals they add up to a recipe for more rather than less Government expenditure. We have the example of the Opposition wanting to have their cake and eat it. In so far as the wording of the Labour Party amendment is concerned we were treated to a recital of things which were supposed now to be matters of fact. I can only say that if that is the case then God help us, there must be nothing more misleading than a fact. I certainly find it difficult to accept some of the statements as factual.

I could not help noting that there was [410] the usual attempt to rewrite history from the Opposition benches. It is interesting the way the interpretation of what the 1977 situation was, what the policy proposals put forward at that time were, have shifted over time. We are always given new viewpoints from the Opposition. I was intrigued by Deputy Cluskey's reference to the fact that the manifesto commitments about growth rates, inflation rates, Government borrowing and so on were all given in return for only one commitment from the people, their votes. That is not true. One very important commitment was required from the people in exchange for this package. It was a commitment, which the Labour leader then said would be essential, if we were to work our way out of the present difficulties. He said there were no instant, overnight solutions. He went on to say that in seeking a way out we would require a sustained effort by all sections of the community.

That is precisely the view we were expressing in 1977. We said that the then difficulties required a sustained effort and contribution by all sections of the economy. That part of it was the very income restraint to which Deputy Cluskey referred. The tax concessions which were advocated in the manifesto were not, contrary to his suggestion, designed to boost the demand for imported goods. They were to compensate for a lower rate of wage increase. I recall quite a lot of debate at the time because we actually had the nerve to suggest a 5 per cent figure as the appropriate level for a wage increase in the 1978 pay round.

Mr. Horgan: The people have let the Deputy down, not the other way round.

Professor O'Donoghue: I will deal with that in due course. I am not saying whether I regard the people as having let me down or the other way round.

Dr. FitzGerald: The Deputy is the person let down.

Professor O'Donoghue: I thank the Deputy for the implied compliment in what he has said. Deputy FitzGerald was also at the same process of reinterpreting [411] and rewriting history. I will come to that in a few moments. If Deputy Horgan wishes we will get on to the question of who let whom down or where the problems have arisen over the last few years. I would like to stick with the basic point. There was a particular purpose and direction of policy behind the manifesto targets whether or not one agreed with them. I agreed with Deputy Cluskey on the need for all sections of the community to make their contributions to the solutions. We sought to win their support for that. Obviously we did that successfully in electoral terms. I found it very confusing in Deputy Cluskey's approach that he presumably believes in a democratic approach to those problems and he presumably believes that one should say to the people what one wishes to do. We went out and did that very thing and said it far more explicitly and in far more detail than was ever attempted before, when we said exactly what we wanted to do and did not give commitments as to results but set out targets, indicating the scale of the results that could be achieved by this combined effort.

Surely that is the very process that he was himself advocating in some sense when he spoke about the need to have a commitment to longer-term economic and social planning. I fail to see how one can indulge in longer-term economic and social planning if one does not develop some machinery along the lines sketched out in the manifesto. However, perhaps he has some mysterious means of reconciling any inconsistency that might arise there also. To get that aspect of it clarified and to avoid any further attempts at rewriting history, it was a spelling out of a policy that was deemed to be relevant to the circumstances of the time and the tax cuts were not to finance a wave of imports of consumer goods but rather to protect living standards as the counterpart to income restraints and a figure was actually put on the measure of income restraint required.

Since I am on that business of rewriting history, let me make a quick comment on Deputy FitzGerald's remarks. Again his was a very selective interpretation [412] of history. I did not quite catch all the figures as I was coming back into the Chamber at the time. But I think I am correct in saying that he was talking about the fall in the growth rate from the 5 per cent achieved by the Coalition in 1977 to 3 per cent in 1979. We are given the impression that that is all that one got for the application of manifesto policies. Then he went on to say—I was here for that part of his speech—that one of the problems of the manifesto approach was that it had been designed a year earlier and was out of date and therefore inappropriate by the time it was applied in 1977. I am quite clear in my recollection of the sort of numbers that were being bandied about in 1977 and, whatever else was being suggested as the then prevailing economic position, I do not recall anyone claiming a 5 per cent growth as a likely target. If we look at the situation that was prevailing in May and early June 1977 people were talking about a 3 per cent growth rate. Indeed, that was the official projection from the then Minister for Finance, Deputy Ryan, and I doubt if the Coalition were going to sell themselves short. So if things had been rosier than 3 per cent I suspect they would have been claiming it.

Dr. FitzGerald: Is the Deputy suggesting the growth rate was not 5 per cent?

Professor O'Donoghue: It was. I will come to that in a few moments. I am saying it was not anything to do with the Coalition as such.

Dr. FitzGerald: Good Lord.

Professor O'Donoghue: Why “good Lord”? I heard the Deputy out. He should hear me out.

(Interruptions)

Professor O'Donoghue: I will claim injury time if I may, and I hope I will not have to question whether the Chair or the Deputy is more accurate in measuring the number of minutes which he has spoken.

[413] The situation then was that there was a feeling that growth was of the order of 3 per cent, perhaps a little bit more if one wants to be generous, but there was no basis for it at the time.

Dr. FitzGerald: Except the fact that it happened.

Professor O'Donoghue: What fact?

Dr. FitzGerald: That it was 5 per cent.

An Ceann Comhairle: Let the Deputy proceed without interruption, please.

Professor O'Donoghue: In fact, the growth rate in 1977 turned out to be a good deal more than 5 per cent. Why? One good reason was that agricultural output, due to an extremely good harvest, rose by 10 per cent that year. That had nothing to do with the policies of either the Coalition or Fianna Fáil for that matter. It was the accident of these occasional variations in agricultural performance. If we knock out the differential impact of that we would knock out about 1 per cent of the growth rate that year. So that is 1 per cent of the 1977 growth that has nothing to do with anybody's policies on either side of the House. I do want to go on and claim, however, that at least some of the growth in 1977 was due to the policy changes that were introduced following the change of Government. As proof of it I would point to the specific addition to spending that was undertaken by the Government in the investment area as part of the job creation programme and also to the very noticeable turn around that took place in private investment in the aftermath of that election result. I would claim of the order of 1 per cent addition to growth in 1977 as attributable to the change of policies in that year. So I do not see the basis for Dr. FitzGerald or anyone else implying that there was any superior growth performance in 1977 attributable to Coalition policies.

However, I do not really want to waste all of my time dealing with history. I [414] would much rather try to deal with the issue before the House which is in which party should the House reside its confidence for dealing with the current economic situation. We have had contributions from all three sides by now and, as I have already suggested, we have had proposals or outline proposals from both Opposition parties which I notice, incidentally, are not exactly in harmony with each other.

Mr. P. Barry: That is good coming from a member of Fianna Fáil.

Professor O'Donoghue: The Opposition have been making great fun these days over implied splits or division of opinions in the party on this side of the House. Let me point out that first of all there are the acknowledged differences in the policies put forward by the two parties over there. Then we could go further and entertain ourselves with the quite different songs that are coming from different members of parties on that side of the House. So I presume there would be at least four shades of green to accommodate in any new package.

Mr. P. Barry: The Deputy is on dangerous ground. I would advise him to get on to the economy quickly.

Professor O'Donoghue: I am quite comfortable on my ground. Deputy Barry is the one who is slightly uncomfortable at this moment.

Mr. P. Barry: The Deputy is whistling passing the graveyard.

Professor O'Donoghue: I do not have to whistle at this stage.

An Ceann Comhairle: The Deputy has only a limited time. Please allow him to speak without interruption.

Professor O'Donoghue: I would much rather get on to talking about the economic problems which are apparently the subject of the debate before the House. What, first of all, is the nature of the problem? It is a problem of unemployment; [415] it is a problem of inflation; it is a problem of the high level of Government borrowing and it is a problem of dealing with the balance of payments situation. In that respect one could say that the problem today is very similar to that of three years ago. The one difference has been the emergence of a balance of payments problem. The other three characteristics were present at that stage also. The approach which was made out for tackling the situation was to seek to trigger off the fastest possible rate of growth because, contrary to the view expressed by Deputy FitzGerald in the House today, growth was not adequate in 1977. Whatever recovery there might have been from the recession of 1974-75 it was not producing any increase in employment. That is the crucial point I want to make if we are going to have any debate about the merits and demerits of the policies as distinct from arithmetic put forward by the three parties. There is not the slightest shred of evidence that there would have been any growth of employment had the then policies been persisted in, so I would like to categorically oppose the view which says that it was not necessary to take action in 1977 to trigger off fast growth, higher investment and more job creation in the economy. If anyone says that was unnecessary then, they are saying that they have not the slightest intention of doing anything about unemployment. Let us bring that one out very clearly because I was listening carefully today for any suggestions as to how to deal with the unemployment problem. It almost disappeared from Deputy FitzGerald's speech.

Mr. P. Barry: That is not true.

Professor O'Donoghue: I said almost. I heard references to employment——

Mr. P. Barry: There were categorical proposals.

Professor O'Donoghue: ——and the problems. I did not hear very much in the way of policy for dealing with it and for providing the additional employment needed.

[416] Mr. P. Barry: The Deputy must have been out of the House at the time. Deputy FitzGerald did make proposals.

Professor O'Donoghue: He began by saying it was not feasible or appropriate at this stage to put forward most of the Fine Gael policy. After all, having just said that the problem with the manifesto was that it was prepared prematurely he did not want to fall into the same error; he did not want to create a package or policy prematurely. Therefore, he would withhold the bulk of his proposals. The only ones on which he touched were unofficial strikes, housebuilding, some sort of long-term finance for industry and some measures for agriculture. If I might digress for a moment, he welcomed what he called a belated change of heart leading to the removal of some of the agricultural rates bill, incidentally, the House will note, another action that was increasing Government spending rather than reducing it. Also, surprise, surprise, having spent a lot of his time attacking the Government for changing or adapting their policies in the light of changing circumstances, he is now applauding them for doing so. In other words if one sticks with a particular line then one is being intransigent and unwilling to accommodate legitimate, reasonable demands. If, on the other hand, one actually adapts one's behaviour to problems as they arise one is regarded as being inconsistent, vacillating or whatever. Again there is the approach of having one's cake and eating it.

Reverting to the main point of policy proposals. I am not saying that each of those has not got some relevance. I am saying that they do not add up to any package for making a serious impact let alone solving our employment problem. I shall come back to that in a moment. Therefore for better or worse our approach was quite clear. It was to trigger off a wave of investment, primarily in the private sector, but recognising that it would take some time for the volume of private investment to build up. There was an initial period of pumping in additional public investment. This is where I want to take up one other of Deputy Cluskey's [417] criticisms when he said that we have had all this borrowing and have nothing to show for it. I would have thought that what we had to show for it was noticeably increased spending in areas like telephones, roads, water supply, hospitals, educational facilities and energy facilities, all areas where spending had been cut back very drastically during the Coalition years and where it was necessary to catch up. Again, to work that one out fully we would have to get into a very detailed comparison of figures which I do not propose to attempt in the limited time available to me. The essential point is that there was a clear programme designed to shift spending in the direction of more investment, the investment being needed to provide more jobs that could be competitive and that would enable us to pay our way in the world. If that was the direction in which policy embarked, did it start to yield results? The answer is yes, again contrary to some of the attempts to rewrite history that have gone on today and in the recent past both inside and outside the House. The facts are that investment did rise very rapidly in 1978 and 1979 and, more especially, that it was private investment which rose fastest of all. The volume of private investment rose by almost 20 per cent in 1978 and by approximately 15 per cent last year. Although there will be no increase this year if we distinguish between investment in agriculture and investment in industry we can see that, despite the difficult conditions of 1980, there is still significant investment taking place in the industrial sector.

To revert to the basic point—the direction of movement was in accordance with expectation and was starting to yield results of the right order even if they had not built up quite to the scale of result that had been hoped for initially. Quite clearly by the time we had come into this year we were dealing with a different situation. Therefore what went wrong—and to take up Deputy Horgan now—who do we start to blame? I think we can all agree that in one sense part of what went wrong—I do not know whether or not we should attach blame [418] to anyone—was outside the country but all oil-importing countries, of an order of magnitude far greater than the previous crisis of 1973-1974. That is a point many people tend to overlook.

Mr. Horgan: Greater?

Professor O'Donoghue: Far greater. The 1973-1974 oil crisis added about £100 million to £125 million to our import bill. The 1979 oil crisis has added something like £500 million to our oil bill, a certain slice of last year and the balance this year.

Mr. Horgan: In percentage terms.

Professor O'Donoghue: In percentage terms it comes out as a bigger slice of our gross national product than the 1973-1974 one.

Mr. Horgan: But not as a percentage of oil price.

Professor O'Donoghue: If you start off, say, with a price of one dollar and then increase to, say, three dollars you have a 200 per cent increase. If you then go from three dollars to eight dollars you have only a 166 per cent increase but you pay five dollars more whereas in the case of the first increase you pay only two dollars more. This is the principle of what I was taking up with Dr. FitzGerald about there being nothing more misleading than a fact. Of course if it suits one's case, as it will on the Opposition side of the House, go ahead and quote the percentage increase in the price of oil. Yet one will get a smaller percentage increase. That makes no difference to the individual person paying for oil at the garage or elsewhere. Particularly it makes no difference to us as a nation having to pay the Arabs and the other oil producers for our oil. It is not the percentage they want to hear about, it is the numbers of millions of pounds you are going to pay out for it. And it is the numbers of millions of pounds which present us with our balance of payments problems.

Therefore I stand over my remarks that the impact of the 1979 oil crisis was much more severe not only on Ireland but on [419] all of the oil-importing nations of the world. That is one very important factor and is highly relevant to one of the issues we are discussing, namely, the level of government borrowing and the way in which to deal with our balance-of-payments deficit. If every country faced with this very large increase in its oil bill tried to correct that within one year, let us say, then the whole world would have to plunge itself into a massive recession that would easily match the great crash of 1929 in its severity. Fortunately the Governments of the world have a bit more sense and somewhat more experience today than perhaps they possessed in different circumstances 50 years ago. Therefore, it has been recognised that it would not be appropriate for every country to carry out the savage deflation that would be needed to cope with a rise in its oil bill of this magnitude. Were we to try to eliminate a £500 million increase in our oil bill in one year, look at the cutbacks that would have to be inflicted on the economy. The more sensible approach is to think in terms of coping with that payment over a period of years, by all means exercising some restraint or cut-back in your own consumption but also accepting a fairly substantial balance of payments deficit for a number of years and financing that deficit by borrowing the surplus funds from the oil exporting countries. The counterpart of all the oil-importing nations having to pay out a lot of money is that the oil importers take in a lot. This year they take in something like an extra £400 billion, four hundred thousand million dollars and, in practical terms, they are just not able to spend it all. In the jargon phrase, they have not got the absorptive capacity to make good use of that additional amount of money overnight. Therefore the correct policy for the oil producers is to relend some of that money rather than try to spend it all instantly. If they want to lend it the obvious people to whom to lend it are the oil importing nations who find themselves with this difficult problem of investment.

Far from there being any major problem associated with this balance-of-payments position needing more drastic [420] action to remedy, the sensible approach has been followed, not only here but in other countries, of seeking to correct one's deficit and to restore new balance to one's balance of payments over a period of years—a gradual build up in exports. If the Opposition Parties disagree with that approach, which is a very important part of economic policy in the wake of what could be called the new realities of the economic situation. I should like to hear a contrary policy from them. I have not heard one so far in this debate, or in any recent contributions from Opposition speakers. I invite them now, whether in the course of this debate or some time in the near future, to spell out any alternative policies which they wish pursued in that area.

So much for the external factors which would have caused the deviation from the original targets for growth and living standards and increased employment. This external shock was of very major significance and must be taken into account.

Secondly, there is the very important area of domestic behaviour where we can have some responsibility for and some influence on the results obtained. Here I would single out, in the limited time available to me, two areas which certainly started taking us off course. One is the factor already referred to in speeches from all three parties—namely, the effect of industrial disputes. There is no point in pretending that industrial disputes have not damaged our economy, of course they have. They have been one of the reasons why we have had both a slower rate of growth and a higher rate of inflation. The pattern in almost every case has been that output is lost and there are higher wage bills in the industries concerned, which brings about a deterioration in economic performance. Presumably, all parties will agree that that has been a factor. I do not know if Deputy Horgan wishes to assign blame to anyone for that state of affairs. If so, I should be interested to know if he wishes to attribute blame to Fianna Fáil or to Fianna Fáil policies for it. His leader tried to attribute blame to Government policies——

[421] Deputy Horgan: Surprise, surprise.

Professor O'Donoghue: ——when he said that the manifesto approach had generated unrealistic expectations, that is a perfectly legitimate political ploy. The quick, legitimate, political response which I would put forward with conviction is that during the Coalition years there had been a tremendous clampdown on pay adjustments in many areas—we recall the ban in the public service area from 1975 onwards. By the time there was a change of Government in 1977, the situation was virtually at explosive point. I recall particularly the acute difficulties in the post office area. Far from all the blame being attributable to Manifesto policies, a lot of the blame lay in the policies adopted during the Coalition years, but where is that going to get us? I see no point in trying to attribute blame at this stage. Much more important, given that, as a matter of fact we have had a number of industrial disputes of considerable severity and, more importantly, given that they are increasingly taking the form of unofficial disputes, what—if anything—do the parties recommend as a solution?

Deputy FitzGerald referred to the policy put forward by his party for dealing with unofficial strikes. Deputy Cluskey, in his turn, referred to the need for winning the support of all sectors for the necessary degree of income restraint. He further mentioned the importance of demonstrating justice in the operation of the policy. I am very much in agreement with him on the importance of being able to demonstrate the justice or fairness of the policies being pursued. However, there is one other important element in this issue which must eventually be faced up to and resolved and that is the recognition of the way in which power has accumulated in the hands of particular groups and the way in which that power is used.

The real, political issue at the end of the day is how—using legitimate democratic means—to arrive at a situation where power will be exercised in a more responsible manner and with greater regard for the interests of the community [422] as a whole and not simply exercised in a very narrow, selfish way to promote the short-term interests of and achieve short-term gains for the groups concerned. That is the real nub of the issue in this area. It may well be that legislation such as that proposed by Fine Gael may have some contribution to make to a solution but I cannot believe that legislation alone will solve the problem. It will be solved by facing up to and recognising the way in which power is acquired and used in a modern democratic society.

If we are to make some progress in this area, we must put forward a policy which will command sufficient support from all sections of the community, will be accepted as sufficiently fair and will be capable of being operated because we shall be dealing with the way in which power can be exercised by particular groups. This approach underlay the development of the national understanding. I was puzzled that Deputy Cluskey should claim that the Government had no policy for dealing with these problems. It has a quite clear policy which it has been operating over a number of years with a considerable degree of success. If one looks at the approach embodied in the national understandings of last year and this year, one will see that it attempts to tackle this very question of the way in which power will be exercised by the groups who have some responsibility for it. In the particular area of industrial relations, it seeks to involve the trade union movement and the employer bodies in operating an agreed set of policies which they will have agreed because they will have helped to negotiate them.

I have heard no alternative to that approach. If there is one which the Opposition Parties think is superior, I should be delighted to hear about it and have it debated on its merits or demerits, as the case may be. In the absence of any such proposal, I must assume that the Opposition are engaging in the traditional task of opposing. I must emphasise that point and note one thing which Deputy Cluskey said. This was that there had been a dropping of any reference to full employment as part of government policy. [423] That is not so. It was made clear earlier this year by the Taoiseach in the House, and it has been repeated in the context of the discussion of the national understanding, that it is the aim to promote the fastest possible progress towards full employment. That is why the national understanding was launched, to get agreement on a set of measures that would enable us to arrive at full employment at the earliest possible date. That is the real issue you have to face up to and, in addition, in the industrial relations area the question of the way in which power is acquired and used. We have to address ourselves to the more general policy issue if we want to continue to be relevant as a parliamentary democracy. That is the way in which we must tackle the whole question of what is a fair economic policy. It has to contain a commitment to achieving a sufficient level of employment—I would go further and say full employment—within a rapidly short span of years. If you do not offer some such commitment, how can you possibly expect to get the support of the growing number of young people for the maintenance of the system when it is not going to offer basic security and decency such as access to an adequate income and adequate housing and other facilities?

Remember, we have gone a good step along the way towards providing for them reasonably decent facilities in the earlier years of their lives. I am not suggesting we have arrived at Utopia, but we have been quite successful and the country can be reasonably proud of the progress which has been made in providing educational and other facilities for young people. Once they have completed that process and arrive at maturity, young adulthood, and want to make their own contribution in the world, surely we as a society have to be capable of holding out a reasonable prospect to them. If we do not, how can we expect that they will ever support the system as being in any sense fair or just, if it is going to deprive many of them of opportunities for employment and for achieving a decent income for perhaps a substantial portion of their lives?

[424] When people talk about the need to deal with shorter term problems, such as our balance of payments or the level of Government borrowing, it is important that they should not lose sight of the longer term direction in which we need to move, because there would be no point in seeking to achieve a cure for an illness—I will not say a major illness—by killing the patient. That is the essential point that should underlie our approach in this whole area of developing a national understanding which is geared towards promoting the fastest possible growth in employment, because what you are talking about then is using some of the growth that can take place in the economy, some of the productivity gains that can occur from the introduction of new technology and new firms, using the fruits of that progress to provide more work rather than providing higher incomes for those who already enjoy reasonably good jobs and reasonably secure employment. That is the nub of the problem that has to be faced up to in this whole employment area. I see no alternative to the approach enshrined in the national understanding. There is obviously not going to be an overnight solution.

In the meantime we come back to our more immediate concerns. What are we to do about inflation and the level of the public sector borrowing requirements? I will simply say quickly that there is no objective way of saying what is the correct level of public sector borrowing. It is much more a question of the purposes for which it is being used. Provided we embark on the correct policies, a higher level of borrowing with the right policies is infinitely preferable to a lower level of borrowing and the wrong policies.

The other extension that is needed very rapidly, if we are to make progress in this area of the right policy, is to bring the farming community within the compass of the national understanding. We should recognise that there has been a very severe turn around in the fortunes of the agricultural community in the last two years. They have suffered a very severe drop in income, one which would not be tolerated by any organised trade union group. If we are to do anything substantial [425] in the area of dealing with these shifts in income levels between groups in the community, then they must be present when the discussions are going on. That is one practical area in which I would want to see the discussion policy developed. I see I have to conclude, a Cheann Comhairle. There were a number of other points on which I would like to have touched but, alas, time has defeated me. I conclude on that note, that the issue before the House is the correct conduct of economic policy and, despite the noise and the hubbub from the Opposition benches, there is no evidence that they have any alternative policy to put forward.

I conclude on a personal note. I am very interested in the Fine Gael proposal for housing finance. I recall writing an article on that very topic, outlining that very scheme, which appeared in The Irish Times a few years ago. My recollection is that proposals to harness the sort of funds described had been going on for quite some time as a result of suggestions which had been developed over the past year or 18 months by various members of the Government. If the Opposition party find that this policy is implemented it will not be a question of our pinching their clothes but rather they recognising the policy which we are already pursuing.

Mr. T. J. Fitzpatrick (Cavan-Monaghan): Thanks for the advance compliment. We are discussing a vote of confidence in the Taoiseach and the Government. That motion has been put down by the Taoiseach in his own name, not because he feels that he is entitled to a vote of thanks or a vote of confidence but because he has been confronted by a vote of no confidence in the name of the Fine Gael Party and a vote of no confidence in the name of the Labour Party. That explains the Taoiseach's resolution, inviting the House to affirm its confidence in the Government. A much wider body of public opinion has already voted no confidence in the Government and the Fianna Fáil Party. Last year they faced the electorate in three different contests, two of which could be described as [426] national elections in so far as they covered every polling booth in the country, that is the European direct elections and the local elections. In both of those they got a resounding vote of no confidence and in the two Cork by-elections they got a resounding vote of no confidence.

In discussing a motion like this it is no harm to look back a little. This Government are responsible for the state of the economy since 5 July 1977 only. I want to go on record as saying they took over the economy on that date in a sound and healthy condition. It was handed over to them by the National Coalition Government who had brought it through a period of recession unlike this recession. The period of recession during which the National Coalition Government were responsible for the economy was unexpected. They brought the economy through that unexpected recession and handed it over to the Fianna Fáil Party in a sound and healthy condition.

Mr. Nolan: The people did not think so.

Mr. T. J. Fitzpatrick (Cavan-Monaghan): I do not think anyone denies that. No economist denies it, and it has not been denied since the change of Government. In this House in December 1977 the then leader of the Fianna Fáil Party, the then Taoiseach, during an adjournment debate described the economy as being in a healthy state and as being sound and ready to build upon. The Minister of State will not want to contradict that. He will not want to contradict publicly what the then Taoiseach said.

I suggest that we should start to look at the economy since December 1977 when the Government had and opportunity to examine the records, check the accounts and look at the bank balances. Eighteen months later the people were so disillusioned about the promises made to them in the manifesto, and the Government's performance on those policies, that they revoked the Government's mandate on three occasions between mid-summer 1979 and the end of that year. Their message to them in no uncertain language—in the language of the [427] ballot box which politicians understand—was that they were totally and utterly dissatisfied with the performance of the Government on the economy and their delivery on their manifesto.

The revolt did not stop in the ballot boxes. It continued in the party rooms on the fifth floor of this House. The Fianna Fáil back benchers revolted against the handling of the economy by the Government between July 1977 and November 1979. They forced the then leader of the Fianna Fáil Party to abdicate, and the economy and the country were handed over to the present Taoiseach who, of course, had to find a scapegoat or two or three for the mess into which the country had descended. Strange as it may appear, one of the scapegoats he found was none other than Deputy O'Donoghue who has spoken for the past 45 minutes. He was an economic Minister and he was sacked. Another economic Minister from the Minister of State's constitutency. Deputy Gibbons, was sacked. Presumably they were to be made an example of, and were to carry the can and take the blame as well as the then Tánaiste and Minister for Finance.

That was the position at the end of 1979. There were great expectations. Even people who were not admirers of Fianna Fáil said: “You may say what you like about Charlie but we believe he will do the trick in a short time.” That was the promise held out. What do we find since then? Just 12 months later instead of having improved, things have got infinitely worse. Unemployment has rocketed to over 100,000, the magic figure the former Taoiseach said would be justification for rejecting the Government.

We learned from the Minister of State in the Taoiseach's Department in reply to a question today that, between September 1979 and today, the national increase in unemployment is 27.8 per cent, almost 28 per cent. Growth is static. Borrowing has gone sky high. Generally the country is in an economic and financial shambles. From glancing through an article by an economist in today's Irish Times [428] it would appear to me that the receiver is on his way. Mr. Paul Tansey began his article in The Irish Times today by saying:

The level of borrowing by the Irish Government has now become so critical that leading economists are now openly discussing the prospects of a team from the International Monetary Fund being installed in the Department of Finance to run the economy before the end of the decade.

I can find no language to describe that paragraph other than to say that economists, some of them probably international economists, are talking in terms of putting in a receiver to run the country. In our worst times ever, I never heard anybody talking about putting in a receiver.

I want to say a few things about the Department of the Environment. The failure of the Government's economic and social policies has manifested itself in a most dramatic way in the Department of the Environment and in the local authorities which operate under that Department with the aid of funds provided by them. All the local authorities have been starved of finance by the Government during 1980. They are all in a financial crisis. Not one local council are in a position to provide the normal services for the citizens they are supposed to serve. Our roads are a national disgrace and are rapidly getting worse. Nothing is being done about water and sewerage facilities. Many schemes have been in the Minister's Department since 1977, and I admit before that, awaiting approval and authority to invite tenders for the jobs, and nothing has been done about them.

The local authority housing programme—I will have more to say about that—has come to a halt so far as new starts for 1980 are concerned. Housing authorities, excluding Dublin County Council and Dublin Corporation who have made separate applications, applied for a total of £38 million for new starts in February or March of this year for work they wanted to commence before 31 July 1980. Not one penny was allocated to any [429] of the housing authorities until 17 September 1980 when a sum of £12,268,000 was given to cover not only new starts but also existing commitments of the housing authorities for 1980. That is alarming in the extreme. We know that local authorities requested £38 million for new projects they wanted to start before 31 July. We know also, in answer to a question I asked today, that not one penny was given until 17 September 1980, many months after the commencement date and when we are going into the winter months. The sum of £12,286,000 was given not just for new starts but as an omnibus sum to cover new starts and the schemes that were in progress since the beginning of the year and for which money was needed.

It is an alarming state of affairs. The local authorities' national housing stock is being allowed to run down. Repairs are not being carried out and in a short time a huge bill will have to be met. Repairs are not being done because the authorities have not the money. The Government know the Department of the Environment have not done their job by the local authorities. The Department know that local authorities have been starved of finance and we know the result with regard to roads, new houses, existing houses, pollution and every other thing for which local authorities are responsible. The Taoiseach knows the situation also. He knows the Government have fallen down on the job with regard to the Department of the Environment and the local authorities but there is no better man than the Taoiseach to find a scapegoat. He found two or three scapegoats in the form of economic Ministers when he took over the Government 12 months ago and in his reshuffle of the Government recently he found another scapegoat to blame for the mess that prevails in the Department of the Environment and the local authorities when he demoted—according to the newspapers—Deputy Barrett who had been in charge of the Environment since July, 1977.

I want to go on record as saying that Deputy Barrett is not to blame for the [430] state of our roads, for the lack of housing programmes, for the lack of a pollution officer in Cork or for many of the other shortcomings in local government. He did not get the money. He is not responsible for those things; neither is he responsible for the fact that road workers are being made redundant, are put on short time and are being sent out to work with picks and shovels when they should have machinery. It is not my business to defend Deputy Barrett, and I am sure he does not want me to defend him, but it is not good enough for the Taoiseach to make a scapegoat of the Minister, while trying to pretend to the people that Deputy Burke who has been promoted and put in charge of the Department of the Environment will wave the magic wand and cure everything. He cannot do his job unless he gets money. His only advantage to the Taoiseach will be that he is the most junior of the Cabinet Ministers and questions for his Department will not be reached as soon as would be the case with Deputy Barrett.

Let us look at the Department of the Environment because it is important and let us see why we have crazy economics prevailing in county councils throughout the country. When Deputy O'Donoghue was in office he had no solutions for anything, and according to the Taoiseach he should not have been in the Cabinet at all, but now he comes here, making speeches from the back benches and apparently has solutions for everything. The fact is that Fianna Fáil had a policy when going into the last election to remove rates in one operation but they had no policy, and never found one, to replace the revenue they took away from local authorities. Former Fianna Fáil Ministers were satisfied to paddle along with the pedestrian title of Minister for Local Government but when Fianna Fáil took over again there were many new handles and titles and Deputy Barrett was given the title of Minister for the Environment. He took control of the finances of local authorities on the direction of the Government and, at a time when inflation was raging, and is still raging, at about 20 per cent, he restricted the finances of local authorities to an [431] increase of 10 per cent. That is as simple as I can put it.

Although national inflation was raging at 20 per cent, figures showed that price inflation in local authorities was as high as 30 per cent because of wages and the cost of materials for roads. At a time when it took £130 to do a job the Minister for the Environment told local authorities they would have to do that job for £110. He left them £20 short in every £130. Local authorities, as Members of this House know, must pay certain charges in full—salaries of higher officials, statutory contributions to one board or another and so on—and there are only a few discretionary spending areas, roads, housing repairs and so on, but there was no increase for these categories.

Members of our party went to county council meeting after county council meeting on the estimates this year and said that the amount being allocated was not enough and that men would have to be let go if a proper budget was not prepared and sanctioned by the Government. The odd county manager who was brave enough and regarded himself as the watchdog of the people of his area rather than acting as a smokescreen or an umbrella for the Department of the Environment or the Government, put it in writing to members of his council that the rates being struck were inadequate. What we said then has proved to be right. The roads of Ireland proved it.

In many councils men who were not superannuated but who were normally kept on were let go. I make no apology for giving the example of my own county, Cavan. I want to put it on record that at first it was proposed to sack 85 road workers. There was a row about that and it was then decided that 42 men would be let go. To make a long story short, the solution found was to dispense with 16 men and put 60 men on a three-day week. That is something that has never happened before and demonstrates the point I am making.

In other counties men were kept on [432] but machinery was dispensed with and materials were not available in sufficient quantities. The men on a three-day week are paid for three days by the county council, they sign on the labour exchanges and get three days' unemployment benefit from the Government. They are not taxed on their social welfare. That is the craziest brand of economics I know. These men do not want to be on the dole; they want to work. Why not keep them working by supplying the necessary materials? Putting men on a three-day week might make sense if the employer was a private individual who was saving a half week's wages while the State was making up the other half; but here we have the State paying a half week's wages and unemployment benefit while losing the income tax and getting only a half week's work. If that is not crazy economics I would like somebody to put a name on it that would adequately describe it. I do not think I have to speak any longer on the finances of local authorities because what I said puts it beyond yea or nay.

The number of people unemployed in the building construction industry at June this year, according to official figures, was 2,000 higher than it was 12 months ago. It is common knowledge that since June many firms have been letting men go. Official figures are not available but the best guess is that there are about 4,000 unemployed in that industry. That would fit in with the figure given by the Minister of State, Deputy Moore, of an increase of 27 per cent since September 1979.

A lot has been said about the national understanding. The Government gave the employers an undertaking that they would maintain employment in the building industry at the same level as last year, but they are doing nothing about it. If things were bad in the building industry and no promises had been given that would be bad enough, but promises were given that the rate of employment would be maintained at last year's level and nothing has been done; things are getting worse.

There has been a large cut-back on [433] sanitary services. I know of one contractor who applied for 14 different medium and large public contracts. He was told that each contract was being postponed. But the position is even worse than that. County managers were told not to send up schemes, in other words, not to embarrass the Minister. There has also been a big cut-back in the civil engineering section of the building construction industry and in roads. The Department published a well-presented document in March 1980 which outlined all the road programmes that were to be undertaken between now and 1985. Between times, instead of that road policy being implemented, it has fallen behind badly.

The local authority house building programme has come to a halt. In February and March £38 million was applied for, the work to commence before 31 July. Not a tosser was given until 17 September when £12 million, instead of £38 million, was given to meet existing commitments.

Another interesting thing is that the Government are damaging the local authority house building programme, not alone for this year but for years to come. The official bulletin issued by the Department shows that the number of local authority houses at the planning stage at the end of last year was 2,000 fewer than the number for the year before. That situation is bound to manifest itself this year and next year also. So much, then, for local authority housing.

As regards the private building sector, one need only drive through the country and see all the auctioneers' advertisements offering newly built houses for sale to realise that the situation in that area is bad also. In many cases, these advertisements have been up for many months.

There are other tell-tale factors, too. According to the information at my disposal, sales of cement for the third quarter of this year are down 34 per cent compared with the figures for the corresponding quarter of last year. This cannot be attributed entirely to house building. Some of the down fall is due to the recession in agriculture. Because of the depression in that sphere farmers are not [434] building, either. But there is another factor in relation to this reduction in cement sales. There are anti-damp courses which are sold as a parcel and which are put in near the foundation at house-building stage. I understand from reliable sources that the sale of these damp courses has practically dried up.

Mr. Horgan: That is a very appropriate phrase.

Mr. Leyden: I wonder where the Deputy got that information from.

Mr. T. J. Fitzpatrick (Cavan-Monaghan): I am sure that if Deputy Leyden checks this information, he will find that it is correct. The point is that the Government are not doing anything to rescue the building construction industry despite their promise in this regard.

A commitment in the national understanding was that there would not be any change in the employment content of the building industry from 1979. That commitment has not been kept. The Government were asked also to provide incentives for work abroad. There are many large building firms and contractors here who have the machinery and the organisation necessary to undertake large contracts abroad. It is customary for national governments to provide assistance by way of tax concessions, for instance, to any such people who are willing to engage in such contracts but the Government have not done anything in that area.

I have said enough to indicate that the building industry is in a bad way. Yesterday in a document which we published we put forward proposals which, if accepted, would render it possible for people whose incomes leave them outside the local authority housing list means test but who cannot afford to pay 50 per cent or more of their incomes to service loans, to obtain loans which would cost them 17½ per cent of their incomes or certainly not more than 20 per cent. The money for such a scheme could be raised by issuing 25-year bonds which would be taken up gladly by way of pension schemes and life assurance funds, an area in which there is about £300 million that [435] could be invested. The proposed return on these bonds is a built-in protection against inflation, plus 2 per cent. I am very pleased that that proposed scheme has been welcomed by Deputy O'Donoghue. Unfortunately, he did not put such a scheme into operation when he was in office, having regard to the fact that he appears to have known so much about it. Is it any wonder that one often hears the remark that one should not publish policy in advance of an election? We published that policy because we had it prepared and because we believe that if it were put into operation now it would do something for the building industry and that it would help those young married couples who are not in a position to get houses because of their not being able to afford 52 per cent of their salaries on mortgage repayments. We should be delighted that Fianna Fáil would take the scheme and put it into operation. They have given us a speedy welcome though we had not heard a word from them about any such scheme prior to the publication of our proposals yesterday.

Deputy O'Donoghue tells us that the farmers are coming through a trying period, that they are experiencing a loss of income, that their incomes are reducing substantially yearly. All I can say in that regard is that such a time is a rather odd time to impose a tax on that sector of the community, a tax which is designed not to take any account of a person's capacity to pay or of whether he is in a profit- or a loss-making situation. Since Fianna Fáil returned to power there have been a number of such taxes. There was the 2 per cent tax, the 2 per cent levy and the resource tax of £3.50 per £ valuation.

However, the biggest joke of all is to hear Fianna Fáil boasting about the farmers not being asked to pay the second moiety of their rates this year. These are rates which are recognised as being an inequitable form of taxation, a form of taxation which does not have any regard to a person's income or to his capacity to pay.

I would remind the Taoiseach that he [436] is leaving the farmers worse off from a rates point of view than was their position last year. Last year, for instance, a farmer with a valuation of £40 and in an average county would have paid less than £200 in rates. However, as I said here many times when the Rates on Agricultural Land (Relief) Bill was going through, that legislation would have the result of that same person being asked to pay almost £500 in rates. Now Fianna Fáil are clapping themselves on the back because such a farmer will be asked to pay only £250. Has anyone ever heard such nonsense? Is this a way of encouraging agriculture?

I should like to say a lot more about agriculture but there are a couple of other points I should like to make before concluding. I do not know how the Government are running the country but I am aware that the last budget provided for a dramatic cutback in relation to school transport. That drastic cut was announced after the budget but there was then a type of round robin in Fianna Fáil. There was a furore within the party because of that announcement with the result that the proposal was dropped. I was glad that that happened. We have not heard since where the money is to come from. About £5 million is lying around somewhere to pay for transport between now and the end of the year. I put a question down to find out how it is proposed to reimburse the county councils for the £7 million that they will lose in this rates business and the income they will lose by going easy on the taxpayers and I would be glad to know the answer.

Normally speaking, how Fianna Fáil behave as a party or whether they are indulging in political cannibalism would not concern us but this debate shows that the country is in a sorry state economically and that the country needs the full and undivided attention of a Government and a Taoiseach. We have in office at the moment a Taoiseach who spent the summer having plaques to himself unveiled, and creeping out of caves, and when he was not doing that he was watching certain people in the party and in the Cabinet to see when they were going to stab him in the back. How could that man [437] devote his full time and attention to running the country? There is dreadful strife in the Fianna Fáil party. This is important because if a man is in charge of a factory, a farm or whatever, if he is distracted he cannot keep his mind on his business and he is not doing a good job. This Government led by this Taoiseach, having regard to their recent past, cannot devote their time to the Government of the country and the sooner they are replaced the better.

Mr. Leyden: Contrary to Deputy Fitzpatrick's scurrilous comments we are fortunate in having a united Government and if we had to rely on the very divided Opposition parties we would be in a sorry state. The situation is that in Fine Gael we have the alleged leader, Deputy Dr. Garret FitzGerald and the leader-in-waiting Deputy Richie Ryan, and Deputy Ryan is so anxious to become the leader that he wants to take on the leader and beat him in his own constituency. That is a sure sign of division. The former Minister for Finance is trying to unseat the leader of the Opposition in his own constituency.

An Leas-Cheann Comhairle: We will get back to the debate now, Deputy. I gave Deputy Fitzpatrick two minutes on politics and the Deputy has now had his two minutes, so we will go back to the debate.

Mr. Leyden: The leader of the Labour Party has now come in. His deputy leader is also trying to undermine him.

(Interruptions.)

An Leas-Cheann Comhairle: Will Deputy Leyden get back to the debate. We have finished with politics for a while.

Mr. T. J. Fitzpatrick (Cavan-Monaghan): Will the Deputy go back and look after the Minister of State, Deputy Doherty, he is a full-time job.

(Interruptions.)

An Leas-Cheann Comhairle: Let us get back to the debate.

Mr. Cluskey: If the Chair were in his [438] position would he like to get back to the debate?

Mr. Leyden: I am concerned about whether both leaders of the Opposition will be re-elected. I would like to see people of their dedication not their ability re-elected as Deputies.

(Interruptions.)

Mr. Leyden: If Deputy Dr. O'Connell does not unseat Deputy Cluskey and Deputy Ryan unseat Deputy Dr. FitzGerald, they can solve their problems after that.

An Leas-Cheann Comhairle: Forecasts about the next election have nothing to do with this.

Mr. Leyden: I am honoured to have the opportunity of speaking on this motion:

That Dáil Éireann re-affirms confidence in the economic policies of the Government and expresses approval of the measures being taken by them to mitigate the effects of the present world recession, to expand employment, to assist the agricultural industry and to promote general economic development.

I am proud to compliment, in Dáil Éireann, our Government on their fine performance. We are fortunate in having an effective leader in Deputy Haughey and in having a good Cabinet working as a team for the country. The House will have no hesitation in giving the desired mandate to this Government to continue their term in office. We are sailing through difficult waters at present but we have a good captain and a loyal crew of Ministers. This leadership has the confidence of the people and when we vote overwhelmingly on Thursday next, their confidence will be strengthened. As the Taoiseach said, we have serious difficulties. The Taoiseach clearly outlined the situation and the efforts being made by the Government to maintain and expand employment. The Taoiseach's contribution was a very detailed speech on the economy. There was no running away from the situation. We are facing the [439] situation and dealing with it.

Last week the Taoiseach, the Minister for Agriculture and the Minister for Finance announced that the second moiety of the rates from £40 to £60 would be waived for this year. I made representations to the Minister for Agriculture in relation to farmers who have already paid the second moiety from July. I understand that where this occurred the second moiety will be given as a credit note for the rates of 1981. I commend the Minister for introducing this concession and for allowing people who had already raised the money to pay the rates not to be disadvantaged. This concession was badly needed because the farming community have suffered a cut in their incomes not through any fault of the Government but because of the international scene. Agricultural costs have risen as well as the cost of oil and this has caused the cut in farm incomes.

Along with that concession we have to look back to August when the Taoiseach, the Minister for Finance and the Minister for Agriculture met the farm leaders. That meeting took place at a time when we were facing a major fodder shortage. The decision of the Government to introduce a fodder scheme was a clear indication of good leadership and for this reason I should like to commend the Minister for Agriculture. Deputy MacSharry has proved to be a most effective Minister in that Department since he took office less than 12 months ago.

In 1974 when the National Coalition were in power Deputy Clinton, as Minister for Agriculture, faced a major crisis with regard to feeding cattle in the winter of 1974 and the spring of 1975. However, Deputy Clinton, who is regarded by the farming community as having been a fairly good Minister, was not able to do anything about that situation. Taking that into consideration we must look upon the present holder of that office as a tremendous asset in the Government. He has managed to prevent a similar problem arising this winter.

Mr. L'Estrange: Who does the Deputy think he is codding?

[440] Mr. Leyden: Deputies will recall that Deputy Clinton introduced the £7 voucher scheme for buying feed. I do not have to remind the House that there was a wholesale scandal and fraud in relation to that scheme and the vouchers were not honoured until Fianna Fáil returned to office in 1977. It was not until then that many of the millers and small traders were refunded the money they gave out on credit under that scheme. If Deputy L'Estrange checks the record he will find that what I have said is true.

Mr. L'Estrange: The place was burned down. There was a law case which was only settled last year. The Deputy should not blame Deputy Clinton. He did not burn down the building, I can guarantee the Deputy that.

Mr. Leyden: I am not accusing the National Coalition of having burned down the building.

Mr. L'Estrange: Others did.

An Leas-Cheann Comhairle: When the Chair calls Deputy L'Estrange he will have permission to speak but not until then.

Mr. L'Estrange: Let us hear the truth.

Mr. Leyden: A scheme that is undermined by the burning of a building is a very ineffective one. The National Coalition also went down in flames in 1977 and, unlike the phoenix, will never rise from the ashes.

Mr. L'Estrange: The ship of State is on the rocks now and the captain is lost in the mist opening cowsheds.

Mr. Leyden: I am anxious to compare the effective way the Minister for Agriculture has dealt with the problems this year with the way Deputy Clinton dealt with similar trouble in 1974. We now have effective leadership in the Department of Agriculture. I am glad Deputy L'Estrange has confirmed that the scheme I referred to did not work because a building was burned.

[441] Mr. L'Estrange: The records were kept in that building.

Mr. Leyden: The farming community faced a real crisis in 1974. In County Roscommon, and other western counties, cattle died along the side of the road and at marts cattle were sold for £100 although they were worth up to £400. It was impossible to give calves away. At a recent party meeting we discussed that situation and compared it with the present difficulties. The difference is that now the Government are prepared to take action to rectify the matter. In 1974 when I was a member of Roscommon County Council I appealed at every meeting to the Government to help the farming community.

Mr. L'Estrange: What party did the Deputy belong to then? Independent? The Deputy could not have been in Fianna Fáil at that time because he had been expelled.

Mr. Leyden: All the National Coalition did to help the farming community was to introduce the £7 voucher scheme but it did not work because the building was burned down. The Taoiseach today outlined the realities of the situation in relation to unemployment. This level of unemployment is unacceptable to Fianna Fáil but it would be acceptable to the National Coalition. It is no harm to remind the Opposition that in 1977 we allowed single girls and widows to claim unemployment assistance. That concession increased the number of people on the live register. If we had done as the National Coalition did and concealed the truth the number on the live register would be less than 105,000.

Mr. L'Estrange: It is 160,000 if one takes account of school leavers.

Mr. Leyden: We are honest enough to give the exact figures. It should be remembered that many of those on the unemployment register are not employable. If that number is taken into consideration the real figure of unemployed is [442] a lot fewer. It is the policy of the Government to create positive employment. That is being done by people like the Minister for Industry, Commerce and Tourism who is making great efforts, with the IDA, to promote industry. As a representative of the constituency of Roscommon-Leitrim I am aware of the work that has taken place in that part of the country since 1977. A very good advance factory programme has been carried out and many people are gainfully employed in industries sited there. We have been fortunate enough not to experience the job losses that occurred between 1973 and 1977. We are anxious to get more employment for the area but we are well satisfied that the Government are doing everything possible to create more employment in rural areas.

The announcement by the Taoiseach recently that the policy of decentralisation will continue has been welcomed. The policy was introduced by Fianna Fáil and we will continue to carry it out.

Mr. L'Estrange: In Donegal?

Mr. Leyden: The moving of the Department of the Gaeltacht to Connemara has been welcomed by those who live in Gaeltacht areas. I look forward to the day when a semi-State concern, like Bord na Móna, will be located in County Roscommon where turf is produced. I understand that in the next few weeks there will be a detailed announcement about the decentralisation of sections of Departments.

Mr. L'Estrange: Will it be before Donegal?

An Leas-Cheann Comhairle: If Deputy L'Estrange went to Donegal for a couple of days we would have great peace here.

Mr. Leyden: I hope County Roscommon will benefit from that decentralisation scheme. The west would benefit if Government offices were sited in western towns as has happened in Athlone and Castlebar where sections of the Departments of Education and Lands have been sited.

[443] In recent weeks we saw evidence of how effective the Government are when they decided to call in the Army to deal with the very damaging unofficial dispute by the oil tanker drivers. That was a courageous decision and it was one that was applauded by the nation. The Government showed their strength in the way they dealt with that dispute. I doubt if a Coalition Government which would be split because of divisions between Labour and Fine Gael would have had the courage to call in the Army to solve such a dispute.

Mr. O'Keeffe: Very few unofficial disputes took place when the National Coalition were in power.

Mr. Leyden: Fortunately, sanity has prevailed and oil is available at all filling stations. That dispute cost the country a great deal of money and it took courageous action on the part of the Government to bring about an early settlement of it. I was overwhelmed at the number of letters, phone calls and personal approaches conveying appreciation of the Government's action in relation to that dispute. The volume of congratulations reaching the Department and the Government was tremendous. We had a most effective action team in the Department of Energy working on emergency supplies and I congratulate the Minister involved, Deputy Colley and his staff who worked with dedication in the past few weeks in ensuring that supplies would be distributed throughout the country.

Mr. L'Estrange: You did not vote for him.

Mr. Leyden: It is appropriate to give credit where credit is due. I believe this action has stabilised a situation that was getting out of hand regarding unofficial disputes. It is one of the curses of the country that a situation should prevail where you would have one man, as in the case of ICL, holding up distribution of fuel in the country. Fortunately, that man has now withdrawn his picket and supplies are being restored. I know the Government [444] are deeply concerned about this phenomenon that would allow one picket to keep people from work. As it happened the courts took no action because they could not take any action against him. I hope the Government will bring in legislation which will prevent and outlaw this maverick type of behaviour.

In passing a vote of confidence, which I do not doubt will be passed on Thursday, we are expressing confidence in the Taoiseach and his team collectively and individually. If you go through the Ministers and their performances I believe the country would be satisfied with the manner in which they are running their Departments. The programmes they are following are bringing about the desired results. You have effective leadership in the Department of Agriculture from Deputy MacSharry who is doing tremendous work. The Minister for Industry, Commerce and Tourism, Deputy O'Malley, is very effective in the creation and retention of employment. These are two young Ministers in very sensitive areas who are absolutely on top of their jobs all the time. We are fortunate in having that calibre of Ministers to run the country.

In Fianna Fáil we do not personalise as the Opposition have done in the past. They are less anxious now to personalise during debates because they get a very clear message from their constituents that the scurrilous attacks made on the Taoiseach last December were unacceptable to the Irish people. The people's sense of fair play and honesty was shocked and horrified by the way the Taoiseach and the Government were attacked last year. We in Fianna Fáil will not personalise regarding the defects of the Opposition in this House or on their defects when they were in Government. We will deal with them in the Departments they headed at that time. Some of them ran their Departments into the ground and when we came back to office we had to resurrect them and ensure that they worked effectively. As regards agriculture so many improvements have been announced in the past few months——

[445] Mr. L'Estrange: The farmer's income has dropped 50 per cent in two years. Is that an improvement? There is plenty of room for improvement.

An Leas-Cheann Comhairle: The Deputy should not interrupt.

Mr. L'Estrange: How could you call that an improvement?

An Leas-Cheann Comhairle: Each Deputy has a very limited time in this debate and if the Deputy offers he will be allowed to speak.

Mr. Leyden: It must be pointed out that headage payments in disadvantaged areas of £22 and £18 announced on 1 August 1980 are being increased by £10 to £32 and £28. The corresponding rates in 1979 were £17 and £13. These new rates will apply to this year's headage payments including cases where inspections have already been made. They will provide a strong incentive to expand the beef breeding herd and so counter the downward trend which has applied for the past six years or so. That was one scheme where action was taken. In regard to the beef suckler scheme, I am quoting from the official statement issued through the Government Information Office after the meeting in August with the farm leaders. It is important to place on record the improvement in these schemes. The new beef suckler scheme was introduced forthwith financed by the EEC. A grant of £13.18 will be paid on cows in beef suckler herds in all parts of the country. An additional grant of £12 will be paid out of national funds on each cow in a beef suckler herd at two inspections under this year's scheme over and above the numbers at the time of the 1979-80 test for tuberculosis. This will be subject to clearance by the EEC Commission. In next year's suckler scheme a national grant will be paid on extra beef cows under inspection within the scheme.

I could go on to mention all the improvements announced in August to counteract in many ways the fall in income in the farming community. We are well aware of that fall but the Government [446] are taking the necessary action to cushion its effects. They are taking positive action on all sides to help the farming community. This is surely an indication of the hard work of Agriculture Minister, Deputy MacSharry, who is from the west of Ireland and is very much aware of the plight of farmers at present. We shall continue to do everything possible to cushion the effects of recession for farmers.

We have also taken very positive action in the energy field. Efforts being made now in the Department of Energy to obtain the maximum potential from the bogs of Ireland will provide indications that we will not need—at least in the foreseeable future—a nuclear power station. The work of the Minister for Energy could result in this country not having to go nuclear. Personally I would be reluctant to advocate nuclear energy except as a last resort. If a decision is ever to be taken on going nuclear I would be in favour of a referendum on the issue. That would be the only way of getting the people's view, in my opinion. It is a matter I would have to consider very seriously if a decision were made to go nuclear. The decision has not been made, or it certainly has been delayed by effective leadership in the Department of Energy. The Taoiseach created that new Department last December because he knew how important that section of our economic life was and he saw how vitally necessary were the services of a full-time Minister. We are fortunate in having that type of leadership in that Department. In my constituency of Roscommon and part of Galway we are in the process of providing a briquette factory in Ballyforan near the Galway-Roscommon border. This was a decision made during a Fianna Fáil term of office in 1978 or early 1979 and it will help to make us more self-reliant in regard to energy. The demand for briquettes is tremendous and far exceeds supply. I believe we can rectify that situation by building this briquette factory in Ballyforan. I support the policy to build such a factory in the new constituency of West Roscommon which I represent. There are 24,000 acres [447] of good undeveloped bog there and a factory and power station should prove worthwhile employment. I am asking the Minister for Energy to investigate the economic possibilities of that area fully. Not only would it help our energy needs but it would create much needed employment. Deputy Dennis Gallagher who is now in the House knows the situation in Roscommon on the border with Mayo, which he represents. There are similar characteristics, with small farms of low valuations.

In another part of the constituency the Government have decided to erect a coal burning station using waste coal from the Arigna Collieries. I hope that power station will be developed soon because not only will it provide employment but it will use thousands of tons of waste coal in the Arigna Valley. Generally, I am indicating the type of effective leadership we have in each Department. Individually, each Department is being run in the best possible way and the proof of that is in the achievements so far.

Mr. O'Keeffe: Why, then, is the country in such a mess?

Mr. Leyden: Since 1979 there have been many useful developments in regard to energy. In the Department of Education we have a most efficient ministerial team in Deputies Wilson and Tunney, both of whom are working effectively——

Mr. Horgan: Retrenchment.

Mr. Leyden: We have had a report on teachers' salaries. I know the Minister is negotiating with the three teaching unions and I have no doubt there will be agreement to ensure that the teachers will share fairly in the economic progress we have made. They are doing a tremendous job and I know they have full confidence in the Minister for Education and what he is doing. From the point of view of my constituency we are fortunate that the Minister has approved a major extension to the Convent of Mercy in Strokestown.

Mr. O'Keeffe: You are unique.

[448] Mr. Leyden: There is the possibility of a new vocational school in Roscommon town. I expect good news about the allocation of funds for it in the next few months.

Mr. O'Keeffe: We will be expected to provide them.

Mr. Leyden: The new school in Roscommon will be on a 15-acre site. In another part of the constituency, Ballygar—I am crossing the county boundary—we hope to hear the Minister announce a new school extension costing a considerable amount of money. I will not go into the numerous national school projects in my constituency in the last couple of years and the progress made generally in this sphere. I should like particularly to compliment Deputy Tunney for what he has done in regard to school transport since he came to office in 1977. He has brought about many innovations resulting in many more young people being carried on school buses, and I am confident he will continue along those lines. It was Fianna Fáil who initiated the scheme of free school transport which is so vital in rural areas where roads can be dangerous for school children.

In the last day or two we had the good news that the Minister for Foreign Affairs, a former Deputy for my constituency, had succeeded in getting us a seat on the UN Security Council.

An Leas-Cheann Comhairle: All the Chair can do is remind the Deputy that he is placing the Chair in a difficult position. There is not a word about education or foreign affairs or any of the other matters in the motion——

Mr. Leyden: I would not like to have a row with you.

Mr. O'Keeffe: As long as he keeps to this irrelevant rubbish it does not make any difference.

Mr. Leyden: The Government includes every Minister—they are all part of the Government.

[449] An Leas-Cheann Comhairle: The motion and the amendments are very specific in regard to what Deputies may debate. I have allowed the Deputy a lot of latitude.

Mr. O'Keeffe: It is a lot of rubbish anyhow.

Mr. Leyden: Are we to have the same difficulty as we had before the recess? Are we to have a recurrence of the behaviour?

Mr. O'Keeffe: It is up to the Deputy.

Mr. Leyden: I was about to congratulate the Minister for Foreign Affairs on securing a seat for us in the Security Council. We have been in the UN since 1965 and this is the first time we have achieved it.

Mr. L'Estrange: It is the second time.

Mr. Leyden: I read in The Irish Press today that it is the first time.

Mr. L'Estrange: That is it.

Mr. Leyden: I stand corrected. I thought it was the first time. I presume the other occasion was when Fianna Fáil were in Government.

Mr. L'Estrange: I think it was 1962.

Mr. Leyden: I congratulate the Minister for Foreign Affairs on this great public relations exercise for this State. We certainly deserve the seat but we would not have got it without the work of the Minister for Foreign Affairs.

Mr. O'Keeffe: It will not feed our people.

Mr. L'Estrange: If the people of Roscommon had not sacked him Deputy Leyden would not be here representing them.

Mr. Leyden: The Deputy may not be here for long. I hear that Senator Cooney wants to get rid of him.

[450] An Leas-Cheann Comhairle: The Chair will have to get rid of someone in a minute. Deputy Leyden has seven minutes left.

Mr. Leyden: I was going through the list of Departments and availing of this opportunity to record the developments in the Departments and to compliment the Ministers on their performances. I feel confident facing a general election with a team such as we have today. I have every confidence that whenever that election is held the people will give a confidence vote, such as we will be giving here on Thursday, and a decisive mandate to the Government to lead on for the next four or five years.

Mr. L'Estrange: And open another few cowsheds.

Mr. Leyden: I do not want to give the Opposition any bad news because I know they are all anxious to get their hands on the jobs and the ministries——

Mr. O'Keeffe: The Deputy has no interest himself?

Mr. Leyden: I am interested in representing my constituency and intend to be re-elected with the help of the people in my constituency. I should like to deal with the Departments of Posts and Telegraphs and Transport and compliment the work of the Minister, Deputy Reynolds, Ministers of State, Deputy Killilea and Deputy Flynn. They are a great team doing great work in that difficult Ministry. In the last few months we have taken major decisions in relation to the provision of proper telecommunications. These Ministries have been given a new lease of life under the Minister.

Mr. O'Keeffe: After four years of Fianna Fáil Government they would want to.

Mr. Leyden: Without proper telecommunications it would be impossible to have industrialisation. The Minister indicated that there will be 60,000 connections in 1980. I hope he achieves this [451] target but even if he gets 40,000 it would be great progress. It will not be the fault of the Minister or his Minister of State if we do not have that achievement in that Department.

Mr. L'Estrange: Is the Deputy downgrading what the Ceann Comhairle did for the previous three years? Remember Deputy Faulkner was there.

Mr. Leyden: I do not wish to refer to the Ceann Comhairle. It is not appropriate——

An Leas-Cheann Comhairle: The Chair should not be involved in any debate. The Deputy has about four minutes to finish.

Mr. L'Estrange: Deputy Faulkner did one good job—he got a decent man back in the Cabinet.

Mr. Leyden: We have had an effective leadership in the Department of Posts and Telegraphs since 1977. I should not like to have it implied otherwise. I am talking about Ministers with present portfolios not Ministers with previous ones. In the health services the Minister, Deputy Woods and the Minister of State, Deputy Nolan, are doing great work and we are proud of their achievements.

(Interruptions.)

Mr. O'Keeffe: That Deputy Tully did not have for lack of money.

Mr. Leyden: I am confident that the Minister and his team will bring about a just settlement to our demands for improved facilities in the county hospital in Roscommon.

Mr. O'Keeffe: They could not keep the one they had going.

Mr. Leyden: In relation to the Departments of the Gaeltacht, Defence, Fisheries and Forestry——

Mr. O'Keeffe: Do not forget the 50 mile limit.

[452] Mr. Leyden:—Justice, Finance and Industry, Commerce and Tourism I should like to compliment all the people involved in those Ministries and the work they are doing. My colleague, Deputy Doherty, is dealing with law reform and doing tremendous work in relation to the licensing laws——

Mr. L'Estrange: He should know about that alright.

Mr. Leyden: In case I leave out Deputy Moore all I can say is that as Minister of State in the Departments of the Taoiseach and Defence he has given a new lease of life to Civil Defence. I know from those involved——

An Leas-Cheann Comhairle: The Deputy's time is up. He has covered every single Department, senior and junior.

Mr. O'Keeffe: He kept well away from the economy and I do not blame him.

An Leas-Cheann Comhairle: The motion and amendments only covered three Departments.

Mr. Leyden: I reaffirm the confidence of the House in the Government. It was only fair to go through all the the Departments. The whole team working together effectively——

Mr. L'Estrange: Are they?

Mr. Leyden:——have the confidence of the country. That will be proven after the next general election.

Mr. O'Keeffe: God help us.

Mr. Leyden: That will be the real proof. In the by-election in Donegal which we are not allowed to mention——

Mr. L'Estrange: Fianna Fáil are divided down the middle.

Mr. O'Keeffe: The Deputy can mention Cork.

[453] Mr. Leyden: I have every confidence that our candidate in Donegal will be elected.

Mr. Moore: The Deputy was good all the same.

Mr. O'Keeffe: It will look well in the Roscommon Herald.

Mr. Horgan: We have reached something of a watershed in Irish politics. Oppositions are traditionally renowned for spending other people's money but in this debate on the economy it is from this side of the House, and these benches in particular, that taxation is being proposed. It is the Government who are finding the miraculous pots of money which are the prerogative of the Opposition.

It was rather unfair of the Government to send in Deputy Leyden at this stage because he raises so many hares it is difficult to resist the temptation to follow him. I do not intend to follow him down many of the boreens he opened up but, in justice, a number of comments are required. I was particularly intrigued, as Sherlock Holmes was by the dog that did not bark in the night, by the absence of any reference in Deputy Leyden's speech to the fact that he is allegedly a socialist. In this House in the past few years he has described himself as a socialist and spoke about the unacceptable face of capitalism, the profits made by the banks and so on. We must remember that talking about the unacceptable face of capitalism does not make one a socialist. It only means that one prefers the acceptable face of capitalism.

It is obvious from the content of Deputy Leyden's intervention that the reason he has now suppressed the word “socialist” from his political self-description is that from now until the next general election he will be chasing socialists, finding them under every bed in Roscommon, flushing them out and trying to destroy them in the name of Fianna Fáil and democracy.

Mr. Leyden: The Reds have gone from Roscommon.

[454] Mr. Horgan: I am glad that Deputy Leyden no longer includes himself in this splendid category of people. It is fairly obvious that in the absence of any real ammunition with which to reply to the reasoned amendments to this political confidence trick which the Government motion is, the Government speakers are increasingly taking the line that the only way out of their predicament is to attack the Opposition. They do this in two ways. First of all, they accuse the Opposition of being divided. For Fianna Fáil to discover, after three-and-a-half years in Government, that there are not one but two political parties on these benches gives them low marks. Their second line of attack is to accuse us of making personal attacks on the Taoiseach in the furtherance of our political objectives. Nobody can get into politics without an ego that is to some degree larger than average. The political ego of the present incumbent of the office to Taoiseach obscures the horizon to such a degree that the public have been encouraged to believe that all the political attacks which are being made on him, especially from these benches in which I sit, and upon his policies and the policies of his administration are personal attacks. I do not believe that the people will be fooled for any length of time by this attempt to blur the essential distinction—a distinction which is essential to the conduct of real politics in this country—between political attacks and personal attacks. This “Hit me now with the child in my arms” cry from the other side of the House whenever the Taoiseach's name is mentioned regardless of the political context will not wash very much longer, if it still washes, which I doubt.

I referred earlier to the fact that it is strange in this debate that the more positive and creative responses to the country's economic problems are coming from this side of the House, including proposals for taxation, and that it is the Government side of the House which is trying to persuade us that everything in the garden is rosy and that the economic trends, and in particular the key economic trends, point unambiguously to recovery, improvement and an easy way out of the [455] recession. The Taoiseach himself has discovered not one but three pots of gold. In Donegal, of all places, he has discovered gold when he might have been satisfied with uranium. He found three pots of gold in Donegal and he has come down here carrying them on his back and invited us to inspect them and look at the contents. When you analyse his speech in detail it is some time before you find any serious attempt to persuade us that the economy is improving. I contend that when you look between the lines of what he said you will find that the arguments which he advanced do not stand up. He said, and I quote:

Any examination of the Irish economy must pay particular attention to the trade statistics, the balance of payments, and the level of the external reserves.

Nobody can disagree with the Taoiseach on that, but we can and have to disagree with him in his interpretation of the figures that he gives in relation to each of these three areas. He said further on:

Recent trends in this area are encouraging. At the start of the year it was estimated that the balance of payments deficit might be in the region of £750-£800 million. However, because of considerable improvement in our balance of trade, an improvement which the trade figures for September confirm is continuing, the balance of payments deficit for the year will fall to not more than £600 million and in fact some commentators now place it at £575 million.

As the saying goes, that has less than it might seem to have to do with the price of eggs, and the reason is that you have to look at the trade figures and the balance of payments figures in relation to what is happening in our external trade and in relation to the kind of goods that are being bought by this country. It is undeniable that one of the chief factors which has led to a favourable trade figure in September and in the recent past has been the effective devaluation of the IR£ against sterling, a devaluation which has not been created by the Irish Government [456] or by Irish Government policy but by a combination of high interest rates in Britain and the possession by Britain of oil reserves of a quantity sufficient to protect it at least in the short or medium term against any drastic increase in oil prices worldwide. In this area the Irish economy in general in so far as it has been benefiting has been benefiting through circumstances and because of factors which are not only outside its control but which could turn around and start a reverse track again. If the recession in Britain bites deeper not only will the purchasing power of the £ sterling start to decline but the quantity of £s sterling available to buy and pay for Irish exports will begin to decline also. We will not hear so much then about the splendid trade figures because it will be seen that the advantages of an effective devaluation against the £ sterling, now of the order of almost 20 per cent, would have been proved to be, if not ephemeral, certainly a very dangerous thing to rely on as a long-term prop for an economy that is in serious trouble.

If you turn to the balance of payments, again you have to look at the improving balance of payments situation on paper in the context of how balance of payments difficulties, problems and ratios arise. One area in which you need a balance of payments deficit is the area of importation of capital goods which would be used to create jobs, to produce wealth and to produce articles and objects for sale at home and abroad. To that degree you could argue that the balance of payments situation which is improving on paper actually can mask a serious problem. It can mask a slowdown if not a stoppage in the rate of investment in capital goods of the type of which this country produces very little and, therefore, instead of being a pointer to the health of the economy, can be a very long finger pointing to the dangers that lie ahead in the medium and long term for industrial employment and for the health of the economy generally.

The third pot of gold that the Taoiseach discovered and hawked up to us today for our investigation was that in relation to the level of external reserves. [457] Really it is about time that somebody demystified this notion that the more our external reserves go up the better off we are.

Mr. L'Estrange: Hear, hear.

Mr. Horgan: At the moment our external reserves are going up because the Government are borrowing money. As I said in relation to the balance of payments, this might not be such a serious problem if this money was being put to certain uses, as Deputy O'Donoghue said, but the money increasingly is not being put to any use at all. Not only have the Government borrowed both directly and through the agency of the semi-State bodies, like the ACC and the ICC, tens of millions of pounds of foreign currency but they have been unable to lend it for productive investment. As a result they have had to float a considerable quantity of it, almost as much as 30 per cent of the total, on the money market. It is this and not any benevolence on the part of bankers that has had the effect of reducing the interest rates in the recent past. The [458] interest rates have been reduced simply because more money was in supply than was in demand. Of course, when the interest rates go down some of the hot money that has flowed into here, as it flowed into Britain in response to high interest rates to which the rates here were equivalent roughly some time ago, will start to flow out again. Therefore, what do the Central Bank have to do? The Central Bank have to step into the breach and buy IR£s that are on offer in Dublin in order to prevent a flight of capital that would have not just dangerous but perhaps even catastrophic results for the Irish economy and the Irish people.

Therefore, when you unpick the strands of this deceptively simple part of the Taoiseach's speech and when you upend his pots of gold and spread them all out on the counter you discover that only the top layer has any glitter at all. Underneath is dross and counterfeit.

Debate adjourned.

The Dail adjourned at 8.30 p.m. until 10.30 a.m. on Wednesday, 22 October 1980.