Seanad Éireann - Volume 81 - 02 July, 1975

Appropriation Bill, 1975 (Certified Money Bill): Second Stage (Resumed) and Subsequent Stages.

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

Mr. Markey: I always find it difficult to follow Senator Noel Browne in making a speech because it is almost as if we were arguing about the letter Z of the alphabet while he was arguing on his own about the letter A. There is that much ground between us and that much of a gulf. He concluded his speech by saying there was no inflation in Russia and other socialist countries and that there was no unemployment in those countries, and it was with considerable pride he made those statements. It is utterly impossible to make a case or to start an argument with him on these points because we are talking [1572] in a democratic and a politico-economi society in a sphere in which a rate of inflation and a rate of unemployment are accepted. We all know that if there is no inflation or unemployment in Russia there is a price to be paid for that. It is not that I could regard myself as being on the opposite end of the pole to him, he as a professed socialist and I as a capitalist, because I have very little capital on which to declare myself a capitalist. I find it extremely difficult, if not impossible, at times to argue with him in the context of what we are supposed to be debating in this House, namely, inflation and unemployment within the context of the western democratic societies, and particularly the polito-socio-economic societies as we know them.

The Minister for Finance has made a very sombre speech about inflation and unemployment. It is a speech which is a definite invitation to the Opposition to have a field day, as it were, at his expense and at the expense of the Government. That has to be accepted and it is part and parcel of the political ambit. The Minister pulled no punches whatsoever in his address. He laid it on the line as to what confronts this country unless certain things are done. Likewise, I would expect the Opposition not to pull any punches, but that, as the Minister has set out what the Government propose to do, what they have already done last week in the budget and what they are suggesting to the employers and the trade unions as regards the national wage agreement, the Opposition might come forward with some suggestions as to what should be done in the situation. Unfortunately, to date, in the debate very few such suggestions have been forthcoming.

In regard to the whole question of inflation, we must put it into relative terms. In 1975 we are talking in the context of a 20 to 25 per cent inflation rate in this country and in Britain, as against an inflation rate which has been reducing from that figure over the past six months in countries like Italy and Japan. The Minister in his address referred to Italy bringing an inflation rate of 19 per cent down to 12 per cent and to Japan bringing a 25 per cent inflation rate last year down to 15 per [1573] cent. Therefore we are talking in terms of a 20 to 25 per cent inflation rate and what to do about it. It is no harm to refer back to what Senator Lenihan said in regard to the rate of inflation in the mid-sixties up to the change of Government in 1973. Unfortunately for the case he was trying to make, he confused the years of the transition of Government. The figures of inflation which apply for all the years are very relevant to the debate we are having now.

The records show that the rate of inflation was something in the region of 3 per cent in the very early 'sixties, which received a considerable boost by the famous 12 per cent increase approved by the then Taoiseach prior to the two by-elections in 1964. This rate had increased to about 10 per cent by 1973. Senator Lenihan mistook 1973 for 1972 as regards the change of Government, because he seemed to take some pride from the fact that the rate of inflation had gone down from 9 per cent in 1971 to 8 per cent in 1972 and he was making the case that they had started to reduce inflation. Statistics show that at the beginning of 1973 the rate of inflation was around 10 per cent.

We were in the position where the inflation was spiralling from 3 per cent to 10 per cent in about eight years. One could say that the ascent of the spiral had then begun and that it fell to the lot of this Government to arrest that ascent in some respects. I wish to refer to pages 23 and 25 of the National Economic and Social Council Report on Inflation. It punches home the point that inflation existed during the term of office of the previous Government, even though Senator Lenihan and others would like to think that it occurred only during the past few years and under this Government in particular. The footnote on page 23 says that in its report on incomes and prices policy published in the spring of 1970 the National Industrial Economic Council concluded that from many examinations and discussions on inflation it very soon became clear that no one was prepared to accept final responsibility either for causing it or curing it.

It goes on to say that it was the view of the NIEC that unless those who [1574] contributed towards inflation were prepared to recognise and accept responsibility for their contribution, there was very little hope of keeping inflation within the bounds of what was going on in other countries. It was the unanimous conclusion of the NIEC that if the then current rate of domestic inflation was not curbed, even the existing level of employment could not be maintained and that it would be utterly unrealistic for Ireland to aspire towards full employment. Subsequent events have confirmed the NIEC predictions. These predictions were made in 1970. They had also referred to inflation on previous occasions. Remember that the Government, the employees and the employers were represented on the NIEC.

The NIEC reports on the Economy in 1968, the Prospects for 1969, the Economy in 1969 and the Prospects for 1970 and Prices Policy, all showed a deep understanding of the causes and consequences and dangers of inflation and the policies by which they might be slowed down. Nevertheless, inflation has accelerated over the past five years.

When we are talking about a rate of inflation of 10 per cent in the beginning of 1973 as against a figure in excess of 20 per cent now, we are talking of the pre-oil crisis era. This was a rate of inflation which no other country was experiencing at that time, and so Ireland, at that time, was head of the league. If we are head of the league now together with Britain, we must remember that Japan, Denmark and Italy have seen the rate we are experiencing at the moment, so what we are talking about is not a phenomenon. It is something that has happened before, except in relative terms it is a different figure now due to situations which were completely outside the control of all western democratic countries. We must really get down to the kernel of the matter which is one of discussing what we should do about inflation and not be talking about its history or trying to lay the blame on one side of the House or the other.

Running right through the speeches from the Opposition there has been the theme that the Government must give a lead. When people talk about the [1575] Government giving a lead I am inclined to think they are like the person who finishes up every sentence with the two words “you know”, which is merely a substitute for saying: “Well look, I cannot put it into words, I am not quite certain what I should say but you know what I am referring to.” In other words, when they say the Government should give a lead, they are more or less maintaining that they do not know what to do or do not want to know what should be done, and that they are all throwing it into the lap of the Government to take the necessary action.

Mr. Yeats: What are Governments for except to govern?

Mr. Markey: I shall come back to the point of leadership. I have asked Fianna Fáil these questions: if Fianna Fáil were in Government would they deflate? Would they have deflated in 1973? One of the textbook answers to inflation is deflation. We must remember what Senator Lenihan said yesterday evening when he referred to the papers which were before the Cabinet on the eve of the general election, papers which indicated that the Government would take very severe economic action after the general election. It is interesting to point out at this stage that Senator Lenihan referred to moral irresponsibility on this side of the House with regard to certain actions they have taken over the past two years. There was absolutely no public indication by the then Government during the general election campaign of 1973 as to what the contents of these papers were, but if one reads their election propaganda one will find that the picture painted was quite a rosy one, so the accusation of moral irresponsibility can be thrown back at them.

Deflation is a classical textbook answer to inflation. We must remember that, in this sense, since the oil crisis this country has done somewhat better than most of the other EEC countries in maintaining employment and demand. While the unemployment figures have almost doubled on the level of the previous decade in Ireland, in certain EEC countries they have quadrupled. They have quadrupled [1576] because those countries had a deflationary policy. We could have done the same in 1973 with the result that the rate of unemployment would be considerably higher than it is now. I ask Fianna Fáil if they would have taken the deflationary action in 1973 or over the past two years. The consequences are there for all to see. It would mean an increase in the unemployment level to a figure higher than it is at the moment.

I would ask Fianna Fáil another question. Would they revalue or break the link with sterling about which we hear so much? We have heard no positive indication from them as to what action would have been taken on that account. My own opinion is that the question of breaking the link is too important and too critical even to be included in a debate such as this. I would agree with Senator Lenihan that it is so important and so substantial that it warrants a separate debate and there is a motion on the Order Paper which would authorise this Chamber to set up a Select Committee to deal with this matter. That is the situation I would prefer to see rather than dealing with the question of breaking the link with sterling in this debate. The situation we are faced with at the moment is not an ideal one in which to break the link, because it might be only an excuse to attribute the blame for what is happening, and we should remember that the blame for inflation largely lies not with one section but with all of us.

The key to this whole problem is to be competitive. If we cannot compete in markets abroad, we cannot sell our goods, and that creates unemployment. If we cannot compete it means that we have a rate of inflation which makes us uncompetitive. It is interesting to look at some figures in regard to our competitiveness. From 1970 to 1974 the wage cost per unit of output in Ireland has gone up by 50 per cent. In France it has gone up by only 35 per cent; West Germany by 22 per cent; USA by 16 per cent; the UK by 48 per cent. These are rather frightening figures because it pinpoints what our dilemma is, namely, that we are pricing ourselves out of the markets.

Senator Dolan referred to and invited [1577] me to make some comment on the position of the footwear industry and what happened in the electrical industries concerned in my own county. I am not saying the sole reasons behind the difficulties experienced by the footwear industry or by AET are attributable to inflation and being non-competitive. But it is no harm to remind ourselves that even the Federation of the Footwear Industry made a statement earlier this year that, if the national wage agreement as it is proposed, together with the legislation as regards equal pay for equal work for female employees, goes ahead, by January, 1976, our wage rates could be anything up to 40 per cent higher than they are in the UK in the footwear industry. That cannot but have a horrible effect on this country's competitiveness in that sphere.

The Minister asked a number of questions in his opening address, questions which one could say are loaded in the sense that any sensible or reasonable person would perhaps give him the answers he is looking for. Somehow the question that should be put is not being put starkly or vividly enough to the population as a whole. Perhaps I can give my own experience in regard to last week's reaction by the public to the budget. No matter what Members on the opposite side of the House may say, the budget of last week has gone down favourably with the public at large. One asks them why and they refer to the subsidies, but when one progresses and asks them if they know why the subsidies are being given they are somewhat vague, indefinite—possibly they do not know—in their answers.

While the public may be aware of inflation through hearing so much about it and, perhaps, seeing it in operation, can they identify themselves with inflation and its implications? This is why I refer to the questions put by the Minister as not being stark enough or vivid enough to press home this point of identification with the dangers of inflation. If the public were told that if they do not curb wage rates, salary increases, dividend increases, we will just not be competitive in markets and therefore cannot sell our products and therefore we must lose jobs, it might strike home the argument much more [1578] vividly than we are now doing.

If, for instance, they were told that very many parent companies of subsidiary industries in this country, in Shannon and various industrial estates around the country and throughout our many towns and villages that have factories, small or large, are now in a situation where they can say to the subsidiaries: “Look here, one of the reasons why we went into Ireland was its favourable competitive aspect. That is no longer applicable. We cannot sell your goods abroad”, that might well illustrate to the public at large that it is jobs and the standard of living that are at stake here.

The Opposition said it was unfair to ask the employers and the trade unions to have a look at the national wage agreement with a view to revising it. I do not think it is the intention of the Government to be unfair in this matter. The Government have a vested interest in any national agreement forthcoming. As far back as last October in their White Paper on National Partnership, the Government set out the implications of inflationary rates. The Government would be failing in their duty if they did not point out to the employers and to the trade unions, who are the major parties to any national agreement, what are the dangers of inflation, and ask them to reconsider it.

To encourage the trade unions and the employers to do this, to give them a better and more solid basis on which to influence their members to look again at the agreement, the Government have taken the lead in certain matters. They have introduced measures to cut the cost of living by four points. They have promised that, if sufficient response is forthcoming from the trade unions and employers, they will consider restricting dividends. This is leadership, whether the Opposition like to admit it or not. The Government alone cannot solve the matter of inflation, because inflation affects every individual person in every occupation and business.

When all the blowing of hot and cold air in this debate is finished we must get back to our being competitive and what it means if we are not competitive. If the national agreement is to be revised one question which should be faced up [1579] to is whether a percentage increase should continue under the national `agreement or whether there should be a flat increase. My own opinion is that the circumstances are not suitable for percentage increases. Perhaps on this occasion we should revert to a flat rate of increase.

We have heard what the British Chancellor has told the unions and employers: it must be 10 per cent or else there will be a statutory incomes policy. It is opportune to compare this action by the British Government with that of the Irish Government. In Britain the Chancellor has said the limit must be 10 per cent within seven days or he will impose a statutory incomes policy. We have the Irish Government adopting an attitude which when spelt out means: `We ask you to have another look at the national agreement. We are taking certain measures in advance to encourage you to do so. If your response is sufficiently satisfactory, we will do more.” It is a question as to which is the better policy. Let there be no doubt that leadership is being shown in Britain by the Government and leadership is being shown by the Irish Government in regard to what should be done.

No matter what rate is struck here in regard to the revised national agreement, a percentage or flat rate, the overriding consideration is that we must be kept on a competitive basis with what rate results in Britain. Britain and Ireland are top of the inflationary league. We cannot tolerate a situation in which, before the end of 1975, if we agree on a percentage rate or a flat rate which would be in excess of what is agreed in Britain, we would stand on our own at the head of the inflation league. That would be something which no Government could afford to let happen. We cannot be out of line with the rate of increase which results in Britain.

When all is said and done, we are back to the revision of the national agreement to enable us to remain competitive or, worse still, to restore our competitiveness. There is one decision under the national agreement which resulted, in February or March [1580] of this year, in the linking of increases in wages and salaries to changes in prices brought about by the Government having to impose taxes to help the deprived sections of our community, the old age pensioners, the sick, disabled and so on. In this matter the Government can only use two sources for revenue, taxation or borrowing. If the Government impose extra taxes to provide funds for the easement of these deprived classes, it is incongruous that the increase in prices brought about by those taxes should result in an escalation of wage and salary increases under the national agreement. That point should be looked at again by both trade unions and employers. If the experience of the past year has shown anything it is that this country cannot grant itself wages in excess of those granted by other countries, that certain anomalies exist in the national agreement which must be ironed out.

I said at the outset that the Minister had pulled no punches in his address. He would not be acting responsibly if he attempted to gloss over the situation. The Minister is pulling no punches and he invites criticism from the Opposition, but in addition to that criticism I would look forward to more constructive suggestions, whether the Opposition would deflate, revalue or break the link with sterling.

Mr. McGowan: I welcome the opportunity of saying a few words on the general financial structure of the country. Few people, regardless of their position or business, are unaffected by the financial situation. Most of us realise that if the Government are now standing on their own feet they have an easy run because most of the legislation, planning and structure of Government was already prepared when they took office. Only now have we seen this Government attempting to govern. It has been said—and I endorse the belief —that the Members of the Coalition, of the Fine Gael and Labour Parties, are at loggerheads and there is internal trouble. The Government are hoping that those who are promoting and supporting labour interests will back down and all the ills will be cured. I do not think this is the case. I do no think that those who are supporting labour [1581] when they are asked, will back down and carry the whole burden of the financial difficulties in which the country is at present.

Whether it was due to the budget at the beginning of the year or the budget of a few days ago, the country is experiencing inflation, unemployment, lack of confidence, no money for schools, no money for housing programmes, no money for local authorities. The most serious aspect is the lack of confidence because this is the aspect which will have a long-term effect. There is a very serious lack of confidence in the private business sector. People who have small businesses and industries are not encouraged by the present Administration to expand. The lack of expansion has brought about stagnation, and therefore will contribute in some way to the inflation we have in the country. There is no man at present, responsible for administering or running a small business, who has the confidence to expand that business. I do not know how that confidence can be restored when things are going as they are now.

It would appear that the Government are changing. Up to this they blamed the Middle East crisis, the oil crisis and everything that went with it. I do not accept for one minute that this has been partly responsible at all because we all know that the Central Bank and other surveys have shown that most of the inflation was created at home. The Government got numerous warnings and did little about it. They continue to fall back on old, worn-out theory that the inflation here in Ireland is caused entirely by the increased prices of oil.

I was a member of a parliamentary delegation to an oil-producing country. I do not want to burden the House with information that I am sure the Government already have because there were two Parliamentary Secretaries on that delegation, but rather strangely, that country was most anxious that the message should be got across not only to the people in Ireland but to the people in Europe that oil increased by 4 per cent and that we should be checking up and negotiating if the oil increases here were greater than 4 per cent. I am pretty sure that the Government have [1582] been advised that country was most anxious to sell oil. They were free to sell oil to this country. I find it hard to accept that the Government would turn a blind eye to the information given and the offer made by that country.

Recently the Minister for Finance visited oil-producing countries. I was disappointed that he did not go to Libya where the offer was made. I do not know what offer or what support the Minister for Finance got. I am pretty sure he would have taken the opportunity when speaking here yesterday on this Bill to tell us if he had been successful. In the absence of any statement from the Minister, I take it that this trip to the oil-producing countries was unsuccessful. Therefore I am disappointed that he did not go to Libya, a country that expressed an interest in the future and welfare of Ireland.

We hear many derogatory and uncomplimentary remarks about Libya and I would expect a retort from the Minister, or any Minister representing him, about the help we have got from Libya. That will not cover up the fact that an offer was made in the presence of two of the Government's Parliamentary Secretaries to supply oil and to take an interest in an oil refinery here to refine that oil should any difficulties arise about the supply and acceptance of the oil.

I am only referring to this to highlight the lack of real ability in the Government to cure their ills, even those that they diagnosed themselves. If the Government are convinced that oil is totally responsible for the inflation that we have had in the past couple of years, then I think the Government are entitled to be actively involved in removing the cause of that inflation. I am satisfied that they have not done this to the full. I would suggest that the Minister contact his two Parliamentary Secretaries who were in Libya if they have not given a detailed report. If the Minister is not then satisfied he will have no difficulty in getting a detailed report because all of the meetings that were held in Libya were recorded and are available to the Government. We were there not to embarrass the Government but to be helpful to the Irish people and we were listening for any [1583] constructive offer of business that would be given to the people of Ireland. I only hope that the Government have not neglected that opportunity and that offer from Libya.

The most serious aspect of our whole financial structure is the lack of confidence. I see this every day. I see in our school managers and our whole educational system, the school management boards from primary schools up to national universities that there is no confidence at all. The ordinary growth that is expected, necessary and in keeping with the whole future of education is not there. Those people who are actively involved in giving of their best are no longer sure what tomorrow will bring under the present Administration. We have plenty of plans and promises.

Recently somebody said the Government were very successful in giving the impression that they were going to do something. I thought of the many announcements and statements and the various communications that had come from the Government and I could not think of anything that fitted the present situation better than that particular statement. This is unfortunate but perhaps it is necessary to string people along and hold them in check until brighter days come. We find it hard, without being critical, because we would rather be hopeful than critical, to accept that there are any brighter days ahead. We would like to encourage those who are involved in the education of our young people and to tell them that the money is not available but that the Government have constructive plans to do something about it and raise finance and that it will be available next year or the year after. In fact, this is not the case. There is no constructive proposal for those who are involved in education and for those who are actually caught with plans and do not know where they are going or those who are caught with overcrowded schools, under-provision in classrooms and under-provision under the various headings. We find, through the school management boards, that in small rural schools we have not money to paint the schools or to provide or replace windows where they have decayed. When it comes down to that, I cannot see what will be the [1584] answer because when we look at the provisions in the budget there is no money or hope or even a promise that these people might look to. I ask the Minister to give the answer: it is the Government's responsibility and it is part of their job to restore confidence to the people who have to carry on a difficult job at a difficult time.

The housing problem has been much discussed. The Minister for Local Government has become quite recently. Numerous statements were made by all of the sections of the building industry that we had a crisis. In fact, that statement was made soon after the present Government took office when they announced that they would have a housing target and that they would keep to this housing target regardless of difficulties. The Minister for Local Government insisted that he would keep to the target and that there was not a crisis in the building industry. I believe he convinced his own supporters that there was not a crisis. This is unfortunate because he did not convince the man in the street, the man who was waiting on a house, the local authorities who were involved in planning and building and in the search for money. He did not convince them and the whole situation has now collapsed to the point when local authorities are not in a position to sign contracts for plans they have drafted for housing schemes. The contractor who is waiting for months on that contract to be signed has been left in the dilemma that he does not know whether the local authority is going to sign the contract or not. That contractor is kept waiting; he has lost his men. He does not know if the money will be available or not.

No longer will it be accepted from the Minister for local Government that there is not a crisis in the building industry. We know there is a crisis in the building industry and in County Donegal we have come to the point when we have a waiting list for single cottages. I made representations on Monday to the Donegal County Council regarding a house costing £4,000, approved six months ago with the contract ready to be signed. But the Donegal County Council and the county manager will not sign that contract because they have not the [1585] finance to provide one single house. The name of the man is Patsy Friel, Coolatee, Lifford, County Donegal. I would ask the Minister who is now representing the Government to check the facts with the county manager and, if I am telling lies, come back and say so in concluding the debate tonight or tomorrow. It is time people came in with facts. It is time the Government got a kick in the pants because nothing short of this will suffice. Apparently, they are sitting down and prepared to say that inflation is a European or world phenomenon: that we have to accept it and sit back and do nothing about it. But the people are no longer going to sit back because the uneasiness is already there. The whole community are concerned that the Government are doing nothing at all to prevent it, relieve it or bring about any remedy.

Not only housing but the whole field of financing local authorities is affected. We have a reduced allocation of money for roads to our local authorities. At the same time we have the whole structure of administration taking up a very large part of any money allocated to local authorities. We are burdened with engineers, managers, secretaries and staff officers. Rather than having allocations up-dated or increased the money is reduced. We have now reached the stage when local authorities are no longer planning roads, sanitary services, or other necessary services. Local authorities have stopped planning. In the Donegal County Council we had a proposal that engineers and administration staff be laid off. I understand that the same is true in County Sligo. There is no point in leaving off road workers, forestry workers and the low-paid sections: we have done this but our administration structure is the same. We will now be forced to lay off engineers, and senior staff unless the local authority are financed and that confidence restored.

At Monday's meeting of the Donegal County Council the county manager read a letter from the bank. He was forced to go to the Bank of Ireland to apply for long-term money to build houses when the Minister for Local Government had not got it. The Minister suggested to the county manager that to meet his present needs he [1586] should go to the bank. The Bank of Ireland said they would provide money for current expenditure but they would not provide money for capital investment. Members of the council were forced to vote on whether they should go to another bank, or ask the local authority to continue with the Bank of Ireland in view of the fact that they were refused this money. I am sure some of those who were voting were being screwed into the ground by the banks.

Is it not a deplorable situation when you have a crisis like this and when you have members of a local community being blackmailed into voting on where a local authority should have its bank account. No Government could put on a worse performance than to have brought about a situation where that happens in a local authority, where the local members of the local community are forced to disclose publicly and by a recorded vote where they would want the local authority to raise its finance. At every opportunity we get as members of the Opposition we must remind the Government that they are failing in their obligations and that the most serious aspect of their failure is in regard to the provision of money for local authorities.

The largest number in the unemployment queues are people who have been laid off—road workers, forestry workers and small farmers or farm labourers. I hope that the Government will see that they will not cure the financial ills of this country by paying out £2 million a week to people standing in dole queues. The whole approach to the relief of unemployment will not work. The dumbest member of the community at the present has no confidence in the Government; he accepts that this approach will not work.

We can no longer turn to the ratepayer for the means to finance local authorities because the ratepayer is over burdened and is today paying a higher rate than he ever paid before despite the fact that this Government promised to reduce rates, to phase out rates over a four-year period.

I am sure the Government will accept that they cannot ask the rate-payers to contribute any more to the financing of local authorities. They cannot expect those who were promised, [1587] when the Government took office, a reduction in rates phased over four years to forget that promise. The Government will be forced to admit that this is one promise they have not kept and have not made any attempt to keep. They cannot ask the farming community to contribute any more to the upkeep or administration of local authorities or local government because the records will show that during the last 12 months farmers bought less fertilisers, less limestone, and that the purchasing power of the farmer has decreased very steeply in that period. The Government will be forced to recognise this in the near future.

Any extra burden on the farming community at the present time will have disasterous results. It is sufficient to say that last year farmers' backs were against the wall trying to survive—they could not sell their stock, they had to pay rates and did not get the results of the promise that was made by the Government. I hope that any new financial structure or arrangement will include the reduction in rates promised by the Government.

There is no extra money for fisheries, for the development of ports and harbours or even for minor developments at ports and harbours. The fishing industry is one which should have had massive money injected into it to expand it and keep it abreast of other European countries. We accept that we have been behind because the economy never allowed for sufficient money to be put into this industry, but the fact that no increases in financial support to fishery development have taken place over the last two years has resulted in the deterioration of the industry. The fishing industry will have to get substantial capital allocation if it is to expand and compete in Europe.

It is time recognition was given to those who are contributing largely to the economy and to the health of the financial structure of the nation. The fishing industry is one that can help the whole financial structure and it is time the Government saw this.

On regional development, there was a lot of talk and hot air about what we would get and how successful the [1588] Minister and the Government were in their negotiations with the Common Market and what the regional funds were going to be. Regional development authorities in County Mayo and County Donegal were all planning to spend money from the Regional Fund. It is more than doubtful now if any of that fund will ever reach the regions that have been planning to spend it. The Government have made no clear statement as to where the money is to be allocated. Not long ago we were told that ventures or projects which would benefit both North and South in the Border regions would get priority. Mr. Thomson, the Regional Commissioner, stated that no application was made for such a project by the Irish Government. That is on record. I wonder if the Government are serious about supporting such a project in the Border areas.

This debate cannot be allowed to pass without referring to the so-called budget we had the other day. Just before the budget a number of people were speculating as to what might or might not be increased. I thought that if I made out a list and take every item, whether it be a motor car or a packet of biscuits, it would be difficult to see where the Government could increase the price of anything. As one who comes from fairly close to a Border county, I can see the price differentials. The Government cannot be aware of it and if they are they are doing nothing about it.

Why have we to pay £3,600 for a Peugeot car, assembled in France, when it is available in Northern Ireland for £2,400, a difference of £1,200? Are the Government aware of that? Where is the difference in price going? Who is benefiting and why has a businessman in the Republic to pay £1,200 more? That is only one make of car. It is the same right across the board. On average, a car is £1,000 dearer in the Republic than it is in the North. Every item is cheaper in the North than it is here. The Government have closed their eyes to the price spiral that has taken place over the last two years here.

In January last year the Minister for Foreign Affairs told me I was out of touch and that there was free trade between North and South. The Minister for Foreign Affairs, in theory, the same [1589] as his colleagues, is doing very well, but in practice they are out of touch with what is happening. Eight weeks ago a Sunday market was started in a little village called Clady inside the Border in County Donegal. The local customs authorities were aware that this market would attract a lot of people from the Republic to shop. Their forecast was right. They came from long distances by coach, mini-bus and car. There was a huge traffic build-up. All the customs officials in County Donegal converged on this little village or on the Border between the village of Clady and County Donegal. The customs men were under such pressure that they had to call in the Garda and the Garda had to call in the army and we had the situation where the Irish Army were preventing the people of Donegal, Sligo and Leitrim and the surrounding counties who had come specially to buy merchandise cheaper from across the Border.

It is hard for me to understand how much in touch with the situation the Minister for Foreign Affairs was last January when he said there was free trade between North and South. The Irish Army were standing on the Border preventing people from buying soap powders, biscuits, tinned fruit, butter and other produce, most of them produced by international companies who were trading on both sides of the Border. A packet of Jacobs biscuits made in Dublin and retailing at 13p could be bought in Strabane for 8p.

These are things the Government are not aware of. They are things which are affecting the economy, our living standard, the spending of money. The Government must convince the public that they are aware of what is happening, that they are interested in doing something about it. There is a complete lack of confidence in the Government.

If the Government were to try to raise money for budgetary purposes tomorrow where would they get it? Would they increase the price of spirits, beer and tobacco, petrol, motor vehicles or many other articles? All these things are already costing more here than they are in the North of Ireland. The Government have not controlled prices. We have the Priees Commission, but [1590] they have not succeeded in controlling prices in a way acceptable to the public. The people have no confidence in the Government's ability to control prices. We cannot survive in a free trade area if there is such a big price differential between the Republic of Ireland and Northern Ireland. On an average list of consumer items there is a difference of between 20 and 25 per cent. The people are not going to be gulled by being told that we are in a free trade situation, that prices will be comparable to those prevailing in Europe. The Government must convince the people that they are doing something useful to decrease prices.

During the last year massive increases were granted to insurance companies. The reason given by the Government was that it would be easier to get insurance. Now, six months later, there is a further application for an increase of 30 per cent from insurance companies. Will the Government sanction this? Why is insurance more expensive here than in Northern Ireland? Most of the companies here are also doing business in Northern Ireland and in Britain, but they are from 20 to 30 per cent cheaper there for the same type of insurance cover. Have they a haven here where they can do what they like, unnoticed by a Government that are out of touch?

Any tax concession given to the textile industry in the recent budget is minimal and will contribute very little towards the support that is necessary to re-establish our textile industry. Numerous requests for aid were made from those in the textile industry in an endeavour to keep the industry going, but we read day after day that workers have to be laid off. In my area, half the number of unemployed were previously employed in shirtmaking and other textile industries. The Government were told time and time again about the gravity of the situation but nothing was done. The position has arisen because of the importation of clothing from low-cost countries. The taxpayers have been beaten into the ground to pay for social welfare, to pay for the unemployed but the Government have not succeeded in convincing the employers and the workers that they are doing anything constructive to remedy the [1591] situation.

No money has been provided for the tourist industry. Many engaged in the tourist industry wish to get out of it. The industry is in a very bad way and it is likely to deteriorate even further. This Government have taken no interest at all in tourism. It has not even been mentioned by them. They have contributed nothing towards it. We are very dependent on the tourist industry and the Government should be doing everything possible to come to its aid. This industry could contribute greatly towards our balance of payments position. There has been no word of support for the tourist industry from any memer of the Government. It is a forgotten industry so far as the Government are concerned. They blame the troubles in the North, the inflation in Europe and so on for our present state.

Minister for Defence (Mr. Donegan): Troubles in the North and in the South.

Mr. McGowan: I am as familiar and as close to the troubles in the North as is the Minister. I have been as much involved in a political sense as he has. I am in a position to say to what extent the tourist industry is affected by the troubles in the North. I live on a main road from the North and we have been largely dependent for business on tourists from Northern Ireland. I am involved in the industry myself. I know the exact position.

The guest-house and the small hotel are not getting any support from the Government to modernise their premises. They are unable to be in competition with other countries who support their tourist industries. Support has been totally withdrawn by the present Government. I will not accept that the decline in our tourist industry is due to the troubles in Northern Ireland or because people abroad do not know the difference between Northern Ireland and Southern Ireland. It is a convenient slogan that our tourism has deteriorated because of the troubles in Northern Ireland and because people further afield do not know the difference between Northern Ireland and Southern Ireland. This is a convenient slogan, but it is not accepted. I am talking about the aspect of the industry that has been [1592] allowed to deteriorate when hotels, guest-houses and those involved in the tourist industry are not in a position to pay their VAT or to paint their premises. That is true because of the serious unemployment in the tourist business.

Mr. Markey: They are not getting the holidaymakers and the holidaymakers are not coming because of the violence.

Mr. McGowan: That is not the answer but unfortunately it is the one the Government would like to put across. It is the easy one. It is theory again, and this country cannot be governed by people who believe in the book and believe in theories and who have little knowledge or ability to get off their posts and do something constructive and something practical.

Mr. Markey: If the Senator cannot see that—

Mr. McGowan: I can see it. I am talking about the tourist industry. I am talking about the lack of confidence that the people have in it, the same lack of confidence that I referred to in every other sector. Not too long ago the Government increased the social welfare contributions but that money had to come out of the pockets of the employers. The people in the hotel industry and the tourist industry had to pay increased contributions towards their employees. Where did that money come from? If the Government knew that that industry was undergoing difficulties because of the Northern troubles, why did the Government not take an interest in cushioning those involved in the industry against having to bear extra costs? There is no simple answer and there is no excuse that would be acceptable to those involved in the tourist industry. The Government are not interested. Apparently they do not care. It is unfortunate.

This is probably one of the causes of their trouble, because the tourist industry in 1969 and 1970 was contributing more than £100 million to our balance of payments. But the Government do not appear to realise what is important and what is not important and that is the reason they are in this dilemma, that they are up to their necks in debt, that the people who are involved, the people who would be [1593] anxious to help the country, to help the Government to get out of the dilemma, have no confidence.

There is no leadership at all. Whether it is the tourist industry, the farming industry, the textile industry or any other industry, the answer is the same. There is no confidence here. It is no pleasure for me to stand up today and to be crying about this sort of attitude here. I should like to be out restoring confidence, extending employment in every industry, but when the increased prices go on and when the inflation and the whole net is closing in on those that are involved in the day-to-day running of the country, what is the answer? How do they escape? The answer is to take the easy way out, to employ fewer. The Government try to put on the backs of those, whether civil servants or whether those in private business, those who survive and those who stay in business, the cost of social welfare benefits to the unemployed whose numbers are going up week by week.

Every man who works in this country today has a man sitting on each shoulder. He is paying for his education, his social welfare, his health. It has got to the stage when the outlook is that if you are working you are going to carry the burden of the nation and there are fewer people going to be interested in working here while the Government continue on the course they are now on. I hope the Minister for Finance will wake up and not try to bluff the public that his mini-budget will contribute anything, because it will contribute nothing to restore confidence. Until we have confidence restored we are wasting our time.

This winter will test the Government. It will test their ability to survive. If the Government survive this winter they will be looked upon very closely by those who are looking for hope and some confidence. I hope that in the interest of surviving as a nation and a people, the Government will do something constructive before the complete collapse of the whole administration. I would ask that the Minister for Finance would take some radical steps, either by going abroad and borrowing substantial amounts of money or something constructive in another way. I do not see any other way because [1594] those who represent labour here will not be told: “Sit back and be good boys for a year or two until we get out of this dilemma.” That will not happen. Labour will not sit back and labourers will not bear the responsibility of bad Government and bad administration.

The Minister for Finance will have to take his courage in his hands and will have to do something constructive. He will have to get a long-term loan, if any country in the world will give it to him, if the Central Bank will give it to him, to get us out of the hole we are in at present. If not, he will have to get out of Government and leave it to the party that actually built up every section of industry in this country over the last 30 to 40 years.

Mr. Harte: The Minister in his opening statement drew attention to the points of view expressed on our link with sterling. In disagreeing with the points of view, he said that much of our inflation was imported. He said 50 per cent of our trade, exports and imports, were to and from the UK. In making that statement he pointed out that there were occasions—and he gave some credit to the Fianna Fáil Government— when being linked with sterling paid off in some respects and was a very good thing. I agree with that. I noticed also that Senator Lenihan agreed with him. Senator Lenihan and the Minister are both correct that we must put our own house in order—that is how the debate came across to me—before we talk of breaking the link with sterling. Nobody could quarrel with that point of view.

When the Minister gave emphasis to the economic disciplines that would be needed if we were to think about breaking the link with other currencies he probably had in mind—and I hope I am not reading too much into what he said—the type of disciplines that are not in the eastern European countries but that exist in the EEC countries. I have in mind the strong link, which somebody might be advocating or thinking about, with the German mark. I know from experience of the type of disciplines that are in existence in Germany, not so much in the sense of somebody beating them with a whip or pulverising them or anything like that, but an inbred thing. I saw it first hand [1595] during the war days. In this country we have general approaches and traditional attitudes, I will not support them in every respect, particularly between the two major factors or parties to the economic situation. I am not denying that in the process they may have made some contribution to the development of economic growth. If the break with sterling would mean greater economic disciplines we would have to face up to that reality.

The economies of Europe were in a collapsed state in the post-war years. This is a different situation from a country that is going through a bad time. If an economy collapses the people's mentality changes. After the war, all countries had to start from scratch in order to rebuild their economies. In those countries all the people were at the bottom of the ladder and they could then work on a basis of equality for all. In that situation economic discipline is born. If anybody wants evidence of this they can take the example of Holland. That country was submerged. There was no way in which she could deal with her problems except by adopting the approach which Germany and other countries adopted. The result of this community spirit and equality of treatment in an area the size of Munster was that the people grew to prosperity through detailed economic planning and the disciplines required for each group. The Dutch were able to build up their population to 8,000,000 and they reached such a boom period that they had a full employment situation.

Senator Lenihan mentioned Denmark. That was another occupied country. The Danes also worked on the same principle of no privileged positions. They had to find ways of resolving their differences and had to have agreed machinery, which had a strong legal element and which influenced binding decisions. This was brought into effect when there were any disputes between the major parties, industry and labour.

Germany was also a ravaged country. Their total economy had collapsed. They had to start rebuilding their nation [1596] again. If we contrast that situation with the Irish one, certainly in the Twenty-six Countries we were not occupied, but our economy was from time to time in a very bad state. I do not think that any member of Fianna Fáil would argue that we had not problems in all sectors and that the economy went through good and bad times but mostly bad times in the initial stages. We never reached the point where we could say the economy had collapsed so we did not need to have the same approach as that adopted in European countries which were occupied during the war but we had a bad economy.

The point I am trying to stress is that the disciplines needed either to break the link with sterling or to assist in the building up of a collapsed economy are very severe. I do not think Ireland has ever been in that situation. While we were in a very depressed state we had an approach to life whereby we went about our business in our own ways. There has been a tendency in recent years for the trade union movement, now that they have developed to a certain point, to come back to the way in which we dealt with our problems—not to take them completely from the integrated idea to seek more autonomy in approaching problems.

If we consider that type of development, one could say that it has not been the reason why these countries have solved their inflationary problems quicker than we have. The answer is that, having had that tendency to evolve, these countries wanted to get back to the disciplines they had during the war years and which were inherent in their make-up, in order to bring the inflationary situation under control. This was much easier for these countries to do because they already had experience of working under these disciplines. Therefore, we are experiencing a more difficult problem. It is much easier to get people in those European countries to tackle the problem of inflation than it is to get the Irish people to do so. Despite that—I am speaking on behalf of most of my colleagues in the trade union movement—we will not panic if some phases of the agreement are affected. We will act in the same way as we have done over the years. We appreciate that our function is to [1597] maintain and improve the living standard of workers. We also understand that we can only deal with the circumstances in which we find ourselves. The way in which you settle a problem at one stage may not be the correct way to deal with it on another occasion. I would be confident that the trade union movement would have a very broad out look in this respect. I do not think they will be found wanting when it comes to the question of playing their role in trying to half and reverse the inflationary trend.

I would like to make it clear that Senator Lenihan and I are at one on the question of the link with sterling. However, the one thing Senator Lenihan overlooked was that we had the disadvantage of not having adjacent markets. He mentioned Denmark, but while that country had its problems it also had very adjacent markets. The society there grew up together and when they came to a certain level there was free choice as to whether you wanted to be a brewer, a mechanic or a labourer. That system did not exist here.

We had the problem of getting our goods across the water. If we want to develop it beyond that the problem is greater still. The GNP of some of the countries we are trying to export to contains an import-export element of 34 per cent compared with the figure of 96 per cent here. We have a much more difficult situation than that which obtains in the UK and the UK are in a worse state than we are. That is why to some extent it could be said that the halting of the inflationary trend was faster in other countries.

Let us have a look at some of the accusations made about the Government's behaviour by people from the opposite side of the House. It is a fact that the organised groups in the European countries have been working together since the end of the last war with their objects clearly defined—the achieving of full employment, a steady rise in living standards, equality of opportunity, a fairer distribution of income and wealth, and a comprehensive and adequate social welfare service. The whole purpose behind this was that they would grow away from poverty. In the final analysis because [1598] those people were working together a good eye was kept on the improvement of the quality of life and on the environment in general.

Taking the period of time from 1967 to 1972 during which Fianna Fáil were in office, national production rose only by 4 per cent. This was when they got around to economic planning but I must give Mr. Lemass some credit for having thought of economic planning much earlier. Many years ago, when the then young Jim Larkin advocated detailed economic planning he was scorned by members of the now Opposition who were then the Government. They thought it was crazy. Later on, Mr. Lemass was the man who saw the value of such a policy and we had great developments in respect of national productivity organisations. We had the import of expertise from outside and even a full-time man appointed to help us with our planning.

Getting back to what happened during the lifetime of the Fianna Fáil Government, it was recorded at that time that unemployment was higher than in any other country in Europe. It amounted to 6¼ per cent although this was supposed to be boom time—1969 to 1972. When we talk about a boom time and realise that the national production rose only by 4 per cent in five years and that the question of unemployment was in the region of 6¼ per cent, somebody must realise that, measured against the present world situation and the general crisis, we are not doing too badly.

On the social side there was a very high proportion of people in the lower income groups. I remember submissions from the Irish Congress of Trade Unions on this point. I am sure the previous Minister who got the submissions will not deny that. The welfare services were not adequate at that time. There was a grave housing shortage. If we look at some of the items included in the index then, we find that some of them showed 20 per cent increases. These figures have been taken from the Irish Congress of Trade Unions leaflet. Potatoes at that time were 50 per cent, onions were 20 per cent, tinned salmon was 23 per cent. Potato crisps were 21 per cent and items, the prices of which increased by between 15 per cent and [1599] 19 per cent were hairdressing, electric irons, carrots and margarine, laundry charges and so on.

Taking inflation during the same three-year period, retail prices increased by 27 per cent, which is a fairly substantial increase in prices, particularly at a time when there were not any world situations militating against the approach to controlling prices and detailed economic planning. Everyone has agreed that world prices have had an effect on us. If we realise that the import-export content of our GNP is 96 per cent. We must admit that external factors are at work and are the cause of the spiralling prices.

Mr. Yeats: There were no external factors when Fianna Fáil were in office, I take it.

Mr. Harte: There were but not to the same extent. There was a 27 per cent increase between May, 1969, and 1972 in retail prices.

Mr. Yeats: Sixty per cent since then. There were external factors during our term of office.

Mr. Harte: That was a boom period.

Mr. Yeats: This Government were to stabilise prices. Remember the 14 points.

Mr. Harte: Is the Senator saying that the period 1969-1972 has not a boom period?

Mr. Yeats: It was not a paradise.

Acting Chairman (Mr. Brosnahan): As Senator Yeats is the next speaker, he will have an opportunity of rebutting all the arguments put forward by Senator Harte, if he so wishes.

Mr. Harte: The ICTU at the time said that unless the rate of increase in prices slowed down considerably we would be in trouble. Congress had every reason to be concerned because of that inflation. I accept the Senator's point of view that there were other factors. One cannot go through life sheltered totally from the outside world but the problems then were not as drastic or as difficult as those we have to deal with now.

[1600] The ICTU had noticed this sharp increase in prices and were concerned about it because it would be an obstacle to the achievement of the economic and social objectives which not only they wanted but which, I am sure, the Government of the day were anxious to achieve, also. They made the concessions they thought were right.

The trade union movement and the Labour Party are committed to realising full employment. They are committed to a steady rise in living standards and to equality of opportunity, to a fair distribution of income and wealth, a just taxation system, the elimination of poverty, comprehensive and adequate social welfare service and benefits and improvement in the quality of life and of the environment. These are the very same ideals that the trade union movements were pursuing on the Continent but, as I have pointed out, it was much easier for them.

Let us see what happened since the new Government came into power. Has anything been done to proceed with those ideals? We have had the Trade Union (Amalgamation) Bill, the Social Welfare Bills, the democratisation of local government, the pay-related benefits, the general economic developments under the Department of Finance. The Minister for Industry and Commerce is trying to get a grip of our natural resources. He is getting the best deal possible in all the circumstances. There are many other indications of a willingness on the part of the Government to listen to the needs of the trade union movement.

In this respect I am quite happy. I would have regard also to the fact that, while we have this priority of maintaining and improving the living standards of our workers, we cannot ignore world situations but we can have an influence on the policies of Government. We have had some successes in this regard. One ex-Minister with whom the trade union movement had the greatest success with was Mr. Sean MacEntee. He was a very good Minister for Health and was very receptive to the trade union point of view in matters affecting their members in this area and also in respect of the workers he dealt with. In the case of this Government there has been a more open type of Government all round. [1601] The door is open. People have had access to the Government and the trade union movement have met with this Government on more occasions than ever they met with the Fianna Fáil Government, having regard to the length of time they were in office.

I am trying to establish three main points: (1) that there is a general recognisation that there is inflation; (2) that the other countries who have recovered quicker than us or who claim to be recovering quicker than us have had a different background in that they had the advantage of adjacent markets plus the disciplines I have mentioned.

Debate adjourned.

Business suspended at 12.30 p.m. and resumed at 2.15 p.m.

Mr. Harte: Just before we adjourned I had made some points to try to demonstrate that, prior to the taking of office by the present Government, an inflationary situation was evolving of which there was evidence, not only from the public viewpoint but, in fact, as a result of certain studies. I would like to quote from Trade Union Information:

The report of the National Prices Commission for July, 1973, contains a study by Dr. S.J. Sheehy of the Department of Applied Agricultural Economics at University College, Dublin of the causes of the substantial increases in food prices over the last two years and particularly the implications of farm gate price increases for the consumer. From this study a number of interesting conclusions and assessments emerge.

In the first place Dr. Sheehy notes the relatively modest increases in food prices occurring annually up to 1971. Thus, taking the retail price level of foods included in the Consumer Price Index, there was an average annual increase, as at May, of only 2¼ per cent in the ten years 1953 to 1963, and an average annual increase of 5 per cent in the following eight years, (1963 to 1971). However, between May 1971 and May 1972 food prices rose by 10¾ per cent and in the following 12 months (May [1602] 1972 to May 1973) by a further 20 per cent. Thus, the absolute increase in food prices in the last two years was equal to that recorded over the previous eight years.

The purpose of quoting this is to further develop the points I made earlier. We had gone through a stage, prior to the taking of office by this Government, of having a very high rate of increases in prices, when one considers that from May, 1972, to May, 1973, there was an increase by a further 20 per cent in the cost of foodstuffs. Therefore, having regard to the world energy crisis and the general increase in world commodity prices and measuring that against the earlier period, one can say that the present increases compare very favourably despite inflation. That is not to say that there is not an inflationary situation nor is it to defend the spiralling of prices. It is easy to lay the blame on the Government but an admission must be made that things had begun to evolve. When you look back to the 2¼ per cent for ten years, see the growth to 5 per cent in the next eight years, and then suddenly see the massive increase of 10¾ per cent for one year, right up to 20 per cent between that year and the next year, the present Government can hardly be blamed for that sort of situation. That was a fantastic rise for which there is evidence in a study reported in the July issue of the National Prices Commission's report, 1973.

The real point is that, generally speaking, people are not taking to the streets as they did many years ago when we had large figures of unemployed. This is clearly indicative of an understanding by the people in general of the nature of the situation in which we find ourselves. The public do not stand still for very long, particularly when they think the Government are to blame. Having regard to the reception the budget got last week, one can readily accept that the public in general, despite what has been said by the Opposition, have become aware that the world crisis and the energy crisis caused the latest situation. They realise they all have a role to play, difficult though it may be.

In the report of the National Prices [1603] Commission for March, 1973, the commission analysed the causes of inflation. They listed six main reasons for the price increases that have occurred in recent years: (1) increases in import prices; (2) increases in export prices; (3) increases in indirect taxes; (4) increases in money incomes; (5) growth in Government expenditures; (6) the accommodating nature of monetary policy. The report goes back to the time Fianna Fáil were in power and all of those six points are indicative of an inflationary trend. Once again the point is established that, apart from the world crisis, the increase in world commodity prices and the energy crisis, our inflation was running at a high rate. The Government of the day inherited that from the outgoing Government. I do not suppose that is the most unnatural thing in the world. I do not deny that we may have inherited some good as well. The report goes on to give further reasons. It says:

Import prices have risen because of inflation in the countries from which we import goods....

This clearly demonstrates that this is an external factor and outside the control of the Government. They go on to talk about the devaluation of the Irish pound in terms of currencies other than sterling, and increases in the world prices of basic commodities as a result of change in the relationship between supply and demand. Again this is indicative of external factors. This is not a Government report; it is the report of the National Prices Commission, and the present National Prices Commission was set up in October, 1971 by the Fianna Fáil Government. It is an independent body.

Nobody is trying to say we are not going through a difficult period but it is not because the Government did nothing, as was alleged. It will not be solved by doing nothing. The Minister's budget of last week goes a great way towards a solution. The Economist index of world commodity prices shows that prices rose by 71 per cent in the 12 months to the end of August, 1973. This is another indication that we were not alone in this situation, that there were outside influences militating [1604] against us, and that the course of action we took quite recently was the only one open to us at the time. I would again draw attention to the difference between the approach in this situation and that needed in the situation of a collapsed economy.

When the Government took office in 1973 they had a very good year and there was a certain amount of euphoria. They probably had good reason because in that particularly awkward situation they could point to an increase of 6,000 jobs and an increase of 6 per cent in consumer expenditure. In such a situation an industry may decide to build a new canteen, a new bottle plant or a new bakery and so on, but in an inflationary situation they will only go ahead with the essentials. That canteen will not be built. There is a tendency now for banks, if you go too hard or too high, apart from the high increase in the rate of interest and the quick period of having to pay back, to keep their eye on stocks and shares. They are putting the boot in to the extent of getting a little more out of it than they would in normal banking transactions. It is not so evident here as in England where they have tried to buy into the equities.

As regards capital expenditure, in industries where one does not get a quick return, such industries will hold back on the cash flow themselves, and this is part of the reason for unemployment for instance, in the construction industry. But, despite this problem there are more houses being built now annually than in the reign of the Fianna Fáil Government.

The National Prices Commission are a very important body. There may be occasions when, if the employer does not get a price increase he goes out of business. I do not know whether it is called a value judgment or what, but when you are in an inflationary situation and difficulties arise, in order to save jobs even trade unions might have to make representations to the National Prices Commission. I am not saying this is a fact, but it is a possibility. I do not know whether the machinery is there for it or not. I have never done it myself but if somebody was in severe difficulties I might be inclined to make tha [1605] kind of submission provided all the evidence was there that the jobs would go out of existence.

The National Prices Commission have been playing a vital role in the control and surveillance of prices but it is difficult in present circumstances to make a judgment on whether it is working or not. The first one the Fianna Fáil Government set up did not work and either by mutual consent or by Government decision it was abolished. The National Prices Commission was set up in October, 1971 and it would be unfair for us to make a judgment on them as to whether or not they are doing the best job possible having regard to the situation we find ourselves in.

The trade union movement are very conscious of the need to remedy the inflationary situation and from time to time they draw attention to developing trends. I wish to quote from a document dated 1972 which I think was read to the Irish Congress of Trade Unions:

Reference has already been made to the serious problems, economic and social, presented by the inflation of recent years. Prices have risen much faster here than in most other countries, though not greatly faster than in Britain. Over the last three years retail prices have risen by 27 per cent in this country as compared with 24 per cent in Britain but Britain's record of price inflation has been the worst in Europe.

It is not necessary to spell out the impact that this unprecedented increase in prices has had on living costs and on the weaker sections of the community such as pensioners and low-wage earners. It is true that industrial earnings on average have kept reasonably well ahead of prices over this period (the index of industrial earnings increased by 47 per cent between December 1968 and December 1971), but the real increase in earnings was comparatively modest. Thus even though earnings rose by 47 per cent over this period, the real value of these earnings rose by only 14 per cent.

A serious consequence of the fact that the rate of inflation was worse here than in other countries has been [1606] a loss of competitiveness vis-à-vis these other countries.

This loss did not start on the appointment of the present Government. The document I have quoted was put to the Congress in 1972, during the term of office of a Fianna Fáil Government. We could see the evolving nature of the problem of inflation at the time. The Government of the time knew of the problem, and if we want to score points off one another and engage in oneupmanship, we could say: “Why the hell did you not do something about it?”

We are now at a point when we need very cool, calm and collected deliberation to see what we can do, in all our interests, to get us back on the rails. I speak particularly as a trade unionist and in that sense perhaps I speak a little bit selfishly. I make no apologies for trade unionists being selfish. I believe that the nature of the society we live in has done that to me and to many other workers. Society has created the wants in us rather than needs. I do not blame society entirely for that; I was probably a willing party to it. But I would like to see a fairer distribution of incomes, a more equitable taxation system and so forth, and the present Government are moving in that direction. That is something that is desirable so far as the trade union movement is concerned. Most of the things trade unionists would have desired in 1972 are, to a great extent, being undertaken now. The wealth tax and the capital gains tax legislation is proceeding slowly through the Dáil, but when it is passed it will give a good deal of satisfaction to trade unionists in the sense that people who would normally have escaped the tax net or who would have had a freer range of activity without the in habition of tax payments are now in a position where they are accountable to their fellow members of society.

Regarding the payment of social welfare benefits in an inflationary situation, it may be argued that some of the money is being eroded. What would have happened had these substantial increases not been granted? What would have happened if the policies of the Parliamentary Secretary to the Minister for Social Welfare had not been pressed through and debated [1607] each time there was necessity for a budget? There would be real poverty lines, but not only has there been a gain, relatively speaking, but it has moved us away from the argument that we could have sustained a couple of years ago, because the number of people below the poverty line has decreased. That is not a great thing to have to say. There should be no people below the poverty line, but unfortunately the society in which we live and the methods by which we approach our problems do not allow for speedy turnover of wealth. There is no bottomless purse. Workers have had to wage a sort of civil war against employers to reach the stage we are at today. However, they have got there, and they are more involved in integrated negotiations both at plant level and general level, and they are also involved in all of the infrastructures of the European Community. The battle has been worth while. The trade union movement, with its very extensive knowledge and broad outlook, is reasonably satisfied with the progress.

There is another reason for my harping on the trade union element. Since the debate commenced everyone has spoken about the national wage agreement. Everybody talked about the problem of the worker who would be faced with having to concede perhaps a couple of phases of his increase. If one looks back on the figures I quoted about inflationary trends, much of this information was available when other national wage agreements were being negotiated during the term of office of the Fianna Fáil Government, but there was no outcry about them then. In fact, they were welcomed, even though by their nature they have been somewhat inflationary. The reason they were welcomed was that they provided an opportunity for an ordered approach for settling our affairs and to get us away from the sort of civil war mentality that existed of “them” and “us”.

The Fianna Fáil Government were quite right. I agree with national wage agreements, but what we must bear in mind is—I cannot overemphasise this— that the trade union movement has got to be pragmatic to a great extent. They can have policies and ideals but they [1608] cannot insist on having some ideology recognised and accepted. It is not their function. Their main function is to maintain the living standards of their members and try to improve those standards where possible. That is their main function; other things occur as circumstances arise. If the circumstances were the same, it would not matter what Government were in power.

I do not know what the trade union movement will decide. Trade unionists are people who do not select the circumstances in which they find themselves but who try to deal with such circumstances. They know that anticipating something that may arise will not help in a new situation. Trade unionists have a very broad outlook and a full knowledge of economic and social developments, and they know how to conduct themselves. They are quite conscious of the situation. If the trade union leaders react—no doubt we will hear from the workers—and take that kind of line, I would imagine they would produce plenty of evidence to support the reasons why there should be no pull back on the national wage agreement.

That does not seem to be the case at present. I cannot predetermine what the outcome will be, but I feel if they did that, they would be able to substantiate whatever arguments they would put up. It would not be just a question of trying to score points but would be on a really detailed analysis of exactly whether the economy can stand the amount required in the present circumstances without adding to the problem or if there are other means of dealing with the problem rather than an actual cutback on the last two phases, as has been suggested. They may find another way to deal with it—just as they did when they had to have shorter periods in the national wage agreements and when they provided a substitute clause to overcome the situation in which people were losing.

I should now like to quote from the pamphlet of the Irish Congress of Trade Unions, the 1972 document, where they talk about a strategy for industrial growth. It is well worth putting on the record:

It is not possible to pinpoint with any precision the geographical pattern of redundancies that are likely to [1609] arise in declining industries and in firms hit by free trade. Where these do occur it would be desirable to steer industries to the areas of labour surplus or to where existing industries are in a precarious position so as to minimise the need for workers to have to move away from their home areas. Inevitably, however, in the rapidly-changing conditions of an industrial economy, dependent to an ever increasing extent on foreign trade, some internal migration might arise.

This is a very serious statement but, obviously, this is happening and the number of people coming off the land to work in industry has grown substantially. In the technological age we are in, very serious regard will have to be had to the need for training people to meet the technological developments and the services also, that may be needed for them. That is, perhaps, something beyond this point but it is something that will have to be tackled. At the moment we are trying to deal with a semi-crisis situation and, therefore, it may not be possible to give effect to that idea in this instance. It is something worth bearing in mind. They go on to say:

Experience in countries at different levels of economic development confirms that if industry is to achieve a significant self-generating growth it can best do so in areas of some concentration. In the Republic there are only two urban complexes (Dublin and Cork) that can be regarded as in any way comparable in size to even moderately large centres of industrial concentration abroad. There are many reasons for believing that more industrial concentration will be necessary if the rate of industrial growth is to be adequate to achieve full employment. This does not mean that a couple of centres must be built-up at the cost of the decline of the smaller towns. A growth centre must not be seen as an enclave in a regional desert but as a centre from which growth will radiate throughout the region. A too widespread dispersal of new industry will not enable us to avail of opportunities for expansion. A degree of concentration in a limited number of centres will. (Special [1610] measures will be required in regions such as the North-West where this strategy may not be feasible.)

Again this is clear evidence that Congress are conscious of their responsibility to society. They put down very constructive and good ideas that are there to be discussed by whichever Government are in power. I put it on the record for the benefit of this Government to examine it.

I mentioned the rise in the wage cost per unit of output of 37 per cent in three years, 1968 to 1971, as compared with 25 per cent in Britain, 21 per cent in West Germany, 10 per cent in France and 8 per cent in the United States. These figures are some indication of the competitiveness. It is as well that they are recorded. I am drawing attention to the fact that running through the whole tone of what I have been trying to demonstrate, although it may be sketchy in parts and possibly a little bit incomplete in other ways, was the theme that there was in these countries a discipline and a mental attitude, where because of the last war, they were not inhabited by traditions. They had to throw all their inhibitions to one side along with their traditions and difficulties so that they could come together to rebuild the economies which had collapsed.

Finally, on the question of the national wage agreement, on a survey done by Irish National Surveys Limited, they found that 62 per cent of the people favoured national wage agreements and 29 per cent of them favoured individual agreements. Of course, that is understandable because that is the way the trade union movement voted. Obviously, the sample was not taken from trade unionists. It clearly indicates that the national wage agreements are the way to progress.

Much has been done about social welfare payments. They cannot be thrown overboard because there is a crisis. The people must be looked after. We cannot say that because we have a crisis in our country we should not do anything for anybody in the Third World. If that mentality prevails we will never get around to doing anything about the Third World. Problems will be with us for a while; otherwise we are all out of business. Let us hope we are [1611] minimising them or making them less acute by the various legislation introduced. We cannot leave social welfare and things like that to one side. We must turn to other areas for relief, to the sur-tax, the question of helping industries to subsidise payment of any people they employ—in other words, to generate the idea that it might be now worth taking the risk they would not take prior to the budget. That may promote a little more of the spirit of the enterpreneur.

I am not so sure that the Irish people, generally speaking, are the best in the world when it comes to getting themselves into productive enterprises and involved in technological matters. It seems to me that what has been happening over the past few years was that people were getting into businesses where it might be easier to get a quick return rather than produce a long-term benefit that would be in the interests of the country.

The idea of the State not being involved in the technological and production situation is another thing which would concern me. I am not speaking of a fusion of the societies. But there is a common interest running through our present problems and there is no reason why there should be an unwarranted confidence in the ability of the private enterprise system to solve our economic ills. There is no reason why the State should not seriously think about becoming involved in the technological and productive areas of industry. I would suggest that it would just be another step in the mixed economy we have and it might be an essential one. We should not be put off by events which happened in Great Britain; there is room for the two systems to work together. Indeed, if they work jointly we can overcome many of the problems. I do not know if that view would be accepted by some of my colleagues in the Fine Gael Party but judging from recent events I think it would, provided we were not making a demand for a totalitarian system takeover, but rather that the State would play its role in helping to develop the employment situation in general, that it would break from the traditional role of being involved only in services [1612] and would enter the industrial and technological field.

The trade unions play a role in trying to influence Governments—they do not have any control over world events— and they will continue to play that role in a constructive and democratic way. However they have a slightly different problem from that of the Government, who can decide by Cabinet majority to put a Bill on the Statute Book. The trade unions must involve a very large membership in wide-ranging industries and must overcome certain attitudes which exist. In some cases—not in all— there has been the enduring attitude that we must remain adamant and that there should be no “give”. We have this problem but I do not see that it is an impediment in dealing with this particular problem. It is not as easy for the trade unions to get people to go along with them as it is for an institution which has a smaller membership—for instance, a board of directors. The battle is an uphill one but I think we have the leaders and there is no doubt that we will bring about the right approach which will help out in these extraordinarily difficult circumstances.

This, then, is my contribution. I hope I have demonstrated (a) the difference in dealing with a collapsed economy in which people have to come together and work together and (b) that whatever policies the trade union movement decide upon, they will have regard to the potentially inflationary dangers of plans of certain magnitude. They have had regard to this type of situation before and will do so now. They will keep their solidarity approach which ensures preferential treatment for wage earners and lower income groups. This is part of their function and nobody will blame them for that. The trade unions have taken an interest in sickness benefit and fringe benefit areas and have had them written into the national wage agreement. The trade unions will live up to their responsibilities but this will not accentuate the inflationary pressures. They will not conceal the consequences of these inflationary pressures from their members. I consider that last week's budget is the only way, in the short term, to halt the inflationary trend and to begin to reverse that trend. [1613] It was easier for other countries to halt inflation because of the reasons I have stated.

Mr. Yeats: We are discussing this Bill in the context of an unprecedented financial situation and in the context of an unprecedented reaction on the part of the Government to that situation.

Mr. Brosnahan: I understand Senator Yeats had an accident on his way to the House this morning as a result of which his ankle is severely injured. I wonder if he would be allowed to remain seated while making his contribution?

An Cathaoirleach: Certainly, there is no objection.

Mr. Yeats: I thank the Senator. The annual budget for 1975 was introduced by this Government on 15th January last. Last week, less than six months after that event, the Minister for Finance had to come into Dáil Éireann and admit, in effect, that his financial house of cards had fallen in heaps around him, that there had been a complete collapse of the entire 1975 budget as originally envisaged.

Now we have the situation that, because of the news from the United Kingdom, because of the fundamental nature of the economic changes envisaged there in the next week or so, the Minister for Finance would do better to withdraw altogether this second budget of 1975. His first budget lasted six months; his second budget has lasted less than six days. Unfortunately, the Minister for Finance is not here to debate this matter with us. The Seanad are always more than happy to have the Parliamentary Secretary with us but——

Parliamentary Secretary to the Minister for Finance (Mr. Kenny): I understand that the Minister will be back at 3 o'clock; so, if the Senator will delay his remarks, the Minister will be able to reply to them.

Mr. Yeats: I thank the Parliamentary Secretary. I am afraid I have very few comments other than those related to the Minister for Finance so his ears will just have to burn until such time as he arrives. I can assure the Parliamentary Secretary and Senators that my remarks [1614] about the Minister being absent are in no sense personal. I appreciate that he is heavily involved in financial business in the other House, but I think one is entitled to make the point that the business in which he is involved is quite irrelevant to the present financial situation. These capital Bills in which he is involved—and I can assure the Chair that I had no intention of embarking on a discussion of them in advance of whatever time they may reach us—do nothing to reduce inflation, increase employment, reduce the balance of payments or to ease the Minister's budgetary problems. Every minute spent on these pieces of legislation is really wasted so far as the really important matters in hand are concerned.

We must consider in the light of what we read in our newspapers this morning what the effect on us will be of the proposal of the British Chancellor of the Exchequer. He proposes that in order to meet an effective price rise of 25 per cent the maximum average wage rise to be permitted in Britain should be 10 per cent. Of course, the British Chancellor of the Exchequer may not succeed: it may be that union and worker opposition would be so great that he does not succeed in bringing in this proposal. I think he is in a stronger position than Mr. Health, the former British Prime Minister, in that in trying to put across his proposal he has the support, not only of the majority of his own Government but also of the main Opposition Party. It is likely that it will go through. Indeed, in the event of this initiative which has at last been taken by the British Government failing, the immediate and inevitable result would be a complete crash of sterling. From our point of view, I hope he does not fail because sterling would instantly go to the floor in the event of it becoming clear that he was unable to undertake this initiative.

The effect of the new British proposal inevitably, in British terms, would be that by the end of 1976, inflation which is now running as it is here at around 25 per cent will be in single figures: I expect around 8 or 9 per cent. I doubt if it will be as high as 10 per cent. There will be a very rapid fall in inflationary [1615] pressures. In the meantime, of course, there will be a very severe drop in purchasing power. This is an extremely deflationary measure. Where you are asking workers to meet a 25 per cent price rise with a 10 per cent wage rise, it is obvious that their purchasing power will be very severly reduced. For the same reason one can expect that in the next year or so in Britain there will be a correspondingly large increase in unemployment.

Obviously, these factors will have an effect on us. We in Ireland must achieve in the next 18 months an equivalent fall in prices. If I am right in suggesting— and I think I am—by the end of next year in Britain as a result of this new plan of the Chancellor of the Exchequer, prices will be rising in the single figure level rather than double figures, we must achieve the same result. Even the Minister for Finance has admitted in recent speeches that our rate of inflation is two or three times that which exists on the Continent of Europe. Until now we have been saved from economic disaster by the fact that our very high rate of inflation has been approximately on a level with that in Britain. Since 50 per cent of our exports go to Britain it has meant that we have been able to remain relatively competitive. Now, however, we have the situation that because of this heavy cut in wage rises and consequent rapid fall in the rate of inflation in Britain and if we continue, as is the Minister's expectation, to have wages essentially indexed to the cost of living—I do not think he expects to do much better than if he cuts prices by 4 per cent to have a 4 per cent corresponding fall in wages—the only result there can be is that we will continue to have a much higher rate of inflation than they have in England.

This matter was dealt with by the Irish Independent which is not a newspaper that I normally quote with any particular approval. Their leading article this morning is one which is merely a statement of self-evident facts: I do not think anyone from any party or with any political views could deny it. They say:

We just cannot afford to contemplate any significant difference between rates of income increases with [1616] Britain over the coming year. This would be a blueprint for complete economic destruction.

That is self-evident and I think the Minister must accept that it is self-evident and that is the reason just before the Minister arrived I was saying that he really ought to withdraw last week's budget altogether. It is now out of date and completely irrelevant to the problems that will face us in the next 12 or 18 months. We export some 50 per cent of our total exports to Britain. How are we to continue to export in the event of prices rising more slowly in Britain than here? Already we have been facing problems because of the recently uncompetitive nature of our economy here. We will have to export to Britain at a time when our costs are very high and their costs are falling. We will have to export to Britain at a time when very severe deflation which is now about to begin there will cut their purchasing power. It will be very difficult to sell anything in Britain, leaving aside any question of competitive pricing. We will have to sell in third countries in competition with British industry at a time when our costs are likely to be considerably higher than those of British industry. We will also have the situation in which British exports to us will be cheaper and will be selling here in competition with our own industrial products. It will be increasingly difficult for us to compete. The fact that British industry is quite clearly going to have trouble on the home market will be an incentive to them to dump everything they can on foreign markets, including Ireland.

The Minister will also face the problem that in regard to these enormous sums of money that he proposes to borrow abroad, the question will arise as to whether, and to what extent people abroad will be willing to lend to us at a time when along with all other countries you have severely deflationary policies in Britain resulting in rapid falls in inflation while here we continue and apparently intend to continue to live in the happy situation that although we are, as everyone agrees, in a state of crisis no one is apparently going to suffer by this. We are to try to live at our existing standards of living [1617] Between State and public bodies the Minister envisages borrowing this year something in the region of £300 million. One wonders in these circumstances whether he has any chance of getting them.

The budget of last week, with its enormous deficit, doubled since last January, with borrowing requirements both at home and abroad, depends on there being a fairly early improvement in the entire economic environment. The British move effectively ends this prospect. Whatever its results, it may be that it does not bring about as rapid an end to inflation as anyone expects it will. It is quite clear that in a situation where you have a 25 per cent increase in the cost of living and the average wage rise to be allowed is 10 per cent, there will be a vast fall in purchasing power which can only be reflected in our own internal conditions. In these circumstances it seems that whatever prospects the Minister had last Thursday—and I do not think they were any good—there is no prospect at all of continuing his existing budgetary practices. We are in the situation that between now and the end of 1976, or perhaps even later, the British market is going to be a very depressed one. As I mentioned, British exports to us will be more competitive and our exports to the United Kingdom less competitive. There will be very little buying power in what is still our main market.

The budget of last week was described by the Minister as “one of the most significant ever produced by a Minister for Finance of this State”. I am afraid this budget turns out to be irrelevant, insignificant and positively harmful to our future prospects in that it attempts to convey the impression that we can beat inflation and unemployment without any need for sacrifices on our part. Now that the United Kingdom has at last taken some action, I do not think it need concern us here whether it is the right action of some kind to deal with inflation. We are in the position that every other country in Europe, for practical purposes, is taking drastic steps to deal with the crisis.

The Government must understand that we cannot stand alone in this respect. The Government must understand [1618] that they cannot allow their positive mania for political popularity effectively to bankrupt the country. One is justified at this stage in reminding the Minister and Senators that we are now in the position, to all appearances, that this present Coalition are going to be the third Coalition to have ruined the finances of this country. We all know only too well of the first Coalition Government of 1948 to 1951 and the second in 1954 to 1957. In each case, because of the inherent problems that non-viable coalitions of this kind have in taking decisions and in framing policies, they were unable in each case to take the necessary decisions and they left behind them a trail of financial problems which took years in each case to solve. The problem with this Coalition, perhaps even more so than with their predecessors, has been that ever since they attained office in March of 1973 they have been totally dedicated to the concept that above all else they must win the next general election.

We had the budget of 1973 which was referred to today by Senator Markey. He wanted to know if Fianna Fáil had been returned in that election would we have had a severely deflationary budget. The answer of course is that we would not. It was not necessary. But 1973, which everybody accepts as a boom year, was at the same time a year which presented certain obvious problems facing us in the future. Senator Harte referred during his interesting speech to the very rapid rise in raw material costs which took place from 1972 to 1973, This was taking place at the time of the budget of May, 1973. It is fair to say that if a Fianna Fáil Government had been returned, while they would not obviously bring in a deflationary budget they would at least have had a neutral budget, one which would have held the balance between inflation and deflation, bearing in mind that while there was essentially a situation of economic boom, there were these dangers hovering on the horizon.

Unfortunately the present Government and the present Minister came into office at this stage and we had the beginning of what has been a slump, a pattern of budgets since then of the universal handout, the effort to persuade the people of Ireland, in particular the [1619] supporters of the Government, that it was possible to govern a country handing out large sums of money for such purposes as social welfare, health and so on—one likes to see this being done—that it was possible to increase spending on these services without taking in a comparable amount of revenue: in other words, that it was possible to use more of the national cake for these purposes without doing any harm to the overall economic situation.

Then we had the budget of May 1974 which was rather like this recent budget of last January except in so far as the various prognostications of the Minister, which were almost entirely wrong, did not prove to be wrong quite so rapidly. During the various debates on that budget he said constantly, and insisted in face of some barracking from the Opposition in this House and the other House, that the balance of payments deficit would be some £140 million. As we know, last year it turned out to be a balance of payments deficit of £310 million. He insisted that price rises were not really an important factor, that while they existed they were not worse than anywhere else and certainly they would not exceed 14 per cent. They turned out to be 20 per cent by the end of last November. He claimed that the budget deficit, which was by traditional Irish standards a very high one, would be £72 million. It turned out to be £92 million.

The problem in that budget and indeed in the entire financial policy of this Government has been that consistently, while recognising that an international crisis existed largely as a result of the energy problem, that they would rely on other countries to do what was needed, rely on other countries and other Governments to take the politically unpopular measures that were needed in order to bring down inflation and cure the other economic ills, and that other countries and other Governments, having faced this political unpopularity, the resulting improvement in international economic affairs would wash off on us and our Government therefore would be able to bask in this new atmosphere without themselves [1620] having taken any practical steps to deal with the situation.

The problem has been that the international revival which is supposed to come to our aid has been delayed beyond the original hopes and expectations of the Government. In the budget of last January the Government and the Minister, in seeking political popularity, added wrecklessly to the inflationary forces which already existed in this country. We had a series of indirect taxes, including the enormous increase in tax on petrol which took place before the official budget of the year and, allowing for the effects of the national pay agreement and so on, the Minister added 4 per cent to prices. It would be ludicrous, if it were not so tragic, that six months after he had added by his own deliberate action 4 per cent to our rate of inflation, he comes along now to try to take off 4 per cent in another budget. He provided in this budget, for similar reasons, for a huge current deficit which he estimated at that time at £125 million. He describes this whole edifice as a carefully planned expansionary budget. It may be expansionary but it cannot have been carefully planned.

We had, about one-and-a-half months or two months after the introduction of the January budget, the negotiations finally culminating in the national pay agreement. The Minister knew at the time he framed the budget that negotiations were about to begin. He knew, obviously, that the amount of the pay award would be to say the least connected with the degree of inflation, and yet he added these indirect taxes at 15th February. The index figure was obviously to be influenced from the point of view of the negotiations, yet he arranged by his own deliberate activities that 3 per cent would be added to VAT, which worked out at 4 per cent when one considers the effect of the pay award on it. He called for restraint and he said in vague terms that he hoped no one would take undue advantage of the position, and so on. But he did nothing practical to exert an influence, and in his own budget proposals he made restraint far less likely. He said last week, in the course of his budget speech, at page 8:

It is now clear that the current [1621] national pay agreement gives increases in pay, including increases reflecting taxes on alcoholic drink and tobacco, which cannot be paid in present economic circumstances without doing serious economic and social damage.

He knew this when he framed his budget. He knew that inevitably the increases, whatever they were, would reflect taxes on alcoholic drink and tobacco or, indeed, on petrol. Therefore, his budget made the restraint he asked for far less likely. It is not unfair to say that the actual amount agreed to in the national pay agreement was perhaps the minimum that could reasonably have been expected. I do not think that anyone, considering the matter, whether in trade unions or outside them, would reasonably have expected that both sides would agree on anything less than what was agreed to. It could have been more but I do not think anyone reasonably studying these matters could have thought it would be less.

We are told by the Minister that his budget of January, 1975, has collapsed and he told the other House in the course of his budget speech of the huge increases in spending he had authorised since January last. Remember, this is not a matter of a year or two, it is a matter of five-and-a-half months. He told us that he had allowed an increase in current expenditure on health of £18.8 million; on social welfare of £8.1 million; an extra £8 million for CIE subsidies—that is an interesting figure. In this House last December when we were dealing with the Transport (No. 2) Bill I crossexamined the Minister for Transport and Power on this matter. I pointed out to him that the sum the Minister had allotted to CIE, £17 million in the annual Estimate, was totally inadequate. Judging by the way in which costs have been increasing in CIE over the years, judging by the constant increase year by year in the subsidy required for CIE, it was obvious that £17 million was not enough. Of course the Minister for Transport and Power said he did not know about this but it was always open to Senator Yeats to make an intelligent guess. Whatever about Senator Yeats [1622] making intelligent guesses, it should not be beyond the wit of the Minister for Finance to make more intelligent guesses than the one had made when he fixed that figure at £17 million.

As a result we now have about £8 million extra for CIE. Education grants since January, 1975, are up by £6.6 million; Justice up £3.3 million; Agriculture up £3 million; Defence up by £2.9 million. The Minister of course will say that there are extra costs for defence and so on because of the Border situation, but he knew about the bulk of these things in January. He knew, for example, about the defence problem and matters have not really grown more difficult since then. They may even have grown somewhat easier.

Posts and Telegraphs is up by £2 million. There is an enormous sum of £20.1 million which has been sanctioned since last January for public service pay. I am not sure where the Minister gets this figure because in answer to a question of mine on the Finance Bill last May the Minister told me that in this financial year, that is up to 31st December next, he was going to have to produce £29 million for public service pay. One wonders, therefore, whether on top of this £20 million he mentioned last week in the Dáil there is another £9 million coming later which would inflate his budget deficit still more. There is £10 million for public debt service. I would have thought that was a figure that was relatively easy to assess from one year to the next. I take it the Minister knows how much he is going to borrow. I find it difficult to understand why he could suddenly find there was £10 million extra required. Even more incredible than this vast list of increases in expenditure which the Minister has sanctioned, on foot of his carefully considered budget, we find that on page 5 of the Minister's speech he said:

Since the publication of the current budget on 15th January last, the Government have had to approve additional current expenditure by Departments totalling £76 million——

That list appears on page 6 and I took the trouble of adding them up and they total £82.8 million. There is an extra [1623] £7 million there. Apparently the financial administration of this country appears to be in such a slip-shod condition that a basic error of that kind creeps in. I do not know which is right, whether he has sanctioned £76 million since the January budget or whether he sanctioned £83 million. I suppose one might say that when the deficits and the borrowings were so enormous what is another £7 million or £8 million between friends? That is no way to be running the finances of the country. On page 6 the Minister said:

We are tightening the control of public expenditure so as to avoid any further increases during the remainder of the year, apart from those I will be announcing later in the statement.

Why did he not do this last January? I should have thought that at the time when the Minister was catering for an enormous budget deficit, which last January was fixed at £125 million, the least he would do was to tell everyone that there simply could not be any further increases. He has now done this, but why did he not do it in January? I would have thought it was an essential part of any budget. He could have done it in 1973 or 1974. In the first half of the year he allowed £76 million or £83 million, depending on which page you read, extra expenditure, and he now says that for the second half of the year he will not allow any more.

Along with this vast increase in expenditure we have a fall in revenue. The Minister says that because of economic conditions which prevent people from buying, they have lower incomes and so on, there will be a fall in revenue of £11 million in 1975. This seems to be incredible. We have before us now the Exchequer returns for the first six months of this year to the end of June. The Minister budgeted on 15th January for a 28.5 per cent rise in current revenue. Up to 30th June the rise compared with the first six months of the previous year was only 18.5 per cent. There is a shortfall of £32.5 million. That is the amount extra he would have got if he had reached his 28.5 per cent as he estimated. The shortfall, which he says is £11 million [1624] for the entire year, is already in the first six months of this year £32.5 million. On the basis of this continuing during the rest of the year there would be a shortfall of £65 million.

The Minister may say—I do not know what his justification would be—that economic conditions will improve in the second part of the year and revenue will go up and so on. If it goes up by £5 million, £10 million or so, it certainly will not go up anything like enough to reduce the shortfall in revenue anywhere near £11 million. It will be at least £65 million or if the Minister is very lucky it might be £50 million or £55 million.

Expenditure, on the other hand—and this one would expect in inflationary conditions and particularly in conditions where the Minister has been sanctioning additional expenditure holus-bolus, right, left and centre to either £76 million or £82 million—is up by £168 million in the first six months of this year. That is an increase of 37.6 per cent, although it was only planned to rise at the rate of 30 per cent. You have therefore this incredible rise since the January budget. The Minister made a comment on this topic in page 5 of his budget speech last week. He said:

Inflation is, therefore, a powerful engine inexorably pushing Government outlays to intolerable levels. Even before account is taken of the limitless demands for further and further moneys for expansion and extension of public services and subsidies.

He speaks of inflation in this regard as if it were some kind of disease that came upon people and there was nothing you could do about it. You came out in spots and went to hospital. But the Minister for Finance is there to deal with this kind of situation.

Surely he has a responsibility to refuse to sanction expenditure on this scale. In any year in any Government there are always certain items of expenditure which in all equity and justice a Minister has to sanction, but there are others he can refuse to sanction. If the Minister feels that some items of expenditure had to be agreed [1625] to, he has a duty to ensure that in other respects there are corresponding falls in expenditure in order that the budget would come out at least approximately as envisaged at the beginning of the year.

Such items as health and social welfare increases due in next October are not included in the figures for prospective expenditure. These items may be somewhat less than envisaged because of the potential fall in the rate of inflation as a result of the Minister's budget last week. Nonetheless, they will be considerable. Since last February you have had the 15th May index figure which showed an increase of 6 per cent. If you add another 2 per cent or so in next August it will be a considerable amount to be paid out in social welfare and health. There is also the problem of the public service. I have asked the Minister about this and whether there is not another £9 million or so coming along. There is no mention in his figures of what he has to pay the public service in respect of the national pay agreement. There is no explanation for the overspending which has taken place since last January. On page 7 of his speech he says:

As a result of double digit inflation public expenditure has risen enormously.

All I can say is that that is mere rubbish. Expenditure has risen as a result of decisions by the Minister for Finance. We have an Exchequer system which does not enable money to be spent automatically. Every item of expenditure beyond what is contained in the budget and the Estimates must be sanctioned before it can be spent. Inflation does not do it. It is done by ministerial decision.

As a result of the fall in revenue, coupled with increases on a very large scale in expenditure, there is a current deficit which from £125 million on January 15th last is now to be £242 million. Of that, £20 million is due to subsidies, and so on, that the Minister brought in last week. The greater part of it is due to what I have been discussing. All the evidence is that the deficit will be much more than £242 million. The revenue shortfall is certain [1626] to be a great deal more than £11 million. There are certain items of additional expenditure that the Minister has not provided for. My personal estimate is that the deficit by December 31st next will be nearer £300 million than £242 million.

One problem with this Minister is that in a flamboyant way he says the right things, but having said them he does not do them. On the Finance Bill debate in May last, at column 1207 the Minister said:

Senator Yeats said the budget was irrelevant to current needs. I do not think it is. What option had we? What else could we have done that we have not done?

He continued:

We could have gone for a bigger deficit, but a bigger deficit would have been more inflationary. It would also have meant that the State would have to borrow more, therefore taking more money away from the private sector that needed it.

The sentiments are unexceptionable. One can agree with them. But he says this about a deficit of £135 million. He said it could not be any bigger because it would be still more inflationary, that he would have to borrow more and therefore he would be taking more money away from the private sector that needed it. He is saying the right thing. Then what does he do? Within five or six weeks after this, he says the deficit is not £135 million, it is £242 million and is likely to be a great deal more than that. How will this deficit be financed?

First, obviously, it will be financed essentially by way of foreign borrowing. The Minister's estimate is approximately £276 million. The January estimate for foreign borrowing was £225 million. Here again we have an extra £50 million or so. The figure would have been even higher were it not for the fact that because of the expectation by certain moneyed interests in Britain that there might be a break away by the Irish £ from the £ sterling, they thought the £ might depreciate and therefore there might be profit to be made, so large and unexpected sums of money have [1627] come into Government stocks which the Minister could not have anticipated. Were it not for that, his figure for foreign borrowing would be even more than it is. Nonetheless, the Minister says he is to borrow about £276 million, another £50 million in addition to what he mentioned in January. We must add State bodies to this. The figure in this respect was given in January at £50 million. This brings us to a figure of more than £300 million to beborrowed abroad this year.

This type of borrowing, equivalent almost to the printing of currency, is highly inflationary and is also expensive and dangerous. During the past six months there has been a fall in the value of sterling as against foreign currencies of approximately 10 per cent. To that extent, all foreign borrowings—the £500 million or so that we owe—have increased in value by some 10 per cent and it will be that much more difficult to pay back. The Minister said in the Dáil on 16th April as reported at column 1873 of the Dáil Official Report:

The Exchequer has no source of money other than taxation or foreign borrowing and foreign borrowing has already reached its limits. We cannot compel the rest of the world to give money to Ireland to service Irish industry and Irish comforts.

Last week he increased by some £50 million the amount he proposes to borrow abroad. This increased deficit of some £117 million has occurred suddenly since last January. Supposing this sum had been used for purposes other than the highly inflationary one of balancing the budget—if, for instance, it had been used for the provision of jobs and supposing the Minister had adhered to his budget decision of last January, had refused to allow additional expenditure on the scale that he did and was able to come to us today and to the Dáil last week with a budget aiming at a budget deficit of £125 million, without in any way increasing the amount of foreign borrowing that he aims at now he could have used this £117 million for the direct provision of employment. This would have gone a long way [1628] towards solving our unemployment problem but he has not done so. That enormous sum of money has to be borrowed simply to balance the budget. It will have no direct effect in providing employment. It will add still further to the inflation problem and, perhaps, irretrievably to the almost insoluble problem facing the Minister in repaying these sums and bringing about some kind of order into State finances.

To what extent has the Minister been able to arrange this external borrowing? I should be interested to learn from him, when he is replying, how much borrowing has been arranged so far. Perhaps he can give us some information about the prospects for borrowing the rest of it in this year. The total borrowing, as set out by the Minister in the document he issued last week, called Summary of Revised Capital Budget including Current Budget Deficit, is now to be some £824 million. It was big enough last January at £649 million but it now represents some 25 to 30 per cent of our entire national income.

In the absence of any real indication from the Minister, one wonders what has changed since January? What has changed to necessitate the doubling of the imbalance in the budget, the deficit in the current budget? There has been a vast increase in expenditure and in foreign borrowing. The only real explanation, if explanation it is, given by the Minister is when he said in the Dáil last week that the upturn in international economic conditions, particularly in what he calls the lead economies of Germany and the United States, has been expected to take place in the second half of 1975 but that full resumption of economic activity was not probable until the middle of 1976. The puzzling thing is that until comparatively recently there was a quite different story being told by the Minister and by others. For example, in a speech on the Final Stage of the Finance Bill in the Dáil on 6th May, as reported at column 1250 of the Official Report, the Minister said in referring to the budget:

What we have produced is a budget that is carefully expansionary in a most difficult situation and if the [1629] forecasters are right and the end of 1975 sees an improvement in the economic performance of the industrial countries with which we are associated in OECD then it will be seen that our budgetary policy is the right one and that the incentives and the reliefs and the taxations in this budget were the right ones in that difficult situation.

At that time, therefore, we still expected the upturn in the economies of the industrial countries this year. We still had confidence that the reliefs and the incentives and the taxations in this budget were the right provisions in the situation.

The following day the Minister came into the Seanad and said, as reported at column 1203 of the Official Report:

We hope that in the second half of this year, in common with the rest of the world, confidence will be again exuded and that the situation will significantly improve.

In the publication, Economic Review of 1974 and Present Outlook, which the Minister and his Department issued coinciding with the budget of last week, there was reference to the anticipated upturn in world economic activity which they hoped would take place in the second half of 1975, but even in this event, they said, it was unlikely that there would be an improvement in the unemployment situation before the first half of 1976. They state, too, that industrial exports should benefit from an improvement in world trade towards the end of 1975.

As recently as last week, while the Minister was suggesting that everything has changed since January and, in particular, that there is no longer any prospect of a full resumption of economic activities in the United States and Germany until near the middle of 1976, his own Department were issuing a review of 1974 and the present outlook which says, in effect, the exact opposite.

The Minister for Labour said in the Dáil on 27th June, which was the day after the budget, that the latest consumer price index showed an easing off in our rate of inflation and that the Government had chosen this time when [1630] the major international economies were experiencing upturns as an opportune time to strike at price increases and inflation. So the Minister for Labour speaks of an upturn in the major international economies whereas the day before the Minister is saying that, of course, all these budgetary disasters were due to the amazing change in international prospects since January.

Incidentally, while I am quoting the Minister for Labour, it might be well to point out that it is rubbish to say that the latest consumer price index showed an easing off in our rate of inflation. If one considers that the 8 per cent figure for February included 3 per cent that the Minister provided himself whereas the 6 per cent figure for May 16th was, fortunately, unaided by the Minister, one can only conclude that the underlying rate of inflation, at least up till now, has been up rather than down.

The truth is that nothing really outstanding has happened since January. World conditions are essentially as were expected. Perhaps there has been a somewhat slower resumption of activity in certain countries but no sudden change of the kind the Minister has referred to. Inflation has been very much as expected. Nobody, last January, would have said that inflation in this country was likely to be much less than 25 per cent this year. It was 20 per cent at the end of the 12 months up to November last and steadily increasing. The figures we have seen since are about what one would expect particularly with the Minister's 3 per cent that he kindly provided in his budget of January last. The pay award, as he said, was just about the minimum that any reasonable person could have expected to emerge from the negotiations. All I can say is that, for whatever reason, the Minister at last came to realise that in his budget of January he made a disastrous miscalculation. It was not a carefully considered budget which went astray because of sudden disastrous and rapid changes on the international scene. It is quite clear that that is not so.

To sum up, the Minister in his January budget increased prices by 4 per cent effectively in advance of the [1631] pay negotiations. He poured scorn on the Opposition for suggesting that subsidies could be used to cut prices by 4 per cent. If he had taken the advice of Fianna Fáil in time and had introduced subsidies in his budget and had he failed to increase prices deliberately, as he did by means of indirect taxation, prices would now be 8 per cent lower than they are. He would have saved the 4 per cent he added and he would have taken the 4 per cent off as he is now doing. An 8 per cent lower price rise would have had an immense and beneficial effect on the entire economy of this country.

Quite clearly, the wage agreement with all it involved and with all in which it involved the Minister by way of the cost of paying into the public sector would have been at least 8 per cent lower. At last, the Government have taken some kind of action. I have suggested already that this action is too late, too little and in the light of the recent events of the last day or so in Britain, is completely irrelevant. The Minister ought to withdraw his budget and think again. However, one must take it as it comes and discuss it fairly briefly as it stands. The Minister has gambled and, judging by the remarks of Senator Harte, one can hope that the gamble will succeed to a limited extent. He has taken this gamble that, even after the wage agreement has been signed and agreed, there will be agreement to change it.

The premium scheme, obviously, is to be welcomed, although I have some worries about this. I wonder whether the Minister has considered the effect this will have on school-leavers. School-leavers here, as we know, are unique in Europe in that they do not appear on the unemployment register. It would seem unreasonable to expect employers to employ school-leavers, if by employing people who are on the unemployment register they can get £12 per week. The Minister should consider the fact that the premium benefits employers who have sacked their workers as against those who, in the interest of their workers, have kept them on part time. I do not know if the Minister intends to deal with this situation but it seems unjust that an employer who, [1632] not having the interest of his workers at heart, has sacked them and closed the factory in order to save money should benefit, whereas an employer who has kept his workers on a two- or three-day week in order to provide them with some employment does not benefit.

The budget provides also for £27 million extra for capital expenditure. This is a very disappointing figure both because of its size, which barely seems adequate, and because of the nature of the expenditure which is involved. One point that occurs to me is the £10 million provided for telephones. We all know that the telephone system is diabolical and could certainly do with improvement. I would hesitate to criticise anyone for spending money on improving this system. Nonetheless, this sum of £27 million that the Minister has provided is supposed to be creating employment. Will there be one man put to work as a result of providing telephone equipment? The Minister nods. I do not know if it will be a dozen, two dozen but the number is, quite obviously minute, when one considers the cost of telephone equipment and when one assumes that the equipment is already on order. There was a shortfall in expenditure on telephones last year, presumably due to delays in delivering equipment. I take it that the sum of £10 million is essentially designed to make up this. Quite obviously, whatever employment is created will be very small.

There is also £5.2 million for industry, of which most goes to Fóir Teoranta. One welcomes this but it is fair to point out that the Minister, some months ago in this House, said that whatever money was needed for Fóir Teoranta would be made available. There is no additional activity involved in this.

Gaeltarra Éireann are to get £1.2 million. One welcomes this, too, but again it seems that it is continuing activity and nothing new.

The only substantial amount for the creation of employment is the £10.5 million for housing and this is in the form of loans just as the help from the banks which the Minister announced last week is also in the form of loans.

[1633] We in this party have said that if a rapid increase in employment is sought there should be direct expenditure on building and construction rather than the much slower process of making money available by way of loans, particularly when the Minister, as part of the package, has increased the cost of borrowing by 10 per cent. One wonders to what extent people who wish to buy houses will be in a position, under existing economic circumstances, to finance them.

One of the problems with the Minister's package last week was that, while to a considerable extent he followed the recommendations of the National Economic and Social Council and to some extent the recommendations of Fianna Fáil of the past six or nine months, he did not follow other recommendations of the Economic and Social Council. He withdrew VAT from clothing and footwear. Obviously, this is a welcome move but one wonders to what extent this will help the position in these industries. It may make it easier for people to buy clothing and footwear but equally it applies to both imports and Irish produced goods. Therefore, since competition from abroad is the real problem facing the country, it does nothing to help.

The National Economic and Social Council recommended that, along with other assistance, import licences should be introduced for the control of imports of footwear and clothing. They pointed out that this could be done within the rules of the EEC but the Minister has not done this. There has been complete Government inaction in this respect for more than a year.

Everyone has known for a year or more past that there was a very serious situation in the textile and footwear industries. There are various reasons for this. Old-established factories have been closing week after week. Workers have been put out of employment but the Government have done nothing. Even now, when they have a recommendation from the National Economic and Social Council that import licences should be introduced, they do nothing.

The Minister for Finance told the Dáil last week that an approach has recently been made to the EEC Commission [1634] with a view to the adoption of immediate arrangements which will enable the flow of imports of footwear to be regulated in the interests of employment in the industry. How recently? I wonder do Senators opposite know? This is a problem that has existed for a year or more but nothing has been done about it despite constant efforts, not simply by Members of the Opposition but by trade unionists and others interested in this matter to urge upon the Government that some action should be taken. It was only last Thursday that we were given the information that an approach has been made to the EEC. I doubt if an approach is needed in this matter. One can accept that the National Economic and Social Council have reasons for suggesting that the controls be brought in without sanction by the EEC. How have the Government decided to seek sanction for some unspecified concession to be given?

Yesterday, in the Evening Herald there was a report of a press conference with the EEC Commissioner who is concerned with this matter. He is reported as having said that he talked about the matter with the Minister for Industry and Commerce. The Commissioner is reported as saying that the EEC have examined possible solutions. The paper goes on to say that he pointed out that, as the EEC Commission had only looked at the problem for the first time on Wednesday last, he could not say at this stage when a final decision would be reached. Therefore, when the Minister says that an approach has recently been made to the EEC Commission with regard to the problems presented by unemployment and short-time in the Irish textile and shoe industries, he meant very recently indeed. He meant that the day before he spoke the matter had for the first time been considered by the Commission. What kind of Government and Administration is this? What kind of Government is this that, even allowing for the well-known inability of the Minister for Industry and Commerce to take decisions, in a time when everybody knows, that there is very serious unemployment in these industries, with long-established firms closing down week after week, they do nothing until [1635] the Minister is finally driven into the Dáil by the collapse of his January budget and then he says “recently”, meaning the day before, the matter has been brought up before the EEC Commission.

It is good to see some kind of Government action, even though on the whole the budget can only be described as a big gamble. There is the question whether the parties to the national pay agreement will agree to change it; they probably will. There is the question, which is a great deal more doubtful, whether we will get all the foreign loans that are required. There is the question to what extent, it at all, the rate of inflation and unemployment will be affected. There is the question, overshadowing all this, what the effect on the country will be of the recently-announced British policy.

I can only conclude that, from every point of view, the financial administration of the present Government has failed lamentably. The so-called decisions announced last week are already shown, after six days, to be completely and utterly inadequate. Once again, I can only call on the Minister for Finance to withdraw this budget and bring in something sensible.

Mr. McCartin: Having listened to the kind of speech which Senator Yeats has made and those made by some other speakers one gets the impression that the Minister for Finance is sitting there with a wheel in his hand and without any great difficulty he can direct a vehicle of State, the whole economy, in whichever direction he wishes it to go. People cannot understand why he does not do something exactly at the right time and why there should be any inaccuracies in his judgment of the situation. I do not see the situation in that light. Sometimes one would wish, when listening to Senator Browne referring to the situation in Russia where there is no inflation and no unemployment, that our Minister had some of the powers which administrators have in Communist countries. If people like Senator Browne were there, he might meet some of these work-shy people in the company of [1636] Government critics in the concentration camps in the north of that country. This is a democracy. We are all individuals. We all play our part. We are all involved. It is not possible for a Minister to direct the economy in the way that so many people expect. Senator Yeats said the present Government were at a disadvantage in dealing with the sort of problems we have at the moment, that for some reason or another a National Coalition were not in a position to take the sort of opportunities and enact the sort of measures that were necessary to set the economy right. I thought it was strange that Senator Yeats should think that we in the National Coalition are in a weaker position to put into practice the sort of suggestions that he has which obviously he was even afraid to mention. This is the sort of talk that we heard from the Opposition benches over the last two days in connection with this situation.

We also heard about the 1973 budget —the budget which created the inflation, the handing out of goodies, as Senator Lenihan described it on a former occasion. Looking back at what has been done by the National Coalition in the fields of health and social welfare, I would challenge the people on the other side to be more specific about what the Minister and the Government have done wrong in this region. I would ask them to pick out the people they think should not have got the sort of increases they have got and tell us what sector they would deprive— whether it is the old age pensioners, disabled persons or unmarried mothers. They should point out to us what exactly they are talking about. We have a serious situation of inflation but I do not believe we have given these sections of the community any more than they deserve. There are certain abuses, and these have been published in the press recently and many public representative have had the courage to refer to them. We all realise this is not something new. We have the cases of people who are working and at the same time getting disabled persons' allowance and sick benefits. Apart from difficulties of this kind, I would like somebody to tell me how the Minister for Finance and the Minister for Social Welfare can reduce any of these things and make more [1637] money available for what might be called more productive purposes.

I think there is a lot to be said for the Minister for Finance's budget last week, bearing in mind that we live in a democratic country where the Minister cannot ram the solution down the necks of the average citizen. The Minister has done the best he could do. He has to some extent taken a gamble. I would not call it a complete gamble. The Minister has done what hopefully will prove to be the right thing. He has gone a long way towards calling a halt to the spiral of inflation in asking people to sit back and think about it and hoping he will get the sort of cooperation he ought to get in the present difficult period.

I do not think the idea of subsidising labour to increase the number of jobs will work, and I am sure the Minister will not mind me saying that. But it will not cost the Government anything, and it might be a useful experiment. There was an old saying in the part of the country that I came from that a man was as well sitting idle as working idle. If there is not productive and important work to be done there is no point in fooling ourselves in putting people into jobs. This sort of thinking is perhaps related to the old idea of building follies to keep starving men employed. It is just thinking up an excuse to give them money for doing something when there is nothing to be done. I am not suggesting that there are not things to be done in this country at the present time.

Listening to the speeches I have heard, you would think that the Minister should work some sort of three-card trick on the whole problem of our economy. He should take a shilling out here and put a shilling in there and do it fast, and with the proper sleight of hand everything will work out.

Senator Yeats said inflation is not a sort of disease that breaks out in the country. On the contrary, I believe it is a sort of disease that has broken out in this country. While I know that some of the ideas put forward and the things the Minister could do are very important, I should like to put the emphasis in a new direction in the few words I intend to say. I do not believe [1638] it is necessary to cut back on wages social welfare and all the other allowances that the State is giving at the present time. We should try to convince the citizens of Ireland—this is something that the average politician is afraid to speak up on and everybody is afraid to speak on it—to do a little bit more and forget the idea of inflation. Shorter hours, more holidays, better working conditions, less work and more money, is the kind of disease that is taking a grip on the country. We should not include in our calculation the weaker sections of the community. The very low-paid workers are still not getting enough money. Some people are in a very difficult situation, but starting if we could, through providing leadership and a change of attitude, get the average man in employment in the public sector to give the sort of return for a day's wages that could be given, we would have gone a long way towards curing our present ills.

In the past few years we have seen the spiralling increase in the cost of electricity. Every single service we avail of is costing more. We hear it is costing more because the Arabs increased the price of oil, and because wages have increased, but to my mind the greatest factor is that people are not giving the return in work they should be giving. In most services and jobs people are not doing a day's work and nobody knows what a day's work is. I am happy to say in the presence of some of the trade union leaders—I listened to Senator Harte who made a very valuable contribution and whose views I respect —that the disease permeates our whole attitude. It is no longer respectable to be a working man or to be a man who gives an honest day's work for an honest day's wages. The employers, the State and the trade unions have a responsibility here. The attitude that all men are created equal may be all right in one sense but in another sense nothing could be further from the truth. We are not all equal. The day we say all workers must get equal return whether they are good or bad we shall be doing a lot of damage to our economy and our nation. I remember the days when a good man was invaluable and worth two men's wages. Now you employ a good man and in a [1639] few days he begins to recognise himself as a fool and in a short time after that he reduces himself to the lowest common denominator of the men on the job because he is not thanked or paid for doing any extra work and he is frowned on by his colleagues.

I would ask people generally and the trade unions to take a new look at this situation. I honestly believe that the trade unions have done a good job and that they are necessary. Let us not replace the tyranny of the employer that we knew and read about with the tyranny of the trade unions. Why do trade unions have to stoop to an accommodation of the laziest, meanest and lowest character on the job? Why does the best man on the job have to reduce himself to that level? We have arrived at the situation where the good man works at the job all day and knows he has not done a good day's work, but when he comes home he takes another job and does another day's work in the evening.

That is all right, but what is happening is that in the place where he should give of his best he is putting his job and the future of his industry at risk. He is degrading himself all because the official attitude is one man is equal to another, because no man should get any more pay than another. This is playing a bigger part in bringing our economy to the state in which it is at the moment than the sort of increases we have given to the poor and the sick, and the services we have provided through hospitals and social welfare.

Senator Dolan talked about industry in the west of Ireland, the need to provide more incentives to industrialists, the need to nurture every idea of manufacturing, every place of employment no matter how small it is in our underdeveloped areas. This should be done for many reasons. I have seen in the west of Ireland so many houses become vacant, so many places where people could live out of the crowded city— where amenities are already overused and overstretched—areas where if people did not have running water and first-class sewerage facilities it would not make as much difference as it does in the cities. Many schools have been [1640] closed down; houses have been vacated and shops have had to close. We have got all this sort of infrastructure going to loss because industry was not developed in the west of Ireland as it ought to have been. There are many good reasons, not only reasons of social importance but economic importance as I have pointed out, why industries should be fostered in the west and why the Government should make every effort to build up their offices in the west of Ireland, to move as many civil servants as possible and not necessarily to move them but to ensure that the new jobs that are being created are in the areas of the country where the structure of population tends to break down.

Here in Dublin city we have a big problem of housing. If a young man gets married he requires £10,000 £12,000 or £14,000 to provide himself with his own home. That includes the cost of a site, the cost of building the house, the cost of all the facilities, sanitary services and so on. This is relevant, because we should bring in here all of our experience in everyday life. It is that experience that helps us to contribute to a reasonable solution to the problems of the country. I have observed in the past year at least three young men who got married, got sites on their father's holdings, built their own houses in their spare time, houses that might cost them £10,000 to £15,000 if it was here in the city of Dublin. The repayments would be colossal and would be outside the reach of those in the lower income groups. The materials for one of these houses cost £2,500. A young man built it in his spare time in one year. I could give facts and figures for other houses that I know of as well.

Yet we have the situation here in Dublin city where people getting married are being forced to provide the sort of money I am talking about if they are to have a home of their own. The alternative is to live in a flat or a council house. If we could have more of the sort of development I am talking about, less of a rush of young people into the cities and a better use being made of the structures that exist and the facilities that are already available in the lesser populated areas [1641] of this country, we could, over the next few years, save ourselves a lot of the headaches we seem to be creating for ourselves by allowing our country to become too urbanised.

An economist used to try to tell us the right place to build a house was where you had sewerage, water, electricity and all the other facilities. In practice I find it is much easier to set a family up in rural Ireland than it is to set them up here in the city. In addition to that, you have a lot of fringe benefits as well. We do not see so many young people getting into trouble with the law. We do not see the same amount of deliquency. There are not the same dangers from alcohol and drugs, and there are a host of other good reasons why our Government should make every possible effort to redress the imbalance that has come about in our population in recent years.

There is another aspect of this whole problem that I would like to mention. I talked about the disease that had entered into this country, the situation that had come about where people were giving less return for wages and were not doing the sort of day's work that it was fashionable to give in the past. There is also the element of waste that has entered into our society. A couple of weeks ago I travelled on an Aer Lingus plane. The air hostesses came around with refreshments. I was given a little packet containing a serviette, a spoon and some sugar. Since I do not use sugar I decided not to tear the packet as it could be used for somebody else, but when the hostess returned and dumped it among the waste paper, I pointed out to her that I had not torn the paper because I thought it could be used again. She said: “That's the way we must do things here”. I was amazed. I am not blaming that hostess but this is the sort of wasteful attitude that has gone into our whole society.

I was talking to the country engineer in my area recently about water supply. He said that it took something like 30 gallons of water for every individual. Coming from a rural area and having been brought up in a house where there was no running water, I could not resist replying that if they had to take it in a [1642] bucket for a quarter of a mile, less than 30 gallons would do them in the day. This is the sort of wilful waste of electricity and water that we see. What are the bare necessities of life? I do not know. I heard Senator Browne talk about the necessities of life yesterday evening. I know young girls and boys that never did a hard day's work and this year they are wondering where they will go for their holidays. They have been in Spain three or four times and in France two or three times and have probably worn out the fifth pair of Italian shoes in the last 12 months. Recently I met an upright hard-working Protestant farmer from Cavan. He held out his foot and said: “I am wearing that shoe 14 years.” The shoe looked all right and that man was none the worse for the experience. We need more of that kind of man and that kind of attitude if we are to combat the problems we have at the moment. People say: “We must have a month's holidays.” The employers are afraid to to say anything. It is not popular, the press might attack us if we said anything about it. More holidays, shorter hours —last year we increased holidays by a week. I do not know what the average employer takes but the average shopkeeper, farmer and small businessmen have not had holidays for years and years. Yet the young people now in the Civil Service, the people who in the 9 o'clock to 5 o'clock jobs, feel they are entitled to go for a holiday abroad every year and have the best facilities.

I have nothing against alcohol. It is all right if people enjoy it. To a certain extent it does not do any harm. Perhaps it is a good thing and perhaps it is even necessary to some extent. They feel it is their right that the pint every Saturday night and one or two midweek and the gin and whisky and all the other things should be included in the cost of living. These have become part of the necessities of life.

I do not accept that these are the necessities of life. When we have people like Senator Yeats and Senator Lenihan talking about the Minister for Social Welfare handing out goodies, I do not think that is where the mistakes are made. Far from it. Many people are doing far too little and are [1643] having too good a time in return. This is the sort of solution I would propose to easing our economic problems at the present time. I know what people should be able to do. I watch the ESB men and the road workers. I am not just picking out these people; it is the same in the offices. It is a crime to answer a straight question now in the semi-State bodies. It is a crime to take up a file and deal with it, and put it to one side. It has to be put in the suspense area and looked at again and again. There is procrastination in everything, coming in late in the morning, wasting time, refusing to make decisions.

I see this as a sickness that our society needs to cure itself of. This includes employers also. I know that in some of the services with which I am more familiar, the ESB, the road workers, the man who is employed initially, can only go so far. He has to have courses and degrees if he is to get any further. This is a bad thing. In any walk of life a man should be in a position to come in at the bottom and go out at the top if he is able to do it. There are too many restrictions. Recently I met a young man who had worked in a library for many years. He mentioned a job that was advertised. I asked him did he apply for it and he said he could not because there was another rule recently that we must have a certain qualification. He was perfectly qualified to do the job. What is happening is that every sort of qualification is required to supervise the man who is doing the job, except the experience of knowing how to do that particular job. It has gone to the stage where we have engineers in the ESB and engineers on roads, supervisors, managers and so on and they do not know what a day's work is. They are not capable of saying whether a man has given a decent return or not. Therefore the man on the ground has no respect for him because he knows they do not know. We will have to look at this again.

Senator Dolan talked about the recent storm over some promotion in the Army. In reply to his suggestions that we should have consulted with the people at the top and that the Minister was wrong, I believe that jobs should be given according to merit and promotion [1644] should go according to ability in all cases and at all times. I will stand by that. I do not accept people like Senator Dolan saying that the Minister should consult people who were promoted through the very same patronage. What Senator Dolan is asking us to do is to consult the people who were promoted through Fianna Fáil patronage before we came into office, to perpetuate the sort of patronage we had before that. This is no solution to the problem. There are too many people saying that jobbery went on for a long time, it is time the other side got an opportunity. I am not familiar with what has happened as far as these promotions are concerned, but it is no solution to the problem to consult the people who got the positions through patronage in the first place.

Senator Browne talked about the Mansholt plan and its social consequences, but this is not EEC policy at the moment. People in authority in the EEC forgot the social consequences of Mansholt's idea of making the agricultural unit more viable. Before going any further I should like to say that in our programmes for economic expansion in the past it has been found that the only section of our community that measured up to expectations, that met their target, was the agricultural community, because the agricultural sector was in the hands of private individuals who were working for themselves. It bears out what I said before, that people who have the incentive to produce and who know they will get a decent return for their labour, will produce.

In reply to Senator Browne's suggestions about the social consequences, has he studied what the social consequences will be of retaining all the millions of small farms we have in the EEC? The average farm is not earning very much more than what is available to the unemployed man through social welfare, the sort of farm which is making less than £14 per week. If we are to say that this sort of farm is to be retained at any price, what we are saying is that the price of food must be increased to such an extent that it will be viable and economical for this family to carry on in the way they have done in the past. Senator Browne and [1645] people who cry out about things like this should ask themselves what will the social consequences be of increasing the price of food to this level? The social consequences would be more disastrous than asking farmers to modernise and improve and to become viable.

Senator Browne seems to have a grudge against employers. He seems to think that the fact that we have private individuals employing people is the root of the whole problem. Of course we have employers who abused their position in the past. Nobody would be foolish enough to think that there should not be laws and regulations and trade unions to guard against the abuses of the greedy and ruthless employer. Senator Browne went as far as to name some Senators on this side of the House and to make special reference to them and their friends. I would say that this one grudge against the Senators he mentioned—Senator Russell and Senator McGrath—is that he has not been able to get his hands on the sort of the resources they have. As far as I know Senator Browne is living in the west, and I am sure the people in the west would be far more grateful to him if he could provide jobs for some of the people in west Galway, and we would welcome this employment if he was able to provide it. The sort of question I might ask is; who would like to work for Senator Browne?

Finally, I should like to say I am not completely convinced, as so many people on the other side of the House seem to be, that the Minister for Finance has everything in his own hands. There is a certain amount he can do, and I think he has done a lot. The rest is in the hands of the average citizen. The leadership should come from the executives, the employers, the Oireachtas, from everybody in a position of responsibility. We must ask ourselves to give a little more. If a particular industry is making £1,000 profit and things are going all right, if the labour force in that industry can increase their output by 10 per cent, they could increase the profits perhaps by 300 and 400 per cent. This is the sort of effort we must ask from all concerned in the future. I do not say we should reduce the wages of the lower-paid [1646] workers. I do not believe that is the solution. We cannot reduce them. We should not suggest they should be reduced. We cannot reduce social welfare; we must continue to increase it but, we must ask everyone to do a little more.

In spite of the efforts by the Minister for Industry and Commerce prices have not been controlled and I do not think they can be controlled except through the vigilance of the Irish citizen. Two weeks ago I gave 80p more for a dozen apples and a dozen oranges in one shop than I gave in another the following day. That was 30 per cent of a difference in price. If I questioned this I would be told about the increases in wages, oil and so on. The average citizen should be far more price conscious and question prices. Except where he is completely satisfied the price increases are justified, he should resist efforts to demand exorbitant prices. When you have inflation, people are cashing in all the time. I know of numerous occasions when unjustifiable prices were charged to unwary citizens. People should not be ashamed to walk out of a shop if they are being overcharged.

Mr. Brosnahan: The Appropriation Bill gives an opportunity to the Seanad to discuss the workings of the various Departments of Government. There was a wide debate during the course of this Bill but this year there has been a concentration upon the budgetary aspect of the Bill arising from the introduction of the recent budget. I should like to refer to some aspects on a broader scale—for example, the Department of Education. Last December, a deputation from a teachers' organisation was informed that the Department of Education had been advised to cut back under several heads of expenditure. These involved a limitation of teacher supply, the abolition of remedial courses for the training of remedial teachers, the dismissal of unqualified teachers and the cancellation of all extensions of service to those beyond the age of 65. We debated this with the Department of Education and succeeded in salvaging one particular aspect of the cutback, namely the suggestion that remedial teachers were [1647] not to be replaced. When the teacher of an ordinary class came to resign or leave for any reason a remedial teacher in the school would be supposed to fill this ordinary vacancy. We thought this a retrograde step because remedial teaching is a sine qua non particularly in the large class systems in city areas.

We were not so successful in getting a cancellation of the other suggested cutbacks. The teacher supply was limited and in the case of those going on extension, the extensions were refused. Those on extension were told they would get no further extensions. In 1975, the College of Education produced more teachers than in any year in the history of the Department of Education. With that number of teachers, together with those due to go on extension and on extension, we had a golden opportunity of doing something significant regarding the large class problem. Our representations, however, fell upon deaf ears.

The large class problem is the greatest single blot on our educational system. A recent survey showed that there were 258 classes with 45 or more children. The child in the large class is denied the opportunity of individual attention. The teacher has to teach in a global fashion. He cannot go to each pupil or question each pupil. His speed of teaching is reduced. Where a teacher is teaching a small group he can move at tremendous speed, give individual attention and produce very spectacular results. The large class which is not selected on an ability basis is just a group of children who have to be taught, the bright and the dull. The large class can do nothing for the handicapped child but rather thrusts further handicap on him. It is here the remedial teachers could make a wonderful contribution.

Courses were available for the last few years for the production of remedial teachers. These courses have been cancelled though the amount of money involved was minimal. We recently asked the Minister for Education to re-establish these courses. I would ask the Parliamentary Secretary to use his good offices with the Minister to have these courses re-established. The courses [1648] were held during weekends and people came all the way from Ballina to Dublin, from Clonakilty to Cork and from several points to attend these courses in order to equip themselves with the expertise to deal with remedial situations and help the lame dog over the educational stile.

It would cost the State little in money but would give a tremendous return in other directions, from the sociological point of view. If these children are neglected they become a burden on the community and instead of becoming useful people who can help themselves they become dependent on the State, the taxpayers. Nothing is being done to help people who cannot help themselves. They deserve all our help. It is false economy to cut back in this field.

There has been a slow-down in the allocation of money to alleviate the bad school situation. It is impossible to form children properly with ideas directed towards things aesthetic, things beautiful, if they are taught in hovels with no running water and bad toilet accommodation. It is useless preaching to them afterwards to be tidy, about the way they conduct themselves, the way they dress and present themselves. It is a waste of time when their characters are formed in dilapidated, broken-down school buildings. Churchill said on one occasion: “We form our buildings and our buildings form us.” We are shaped by our environment. If the environment is good, our ideas are good. If it is bad, our ideas are of a low standard. I know the Parliamentary Secretary is interested in wiping out this blot on our educational system and has done a tremendous amount of work towards the correction of this problem.

Another matter to which I would like to refer in the educational field is the lack of an overall plan, an overall view of the educational system. Primary education stemmed from the establishment of the Board of Education in 1831. Intermediate education stemmed from the introduction of the Intermediate Education Act in 1879 and technical education stemmed from the establishment of the Department of Agriculture and Technical Instruction in the year 1900. This was afterwards changed to the Vocational Education Act of 1930. [1649] These three branches of education grew up independently without reference to one another. The secondary branch is entirely a private affair: the buildings are owned by religious communities and the teachers are employed by these religious communities. They get a subvention from the State to pay the teachers. Primary teaching is controlled by the Hierarchy of the various denominations and teachers are employed by individual school managers, although they are paid by the State. Technical and vocational education is conducted under the auspices of various local authorities. So there is this great division, this lack of articulation between the primary, secondary and the vocational schools. This had led to a tremendous financial loss to the State. There was no overall plan sought at any stage. I am not pointing a finger at this Government; it is tradition and it is the fault of those who have controlled education down through the decades: they have not sought the co-ordination and integration of the three branches of education.

We speak of education as being a system but in actual fact it is not a system at all because when we speak of a system we think of something which is planned systematically. But this never has been a system. We have three branches of education, independent in their own spheres, differently financed, differently controlled, with no overall plan. Money is being spent on various experiments in education, comprehensive schools, community schools, technical schools, regional colleges and so on—all good in their own individual way. But there is no cohesive, overall plan.

To highlight the lack of planning, in the year 1970 a new curriculum was introduced into the national schools. It was a wonderful idea, very flexible, getting away from the rigidity of the past, the type of straitjacket education we had where children were drilled into learning things by rote and coerced into producing the answer. The situation in the primary schools at the present time is much more attractive. Children are brought around, as it were, to learn of their own accord by equipment, by various techniques which the trained [1650] teachers have, change of voice, presentation of colour, picture charts and so on. Children learn in a voluntary way rather than in an involuntary manner, as in the past. This is very good.

Our organisation have been conducting a survey of the results of the introduction of this new curriculum. The results have been most encouraging. We sent out a questionnaire to 13,000 teachers, teaching various classes in rural schools, city schools, large schools, small schools, infant schools, senior schools and so on. We are processing the results of this questionnaire and hope to be in a position to make a public presentation of the results at a later stage. One great lacuna in the whole exercise was that a very good child, excellently taught within the context of the new curriculum, on presentation for admission to a secondary school, could be proven a dunce, for the reason that the flexibility experienced in the primary school has not been continued into the post-primary school and when the child is presented with the traditional examination format the child can fail although he is highly intelligent and excellently taught.

This is a very frustrating experience for a child who knows he is good but is proven a dunce on the result of that admission examination. Something must be done in the overall planning to see that there is proper alignment between the primary and the post-primary schools. I am not speaking only of secondary schools; I am speaking about vocational and technical schools also.

A tremendous amount of money would be saved if a study was made of the entire educational range, primary and post-primary and we should see that schools are sited where they will be of the greatest educational advantage to the community. We should study the type of school needed and not allow ourselves to be pressurised by those who say we should have a school here and a school there, thus involving the community in a tremendous financial loss. There is a tremendous educational loss also because of this indiscriminate type of planning, particularly following pressure from various groups in the community.

[1651] There is another aspect of this matter to which I should like to refer. One of the first things I did when I became a Member of the Seanad was to table a motion asking that the principle of parity of pensions should be introduced, in other words, that when salaries were adjusted because of depreciation in money values, the rising cost of living and other factors, pensions should be automatically adjusted. But pensions are always lagging behind. Dr. Jim Ryan was Minister for Finance on that occasion and he told me the best he could offer was that he would adjust pensions on the basis of the cost of living. But this was totally inadequate. People in the public service and negotiators on behalf of union members take into account two factors when they are negotiating new levels of salary— one, cost of living; two, the development of prosperity. Adjustment on the basis of cost of living would be inadequate. People who create prosperity are entitled to a share in it. I told the then Minister on that occasion that this was inadequate, that this would not meet the situation at all because the economy was expanding and people who had contributed towards the building up of prosperity were being denied a share in it.

Later on I introduced a further motion and on two occasions on similar Bills I spoke on this principle when Deputy Haughey was Minister for Finance and also when Deputy Colley occupied a similar post. We had no debate on the Appropriation Bill last year but on the debate in the previous year I spoke on this matter. If it is logical to adjust salaries in order to meet a rise in the cost of living or in order to give people a share in the prosperity they have helped to develop, it is equally logical to say that pensioners should have their pensions similarly adjusted. Whether a person is working or on pension he still has to meet the same expenditure, the same costs. He cannot buy goods at preferential prices. The pensioner must have some compensation for rises in the cost of living and also he should be entitled to a share in the prosperity which he, when he was giving service to the community, helped to build up.

Deputy Colley and Deputy Haughey [1652] accepted the principle of parity of pensions, that there should be an automatic adjustment. There was one snag in this. The automatic adjustment was on the basis of the level of salary as at 1st June of any year payable in October, but it has been the experience of pensioners, particularly over the last year or two that they have lost a tremendous amount of ground. For example, if one considers the pension which is payable to a man on the 1st October next, he has lost out in the interim period all the adjustments which took place on 1st December, 1st March and 1st June. In other words, he is behind the whole time. He has not got real parity at all: he has nominal parity.

We would ask the Parliamentary Secretary, through the Leas-Chathaoirleach, to use his good offices in this matter. I know that many of his colleagues who have now left the service are caught in this situation where their pensions are falling out of line with the progress made in the increase in salaries.

The next point I should like to make has no political content whatsoever and I do not intend it to have any. It is simply a statement of fact as conveyed to me through people who are members of my own organisation or members of an organisation to which our organisation is affiliated. In the recent proposals made by the Minister for Finance it was suggested that a surcharge of 10 per cent be imposed and that certain people in the public services would be brought within the scope of PAYE and, further, that a revision of the national wage agreement might be considered. The middle income group, which incorporates teachers, gardaí, Army personnel, civil servants and so on, are the people who have been bearing the burden of taxation down the years. To impose a further 10 per cent surcharge on the upper ranges of this group is going to create tremendous difficulties for them. They are already very heavily taxed and now this surcharge is going to break their backs altogether. Further, if they are to be brought within the scope of PAYE there will be a kind of crunch situation in which they will be paying income tax based upon two years' income. There is considerable resentment [1653] about this proposal—we do not know from what source it emanated— among the gardaí, the Army, teachers and particularly among the civil servants. Many of these groups affected are affiliated to the Irish Congress of Trade Unions: the gardaí and Army are not. As a matter of fact, my colleague at head office in my own organisation is incoming president of Congress next week. Our people are not disposed to look in too friendly a manner on the suggestion of a revision of the national wage agreement after the imposition of a 10 per cent surcharge on their taxation and then being asked to come within the scope of PAYE. These provisions are placing a tremendous burden upon people in the public service. I am very dubious about what their attitude will be if they are asked, on top of this, to consider a revision of the national wage agreement.

We all appreciate the validity of the national wage agreements. We have accepted them readily and the colleague to whom I have referred was very much involved in the negotiation of several national wage agreements over the last few years. It is very difficult to maintain your situation and your authority, vis-à-vis your members if you ask them to accept a situation where there is a 10 per cent surcharge on them and then ask them in the same brea'h to come within the scope of PAYE, creating a tax crunch situation for all those involved.

Mr. Kilbride: On this Bill I think it is appropriate that we should look at the trend of events nationally and also in the world as a whole in so far as the economy of this country is affected by outside interests and influences. We must consider how far the inflationary trends in Europe and the world, generally and in our own country affect the wellbeing of our people. In looking at these inflationary trends, we must examine to what extent we are linked with particular currencies and with the particular monetary system which at present seems to be a factor in weakening our economic structure and making our ability to purchase abroad much less than the real, factual value of our economy would warrant. Our problems are associated with the sterling link. [1654] Our economy is under pressure because of the weak economy in Britain today. Let us look at the adverse effects of that.

At home we find that the standards that apply in relation to incomes is so inflationary and so much out of relation with the prices we get for what we export in real value that it is very hard to see ourselves being able to give our people a proper standard of living and at the same time compete abroad in the world market to sell our manufactured goods, our livestock and farm products. It appears that what we get in sterling is very much minimised in its value when we come to buy abroad. In consequence, the cost of living is increased, particularly because of the open market circumstances associated with our accession to the EEC.

This is something that will present the Government with a very difficult and serious problem to solve. We are to be compared with a healthy person giving a blood transfusion of their own system into a deadly sickly economy as is the British economy today. No matter what efforts we make tomorrow, as long as we are tied, as we are, in the sterling area, if the British economy does not come up and be stable then we must go down with it. We must recognise that whatever has to be done in this regard had better be done in an effective way. While I recognise that to do that the Government have certain problems associated with foreign trade, that might make it less attractive if we were to break the link with sterling.

I know that 50 per cent of our trade is with the British. In consequence, the link with sterling is useful in that regard. But it is 50 per cent of our trade with an economy that is losing face daily and 50 per cent of our trade which in terms of its value of return to purchase for us abroad would represent a burden on us of about 25 to 27 per cent less than the real value of money if it was related to the 1971 parity as has been set out as between the dollar, sterling and the German economy.

Along with this, we had an energy crisis. It created the situation which we all in one sense welcomed. We welcomed it from the point of view that at last the unfortunate Arabs were getting [1655] paid for what they own. They were entitled to be paid and as a group of nations who had not got their rights in the past, we would give the day they got full value for their goods our benediction.

The fact remains that it is costing us much more to produce what we have to sell, either manufactured or otherwise, than it cost before. The trend of events in regard to the habits of the people has become no less luxurious. We have people today spending much more money on luxury goods than the economy might be seen to be able to bear. If we consider ourselves making a genuine attempt to right our economy by the methods being adopted by the Government we must have each individual prepared to play his part and sacrifice something towards making our economy a more sound structure. It is well known that you cannot produce something at a greater price than you can sell it for and continue to be employed profitably in the exercise.

Unfortunately it looks, because of certain influences, some outside our own economy and some within, that we are not just doing that and we have come to the stage that the amount of money that it costs to produce many articles that we had been exporting is much greater than what these articles could fetch abroad. The result is that we have many factories and industries closing down and we have many people unemployed and many people are unable to emigrate because elsewhere there are not employment opportunities. It is costing the Exchequer a considerable sum and the circumstances appear to be getting more serious every day.

It is easy for somebody to say “Put these men out to work”. If you put men out to work you must pay them a fair day's wage. If you put them out to work they must be doing something which will bring back a reward appropriate to the amount it would cost in the effort to do whatever you put them to do. It appears that our high total of unemployment depends very much on us being able to sell abroad at competitive prices. To do that we must be able to produce more efficiently and more economically. In other words, if [1656] we are pricing ourselves out to the extent of 10 per cent in the goods we manufacture and sell abroad, the answer can only be found in an efficient and more productive method of producing the particular articles to the extent of at least 10 per cent. We find ourselves above the level of inflation in most countries to the extent that we are easily beaten in prices for many of our manufactured articles abroad.

As far as the ordinary people in this country are concerned, we are all a generous, sincere, national minded people. I do not want to be seen to be placating or throwing out bouquets to the working man, the factory hand or the operative who has to face up to this problem. I am sure that every section of the community will be prepared to row in and accept the sacrifice that will be demanded in making the economy as correct and as strong as this nation can make it.

This is a serious matter for people in every walk of life. We must all stand together. We can all rise together or fall together. If the economy is to be made as sound as we should like to see it, the call of the Taoiseach and of the various interests that see our position in a national light will be answered. It will be responded to in the way that the people of this country have responded in the past when every national emergency came upon us.

We are at a stage where we have got to make certain sacrifices and sustain our efforts to bring us back on the road to prosperity so that when this recession has passed we will be able to look back and say that we weathered this storm by standing together as a nation and behaved in a truly national fashion.

Cáit Bean Uí Eachthéirn: It is only a short time ago since I spoke on the Finance Bill. At that time I said that the Members of the Government were very bad housekeepers, they were living on borrowed money and on borrowed time and that most of this borrowed money was spent buying popularity. It reminded me of the end of the parable which said “Take unto yourselves friends of the Mammon of iniquity”. This they have been doing rather than facing up to the unpalatable fact that the country is really on the rocks.

[1657] At that time, I also said that no woman could run up a big bill with her grocer and hope that he would keep smiling every day that she faced him. This record would certainly not get her any few shillings in the bank. The same holds for the Government. They have done so much mis-spending of money and so much borrowing that the day has come when it will be harder and harder for them to get loans either from our own people or from abroad. They have lost all credibility at home and abroad.

We were told by the Minister for Finance that the deficit is now £241 million. This can only be met in the same way as it was met a few days ago, by coming back to Seán Citizen to cough up some more taxation, either direct or indirect. This has been referred to in the surcharge of 10 per cent and in the PAYE that the middle income group and the public servants are being asked to pay.

In spite of all the goodies we have got, the subsidies on food and clothing and so on makes only a 4 per cent reduction. We in Fianna Fáil proposed this months ago when we saw that things were bad and we were only scoffed at by the same people who now have brought in a mini-budget incorporating all that we advocated should be done. The whole thing is based on the big gamble of the oil bonanza. This is very foolish. It is like waiting for Godot. Nobody knows to what extent this will ever come off. Those of us debating this very grave crisis will be faoín bhfód agus ag tabhairt an fhéir when that will happen. The only thing I would hope for is that the next generation by that time will not be mortgaged to the extent that they cannot pull out of the mess.

Senators Lenihan and Yeats gave us facts and figures of our indebtedness. We have been told day after day that the present Government have given more for all the various services than Fianna Fáil gave. This is a half-truth. The fact is that even if more money were given, the purchasing value and the amount of employment that can be given are reduced to a quarter. Another worrying point about the Government is that they are bent on chasing money out of the country. Their trinity of tax [1658] Bills will certainly do this. Instead of all these taxes, which should be dropped, there should be incentives for people to invest here, incentives to entice our own people to invest, incentives to entice foreigners to invest here. It seems foolish for anybody to save today, because at the rate money is depreciating a £ spent today will be worth about 25p next year.

Another worrying fact about the mini-budget is that the Government seem to be abdicating their responsibility to voluntary bodies. This is very unfair. It is putting a gun to their heads and saying “If you do not give me this I will not give you that”. That is no way for a responsible Government to work. It is a pity that some of our Ministers, when this crisis was hitting the country, were so busy abroad solving the problems of other countries.

We have had the spectacle in the Seanad that we have Bill after Bill being brought before us like red herrings to distract us from the serious crisis we are in. I do not see that there was any point in bringing forward a Broadcasting Bill which will necessitate the spending of more millions. This is something that is not being sought by the Irish people: though we want a second channel we do not want an imposition of BBC 1. The money that would be spent on a second channel could be spent on giving employment in a sector of Posts and Telegraphs for which £8 million has been voted in the mini-budget—whatever is to be spent on this fiasco about BBC 1. We have the Criminal Justice Bill wasting more of our time, another Bill that will never see the light of day and on which the parties forming the Coalition are not themselves agreed.

I can see the Taoiseach's problem in trying to formulate any type of policy when he cannot possibly mix oil and water, which he is trying to do with a Labour Party and his own party. The two parties as a group have only met two or three times since the Government were formed.

Senator Browne was very interesting when he said that the media, both television and press, did their utmost to promote the members of the present Government as the men of all the [1659] talents. They were to establish a Utopia and this would result in getting rid of the big bad wolf, Fianna Fáil. We can see what the results of this change have been.

I should like to comment on some of the Ministries. We heard a lot from the Minister for Education when he was in opposition, talking about consultation. Since he got into office there has been very little consultation with any of the teaching professions. In one fell swoop he dismissed 290 untrained teachers. This was a disgrace. Those teachers should have been given a chance, like the untrained teachers to date were given, of crash courses. Having done that, he could have drawn the line.

I deplore the fact that grants have been withdrawn from summer courses attended by INTO members. These courses have been a wonderful success in all areas. There were so many teachers clamouring to do those courses on the new curriculum that there were not enough places. With Senator Brosnahan, I deplore that the grants for remedial teaching courses have been discontinued. In this way we are reneging on the weakest section of the community, the children who are slow learners.

The gun has been put to the heads of the teachers on the capitation system also. This is another type of blackmail, like we have had in the mini-budget. The teaching profession should not stand for that. Some years ago I referred to home economics having such a low rating in educational circles, especially with this Government, but with past Governments also. I deplore the fact that home economics has not been recognised as a subject for entrance to university or a subject for grant for third-level education. It is incredible that agricultural science, which deals with land and crops, has university status and that home economics, which deals with the health and welfare of our adults and children and with the running of our homes, should not yet have that status. I would ask the Parliamentary Secretary to use his good office to try to influence the Minister for Education to grant university status to home economics.

[1660] In the Department of the Gaeltacht the Minister has been very busy visiting all the Gaeltachts but delivering no goods. Fianna Fáil had outlined one of the most interesting policies yet for the Gaeltacht, that was, the setting up of a local government section for each Gaeltacht area. This is something which should be tackled immediately and the Gaeltacht areas should get sufficient resources for projects in their own areas, projects which they could implement themselves.

We have seen in the Department of Health that the Minister has been at loggerheads with the Medical Union and with the Medical Association, with the chemists and that as well as that our dental service is completely understaffed. We have not sufficient dentists for our children and not even for those on social welfare.

In the Department of Industry and Commerce all we have seen is the disappearance of jobs day by day. The bounty of £12 per job created is another gimmick. Already, whatever readjustment had to be made in factories where it was foreseen that they could not cope, that the rate of inflation was too much for them to sell competitively, the workers have been made redundant. The bounty of £12 will not bring back any of these workers. It would be far better to do something about reducing the cost of the social welfare stamp.

In the field of local government, we in tourist areas are very disappointed that the amenity schemes should have been discontinued. We had hoped that we would have got more for roads and for local development schemes. It is no use saying to me “You got as much or something more than the previous year” because the pound is of such little value that we would need quadruple the amount of money spent on the different services. The £10 million we have got for local government loans is only chicken-feed. What we would like is that the ceiling for the local government loan be raised. Fianna Fáil have asked for that repeatedly. The £40 million the banks are asked to give will not have the desired effect either because the person borrowing some of that £40 million must have had an account in the bank for six months. I cannot see [1661] any young married person having any account. If he can make ends meet he is doing very well, not to mention having a few shillings to spare at the end of the week. From that point of view, his credibility on his income should be enough rather than having an account for six months with the bank. A friend of mine bought a house only 12 months ago for which she paid £10,000. That house has increased in value already by £4,000. I cannot see any hope for the middle-income group of this generation getting a house. It seems to me as if it will end up with a position like that on the continent where one must have a two-or three-generation mortgage.

In regard to Justice, I would say to the Minister to drop his Criminal Law (Jurisdiction) Bill and to get on with the work of trying to do something about the economy. We were to have instant legislation after the escape from Portlaoise. We were to have an auxiliary vigilante force, but that was dropped overnight. There were several bits and pieces of legislation that were thought up on the spur of the moment but which have been dropped as fast as they were thought up.

It has been said that the inflation crisis is due to external difficulties. People had patience when that was said last year but they have no patience this year because they know that most of the inflation during the last nine months was caused domestically.

One would think from hearing the Government speaking that they were the only Government that ever faced a crisis. They have very short memories when they cannot recall that Fianna Fáil, for 16 years, weathered more storms than they will ever see in their lifetime. We brought the country through the war years. We kept our neutrality. We fought the economic war and anytime we had to appeal to the people they depended on the good wisdom of the Fianna Fáil Government to pull them through any crisis and they always answered the call when requested to do so. It is not fair that the onus should be put on the trade union movement or on the employers. The Government should have the courage to take a responsible stand and if there was unpalatable medicine to be [1662] given, they should have given it themselves.

Professor Quinlan: The Minister in his introduction has put before us the stark facts of the serious position that we face in regard to our balance of payments. It is easy to see the defects and to criticise but it is difficult to see where the path ahead lies. We can say the Government should do this and that but we must realise, as the Minister has underlined, that the Government have to work democratically and through consensus. The trade union movement is in such a powerful and entrenched position in this country that it makes the task of Government in making corrections and so on very difficult. Corrective measures must be put to the people as a whole.

The mini-budget was only the first round. Its task was to put over fairly and squarely to the Employer-Labour Conference that the serious position in which we find ourselves can only be righted by a realistic and rather drastic appraisal by all of the philosophy we had for the last few years where it was considered that we were on an ever-increasing wave of prosperity and that each group has to fight not merely to maintain its standards but to increase them. The stark reality has not been faced of the sudden jolt to the economy of the increase in oil prices which opened up an excess of almost £200 million under that heading alone. You cannot take so much money or real value from the economy without everyone having to contribute to that—in short, without having a significant and corresponding reduction in standards of living. The mistake has been that we were not insistent enough in trying to get that message across during the past year or two. There had to be a reduction, hopefully temporary, due to the sudden shifting of the balance of trade between ourselves and the oil-producing countries.

There is need for real leadership at all levels. There is need for leadership from the Employer-Labour Conference, to whom we are looking. We are all, one way or another, involved with trade unions. As trade unions have spread their sphere of influence they must increase correspondingly their public [1663] commitment and consciousness. A lead is called for and a lead will have to come and rather quickly.

That is only one facet. It involves those in employment who have been able to share in the previous wage round. We all know of the many factories where the worker has had to forgo not merely the present round but the last round and even the one before that because it was a choice of either the factory closing or of accepting what could be paid at the time. In justice these people must be thought of and the demands of those who so far have participated in all the rounds will have to be moderated to ensure a contribution to the stability of the economy.

The Government are trying to hold the employment figures as far as possible. But, what has happened to the Buy Irish campaign? Yesterday I was in a shop looking for biscuits and it was almost impossible to find the Irish biscuits among the variety of foreign biscuits that were on the same shelf. What is wrong that we cannot take action on this? I know the Government's hands are tied to a fair extent by EEC commitments, but the hands of the trade unions whose workers are working in those factories that are threatened are not tied. If they put pickets on shops that are not giving adequate representation to Irish goods they would have the support of everybody who is concerned with the survival of the State. That is one picket line we should all be happy to take part in. As individuals we can bring to the notice of the owners our disagreement with their merchandise and our threats to take our business elsewhere if there is no improvement in this regard. The same goes for textiles and the other items that have been hit hardest by the crisis. The remedy lies with the trade unions on the one hand and with the ordinary citizens on the other. However, individual Ministers and people in public positions have not made sufficient use of television to appeal to people and bring home to them the seriousness of the situation and to enlist their co-operation in the fight ahead and to impress on them the necessity to [1664] support Irish products in this critical situation.

What has happened to the save-the-energy campaign we had 12 months ago? It seems to have fizzled out completely. There have been no worthwhile results from it. I was in the USA about six months ago and I was impressed by the determination with which they tackled this business of an energy-saving campaign. In each of their institutions, education, industrial and otherwise, there were targets for energy reductions. These target figures and the attempts to reach the target were displayed prominently, so that all concerned were aware of the task facing them on the energy front. They were proud that they were on target to reach the specified goals.

Such an imaginative approach has not been applied here. Where have the committee on energy conservation gone? Perhaps they have gone on holidays, to join the thousands who are having unnecessary holidays abroad at the present time. There should be a surcharge placed on holidays abroad because our own tourist resorts are experiencing a scarcity of foreign visitors due, this time, not to the Northern situation, but to the scarcity of money in other countries and these people are not using their money for foreign holidays. But as far as I can see more Irish people are going abroad for their holidays this year than ever before. It has become a cult; it has become the “in” thing to do and it is high time some action was taken on it.

I am glad to see that the tax surcharge on incomes is an emergency measure. We could use many other emergency measures which would lapse when the emergency is over. The purchasing of unnecessary luxury items is contributing to the cost-of-living index. The Government cannot increase the tax on drink or cigarettes because this would affect the cost-of-living index and would aggravate the position under the national wage agreement. While there may be a case in normal times for including these items in the cost-of-living index, the index should now be based on an emergency situation. There could not be an objection by any [1665] reasonable section of the community to removing a number of luxury items immediately from the cost-of-living index, thereby giving the Government a freer hand to concentrate on the necessities of life.

The employment premium is useful because it is to the advantage of the State that men should be kept in employment rather than on the dole or public assistance. I hope it will be administered in such a way that it will not penalise those employers who have already made considerable efforts to keep their employees at work. It would be preferable to have workers on short-time working rather than to make them redundant. When work is scarce it has to be spread around in some acceptable way. The Government should provide public works that are labour intensive. I do not mean works that would involve the use of machinery, but works such as ordinary clean-up operations, cleaning of parks, public gardens and so on. In Cork, we are suffering greatly from the ravages of the binmen's strike. There is much to be done to clean up the countryside in general. Perhaps this could be done at very little cost. It would make a difference between having people working or having them on the dole. The equipment needed could be kept simple. There would be no need to incur capital expenditure for the work.

I would like to see AnCO expanding even faster. They have made great strides and I wish to pay tribute to the great work they are doing. Surely we have confidence in the future. This is the time to train every person who wishes to be trained. People who are unemployed or on short time should be frained now to be ready for the better tuture we hope is ahead.

I do not want to go into the agricultural front in any depth. We know the difficulties that have been created by the dry spell. We read about the fertiliser factories being in dire trouble. Would it be possible by way of some scheme or other to appeal to farmers to stockpile fertilisers so as to try to keep the fertiliser factories in production at least part-time?

I should like to say a little on the [1666] Department of Education. I said some hard things about it on a few occasions, but it is nice on this occasion to be able to acknowledge a positive advance. This advance is in the role of post-primary education. The media, the teachers and the public representatives have all brought the serious financial situation of our schools before the people. It is to the credit of the Minister that he made a substantial effort to improve the situation by increasing the capitation grant from £57 to £82. This is not as much as is needed but it is an earnest effort in our straitened economic circumstances.

Far more important was the fact that the Minister recognised that there was a big gap between what are called the voluntary secondary schools and the favoured new creation by the State, the community schools. The Minister gave an undertaking to close that gap gradually. In other words, the facilities the State is providing in community schools should be available to all our children and gradually, as resources become available, we hope all our secondary schools will have the opportunity of broadening their subjects and having more facilities for games, elocution, music and so on, facilities that are at present available from the State, paid for by the State, in the community schools. This is worth while because it is the first real recognition over the last three or four years of the equality of treatment at post-primary level, that this equality is applied to all our children and must apply to the voluntary secondary schools without which the educational system could not function.

Regarding administration, I would like to avail of this opportunity to say that in the midst of the crises that have beset us, and the deepening crisis during the past six months, we have all been proud of the way our Ministers and their officials have risen to the challenge of the period of Ireland's presidency of the EEC. We have marvelled at the way they stood up to the task with so much travel and hard new work and so on. The compliments that have been paid to them have been well and truly earned, and at the top of the list stands the Minister for Foreign Affairs, Deputy [1667] Dr. FitzGerald, who, I think, even out-Kissingered Kissinger in his efforts during the last six months. We have a lot to be proud of in that. I think I am speaking for all here in the Seanad when I say that we congratulate them on what they did.

On the other hand, this must surely reinforce what many of us have been campaigning for here for years, the necessity for lightening the load on the Ministers and letting the Parliament take more of it through committee work. Membership of the EEC, with the tremendous load that it has imposed on both the civil service and Ministers, has highlighted the fact that we cannot go on as we were in the past; that now the task is beyond Ministers to really be able to discharge all their EEC functions and at the same time be at the head of everything here. The initiative and much of the thinking, innovation and so on must come from the ordinary rank-and-file backbencher Members of Dáil and Seanad. That has to come through a proper committee system.

We see a light in the darkness when the Taoiseach announced some months back the setting up of a committee on semi-State bodies. That is a start, but only a start, and we cannot wait. We want action rapidly on this front. When the Ministers have recovered from their exertions of the past six months perhaps they will realise the burden must be shared; perhaps they will read the speeches they made when in opposition and will see how clearly they saw then the necessity for an adequate committee system that will utilise the full resources of both Houses, and will, in the next six months or a year, take real steps to put those into practice, because it is only by this type of full involvement that we can, on the one hand, match up to our commitments with other bodies and, on the other hand, deal with the very complex problem of running a modern democratic State.

I would also appeal to the Minister and the Government to take the country into their confidence on the crisis, to go on television and let the people know the full facts, ask for sacrifices and they will get them. After all, if they want to know how this [1668] should be done they can, simply, go back to the time when England was under threat of invasion and Churchill in a broadcast offered them blood, sweat and tears. But he awakened the soul of England for that crisis. In our present economic crisis the Irish spirit will be no less generous and no less willing to face the crisis as a people united, prepared to share the difficulties that are there, to share what employment is there, to train for the better future that lies ahead and to help the weaker members of our community to meet the difficult times we are now in.

Mr. Keegan: I welcome an opportunity of discussing the state of the economy which the Appropriation Bill deals with in general. It is the first time the amount of money in the Bill reaches ten figures. I remember some three or four years ago, somebody was alarmed at the fact that it was £700 million or slightly more, but now it is over £1,000 million and still there is no sign of any abatement of the inflationary situation in which we find ourselves.

Nobody with an interest in our country wants to see this trend continue. None of us want to see the thousands already on the unemployment register continue to be unemployed. We want to see our men and women brought back to work as quickly as possible. We want to see more and more jobs created for the thousands of young boys and girls who will be available for employment when the examination results are made available in two months' time. That is the kernel of the situation we face today and in the near future. Therefore, I ask the Government, through the Parliamentary Secretary, if they have any real long-term plans to grapple with the situation. The Irish people are crying out for leadership. They are crying out for guidance as to how best they can overcome the economic difficulties in which they find themselves. We have been told in the past that we have, in the Government, men of all talents. If this is so, I say to them: “For God's sake, produce the remedies for all our economic ills.” After all, it is the Government's responsibility. In the same way as when a business runs into difficulty, the [1669] responsibility for correcting those difficulties rests on the owner of that business. Therefore, the responsibility for correcting the economic ills lies with the Government.

Mr. M.J. O'Higgins: This Government never claimed to own the State.

Mr. Keegan: But this Government were elected by the Irish people to govern the country on their behalf. They should not overlook that point. I repeat again that it is the Government's responsibility to put this country back on the road of economic revival. It is the Government's responsibility to give the lead. Leadership is important in order to instil a new confidence which is lacking in the Irish people——

Mr. M.J. O'Higgins: I do not want to interrupt Senator Keegan unnecessarily, but he is probably aware that it is agreed that the Minister should conclude at 7.30 p.m. There was an unofficial arrangement, subscribed to both by this side and the Opposition, that Senator West would get in.

Mr. Keegan: I am sorry I did not realise I was tied for time. I accept that agreement. I should like the Minister to spell out his long-term plans for correcting all our economic difficulties. This is the first time we have had a ten-figure sum in the appropriation account. This is alarming and drastic corrective measures are needed. I hope the Minister will indicate in his reply that he will do everything possible to correct the serious situation.

Dr. West: I am very grateful to Members on both sides of the House for giving me the opportunity, which will be very brief, to talk about one of the main problems we face, the problem of our link with sterling.

Before I refer to that matter I should like to mention something which Senator Brosnahan mentioned and I should like to support the idea he has put to the Minister. I know on a number of occasions that pensions, particularly those of people in the civil service, the teaching profession and fixed State pensions, should be linked to the cost-of-living increases in the normal way at regular intervals.

[1670] I want to talk about the problem of the link with sterling and to refer to a headline on today's paper, The Irish Times, which reads: “Break with sterling may become necessary, says FitzGerald.” The Minister for Foreign Affairs is recorded as saying:

If the anti-inflationary measures announced in last week's Budget prove effective and if the de facto value of the Irish £ then moves ahead of the rate of the £ sterling, a separate Irish £ could become “objectively necessary”.

This sums up one of two arguments. I am not trying to push either of the two arguments. It is a difficult situation and the whole problem is to get the balance right. The first argument is the one put forward in that article by the Minister for Foreign Affairs. I hope I am not taking the Minister for Finance out of context but I think it was more or less what he said briefly this morning, that it is important for us to get our inflation rate down below the British inflation rate before we could contemplate breaking the link.

The opposite view, which is held by a number of economists inside and outside this country, is that the nature of our two economies is such that while we are linked to Britain via the currency we shall always have an inflation rate which is at least as high as the British one, particularly if the British pursue a monetary policy similar to the one they are pursuing at present. I should like to quote from a lecture by Milton Friedman on “Monetary Correction” from the American Enterprise Institute's Essays on Inflation and Indexation, 1974. He says on page 25:

There is no technical problem about how to end inflation (Section 1). The real obstacles are political, not technical.

Ending inflation would deprive government of revenue it now obtains without legislation (Section 2). Replacing this revenue will require government to reduce expenditures, raise explicit taxes, or borrow additional sums from the public—all politically unattractive. I do not know any way to avoid this obstacle.

[1671] Ending inflation would also have the side effect of producing a temporary, though perhaps fairly protracted, period of economic recession or slowdown and of relatively high unemployment. The political will is today lacking to accept that side effect.

This is the problem. It is noticeable that the British measures which Mr. Healy has just taken are more severe in their effect than the measures which this Government have taken in the mini-budget. The whole point is that, although the economists have arguments on one side or the other, breaking the link with sterling is essentially a political decision. The political consequences as well as the economic consequences must be considered.

The monetary economists take the view that if one can control the supply of money one can cut down on the inflation rate. Inflation means more money for the same goods and services, in other words, a decrease in the value of money. If one can control the money supply then one has one main lever on the inflation rate.

The Central Bank of Ireland has followed a more restrictive money policy than the Bank of England. The problem is that this is of little avail while we remain pegged to sterling. I should like to quote an opinion from an American economist, Professor Hofbar of the University of New Mexico. He says:

Ordinarily a small country will find it advantageous to peg its currency to the currency of a large neighbour country. The peg will be all the more welcome if the flow of trade and labour is large between the two countries. The fixed rate will facilitate transactions and would ordinarily help to ensure stability in the small country's prices. However, the ordinary reasoning breaks down if the large neighbour country is pursuing a very inflationary or deflationary policy which the small country does not wish to share. In this case it might be better to forgo the transactions convenience of a pegged rate [1672] for the price stability made possible by a floating rate. A digression on inflation, the technical cause of inflation, is invariably too much money. There are many reasons why central banks condone excessively rapid monetary growth to finance Government deficits, to reduce interest rates, to ease a recession. Rapid monetary growth produces pleasure before pain which makes it popular political medicine.

He goes on to say that, if we remain linked to sterling and the British monetary policy remains the same, the results for Ireland are predictable. With a pegged exchange rate Irish prices follow British prices. More or less as an accommodation the Central Bank of Ireland has increased the domestic money stock, but to be sure the Central Bank of Ireland has tried a more restrictive monetary policy than the Bank of England. With the pegged exchange rates this attempt at monetary independence has little effect. The Central Bank of Ireland did not permit rapid monetary growth. Sterling would simply replace the Irish £ as the monetary instrument. This is the inevitable consequence of a pegged rate.

In order to arrest the inflation in Ireland two steps seem necessary. The first is to break the peg and the second is for the Irish Central Bank to adopt a more conservative monetary policy. If rapid monetary expansion continues in Britain the Irish £ will depreciate relative to the British £. While we still remain pegged to sterling we can do very little about our monetary supply, because for every Irish £ that we do not produce a £ sterling will appear in the Irish markets. The problem is one of facing up to two painful choices. Either we take the deflationary measures which the Government intend to take and remain pegged to sterling or we consider breaking the link, and this automatically would ensure that we would have to adhere to policies which would be severe and cause unemployment and a reduction in the growth of our standard of living but which would, in a more natural way, induce the deflationary measures which are necessary.

One final point on the politics of the [1673] situation is that we always look at our large trade with Britain and our relationship with Northern Ireland. Although there would certainly be problems whatever we face, my feeling is that if in the long term a break with sterling made our economy stronger, then there is no question that this would be, in the long term, very beneficial to relationships between both parts of the country. One of the problems has been the stigma which the Northerner has attached probably wrongly, to the southern economy. If we could show, as I believe we can, that we are basically an economy with better prospects than Britain, then this would, even with a separate exchange rate, mean that the Northerner would look on our economy in a totally different way.

I hope the Government are keeping this situation under review and that, if the sterling value vis-à-vis the other currencies continues to fall, they will take their courage in their hands and make the appropriate decision at the appropriate time.

Minister for Finance (Mr. R. Ryan): I am very grateful to the Senators for the manner in which they have debated the Bill. I would be fooling myself if I doubted for one moment that the interest of the public at present was concentrated on the question of the link with sterling. I think this is a pity because it is one of the least influential factors in the present economic situation. I suppose the link with sterling, like sex, has a certain curiosity, but neither governs people's habits most of the time. It would be very wrong to think that severing the link with sterling would provide for us any immediate or easy way to salvation. I do not think that Senator West or anybody else was suggesting that, but in order that the issues in the debate may be seen in a proper light I would like to refer to some specifics. Even though obviously we would have a certain chauvinistic pleasure in severing the link between the Irish currency and the British currency, which is now more than a century-and-a-half old, we would be foolish to satisfy that temporary chauvinistic pleasure if the consequences [1674] were to inflict some economic harm upon us.

The Government welcome the very adult consideration of this issue over the last year or so. There was a time when this could not be discussed without setting off alarm signals in the money world. Fortunately that is no longer so. The more the issue is debated the greater advantage appears to accrue to this country, because people, comparing the performance of the British economy and our economy, see the greater underlying health of the Irish economy. It stimulates greater confidence in us and in the position of the Irish £.

We are absolutely free to determine the relationship between the Irish £ and the £ sterling or any other currency in the world, subject to this: that if we seek to relate to some other currency or to any group of currencies such as the European snake we would have to get acceptance from other states on the level at which the Irish £ might be associated with any other individual currency or group of currencies.

Ireland is in the oldest monetary snake in the world. When people argue in favour of the European snake system we can understand what they are talking about. We understand their anxieties and their constraints. It would be idle for us to think that we could adjust the relationship between the Irish £ and the £ sterling or sever the link altogether without linking in to some other currency. The value of one's currency is not something that is arbitrarily determined. It is a reflection of economic performance. If we fail to bring down our own rate of inflation, there is nothing in the world which would allow us to revalue the Irish £ against stronger currencies. If we desire to sever the link with the £ sterling—and there may be circumstances in which that would be justified—we will have to accept for ourselves stricter economic disciplines than we have applied to ourselves up to now. It is the view of the Government that a change in our existing currency arrangement could not of itself in present conditions be relied on to be any worth-while solution to our immediate economic problems. I can assure the Seanad that all aspects of the [1675] exchange rate position are being fully examined and kept under continuous review by the Government and the Central Bank. If the balance of advantage is seen to lie in changing the exchange rate arrangements, a change will be made. That change will have to be, as I said last night, and as I have said repeatedly over the last year, the result of sound judgment to maintain and improve a healthy economy.

I think it clearly emerges from all I have been saying—and I hope it will be agreed—that this matter impinges too directly and seriously on Government financial, monetary and economic policy for it to be treated as a subject for control by a select committee of either House of the Oireachtas. That is not in any way to minimise the value of the contributions that could be made by consideration of the problems by a select committee of the Seanad. I am sure all Senators realise that this is such a fundamental and delicate matter that it is not one which could be left waiting for decision or recommendation by any committee, no matter how well-intentioned or how skilled that committee might be in its operations.

On some specific items I would like to make a few comments. When people think of severing the link with sterling they almost invariably contemplate a revaluation of the Irish £ against sterling. A revaluation of the Irish £ at present against sterling would have immediate adverse economic consequences, particularly in relation to employment. As I said earlier, the possibility of breaking the link could arise sometime if our inflation rate is reduced substantially below the inflation rate in Britain. Whether our policies or the policies which the British Government announced yesterday will be more successful, we will only know in time. The Government here are satisfied with the co-operation of the social partners to embark on a course which will wind down inflation. To get ourselves set upon that course is in itself beneficial. We believe the policy of co-operation which we are preaching is more likely to succeed ahead of our principal trading partner.

I mentioned last night that the Irish £ has not depreciated as much as the £ [1676] sterling when trade weighting is taken into account. The £ sterling has depreciated roughly three times faster than the Irish £, allowing for trade weighting. Since December 1971, Irish consumer prices have increased by about 20 per cent more than the trade weighted average of our trading partners. As trade weighted depreciation of the Irish £ has been about 11 per cent, it will be seen that we have been cushioned to some extent against the change that has taken place in Irish prices and in production costs since 1971. Depreciation of the Irish £ has however been only partly offset by this deterioration.

It is very difficult to quantify the immediate impact on the economy of a break in the link with sterling. It can however be said that the immediate impact on the economy of any change which involved an effective revaluation of the Irish £ would be likely to be adverse. A straight revaluation against the British £ and all other currencies would make about 95 per cent of our imports from all sources cheaper. That, of course, would be beneficial from the point of view of reducing our living costs, but it would mean that imports would be more competitive on our home market thereby creating a greater threat to Irish industries. We have in recent years, by reason of the removal of tariffs and quotas and other restrictions on imports, faced considerable competition from imports. At the present time we know just how serious this is for several of our industries, because the removal of restrictions on imports has coincided with a serious reduction in domestic demand because of the world recession. We would have to think very carefully indeed about revaluing the Irish £ if the consequence of it was seriously to increase competition on the Irish market which could be harmful to Irish manufacturers.

A standstill against other currencies leaving the £ sterling to float downwards alone would limit these effects to imports from the United Kingdom. But then imports from the United Kingdom account for about 46 per cent of our imports. There are very few industrial products produced here which could not be imported, and so most industries producing for the [1677] domestic market would be adversely affected by revaluation. On the export side our industrial exports would be less competitive in foreign markets. A higher foreign currency charge would have to be made to obtain the same Irish currency return. In the current depressed state of the world markets it is most unlikely that our exporters could afford to charge higher prices without losing sales. Agricultural production and exports would not be affected immediately because of the operation of the common agricultural policy and the monetary compensatory amounts. But revaluation would merely lead to a reduction in the MCAs currently levied unless the revaluation exceeded 12.5 per cent, which is the present level of the monetary compensatory amounts.

A revaluation could reduce costs since imported goods would cost less in terms of £ Irish currency. Here again CAP imports would not be immediately affected. This cost reduction would act as a partial offset to the adverse effects of revaluation. But imported inputs from only a part of total inputs in the production process. The cost of domestic inputs, which would include our own labour, would not be reduced at the same time in line with revalution. The greater the labour element in the cost of production the less effective revaluation would be in reducing prices. While action on reducing the consumer price index and the increases due under the national wage agreement may cut down on future cost increases for industry, they will not lower the current wage bill. That is, the immediate adverse impact of revaluation would be offset only to the extent that imported inputs are used in the production process. The higher the domestic value added, the greater would be the loss of competitiveness. This loss of competitiveness would be likely to lead to reduced output and add further to the unemployment problem.

In the context of overall anti-inflation policy, revaluation would not seem to play a very significant role under current conditions. It is estimated that a 1 per cent overall revaluation of our currency against all other currencies [1678] could lead to a reduction in consumer prices of about .27 per cent. So, to give even a 1 per cent reduction in consumer prices we would have to contemplate a revaluation of 4 per cent and three times that to get a three times greater reduction in the consumer price. There are available to us, and we have taken, more direct methods of reducing consumer prices. The steps we have taken will not have the adverse effects on the competitive position of industrial producers. It is on that account that we have taken those steps.

I said last night, and I repeat, that in the long run the link with sterling involves an unavoidable importation of the United Kingdom rate of inflation. That does not mean that we must import completely the British rate of inflation. I would point out that not only have we imported the British rate of inflation but over the past 20 years we have added up to 3.4 per cent on top of the British rate of inflation on many occasions. That is a fair indication that we have added to our problems by our own behaviour. If we can add 3.4 per cent to the British rate of inflation it may well be asked why cannot we deduct 3.4 per cent. The truth is we can, as long as we are prepared to make the necessary temporary sacrifices and impose the disciplines upon ourselves which could bring about that reduction.

If we were to bring about that reduction we would significantly increase the competitiveness of our exports and as a consequence we would be in a much healthier position to contemplate the severance of the link with sterling.

Therefore, to everybody who contemplates a severance of the link, the Government would say it is appropriate to contemplate it; circumstances may dictate it in our own interests. But if there is advantage in it—and I believe there would be advantage in it as long as we had in the meantime diversified our trade and reduced our rate of inflation somewhat lower than Britain— then the sooner we embark upon the right course to make this choice possible, the better. The Government would hope that the measures which they have taken in the last week, which [1679] require the co-operation of others, will produce circumstances which will enable us to make the decision with less adverse consequences than would flow if we were to make the decision to sever the link with sterling overnight.

The debate has been a wide-ranging one. My personal view on it is—and I was not here all the time because I was engaged in the other House—that there was not much heart in the Opposition's attack upon Government economic policies. They realised what the world knows, and that is that the world is suffering a worse decline than anything experienced over the last half century. I quote from latest OECD Report as of May:

The present recession is unparalleled in post-war experience both in breadth and depth.

Then it goes on to cite the experience of the 24 member countries of OECD. It points out that the OECD area has experienced three successive half years of decline. It says:

Industrial production has fallen from its last peak by amounts ranging from 20 per cent in Japan to 4 per cent in the United Kingdom, with the United States, Germany, France and Italy recording falls in the 10 to 15 per cent range. Unemployment has almost doubled to some 14 million people, over 5 per cent of the civilian labour force.——

These are the richest countries in the world represented in OECD.

——In a number of countries employment is at its highest post-war level.

Other labour market developments such as a declining number of hours worked reinforced this picture. That is not the Irish Government spokesman making an apologia for the difficulties which the Irish economy is experiencing at present. That is the objective comment of an international organisation representing 24 countries. It is the truth. There is nobody in Ireland who does not know that that is the truth.

Mr. Lenihan: The Minister said yesterday that it was 80 per cent domestically caused.

[1680] Mr. R. Ryan: Yes, but many other countries have their own domestic inflation too. Our inflation this year is 80 per cent the consequences of our own decisions because we are seeking to compensate ourselves this year for inflation which was imposed last year from outside. You cannot do that. That is like being asked to pay twice as much for a product and before you pay the other person you stick your hand in the till to give yourself the money to pay the other person and leave yourself with as much as you had before. No country can do that indefinitely. We are following the policies which OECD, the International Monetary Fund, the World Bank and the EEC recommended as the right policies for countries to follow over the last 18 months.

The tragedy is that most of the countries that agreed on this policy have not followed it themselves. Last year's advice was that countries which were oil importers should borrow to meet the oil deficit instead of allowing recession and depression to develop in their economies. They did not follow that advice and the result is that they have suffered themselves and they have inflicted avoidable suffering on countries like Ireland, which are highly dependent upon world trade in order to maintain their living standards. World trade is in decline because the right policies have not been followed.

The latest view of the European Economic Community, as of June, 1975, is:

The scale of the economic downswing which got under way in January 1974 was underestimated for all Community countries and in many cases has meant that the Member Countries' forecast for the general economic trend in 1975 have had to be revised downwards. The main causes of the decline in economic activity in recent months have been the effect of deliberate stock depletion and the steady slowdown of export demand. The degree of capacity utilisation fell to its lowest level since the Common Market was established. For most Member Countries, however, the decline in industrial production seems to have slackened since the end of 1974, [1681] although there is no firm evidence that the upturn in the economic trend is at hand. In March industrial production for the Community as a whole was some 7 per cent down on a year earlier. Since the beginning of the year the employment situation in the Community has deteriorated further and the number of unemployed has tended to rise further in all the Member Countries.

Speaking of the outlook, the view of the Community is:

The present economic phase——

which is one of depression

——should give way around the autumn to a recovery in activity in the Community.... Towards the autumn when production will have been given a moderate boost by a slight revival expected in exports to non-member countries, the expansion of internal demand could generate more and more vigour in the economies, mainly due to a general easing of monetary policy, the distinctly expansionary bias of the budget in Germany and the Netherlands, selective budgetary measures in most Community countries...

It says that in May, for the third month running:

...managements of the Member Countries covered by the business survey were on the whole more optimistic in their assessment of production prospects which had been deteriorating distinctly for a year.

That is not a very encouraging picture but there is that little crumb of hope at the end, that business optimism is growing. That is an international organisation speaking; that is the view of the Commission, which can take a neutral and unbiased view of the performance of all the member nations of the EEC, individually and collectively. That is their assessment of the world and European position.

Because we realise that that view is understood by our people, we, in Government, have deliberately embarked upon a process of consultation with the social partners. There is no [1682] point in doing a “Heath” on the Irish economy. There is no point in bringing into both Houses of the Oireachtas mandatory legislative measures. We had that some years ago. I broke the party line in my own party at the time. My party supported the Fianna Fáil Party in a Bill to imprison ESB workers. The workers were imprisoned but they were let out in the middle of the night and sent home by taxi after their fines had been paid because it was obvious that the law could not enforce industrial peace. It is far better to get collective wisdom.

Mr. Lenihan: We got the first pay agreement——

Mr. R. Ryan: It is far better to get collective wisdom, to get people to have a thorough understanding of the problem, and they have it. Let nobody suggest that the ordinary worker in this country does not understand the facts of economic life. He does, and he expects that his leaders, political and industrial, will implement his wishes. Today, that means a moderation in the growth of the living standards which we experienced in the halcyon days of world growth. People are prepared to forgo the growth which they had previously experienced in order to get short-term and, indeed, long-term stability back into our economy.

We are, therefore, engaged in a process which calls for great patience, which makes tremendous demands upon the time of the social partners and the Government, but a process which we think is creative and can be beneficial in the short term and in the long term. We are most grateful indeed to the representatives of labour, management and agricultural sector who have sat down around the table with Government Ministers in the working group on the economy. This is a small start, but it is a move in the right direction. It could well be identified by economic historians in the future as one of the most creative steps taken by an Irish Government. It is a recognition that we float together or we sink together and that it is not possible for any group to make an advance in these days without making others suffer.

[1683] Mr. Lenihan: What is the NESC there for?

Mr. R. Ryan: The National Economic and Social Council is a broadly representative body. In fact, because it is so broad I think—and this is no reflection on them—it has some difficulty in coming to decisions and to specific recommendations. It has, however, played a very useful role in getting a broader understanding of the problems with which we are faced. I do not minimise the contribution it is making but we all know, as practical people in the world, that when you want to get something done fairly fast, the smaller the number of people involved the more expeditious will the work be. That is not to minimise the importance of NESC, which is doing a very useful job and will continue to do it. It is following the existence for 18 months of NESC that we have arrived at this position of creative consultation which I believe will operate to the nation's advantage.

I should like to deal with some points that may have been mentioned in the debate. Senator McGowan queried whether the Government's policy had contributed anything towards the stabilising of local rates. It may not be generally known but I think it should be known that if central Government had not removed, as they have, three quarters of the health charges and housing subsidies from local rates, the average rate would be £9.60 instead of being as it is, £5.60. That is a measure of the relief which central Government have given. When people chastise central Government for the size of their deficit or for the large amount of tax they have gathered, it is worth while to remember that we have absorbed over £50 million the last three years from local rates. If we had not done that the local rates today would be £9.60.

Senators Lenihan and McGowan said that the Government were not giving sufficient assistance to the private housing sector and that they were concentrating on local authority housing. First of all, the allegation is false. Second, the Government are giving additional assistance to local authority housing and do not apologise for doing [1684] so. That is money which is spent on housing the least privileged in our community and those who are least able to provide for their own housing.

What are the facts? The year before we came to office local authority housing received £25 million from the public capital programme. This year it is in receipt of £54 million from the public capital programme. On the other hand, the private sector in the year before we came into office received directly from the public capital programme £9.2 million. The current figure of help by the Government for housing in the private sector is £46.5 million— over five times more than what was provided by our predecessors in office who have, I think—and I am using a gentle word—a certain impertinence to criticise our performance in this area. The number of private houses being built has increased from 15,000 in the year before we assumed office to 19,000 in the year 1974-75. The number of local authority houses has increased from 5,700 in the year before we came into office to 7,300 in 1974-75.

I would say there is no country outside the OPEC states which has maintained such a growth in housing over the last couple of years. In all countries that have come to my notice the outlook for housing is in serious decline, with declines up to 40 or 60 per cent in house construction in Europe. The only other countries that have produced the kind of growth we have produced are the OPEC countries who have more money than they can spend themselves and they are able to lend money to the rest of the world. Notwithstanding the tremendous difficulties we have at the present time in Ireland we have given priority to the production of houses, and as a consequence, have made a significant contribution to overcoming one of our most grievous social ills. At the same time we have been able to maintain employment at a higher level than it would otherwise have been. It is worth while remarking that as a consequence of doing this we have been able to maintain employment in a sector which is not making much demands on imports.

Notwithstanding all our difficulties [1685] we are going to make a very significant reduction this year in our balance of payments deficit. Last year our balance of payments deficit was over £300 million. This year the balance of payments deficit will probably run about £175 million. That is a most significant reduction. It has created some problems for us also, because some of the borrowing facilities—those of the International Monetary Fund, for instance—are available only to countries that have a worsening balance of payments position. Our balance of payments position is improving.

Mr. Lenihan: Because of the lower level of our imports.

Mr. R. Ryan: It is in part due to a reduction in imports but it is also attributable to the fact that our agricultural exports are rising and that notwithstanding considerable difficulties our industrial exports have been able to maintain a comparatively good performance compared with other countries. It means that when the economic upturn comes we will be again under some pressure on the importation front as people seek to improve their stocks and as they import for manufacture for re-export. It is nevertheless significant that we have brought about this improvement in the balance of payments situation. It is one of the most significant improvements of any country in the EEC.

We will continue on the path of reconstruction upon which we have embarked. We are confident that we will have the support of all our people in this process. The situation is changing and changing rapidly all the time. Last January I said openly—perhaps I made a historic forecast; it was historic in so far as a Minister for Finance at the time of introducing his budget was prepared then to say it might be necessary to have a further budget in the course of the calendar year—that when the world was experiencing the greatest amount of economic instability of this century it was improbable that economic policy could remain precisely the same for the remainder of the year.

In all my contributions to international organisations where I represented Ireland, in the EEC, OECD and [1686] IMF, I have been severely critical of the surplus countries, like Germany and the United States, for failing to take more reflationary action. They have the key to the economic improvement of many countries, including ourselves. For over a year we have been told they were taking sufficient action and that the recovery would come about. Our friends in Germany anticipated a growth rate of about 2 per cent for this year but in June of this year they admitted that Germany will not experience a growth but may possibly have a decline. There has been no lack of action, so far as this Government are concerned, in impressing on countries who are in a position to do so the need to take reflationary action and to help the world out of the recession which the powerful economic countries unnecessarily created.

However we cannot dictate to these sovereign countries. The international organisations of which we are members are endeavouring to improve the economic performance of individual countries and of the lead economies in particular. In the meantime, pending the significant improvement which will flow only when world trade picks up again, we have to carry on as best we can. Remember, world trade is in decline and in 1975 will suffer a decline of about 3 per cent; some people put it at 10 per cent. We are borrowing and we justify our borrowing because we are doing it to help our people over the temporary economic difficulties through which we are going at the present time. If we did not do this the home recession would get worse and we would not be in the position to get benefit from the economic improvement when it would inevitably come about towards the end of this year and throughout 1976.

We are being criticised for this borrowing. On the other hand, we can point to the fact that we are following the recommendation that every prudent economist was making in 1974 and which still, in 1975, is considered to be the appropriate course for a country in Ireland's position. We have a very high rating internationally and that is why we are able to borrow. It is very significant indeed that over the last year there has been such a massive flow of capital into this country from perhaps [1687] the most nervous kittens in the world. These are the people who have private funds of their own and make their decisions independently of the wishes of governments or of international organisations. The fact that money has been flowing in here is proof that the world has confidence in us. The world recognises the underlying strength of our economy. The world accepts that our Government in a very difficult situation are following the correct economic policies. In Heaven's name, when the world is showing so much confidence in Ireland, surely the be-grudgers in our midst ought to have the decency to remain silent.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and ordered to be returned to the Dáil.