The comments that have been made on the Budget that was introduced yesterday are unanimous in their acceptance of the serious economic and financial position that faces the country. This position has been obvious for some considerable time. The precise proposals in the Budget make little or no difference to the overall situation. The proposals that have been introduced merely make some changes in respect of the substantial increase in the cost of living as it affects the social welfare recipients and some changes in payments in respect of agriculture to compensate for the deterioration in the position of agricultural producers compared with other sections of the community.
This is the first Budget of this year. We have now become accustomed to two Budgets in the accepted sense each year without taking into account additional increases of one type or another that are imposed as a result of individual ministerial or special Government decisions. Last year the Supplementary Budget made certain changes. The principal changes were originally designed to cover what was regarded as a package deal between the Government and the representations that had been made on behalf of trade unions and wage earners. That package deal involved an increase in company taxation and a proposal to impose by legislation compulsory prices and incomes proposals. As a result of strenuous representations the prices and incomes portion of that arrangement was withdrawn and the Government merely maintained and continued the other side of the package deal in respect of company taxation.
This is one aspect of Government policy that has been the subject of quite considerable criticism because of its effect on industry and the reaction on employment. No one pretends that the present position is easy or that it is entirely due to Government mismanagement. Outside factors have naturally some effect on our economy and on economic and financial aspects of life here. In addition there are reactions from action taken by individual groups in the community which have an impact on the national interest but when allowances are made for all of these effects and influences the present Government have neither acted effectively nor efficiently to deal with the situation.
Last October the measures that were introduced in the Supplementary Budget were introduced for the purpose of correcting the substantial gap that was arising, to act as a brake on rising prices and to introduce some order into the situation but, under pressure, the Government abandoned one part of that proposal and maintained the other. The effect of the proposal has been criticised strenuously, not merely by Deputies and by Opposition spokesmen, but by those directly concerned. The Confederation of Irish Industries, which in the past was not ever regarded as unduly critical of Fianna Fáil Governments, has repeatedly expressed the view that the increase in taxation imposed in the Supplementary Budget was harmful to Irish industry, that it raised for the first time company taxation here to a higher level than that obtaining in Britain. The recent British Budget reduced company taxation to 40 per cent. In our case it varies from a total of 74 per cent to 58 per cent. I do not think it is accepted that the calculations made yesterday by the Minister for Finance apply in many cases to companies here. In any event, the effective rate of taxation in most cases is higher than, or as high, as in Britain.
The increase in company taxation occurred at a time of rising unemployment. Last year we had a total of more than 7 per cent on the unemployment register and the early months of this year show a continued deterioration. When we couple that with the fact that our competitive position vis-à-vis Britain and the other OECD countries has deteriorated and when we examine the Government proposals to increase the subventions to the Industrial Development Authority, we are entitled to ask what precise economic policy is being followed.
Under the Capital Budget it is proposed to increase the amount of money made available to the IDA from £18.5 million to £23 million—an increase of approximately 22 per cent. This is to provide and stimulate industrial employment and to provide and assist the establishment of new industries. At the same time, we are continuing with proposals that raised company taxation in the supplementary Budget last year and which bring us to as high a rate as, and in the upper limit higher than, similar taxation in Britain. On the one hand, in the most expensive possible way, we are trying to generate and establish new industries and, on the other hand, we are taxing excessively industries that are established and that have been, and are, providing employment. We are preventing them from expanding, developing and meeting the problems they must face in competition with other countries.
One of the effects of company taxation has been to increase the tax taken from companies in respect of the Budget of last year from a total of £3.5 million last year to £6 million in a full year. This is being done when the growth of imports from British firms to this country has doubled in the last five years.
The Government proposals have not been adequately thought out. There is growing feeling that the failure of the Government to adopt a consistent, coherent policy in regard to industry and finance has been shown in this situation. The figures to which I have referred indicate the situation that has developed in industry compared with that which obtained prior to the Supplementary Budget of last year. This year we reached the half-way stage in the working of the Anglo-Irish Free Trade Agreement. Since the agreement was concluded imports from Britain have doubled and most firms are finding it increasingly difficult to compete with British imports.
We can compare the deterioration in our trading position with the review which was undertaken by the OECD. In that review it is stated that a significant improvement as compared with Britain seems unlikely, even though the inflation prevailing in Britain has been described by the OECD as probably the most acute ever faced by any major country. In the past year our prices have risen by more than 8 per cent; 2½ per cent points of that were due to the increase in the turnover tax in May, 1970. We can compare that with the price rises in most of the countries of Europe with whom we must compete: there was a 4 per cent rise in Germany and a rise of between 5 per cent to 7 per cent in France, United Kingdom, Italy, and the United States.
There is no doubt that this increase has hit hardest the pensioners and those people on fixed incomes. The Budget yesterday merely marked time. The increases given to pensioners, social welfare recipients and those people who are covered in what might be described as the "giveaway" aspects of the Budget are designed merely to compensate for the actual rise in the cost of living that has occurred in the last 12 months. Moreover, there is the defect that, although the cost of living has risen eight points in the last year, the proposed increases will not apply in many cases until August and in other instances until October. At the same time, it applies only to those who are covered by social welfare benefits.
What has been done about pensioners or people who have invested their savings and made arrangements to cover their retirement years? These people, through their exertions and efforts during their years of employment, tried to provide for their declining years but because of the present level at which pensions are applicable they will not benefit.
The change in respect of income tax will mean very little in most of these cases. As was pointed out yesterday, the fact that 20,000 persons have been removed from the income tax net is insignificant when we consider that at present there are more than 500,000 persons eligible for payment of tax. While costs have risen in this country, we have seen what has happened in OECD countries and other countries with whom we are competing. Unit wage costs here were higher than in any of the OECD countries over the past 12 months. That has had an impact and, as Deputies are aware, and as the country is aware, the introduction of decimalisation has coincided with a price explosion. There is no doubt about it that price increases have been phenomenal since the introduction of decimalisation.
In the course of his Budget speech yesterday the Minister made a number of abstruse calculations on the effect of the increases in the price of beer and spirits. He eventually calculated the amount that would be available to Revenue and the amount that would be allowed to the trade. His calculations were obviously made on the basis of statistical information available to the Revenue Commissioners and his Department.
I want to come to another aspect of the Budget on which no similar calculation was made, that is, the health proposals. On this aspect the Budget is vague and imprecise. It is suggested that a total sum of £2 million will be raised from the proposed compulsory insurance. At this stage, with the amount of statistical information available on the number of persons insured in different categories, it ought to be possible to calculate precisely, or within a reasonable margin, what the stamp charge will be. I approach this matter with the very gravest doubts because of past experience of the Government's proposals.
When the 1947 Health Act was introduced, and when the present health scheme was established on foot of that Act, the claim was made that the increase in rates as a result of that proposal would not exceed 2s in the £. With the possible exception of the initial year, it was never as low at 2s at any time. It has rocketed year after year to such an extent that it became a political embarrassment to each Minister for Health and a financial embarrassment to each Minister for Finance. About 75 per cent of the present cost of the health charges is due to institutional costs. At present those who are liable are charged 10s a day. The Minister must have information either in the Department of Health or available from the health authorities, with regard to the charges in respect of those patients who are now benefiting under the health scheme. It ought to be possible, within a reasonable degree of accuracy, to calculate and to know the figures in respect of the health charges. The likelihood is that the proposals put forward will bear more heavily on those people than the 10s they pay at present.
It is bad national economics and bad financing to bring in a proposal of this character and not give more details at a time when we have more up-to-date statistics and more accurate information than ever before, with computers available in Revenue and in Government Departments. It should be possible to give more information than just a blanket figure of £2 million. This information must be available in some form in the Department of Health because not merely did the present Minister say that the scheme was being examined but his predecessor said that the situation was being investigated and considered.
If the present proposals are introduced, how much of the cost will fall on the rates? What additional burden will be placed on the rates? How much of the cost will be borne by the State? The proposals are quite imprecise and quite vague as to their effect on the community as a whole. For years we have advocated the idea of a compulsory insurance scheme. Many years ago when he was Minister for Health, Deputy O'Higgins introduced a voluntary health insurance scheme which has worked well. It was the basis of a health scheme coupled with the health scheme under the social welfare code. With the statistics available of the number of persons insured under both those schemes, it ought to be possible, within reasonable limits, to ascertain what precisely will be the effect of these proposals.
I want to come back to the real effect of the Budget on the economy. Last year was the third successive year in which this country ran heavy external deficits, heavy deficits on the balance of payments. As described by a distinguished economist, Professor Meenan, it was the third wasted year, a year in which prices have risen, in which unemployment has increased, in which the cost of every commodity to every section of the community has increased and which has seen there living standards depressed or worsened. There are no proposals for expansion in this Budget. There are no proposals of an imaginative kind to assist in the development of our resources. In fact, the capital Budget has been examined and the outturn for last year scrutinised and, in almost every case, a slightly revised figure was put into the Estimates for the coming year.
Why is this so? We have repeatedly pointed out that the present indecision and lack of a coherent economic and financial policy are characteristic and symptomatic of the whole Government approach not merely to economic and financial affairs but also to political affairs. This country has now had almost 50 years of self-Government, 50 years in which Governments have been producing Budget after Budget, years in which the ordinary machinery of Government has been in operation. In my memory, for the first time when the estimates of receipts and expenditure for the year ended 31st March were presented to the Dáil, they were presented in stencilled form. The significance of this is that it was a rushed job, that revisions were made in haste, and made for the reason which has characterised every aspect of Government policy in recent weeks, the need to backtrack on the decision on the dole.
I do not know whether Deputies have had a look at this document. At the second column of figures in respect of capital for the year 1970-1971 the figure is written in—written into a document presented on behalf of the Government to the people of the estimate of receipts and expenditure for the year. The reason it was written in is that somewhere lower down a figure had appeared and a correction had to be made to ensure that the right figure appeared earlier. It is not correct to argue that some mistake was made in respect of the dole order. Absolutely no mistake was made because the figure that was expected to be saved in respect of that order was shown in the Estimate for the Department of Social Welfare in respect of unemployment assistance. There was a projected reduction there from £9,325,000 to £7,731,000. That could not be changed. That had already been printed when the Estimates, even the delayed Estimates, appeared, because the Estimates this year were, as far as I know, presented at a later date than ever before. They were probably a month later. In an era in which we are supposed to have more efficient statisticians, more efficient systems in the Departments, with computers, with every modern device, we get Estimates at least a month later and when we get the Estimates for Receipts and Expenditure a correction, first of all, is not even printed and, secondly, has to be handwritten in. This indicates the haste and the backtracking.
There is more to it than that. Nobody can accept the statements of Government or economic policy as representing any coherent system or any system that would indicate that the Government are united in where they are going and united in the policy they are pursuing. The Taoiseach spoke in Cork and is reported in the Irish Press of 27th March last as saying that the Budget “will be difficult”.
... he emphasised the Government's willingness to face up to unpopular decisions and actions, of which the current economic difficulties provided and example.
He might have said "one example".
Simply to continue the existing level of public services such as health, education, or social welfare, or aids to agriculture, industries and other sectors will call for substantial increases in Government spending.
That was the statement made by the head of the Government on 27th March when, with the exception of the last week's figures, the entire revenue returns were available to the Taoiseach. Where are the substantial increases in Government expenditure here?