The few hours that have elapsed since we adjourned and the time that has been possible to devote to reading and considering the Minister's statement of yesterday have not led to any more pleasing view of the effect of this Budget statement than first impressions created. On the contrary, I think that the favourable, or semi-favourable, reception that the Budget statement received will hardly bear examination from anyone who is concerned rather with the mass of the people than with the comparative few, the comparatively smaller proportion even, of the 60,000 income tax-payers who will benefit by this measure. I repeat the statement, with a little addition, that it is unjustifiable to borrow £550,000 towards the expenditure on the Army on the plea that it is non-recurrent, by a simple mental process of reducing the figure which you think should be considered normal when, at the same time, you are proposing what will be, in effect, if it is to fulfil the prediction of the Minister, a more costly Army apart from the reduction in the number of men in the standing forces. Such forces as the Minister has indicated as being in mind will inevitably be required to be fully equipped with armaments and that will be a constantly recurring item.
Consequently I think, on the evidence so far adduced as to the Minister's intentions or hopes, there is no justification for considering £550,000 as non-recurrent, especially in view of the statement made by his colleague, the Minister for Defence, who is primarily responsible in this matter, a few weeks ago, that he would not look with favour on the establishment of a territorial force. I do not know whether the Minister for Defence has changed his mind, or whether he has been overborne by the Executive Council, but I think it is well that we should find out exactly where we are and ascertain which head of the Executive Council is speaking in this matter. I also think that the criticism directed last year is entitled to be repeated, namely, that when framing a Budget statement it is not wise finance to take into account a surplus due to deliberate over-estimation, and that it is one of the departures from the British financial procedure which I think is not justified.
I think that if there is to be a surplus surrenderable it might just as well go to a reduction of the National Debt in Ireland as in England. I, therefore, think that in respect of these two items required by the Minister to enable him to show a Budget with a surplus he is working upon a wrong basis.
I draw attention to the omission from the Estimates and also from the Budget speech of any appropriation or account in respect of the Gaeltacht Commission's recommendations. It is undoubtedly true that, in respect of the economic sphere, some of these recommendations, if carried into effect, would require expenditure. We have to take it then from the Budget statement that it is not contemplated that there will be any expenditure in the coming year under the head of the Gaeltacht Commission's Report.
I notice too, and ask the House to take into account that in arriving at his balance the Minister has reduced the sum set apart last year in respect of public works which would require labour by £148,000; that there is no sum set apart for relief work; and that there is a decline of £70,000 in the estimated amount for housing. It is well that we should recognise that these reductions have had to be made before the Minister could arrive at his balance. We are, by all prophecy, being precluded from the consideration of these Estimates before the election, and from the consideration of the effect upon the public prosperity of such reductions—reductions which are clearly designed to reduce the amount to be spent on wages. Consequently it is the workman who is to be the loser. While the Minister has produced his figures on the basis of the Estimate, less what he considers to be a surplus, I think we have to bear in mind the experience of recent years, and assure ourselves that there will almost certainly be claims for more money by means of Supplementary Estimates.
Replying to the statement made by Deputy Morrissey regarding old age pensions, and the promise of the Minister that the repayment to the old age pensioners of the cut that was made in their allowances would take precedence of any other remission in taxation, the Minister repeated the language of his original undertaking. He said that emphasis should be placed upon the phrase "if the situation is found to have improved," that is, presumably, the general economic situation. If the situation had improved the cut would be restored. I gather that his excuse for the breach of his word in this matter is the confession that in fact the situation has not improved, that the economic situation prevailing in April, 1925, has not been bettered, or at least has not been bettered sufficiently to allow him to repay the quarter million pounds that Deputy Morrissey spoke of. He therefore prefers to pay to the richer income-tax-payers the sum which he had promised hitherto should be paid to the old age pensioners.
I want to direct attention to the effect of this welcome reduction in the rate of income tax. Looked at uncritically it seems to be very generous, very useful, and very valuable to the income tax payer. But I am asking the House to take into account the effect, bearing in mind the statement the Minister made that, in the judgment of the Executive Council, it is much more beneficial to the general well-being that there should be a general cut in the rate of income tax than that there should be exemptions and allowances. The effect of this general reduction in the rate of income tax might be illustrated in this way: A man has a wife and two children. He is in receipt of £500 a year, earned income. Tax does not fall upon the first £338 in this case, taking into account the allowances for himself and his wife and the two children. The net effect in respect of that man is that the rate of reduction upon the whole, income is under 2d. in the £ on his whole income, instead of 1s. in the £. But if you take the richer man with, say, £3,000 earned income, with a wife and two children, the net result to him is a reduction of 9d. in the £ on the whole of his income. In the case of such a man with unearned income, the reduction is equivalent to 10d. in the £ on the whole of his income. So that in this case, as in so many other cases, the result of the Minister's generosity is to help the rich as compared with the less rich. The Minister told us that there were, say, 60,000 income tax payers. I venture to guess that three-fourths of those will be under this £500 limit, so that the real benefit of this income tax reduction is for a quarter of the income tax payers, say, for 15,000, people who are in receipt of more than £500 per year. If, on the other hand, the Minister had adopted the practice which had been advised and moved for on these Benches, in other years, of making greater exemptions on the lower rates of income, the net result would have been of much greater benefit to the community.
As I said, this figure of 45,000 income tax payers in receipt of less than £500 per year is only a guess, and is open to the Minister's correction. It may be found to be on the moderate side. But let us say that there are 45,000 income tax payers in receipt of incomes of less than £500 per year. This remission is not going to divert these small savings amounting to, say, £3 or £4 a year, into new investments, which is the case put forward in favour of the remission. We are told that the remission is going to stimulate industrial activity by encouraging people to invest what is saved from income tax in industry. That is unlikely to happen in the case of the 45,000 income tax payers, who will receive something less than £4 per year of a remission. The Minister has repeated on this occasion, and his statement is echoed by the Press, that the reduction in income tax will prove a great stimulus to industrial activity. On the 22nd April, 1925, in his Budget statement, the Minister said:—
It can hardly be doubted that a reduction in taxation will have on industry and commerce a stimulating effect not to be obtained otherwise.
The remission then amounted to one shilling in the pound. I ask the Minister now to give us the evidences of the results of that particular remission of one shilling in income tax on industry and commerce. There had been at that time a remission of over a hundred million in British income tax, but there was no evidence up to then, and there is no evidence even yet, as to the effect of that in stimulating industrial activity. I think there is a good deal of fallacy about the idea that if you remit taxation which the individual has been paying it will inevitably lead to a revival of industry—that the money remitted will find its way into a better type of spending, and in that way encourage production. I say that that is largely fallacious—that money collected by the Government and devoted to industrial production by wise economic effort is equally good to the general well-being as that same money spent in the same way by the individual. It would be no better and no worse. If that money which is collected by the Government is spent wisely in productive activity it is infinitely better to the general national economy than if left in the hands of the individual to be spent unwisely and wastefully. On the contrary, if the individual can be guaranteed to spend it wisely and economically in the encouragement of home production, it is infinitely better than that the Government should collect it and spend it wastefully. I say there is no evidence whatever, judging by the last remission of a shilling in the pound, that this new remission of a shilling in the pound is likely to increase the amount of money directed to industrial activity in this country. It is just as likely—perhaps more likely if other things are not changed—that that saving will be invested in over-seas enterprise or spent in imported products.
I asked the Minister, in the course of my statement yesterday, to give us some evidence of the improvement in the general economic situation. He referred me to the figures he had quoted in his speech. I have looked through his speech and I presume his reference was to such figures as these—an increase in the savings bank deposits from £2,400,000 to £2,700,000; an increase in the purchase of savings certificates by £600,000; that 200 representative firms had shown profits only five per cent. lower than in 1925—(a striking evidence of growing prosperity !) that revenue from duty on alcoholic spirit was £46,000 more than had been anticipated but that there had been a decrease in the consumption of beer by 30,000 standard barrels. Perhaps the Minister will be able to point to other figures in his statement which are evidences of improvement than these. Except the doubtful evidence of the increase in savings bank deposits and in the purchase of savings certificates—totalling £900,000—I see no evidence of any improvement in any of these figures.
The Minister may point to the increase in the revenue from income tax, which shows a surprising surplus over the amount that was estimated for. We are told that the tax collected exceeded the estimate by £230,000. I take it that that amount above the estimate was collected largely in respect to arrears, and over and above the arrears collection of that was contemplated. I take it that in the main those collections were from the people who will be paying income tax in the forthcoming year and mainly from business men of one class or another. I am curious to know how you reconcile the claim that the remission of £550,000 is going to stimulate economic activity with the claim that the collection of this excess has not caused depression. It seems to me that if there is any effect upon economic activity by the collection or non-collection of income tax, you have got to put against the coining stimulus the depression which has been caused by your over-collection by your rigorous collection.
I say evidences of improvement are called for. I agree that it is sometimes valuable for people to believe that there exists that which they only hope will exist because it will help them to make real what is merely an ideal. I think, though, that it may be carried too far and I do not think it is wise that we should continue talking about the turn of the tide, the improvement that has now begun, and evidences of increased prosperity unless we have something tangible produced. I hope the Minister will be able to produce real tangible evidence of an increase of prosperity in the country, and improvement in economic conditions agriculturally, industrially, and commercially. I am going to give the Minister an opportunity to make a considered statement on that point. If it is not possible for him to make that statement, then he has a responsibility to make considerable changes, radical changes, in the fiscal system which he is, up to now, advocating and practising.
We are dealing with taxation and I take it we are all agreed that the taxing system, one way or another, has an effect upon the industrial, agricultural and commercial life. With that assumption I am going to ask for evidences of the success of the existing system, and if that cannot be pointed to, then I am going to demand that there shall be some change in the system.
In another place I quoted some figures which I intend to use again. It is much more important that figures of this kind should be quoted here so that they can be met rather than be passed over without comment. Since the Ministry came into office they have had great trials and troubles, but they have had three years in which to recover from those trials and troubles. Great as the upset caused by those trials and troubles to industry and commerce was, they were not sufficient to justify persisting in the excuse that all present troubles can be traced to that particular period.