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Committee on Finance. - Resolution No. 3: Tax in Respect of Certain Goods (Resumed).

Thursday, 16 June 1966

Dáil Éireann Debate
Vol. 223 No. 5

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Debate resumed on the following motion:

That—

(a) with effect as on and from the 1st day of October, 1966, a tax, to be paid by such persons and in such circumstances as may be specified in the Act giving effect to this Resolution, shall, subject to the provisions of that Act, be charged at the rate of five per cent in respect of goods sold within the State and goods imported into the State;

(b) the said tax shall not apply in respect of food, drink, tobacco, medicines, clothing, fuel or hydrocarbon oils, or such other goods [791] as may be excluded by or under the Act giving effect to this Resolution.

—(Minister for Finance).

Mr. Crotty: Information on Patrick J. Crotty Zoom on Patrick J. Crotty I have done my best to explain the cause of the flight from the land. I have also brought to notice problems which I am sure will be before the Government for many years. I spoke about the dairy farmers. After that we come to cattle marts. A great amount of time must have been spent by farmers on the cattle marts. I have no doubt that in the future the Minister for Agriculture will see that cattle are bought on the land by representatives of the various factories.

Before I conclude I would again appeal to the Minister and the Government to look at the turnover tax on food and fuel. As I have already mentioned, this has hit particularly hard at the very lowest income group. I would now ask the Government, having been advised that they can have a selective turnover tax, to have a look, between now and October, into the possibility of having the turnover tax on food and fuel removed before 1st October.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon I suppose it is human nature that people instinctively turn away from disagreeable facts. It is certainly true, through a general malaise, that people cannot bring themselves to believe what the real situation is. It is particularly hurtful to members of the Fianna Fáil Party that over the past two years, I have felt bound to warn them that their policy was going to bankrupt this country. They will feel even further affronted when I say what I believe to be true, that this country is now bust wide open. That is a very painful thing to have to say of your own country, when I see a sovereign State, such as we are, enjoying all the privileges and bearing all the responsibilities which sovereignty implies in a situation where there is no money for houses for the people, where in the city of Dublin a family with three children living in one room are still told they will not even be put on the waiting list for municipal [792] housing because Dublin Corporation are yet dealing with families with four children.

I ask myself what significance attaches to that. When I read in the local papers in my constituency, in Louth and in the surrounding constituencies, that all the money made available from the appropriate fund from which local authorities borrow for housing has already been appropriated for housing schemes in the course of completion and that no new housing schemes can be contemplated during this financial year, I ask myself what significance that has for our people. When I hear young people looking for loans under the Small Dwellings (Acquisition) Acts and being told that the money made available to the local authorities is not sufficient to clear the waiting lists of those whose applications have already been approved, I ask myself what has become of our concept of proper priorities.

When I am told of the local authorities submitting schemes for the improvement of amenities and the provision of such modest essentials as sewerage schemes in rural areas of population and being told they must wait for a calendar year before being even considered, I begin to ask myself is it that our priorities have gone wrong or is it that we have reached a stage when we cannot afford to do the things an ordinary Government are expected to undertake for their people. When I go to the congested areas in the west of Ireland and find rural improvement schemes have been closed down, that the Special Employment Scheme Office has been closed down, that gangers are being dismissed and supervisors dispensed with and potential employees being told to go on the dole or to Birmingham, I am slowly forced to the conclusion that I cannot believe the members of the Fianna Fáil Government are doing it out of hardness of heart, of hatred of their own neighbours, that they are doing it for the reason the Minister for Local Government shows weekly, an increasing embarrassment and frustration, but because they know they ought to make these things available but that they cannot—they have no money.

[793] When I find that schemes highly commended by this Government to farmers for credit from the Agricultural Credit Corporation have been wound up and the farmers told that no further loans will be entertained under these schemes, I am further reinforced in my belief that the Government are in the situation in which they have no money to carry on with. I hear my neighbours telling of going to the banks and asking for accommodation and being told it is not forthcoming, being turned away and in many cases being called in and told: “The accommodation you have always enjoyed is no longer available; you must sell your assets if needs be, cut down your business activities and liquidate to pay off your overdraft”, and hear of them asking the banks why they make this unprecedented demand and being told by the joint stock banks of Ireland: “We cannot give you the credit you need because the Government have taken it all”. And when I look in amazement at the quarterly report of the Central Bank of Ireland and ask if this can be true and find that the Government owe the joint stock banks £60 million sterling, I begin to wonder to what extremity have we been driven by the Fianna Fáil Government during the past several years.

When I read in the newspapers today that the sovereign Government of the Irish Republic have gone to the Bank of Nova Scotia to borrow £5 million sterling in cash, I ask myself: Is there any Government in undeveloped Africa who have gone out on such a mission in my time? I remember speaking to the Minister for External Affairs when he was Minister for Defence and castigating him for allowing a development in the Phoenix Park which would discredit a banana republic in the South American continent, never mind a developing State in Africa. Which nation has entered the money markets of the world for £5 million cash? I know of no sovereign State in the world today which has turned to mercantile banks outside its own jurisdiction to borrow £5 million sterling.

Does this combination of facts not justify me in warning this country that this country has gone bust, at [794] great cost to its reputation and to the credit of its people? Let us be clear about this: when a country goes bust, the island does not sink under the sea, the sheriff does not move in, the assets we disposed of are not saleable for the satisfaction of our credit. We stand on 12 million acres of arable land and I do not suppose Fianna Fáil have yet offered for public mortgage the freedom of our people; but when a country goes bust, it is the Government who begin to lose their heads. We had the Taoiseach intervening in this debate and lashing out at his critics with the traditional cry: “Do not hit me with the baby in my arms”. Is it legitimate to ask, if he is carrying a baby of woe in his arms, who begot it and who reared it to the dimensions it has now reached?

I think it right for the people of the country to know that I have never felt as shocked by the situation as I feel today—that one of the most disedifying elements of the situation is that if this nation to which we belong is actually tottering on its foundations, I now assert, the principal preoccupation of the members of the Government in Leinster House today is cowering in corners discussing who is to get the jobs. I have watched for the past 48 hours in this House Ministers and Parliamentary Secretaries gathered in council at every corner whispering the latest rumours as to who were to get the jobs in the shake-up that is to come.

When a country is bust, it is true to say that we are driven back with our backs to the wall, and it is then a nation must ask itself: “What then must we do?” I am going to direct the attention of the House today to a very remarkable lecture delivered recently by a Governor of the Bank of Belgium, Maurice Frere. He is talking of what happens to a nation that finds itself in a certain position as a result of policies which he describes and which correspond very closely to those pursued by Fianna Fáil and suggesting what such a nation must do and must expect in the situation when it has gone bust. He says, in the course of an extract to which I shall return later:

The official foreign exchange [795] market soon loses all significance and it is not long before a parallel market—which may take many various forms—comes into being. Its size and effectiveness depend only on the stringency of the penalties imposed on those who have recourse to it.

The country's economy is in any case destined to stagnate until such time as the government collapses and makes way for new men.

I want to tell the House and I want to tell the country, we have reached the point at which the Government of Ireland is collapsing.

Mr. T.J. Fitzpatrick: Information on Tom J. Fitzpatrick Zoom on Tom J. Fitzpatrick (Dublin South Central): Nonsense.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Listen; the Deputy will learn. I do not want to be rude to him. He will learn that what I am saying is true. I do not want to look backward but I am going to look backward, partly for the education of newer Deputies like him. I am warning you now, the Government of this country is collapsing. But for the stability of the constitutional institutions we have in this country, we might well despair but we have no reason to despair because the collapse of one Government in this House does not mean revolution, does not mean collapse of the nation; it simply means the entry of new men and that is our hope and that is our lifeline. That is possible under the institutions we have so firmly established in this country and, mind you, we should be proud of that fact. There are other countries who have their difficulties which are complicated by the fact that if the Government for the time collapses, there is no alternative to anarchy and confusion. No such danger confronts us but I can understand the Deputy saying today: “Nonsense; that could not be true”.

I want to read for the Deputy another quotation which may be relevant to what he has just said:

In the field of monetary policy, in fact, mistakes and inaction invariably work in the direction of monetary inflation and rising prices.

Mistakes and inflation. Listen carefully, [796] Deputies to this, if I may say so, a Cheann Comhairle:

When the first signs of such inflation appear, one always hesitates on one pretext or another to take action, because, rightly or wrongly, one is afraid of halting or slowing down an expansionary movement that is to everybody's satisfaction. That describes the period when everybody seems to have more money, when everything seems to be booming, when everything seems to be going like a wedding bell and that is the time when very few people are prepared to say: “We are travelling on the road to ruin” and those few who dare to say it are rarely listened to.

An Ceann Comhairle: Information on Patrick Hogan Zoom on Patrick Hogan Will the Deputy give the reference for the quotation?

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon I will, Sir, in a moment. I continue:

Thus the causes of the inflation persist and its effects gather strength, until the time arrives when deficits appear in the balance of payments, gold begins to leave the country in consequence and the threat looms up of a possible devaluation of the currency. As it is known that such a step would be fatal, recourse has to be had to deflationary measures. These are never popular. In our social system they meet strong opposition and can generally only be applied for a limited period of time.

This quotation is from a lecture delivered by Maurice Frere, who was Governor of the Bank of Belgium and is reported in a publication of the Per Jacobasson Foundation under the title Economic Growth and Monetary Stability. The lectures were delivered on 9th November, 1964, at Basle, Switzerland, under the patronage of the Foundation to which I have referred.

Now I am going to trouble the House with another quotation:

Inflation—

and I am submitting to the House that the root of all the trouble with which we are strugging today is inflation—

[797] is the prince of thieves, robbing the defenceless and passing by the experts in the manipulation of money. It is the broad high road so pleasant to travel until it reaches its destination of anarchy, begotten of the collapse of money as a store of value. Then, indeed, Fisher's equation operates to destroy the foundations of a free society until in the ensuing anarchy people turn to authoritarian forms of government to arrest the breaking up of society;

and

all too often the society discovers too late that inflation has destroyed freedom, and that the price paid politically to restore stability has been the surrender by free men of their birthright of freedom, with the prospect of generations of struggle and perhaps bloodshed to get it back.

Unless we had the potential to arrest this dialetic I warn the House, as I have done before, that it is not our economic sovereignty and independence that is at stake, but our political freedom.

There is a precedent for this in our own experience. I remember the case, and I have mentioned it in this House before, of Newfoundland. Newfoundland was a sovereign, independent State, as Ireland is, and the Irish made a great contribution to building up its sovereignty and independence. Just before the war, they engaged in the kind of insanity in which this Government have engaged and then we had the case history. There were large numbers of people in Newfoundland in the initial stages of inflation who said: “This is lovely. We never had so much money before. This can go on and on forever.” Suddenly the time came when they could not finance their imports and gradually the Treasury ran dry. The remedy of the Newfoundland Government was to send for three commissioners from the British Treasury. I will remember them going to Saint John's. The Parliament of Newfoundland passed an Act passing over all executive authority to these three commissioners nominated by the Bank of England or the British [798] Treasury and those three gentlemen took over the functions of the Government of Newfoundland and, I think, administered Newfoundland throughout the whole period of the war.

At the end of the war, the three commissioners were still there and they said to Newfoundland: “The British Treasury is not prepared to carry you any longer. Your fundamental finances are now restored and you can now choose financial independence and relative poverty or you can seek to be merged in the Federal State of Canada.” There was a referendum and, by a relatively small majority, Newfoundland solemnly abrogated its sovereignty and announced it had no longer a desire to be free. It voted to be integrated as a constituent state of the Federation of Canada so that the Canadian Federal Treasury would take over the responsibilities they felt themselves no longer able to bear. It was an historical development when you had a sovereign state simply declaring that the burden was too heavy to bear, that they could not afford any longer to be free.

I want to ask the House: to whom are we going to make this surrender? There is nobody in the world to accept such surrender. When I hear some younger members of Fianna Fáil speaking, I can detect a kind of yearning for the fleshpots of Egypt: why we cannot have what they have in the United Kingdom? Is it not all cod to be talking about nationality and independence, and so on? What we want is progress and equality in affluence with our neighbours. There is even a suggestion that the decision of our Government to leave the Commonwealth of Nations, if it were reversed, would give us the kind of affluent life they think our people ought to yearn for. They do not understand perhaps, or perhaps they do not mean it, but it is not re-entry into the Commonwealth they yearn for; it is the re-enactment of the Act of Union. What in their hearts they are longing for is to creep back into the comfortable womb of the Union from which our people struggled for seven generations to get free.

But there is this distinction. Do you [799] imagine Great Britain is going to commit the folly of attempting the political domination of this country again after the seven centuries of agony she went through when she has discovered that she can effect its conquest much more effectively under a Fianna Fáil Government with a cheque book than she ever could by fire and sword? This is the Government who have solved their problems up to the point at which we stand today by selling our substance for cash. This is the reason so many of the decent backbenchers of Fianna Fáil have not realised the straits to which we have been brought. This is the means by which we covered up the slow, inevitable, catastrophic decline to the position in which we are going hat in hand to the Bank of Newfoundland for £5 million to pay the civil servants. It is true that they successfully postponed that day and that they fooled a great many decent members of Fianna Fáil into believing that day would never come. They did it by selling for cash what most of the people thought was irrevocably purchased in blood. Does anybody realise the extent to which the mercantile life of the country is being purchased by Germans, British and anybody else who comes here with a cheque book and a long purse?

Do the Government aim to sell out? Perhaps they do. Do Fianna Fáil believe it is good to sell out? Mark you, you do not like it when you gradually see your neighbours disappear in rural Ireland and find yourself surrounded by aliens. You then wake up and say: “What has become of my neighbours? How is it I cannot pronounce the name of anybody living within a half mile of me?” Of course, they must have their names registered in the Land Registry, but when people are buying over the mercantile life of the country, they do not register anywhere: they call themselves the Ultra Hibernian Patriotic Distribution Company or The Round Tower and Greyhound Dog Co. It does not make any difference. We become servants in our own country of alien masters.

We can understate the significance of that when it is an evil, when this operation [800] means that old-established Irish businesses whose profits were ordinarily redeployed in Ireland pass into the hands of aliens who continue to employ the people but who skim the profit off for investment abroad. I want to differentiate most emphatically between that kind of sell-out and the invitation in which we have all joined to foreign capital to come in here and inaugurate new industries designed to generate new exports which will finance whatever profits the external capital earns in this country. That is a very different thing and it may be very desirable. There is, however, a great difference between that and surrendering virtually the sovereignty of our own people in our own country to a cash group. We must never forget that those who went before us struggled resolutely to ensure that it would be ours to enjoy as a free, sovereign and independent people.

When the Taoiseach was speaking yesterday, he returned to an ancient theme. I do not believe, in the situation in which we stand at present, that it is very fruitful to talk about who did what in the years gone by. But the Taoiseach elected, for the edification of his own supporters, to ask them to learn a lesson from the situation in which we stand today as compared with that in which we stood ten years ago. He said:

It is very easy sitting in Opposition or on your fanny in a newspaper office to solve all the country's problems by a wave of the hand or by some glib phrase.

The Taoiseach was very much criticised for using language unbecoming to the Leader of the House. To be frank, I have a certain sympathy with him. He lost his temper. I do not blame the Taoiseach for losing his temper. He has a heavy burden to carry at the present time. He went on to say, speaking for his Government:

The Government had brought the country out of the deepest depression of the last ten years which the Deputies opposite ran away from, rather than deal with it. The Government were not going to do that because, having put their hand to [801] the plough, they were going to take the furrow to the end.

I am quoting from the Fianna Fáil Pravda. the Irish Press of today, 16th June, 1966. I thought it fair to quote the Taoiseach's words from his own kept newspaper. I want to dwell on that for a moment.

Here, I think, is the very heart of the difference between the situation in which we stand today and that in which we stood ten years ago. I do not for a moment deny that we had acute economic and financial difficulties ten years ago. I want to boast that I do not think it was idealistic or wrong for us to go out and build houses, and to go on building houses, until a time came that, when our successors came into office in 1957, the Taoiseach sent for the Dublin Corporation and they said to him, in effect: “There is no need to build any more houses, Taoiseach. We have too many houses. Our problem at present is that we have houses on our hands.” I think the proudest boast the inter-Party Government have to make is that we built too many houses.

I do not want to deny that, in the struggle to build houses, I remembered not only to build houses but to do other things also. I look back particularly on the Land Project. I remember the panic that spread through the corridors of the Department of Finance when, with Government authority, I announced in Mullingar that I would spend £40 million on draining the land of Ireland. Venerable figures were stumping up and down the Department of Finance saying, in effect: “He could not have said it; it must be a mistake.” But I did say it and I said it with authority and I proceeded to do it.

Then came the time in 1956 when we were in trouble, the kind of trouble I was proud to be in. It was a kind of trouble that the late Deputy Norton and Deputy Everett and Deputy Corish were proud to be in, too, because they felt they had spent—if we had spent— too much on providing the houses and on doing other things and improving [802] the social services that they had joined the Government with us to do. Now, the day that crisis broke in the Government of which we were members, our position was that the balance of payments had gone against us. It was grave. We did not go to the joint stock banks of this country. The general reserve of the Central Bank was intact: we had not drawn a penny on it. The currency reserves to cover the currency consisted entirely of sterling securities, dollars and gold. We had not one penny of foreign debt. Now, the questions we had to ask ourselves were: “Will we drift on? Will we start borrowing? The balance of payments, up to a point in this crisis, will become so acute that we shall have to put on quantitative restrictions. We shall have to limit the imports of timber and building materials, cars and everything, with consequent mass unemployment. Alternatively, will we put on a damper until such time as the payments come right so that we can resume the programme to which we set our hands, and stimulate employment again?”

It was quite open to the late Deputy Norton, to Deputy Corish and to Deputy Everett to say: “We shall not stay in the Government. We are not prepared to face the music. We shall break up the Government and we shall say that you are putting on the screws and that we, as Labour Deputies, will not have anything to do with it.” But they were too big men to do that. They believed, as we believed, that that course meant mass unemployment. Mass unemployment in this country has one peculiar feature. It never appears in the statistics. It appears on the B & I boat or on the Cunard ship or on the passenger statistics of Aer Lingus. Mass unemployment in this country means mass emigration.

We put on the levy. We did not prohibit imports. We said that anyone who urgently required timber or some such import could bring it in but that anybody not urgently in need of it would naturally postpone the importation for a year or two. I remember saying from that Front Bench opposite: “We do not want anyone to pay any [803] levy. Our ideal situation would be that nobody would import anything on which the levy is payable. The purpose of the levy is to dampen down imports but, if there is an urgent case and somebody's family life will be disrupted, and so on, let him pay the levy and get on with the job”. Twelve months after we had imposed the levy, we turned an adverse balance of payments of nearly £40 million into a favourable balance of payments of £12 million.

I am bound to confess, and I do confess, that perhaps we were too scrupulous. Perhaps we ought to have spread it over two years instead of one, so that it would be easier to get the people to understand the matter and to make it more difficult for our opponents to misrepresent us. But we were determined to get the country back on an even keel and we were also determined to see that no unforeseen crisis would be superimposed on the crisis from which we were suffering at the time. We were determined to see that there must be room for manoeuvre, that we must have reserves available.

This Government, however, scraped the bottom of the barrel. Today they owe £60 million to the joint stock banks. Today they have used up every penny of the Central Bank reserves and I do not know what proportion of our currency reserves is now represented by Irish securities because the figure is not given in the Central Bank report. Today they have borrowed £7 million from Bonn, which they spent before they got it, to balance last year's Budget and they have now gone to the Bank of Nova Scotia to borrow £5 million. When the bad late spring increased their difficulties, they had nothing with which to meet these difficulties and signs on it, we have this Budget here today, this Budget which is going to impose £7 million more taxation in a full financial year on top of a Budget which imposed £12 million extra taxation per annum not more than ten weeks ago.

I ask any sensible Deputy what is [804] he thinking today of a Government who brought in a Budget ten weeks ago and could not go within £7 million of forecasting what they were likely to require and who now bring in a second Budget and do so with a warning that there is hanging over them the ghost of further claims which are as yet undetermined and in respect of which they do not know of any resources to meet them? If that is not a picture of a country gone bust, I do not know what it is.

I want to turn back for a moment. I can tell those stories which are pictures of the experiences of our own Government in office to prove to Deputies opposite that it is because they failed to do two years ago, when there was still time to do them, the unpopular things we did in 1956 that we find ourselves in the disastrous position we are in at the present time. I do not want to rub it in to the members of the Government because they know it themselves. They purchased the by-elections in Kildare and Cork at a fearful price.

I think they made in good faith, a genuine but disastrous mistake when they had recourse to the turnover tax which started the crucial spiral of inflation which is now frustrating us all. That happens to everybody who wants to spend money lavishly under the mistaken impression that there is a limitless Golconda which can pour money into the Exchequer. They forget that the money is levied off the necessaries of the poor. When that spiral began, they were afraid of losing Cork and Kildare. They knew that the adjustment of the 12 per cent increase constituted a grave danger to the whole economic stability of the State. I think the Labour Party and the trade union movement wished for this. They asserted their claim to it and the result was that with the Cork and Kildare by-elections in the offing, the Government gave the green light, announced that the national economy was expanding and that it was time everyone had their share of the cake.

From that time, we have gone into a steady, uncontrollable spiral of inflation. Today the Minister for Agriculture reacted in the House in a [805] manner in which I never saw him react before: he was irritated when Deputy Clinton asked him about the price of fertilisers. He did not realise that he was giving the perfect portrait of the agonising dilemma into which the Government have got themselves, an ever increasing spiral of inflation. They tried to hold down the cost of fertilisers but the costs of production of these fertilisers keep the prices going up and eliminate the margin of profit of the manufacturers.

Ultimately, the entrepreneur says that if he has not got profits, he will have to close down, that if he does not make profit, he cannot pay wages. Then the Minister for Industry and Commerce has to give way and allow an increase in the price of fertilisers. Then the farmers are back again to the Government saying that their costs have gone up and already the Sugar Company have conceded another 6/4d per ton in the price of beet in pursuance of their own undertaking to meet the cost of production. That is the spiral of inflation.

The Minister for Industry and Commerce and the Minister for Agriculture are two reasonable and intelligent men who must be in weekly consultation with their colleague, the Minister for Finance, another decent and intelligent man. What is wrong with these two men that they do not seem to understand what is happening to themselves? If they do not understand what is happening to themselves, they cannot be expected to understand what is happening to the country. Those of us who are living in the country, seeing the consequences to the country, are faced with these inescapable facts and are stating them, out of our duty to the people, here in the Dáil and in the country.

That is my indictment of this Government, that they have dragged the country step by step into this. I am obliged to say I think there are some members of the Government who agreed to this, believing it to be wrong, including Deputy MacEntee. Let us not forget that when Deputy MacEntee wrote his slanderous letter to the papers denouncing the economic soothsayers and astrologers—incidentally, stabbing [806] his colleague, the Minister for Finance, in the back—he overlooked that for the successive years when the mess was being made by Senator Dr. Ryan, the former Minister for Finance, which he bequeathed to the present Minister, who was a party to it, Deputy MacEntee was the then Minister for Health. Every economic soothsayer and astrologer, who according to him was leading us into the desperate situation that he sympathised about his poor colleague, the present Minister for Finance, being in today—every one of them was advising a Government of which Deputy MacEntee was a member.

I once had to resign from a Party, come out into the wilderness alone and face a general election within 12 months of doing so. I never had a cross word with my colleagues. They knew I believed what I was doing was right and I knew they believed what they were doing was right. What held Deputy MacEntee in the Government? If he believed they had abdicated to economic soothsayers and astrologers, am I right or wrong in saying that not only everyone in the country but every individual member of the Fianna Fáil Party was entitled to look down at Deputy MacEntee and at Deputy Aiken, the Minister for External Affairs, sitting in the Front Bench and say that so long as they say it is right, we will assume it is? Was it not the greatest breach of trust a public man ever confessed to when he said that he was party to all that was done, that he knew it was wrong, that he knew it was being done on the advice of economic soothsayers and astrologers who had no responsible regard to the character of the advice they were giving, but yet he endorsed it and commended it to Dáil Éireann? I challenge the Minister for External Affairs to intervene in the debate and tell me——

Mr. L'Estrange: Information on Gerald L'Estrange Zoom on Gerald L'Estrange He did not speak in the Presidential debate.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Wait a minute. Does he agree with Deputy MacEntee or does he believe Deputy MacEntee maliciously stabbed his colleague in the back as an act of resentment for being left out of the Government?

[807]Mr. Reynolds: Information on Patrick J. Reynolds Zoom on Patrick J. Reynolds That is a sore point.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon If Deputy MacEntee and the Minister for External Affairs agreed with what the Government were doing from 1957 to today, they were right to remain in the Government and give them all the support they could. But surely, if they believed they were driving this country on the rocks, they had an obligation to say, without recrimination and without being thought a whit the less of it by their own colleagues: “Thus far we can go with you but no further. We believe you are wrong.” I asked the Minister for External Affairs what was his view. Did he think the Government were being directed by economic soothsayers and astrologers? If he did not, what does he think of his colleague, Deputy MacEntee, in publishing his letter, which he did at a time when the present Minister for Finance was struggling with the Laocoon-like problems which confront us at present?

I am going to read again from the lecture delivered by M. Frere, because I want to get it on the record. It is extraordinary relevant to the situation in which this country finds itself at present. If it stimulates some of the necromancers and astrologers to do a little homework before they give the Government any more advice, it will have served a useful purpose. M. Frere said:

In the field of monetary policy, in fact, mistakes and inaction invariably work in the direction of monetary inflation and rising prices.

When the first signs of such inflation appear, one always hesitates on one pretext or another to take action, because, rightly or wrongly, one is afraid of halting or slowing down an expansionary movement that is to everybody's satisfaction.

Thus the causes of the inflation persist and its effects gather strength, until the time arrives when deficits appear in the balance of payments, gold begins to leave the country in consequence, and the threat looms up of a possible devaluation of the currency. As it is known that such a step would be fatal, recourse [808] has to be had to deflationary measures. These are never popular. In our social system they meet strong opposition and can generally only be applied for a limited period of time.

I want to make this specific indictment of the Taoiseach. It is a grave one. I believe he is intelligent enough to know what was happening. I believe he saw the thistles and weeds of inflation growing above the crop our nation has sown. I believe he thought the British Government were going to be forced into devaluation of the pound, that our Government would follow them and that, with one sweep of the scythe of devaluation, he would take back all the excess that inflation had injected into our economy and put the blame on Harold Wilson. That would provide the perfect alibi for 90 per cent of the more gullible members of his Party to say: “This was a terrible thing, but what could we do? It is all Harold Wilson's fault. Poor Seán Lemass fought it like a tiger. Was he not over there talking to him? Did he not take tea with O'Neill in Belfast? He did everything he could but the villains betrayed him.” It is all the same old story: Albion perfide. The villainous British let us down again.

A most significant event has transpired. Last November 12 months, Lord Cromer, Governor of the Bank of England, staved off devaluation of the British pound by a consortium of central banks in Europe, from which Paris elected to stand out. But, in spite of the Banque de France standing out, Lord Cromer was able to organise to save the £. If you observe, in the raising of the one billion dollars to sustain the £ in the recent operation, the Banque de France has come in. That means the £ will not go so long as the Banque de France remains in and, if the £ does not go, we will have to solve our own problems without having the alibi that Prime Minister Harold Wilson did the dirty on us.

Mark you, if the British £ goes, and we follow, we will get a rude awakening. Devaluation is one of the ways out of the problems this Government are in. It is a catastrophic way out, because, in our case, it will simply become one [809] of a series, if we do it unilaterally; but, if we do it as part of a general movement within the sterling area, it could provide some relief at the expense of the wage earner, at the expense of everybody whose entire wealth and property is bound up in wages.

It will not affect the wealthy. They will not have to worry about money changes. They will not have to worry about problems. They will have all their dispositions made. They will have their money perfectly safe. They will have shifted it out in time to take advantage of any devaluation that takes place here, or elsewhere. The rich are never caught by devaluation; it is the poor who pay when devaluation comes. It is the rich who smell it first in the wind. It is the poor who find it most difficult to anticipate and understand. There are new difficulties created for this country if the Banque de France continues to participate in the international rescue operation of the British £ because then the Taoiseach, Deputy Lemass, will have to ask himself does he contemplate devaluation unilaterally if he has no longer available to him that escape hatch under the aegis of Harold Wilson?

I must trouble the House with a further quotation from the lectures delivered by M. Maurice Frere:

It would be a profound and dangerous illusion for the governments of those countries to believe that, of the many problems facing them, that of maintaining monetary stability is of secondary importance and that it is still possible in the world of today to ensure such stability by strict exchange and price control under cover of which inflation can freely take its course.

It is certainly still possible by means of such control to preserve the semblance of monetary stability for a limited period of time, but, if the inflation gathers strength, such stability, which is based on constraint, soon cases to have any meaning and leads to an impasse. The course of events is always the same no matter what country is involved. Under the effect of persistent [810] inflation the supply of foreign exchange declines because the holders want to obtain for it— quite rightly—the full value, which the official rates, fixed by authority, can no longer give them.

Do not forget that, in this context, we used to have 100 per cent cover for currency in sterling assets and dollars. We used to have. I now resume the quotation:

To preserve a certain degree of equilibrium in the market, there is soon a move to restrict and subsequently to stop the transfer abroad, first of amortization payments and then of income from capital invested in the country. Authorisation to purchase or pay for imported goods is refused—or delayed. Imports thus very soon become paralysed. Exports also fall off because those holding export goods prefer not to sell rather than sell at too low a price. If, nevertheless, some export transactions do take place, the exporter endeavours to repatriate as small a part of his earnings as possible and to hold the rest abroad until the arrival of better times.

The official foreign exchange market soon loses all significance and it is not long before a parallel market—which may take many various forms—comes into being. Its size and effectiveness depend on the stringency of the penalties imposed on those who have recourse to it.

The country's economy is in any case destined to stagnate until such time as the government collapses—

These would be gloomy words if I were not in a position to complete the sentence. That is not the end of the sentence. M. Frere, as an impartial witness, has this to add:

—until the government collapses and makes way for new men.

If, in the ears of some of you, it has seemed that I have sometimes played in my role as a public debater the role of M. Frere in addressing the international bankers at Berne, try to remember [811] that there is no paragraph in his address with which I more abundantly agree than that in which he says:

The country's economy is in any case destined to stagnate until such time as the government collapses and makes way for new men.

And so I come to the last quotation from this most stimulating and, in my judgment, illuminating address. M. Frere concludes with a tribute to a great friend of ours, Per Jacobsson, to whose memory his address is dedicated. He says:

In conclusion, it seems to emerge clearly both from abstract analysis and from observation of economic and monetary phenomena that in economic and social life two essential objectives can be pursued concurrently in order to achieve an expansion of production and an improvement in the standard of living: political and economic freedom and monetary and price stability.

These objectives by no means conflict with each other; in fact I am convinced that they are, on the contrary, complementary.

No one has held this conviction more firmly than Per Jacobsson, who gave admirable expression to it in the following passage, which I should like to quote in concluding this rather over-lengthy address:

“It seems to be a lesson of history that without stable money neither justice nor progress can be assured, and that the human spirit cannot give of its best if it is harassed by all the uncertainties to which rapidly changing money values give rise. Nations, too, must have their selfrespect (which is something other than nationalistic pride), and enjoy the esteem of other nations; but this cannot be obtained without the benefits of a sound currency.”

I shall conclude my overlong address by recapitulating for this House the words I have spoken before, because here is the root of the matter, the root from which all the evils with which we [812] are at present struggling have grown. It is the hateful root that made the farmers picket their own Parliament and made a pusillanimous Minister concede to anarchy what he with held from reason, argument and representation. This is the root from which grows the problem that forced upon us the obligation of passing legislation in this House conferring on the Government the right to prohibit picketing, the fundamental right of men on strike. This is the root from which grows the unfortunate evil and suffering so often borne in silence by the businessman trying to raise a family and feeling restriction of credit grow in about him, and his livelihood squeezed out, his business closed down, his children taken from school, and he on the streets, unemployed and unskilled, looking for work.

This is the root known as inflation. This is the broad highway to hell for any nation.

Inflation is the prince of thieves robbing the defenceless and passing by the experts in the manipulation of money. It is the broad highroad so pleasant to travel until it reaches its destination of anarchy, begotten of the collapse of money as a store of value. Then, indeed, Fisher's equation operates to destroy the foundations of a free society, until in the ensuing anarchy people turn to authoritatian forms of Government to arrest the breaking up of society; and all too often the society discovers too late that inflation has destroyed freedom, and that the price paid politically to restore stability has been the surrender by freemen of their birthright of freedom, with the prospect of generations of struggle and perhaps bloodshed to get it back.

My indictment of this Government is that they planted that root in the soil of this country. They fattened on it. Now the poison is working in their veins and in the veins of all our people and sickness is spreading through the whole land. But there is hope so long as we remember the country's economy is, in any case, destined in these circumstances to stagnate until such time [813] as the Government collapse and make way for new men.

I do not know how long more this Government will stagger along. The Tánaiste, who is sitting opposite now, will agree that he is now the Tánaiste of a very shaky Government. They are quarrelling among themselves. They are frustrated. They are driven to petulance by criticism. They have even reached the stage at which the head of the Government rebukes the Fourth Estate for sitting not upon its sash but on its fanny. Now, think you, when Prime Ministers speak like that, is it not time they moved on, turning their eyes to the Phoenix Park and the relatively simple duties there for which they may still be qualified, recognising that the burdens of office they themselves created have become too heavy further to bear with the equanimity becoming in the Leader of an Irish Government and an Irish Parliament?

Minister for External Affairs (Mr. Aiken): Information on Frank Aiken Zoom on Frank Aiken Deputy Dillon has just given us a very clear demonstration of his characteristic attitude over the years. He has been a prophet of doom and agent provocateur for a great number of years——

Mr. O'Hara: Information on Thomas O'Hara Zoom on Thomas O'Hara And he has been proved right.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken ——and that is the reason he is where he is.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon No—anno Domini. Nothing else.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken That is the reason why Fine Gael have been out of office for the past 34 years. They were merely participants in the Coalition with the help of the Labour Party for six of those 34 years.

Mr. O'Leary: Fianna Fáil ran a Coalition the last time with the help of the Independents.

An Leas-Cheann Comhairle: Information on Cormac Breslin Zoom on Cormac Breslin Order.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken I listened patiently to Deputy Dillon for two hours and never said a mumbling word, although Deputy Dillon must admit he gave me reason to interrupt him, had I been so minded.

[814]Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon I fully appreciate that.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken Deputy Dillon forgets, I think, the history of 1956 because he gave a very one-sided picture of what happened in 1956. There are certain similarities in the two years, 1956 and 1966. In 1956, the Government were running short of money to carry out their programme. This year, because of the situation, our Government were in danger of running short of money to carry out their programme. The difference, however, between 1956 and 1966 is that when the Fianna Fáil Government found the revenue obtained from the taxation imposed last year would not be sufficient to enable us to carry on the programme of development we had laid down, we did not run away from Government and leave an incoming Government to face a situation in which there was a deficit of £13 million.

Mr. Donegan: Information on Patrick S. Donegan Zoom on Patrick S. Donegan That is not true.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken We did not leave a situation in which there were over 100,000 people idle and in which there were 25,000 thrown out of regular work in industry.

Mr. Donegan: Information on Patrick S. Donegan Zoom on Patrick S. Donegan That is not true.

An Leas-Cheann Comhairle: Information on Cormac Breslin Zoom on Cormac Breslin Order.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken That, of course, is true. The Deputy should know it was true of Drogheda.

Mr. Donegan: Information on Patrick S. Donegan Zoom on Patrick S. Donegan It was not true of Drogheda.

An Leas-Cheann Comhairle: Information on Cormac Breslin Zoom on Cormac Breslin The last speaker was not interrupted and the Minister should now be allowed to make his speech without interruption.

Mr. Donegan: Information on Patrick S. Donegan Zoom on Patrick S. Donegan The Minister is prevaricating.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken There was a great decrease in the employment in the factories in Drogheda and throughout the country. In Drogheda and elsewhere, there were 25,000 people in regular industrial employment——

Mr. Donegan: Information on Patrick S. Donegan Zoom on Patrick S. Donegan And there are 1,068 people unemployed today in Drogheda.

[815]Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken ——thrown out of employment in the last year of the Coalition. In addition to that, there were 100,000 unemployed, and there were 60,000 who had emigrated during that year. What did Fine Gael do about it? They were not too high and mighty to borrow. They borrowed all they could. They got £40 million from the United States and they spent it like water to avoid taxation. We have been paying that since and the Irish people will be paying it for a great number of years to come. We have a programme. We intend to carry it out and we are going to collect the money, so much of it by taxation as will avoid the inflationary situation which in the long run would only result in disimproving the lot of the workers and the farmers.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Would the Minister allow me to interrupt to say this? The fact that I guaranteed not to interrupt the Minister as he goes along does not disqualify me from a general demurrer to all his assertions.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken I do not mind the Deputy demurring, but the facts are there. He talks about priorities. This is a very good thing to examine. I agree with him that Government policy has to deal with priorities, what are the most essential things to be done. We have to make a choice. We cannot do everything all at once. We cannot build all the houses we would like to see built. We cannot build all the roads we would like to see constructed. We cannot drain all the land and build all the factories within one year. Certainly we cannot go anywhere near that if we are going to keep our people at their present standard of life. Therefore, we have to have priorities, and our priority, unlike that of Fine Gael, is to make certain that the taxpayer will pay a reasonable subscription to the improvement of agriculture, the improvement of industry, the improvement of our services, social and others.

I wish to put a few questions to Deputy Dillon which he can answer in his next speech, if he wants to do it. The priorities in our case are different from theirs. For instance, they were short of money in 1955-56. What did [816] they do? They talked a lot about education before they became a Government. They demand now that we should spend more on education. We are spending about £35 million a year on education as against the £15 million they were spending in 1956-57. We are spending more this year on education, still more, but in 1955-56 when the Fine Gael Coalition wanted to get money, they cut down on education. They cut the grant for secondary schools by ten per cent. They postponed the building of schools. We are building schools at a rate which far exceeds what was being done during the Coalition period.

There was some talk today at Question Time about the £250,000 extra that farmers would have to pay for agricultural fertilisers. However, in order to meet that £250,000 extra on fertilisers, our farmers have today over £5 million in subsidy on lime and fertilisers as against the £.6 million the last Coalition gave them. The farmers are much better off, even at the cost of getting fertilisers with the increase of £250,000, when they have over £5 million to help them to meet that increase, and all the rest of their purchases, than they would be if they had to go back to the £.6 million which they got from Fine Gael. We must remember, too, that if Deputy Dillon supports the right of the farmers to parade up and down outside the Dáil——

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon I did not support it.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken The Deputy indicated in his speech today that he supported the 100 men who were shutting down all of industry and all the electricity all over the country.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon My general undertaking not to interrupt the Minister imposes silence upon me; otherwise, I would——

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken The Deputy takes up more time in this House than any ten men in it, and I take up very little.

Mr. P. Hogan: Information on Patrick Hogan Zoom on Patrick Hogan (South Tipperary): The Minister is never here.

[817]Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken Deputy Dillon has the right to make a speech for ten hours, if he wishes. In regard to these priorities of building houses, building schools, and so on, in order to avoid taxation, would Deputy Dillon cut down on these projects? Would he cut down the £53 million we have given to the farmers to avoid this £7 million taxation? Would he reduce the £35 million we are spending on education by £7 million, in order to carry on the work of government? Would he go back again to the milk farmers, as he did during his term of office and, instead of giving them 2d a gallon, reduce what they could get at a creamery to 1/- a gallon?

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon That is untrue.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken He put up that proposition.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon There is not a scintilla of truth in that.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken One shilling a gallon for ten years. Is that the priority he wants us to adopt?

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon That is an utter falsehood.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken It is absolutely true. It is no wonder that Deputy Dillon is running away from his own actions. The reason Fine Gael are there in opposition solidly for ten years without the slightest opportunity or hope of ever changing from it is that the farmers know that what I am saying is so, and that is why they have them there.

Mr. O'Hara: Information on Thomas O'Hara Zoom on Thomas O'Hara The result of the Presidential election.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken I do not want to go through all that sad story of 1956. It was a disgraceful period in Irish history, when, with all the need for education, the only thing a Government could think of was to reduce the amount of money spent on education. It was a disgraceful period and the people of Ireland know that and that is why Deputy Dillon is where he is——

[818]Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Anno Domini has me where I am.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken ——and there he is going to stay unless he commits hara-kiri by causing one of those by-elections they are talking about.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Old age is honourable.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken The Deputy is not all that old. As a matter of fact, the Deputy always remained very young from his neck up—permanent adolescence.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon I am much obliged to the Minister for his compliment.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken The Deputy drew it on himself. It is no wonder he does not want to hear me speak because I want to remind him——

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon I am enjoying it well.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken It was not in Mullingar that he decided he was going to spend £40 million on land reclamation——

(Interruptions.)

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken It was when the Minister for Finance said he would have to get £3 million out of the Road Fund to balance his Budget and Deputy Dunne got up, revolted and said: “If you cut the Road Fund by £3 million, I will vote against you, and I will get all the Labour people I can to vote against you.” The Deputy announced the Land Project in the middle of that debate. I have no doubts about that, and this Mullingar business is all phoney. But remember this, that to avoid a mere £3 million he announced he was going to spend £40 million without ever having any scheme for it. It was years before we could get round to spending even £400,000 of it. We had already been spending over £400,000 which we collected from taxation. Deputy Dillon was going to wave his wand and spend £40 million of American money, which we are now paying back, and some of the land has gone back to where it was originally before the thousands were spent on it. However, to cover up taking for the Exchequer £3 million from the Road [819] Fund, the Deputy announced he was going to spend the loan of £40 million we got from the Americans.

Now as to this talk of getting foreign loans, I am as much against foreign loans as anybody else, in certain circumstances, but we have a great deal of foreign assets which are liquid; some of them are held by the Central Bank and by the banks in the money market in London. They are readily available there to meet all our current debts for goods imported and I think it necessary to keep that amount of liquid reserve. When you see how the Americans worry because their £20 billion reserves fall by a few hundred millions, you can see why we should be careful to keep a reasonable level of liquid assets. We could reduce our liquid assets in London and thereby avoid the loan from Germany or the loan we got from Nova Scotia, but it is not derogatory to a nation's status to seek foreign loans. After all, the great miracle of Germany was built up——

(Interruptions.)

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken ——on foreign loans. I remember as late as 1951 the German Federal Republic got a loan of 300 million dollars from poor little Belgium——

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Would the Minister not have thought it queer if she had asked for ten million dollars?

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken At the present time you have ten of the richest countries arranging to give each other reciprocal loans, so it is nothing derogatory to us that we take the cold-blooded decision that it is better to get a firm long-term loan from abroad, rather than run down our liquid assets too far.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon If I asked the Minister to lend me 2/6d he would say I was a sponger.

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken It was better that we do this because we wanted to build houses, to build schools, to give grants to farmers and all the other things we wanted to do. It was better to get a foreign loan of some millions rather [820] than try to reduce the price of the farmers' milk to 1/- a gallon or cut out the education grant, as was done by the Coalition.

Mr. O'Hara: Information on Thomas O'Hara Zoom on Thomas O'Hara Did you not slaughter the calves?

Mr. Sweetman: Information on Gerard Sweetman Zoom on Gerard Sweetman What about sinking all the ships?

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken Again, I should like to say this. Deputy Sweetman, I believe, has a wonderful plot for getting the Government off the rocks we are said to be on and putting us into the deep blue sea, by forcing by-elections. I invite Deputy Dillon to give us a by-election in Monaghan and I invite Deputy Sweetman to give us a by-election in Kildare. In fact, I invite the whole Fine Gael Party to give us by-elections and they will see where the Irish people stand because they know Deputy Dillon——

Mr. Sweetman: Information on Gerard Sweetman Zoom on Gerard Sweetman Why will the Minister not resign himself, if he is so clear about it?

Mr. Aiken: Information on Frank Aiken Zoom on Frank Aiken Even though Deputy Dillon may be in the back benches, he is still over Fine Gael and his sentiments and policy still inform Fine Gael. The people know that if Deputy Dillon had his way, instead of giving the farmers an extra £5 million, he would cut milk to 1/- a gallon, cut wheat again by 12/6d a barrel and would cut out the subsidy for lime and fertilisers as they cut it out the first time they came into office. It was a mere quarter of a million we had in the Budget for lime and fertilisers but they could not afford it and they would not tax for it and cut it out.

I will wind up on this—I will see you in Monaghan, Kildare and the other places when you carry out this great plot of forcing by-elections and you will see then where the people stand.

Mr. O'Leary: It seems doubtful that we should be discussing this because the Minister's statement more or less infers that, perhaps, there may be another Budget later on. Suspicion is growing amongst us that we are in the Indian summer of Fianna Fáil government, and these days there [821] seems to be a lot of hysteria of one kind or another amongst Government Ministers. We are in a period marked by forced labour laws, marked by the outburst by the Minister for Agriculture today and the Taoiseach's outburst yesterday and it seems this is a Government who are steadily becoming panic-stricken in face of circumstances they cannot control.

Mr. J. Lynch: Information on John Lynch Zoom on John Lynch Just fighting back.

Mr. O'Leary: The Government's backs are to the well at any rate.

Mr. Dillon: Information on James Matthew Dillon Zoom on James Matthew Dillon Their backs are to the wall.

Mr. O'Leary: There is nothing wrong with a Government with their backs to the wall, provided that at least they seem to know the problems they are up against.

An Ceann Comhairle: Information on Patrick Hogan Zoom on Patrick Hogan That is a good note to end on and perhaps the Deputy will now report progress.

Progress reported: Committee to sit again.


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