Finance Bill 1954 - Second and Subsequent Stages, July 7 1954: Professor Johnston: I hardly know how to begin my remarks, but I think I will begin by welcoming the distinguished ex-Senator now Minister for Finance. I do not suppose that every member of the House wishes him a long reign over us, but all of us would express our goodwill to him and hope that during his term of office he will be able to produce those financial miracles that the circumstances of the country so much require.

As Minister for Finance it is his function to acquire the means of paying for the public services, but he must never forget that in the exercise of that function he is also an important agent of public economic policy. Every tax and every subsidy has some effect, good or had, in developing or perhaps in perverting the general economy of the nation. That consideration applies especially to the decision to subsidise once more the price of butter, because there is an indirect economic repercussion from subsidising butter, which means, in effect, creamery butter.

Between 1948 and 1951 when the butter subsidy operated there was, indeed, an increase of some 40,000,000 gallons of milk sent to the creameries, but that was balanced by a decrease of nearly 100,000 cwt. of butter produced by farmers on their own farms, the equivalent of some 25,000,000 gallons of milk turned into butter on the farms.

The production of farmers' butter is an important element in the total butter production and consumption in the country, and it is not desirable public policy to discourage the production of farmers' butter. Recently there was a desirable increase in the production of farmers' butter. It was associated with an increased tendency to rear young beef cattle on the farms. An important by-product of that was the production of farmers' butter for sale locally. That, I think, was a thing that we should welcome. I imagine that as a result of this new subsidy that desirable tendency will probably be reversed.

The functions of a Minister for Finance rather resemble the functions of a gardener in this matter of using the pruning-knife of taxation. Sometimes it is the duty of a gardener to cut out an over-luxuriant growth if he wishes the tree as a whole to grow more in another direction and to produce a better balance in itself. In effect, it has been a common practice for former Ministers for Finance to use the principle of the levy on one over-exuberant branch of the economy in order to subsidise another branch of the economy which it was desired to see expanding and developing. It was common practice to levy something on the export price of turkeys in recent years with a view to maintaining a desirable level in the export price of eggs. That was considered to be normal and possibly a proper exercise of the function of a Minister for Finance.

That brings me by a natural transition to discuss a large-scale application of the same principle with which my name has been rather prominently and unpleasantly associated in recent debates in the Dail and in recent hustings down the country during the election period. I refer to a reference I made to the possibility of an export tax on cattle when talking on the Finance Bill in 1952 here, on the 16th June of that year. Senators will find my remarks in, Volume 40, No. 22, page 1571 and the following pages.

Mr. Baxter: Was it the 19th or the 16th June?

Professor Johnston: Sorry, the 19th June, 1952. I do not propose to inflict them at greater length now. The references to me which I regard as rather unpleasant and rather a violation of parliamentary manners took place in the Dail on Wednesday and Thursday of last week. You will find them on record in Volume 146, No. 7 of the Dail Debates, page 835, and Volume 146, No. 8, Dail Debates, page 1044. In one or other of those references you will find a quotation from my speech of two years ago which is completely wrenched out of its context and gives a most misleading impression of what I said or advocated in the speech as a whole. I want to take this opportunity of putting the whole matter in its proper perspective and giving the whole idea of an export tax on cattle the decent burial that I thought I had given to it in a publication, not referred to in the Dail, which I sent to the Press two years ago.

The assumption behind the recent controversy seems to have been that what I recommend in the way of agricultural policy to-day becomes Government policy the day after and the law of the land on the third day. That has never been the case in my personal experience with reference to the previous Government and I am sure it has no application either to the probable practice of the present Government. It is true, and I am perhaps rather proud of the fact, that I served on a rather important committee, the Committee on post-Emergency Agricultural Policy, which sat from 1942 to 1945 and produced a certain report which I think has been adopted in many of its most essential aspects by both the major Parties when they were in power from time to time. I had more than a little to do, in association with another member of that committee, in writing and drafting that report though he contributed the major part of it.

After it appeared, a certain person who was then a Minister in a Fianna Fail Government, asked me if it was true. I modestly.admitted that it was and he said: "You deserve a medal for the part you played in that connection." Not long after that, I met another person who subsequently became Minister for Agriculture in the inter-Party Government, and who is now again the Minister for Agriculture. He asked me a similar question and I said, yes, and he said: "The report is worth its weight in gold." I was rather pleased with these pleasant remarks, but I have travelled a long way from 1945 to 1954, because, in the recent controversy with which my name has been associated with regard to agricultural policy, I have been demoted to the position of a stick to beat the Fianna Fail dog, and I strongly object to being pilloried as a stick to beat a Fianna Fail or Fine Gael dog, or any other dog that happens for the time being to be in power. So far as I can ensure that result, that stick will become a boomerang, so long as I am able to remain in public life and exercise the right of free speech.

Let me put on record the genesis of the whole controversy with regard to this matter of an export tax on cattle. I have been known to write articles for the Irish Press and I have also been known to write articles for the Irish Independent and also for the Irish Times. I am quite catholic, in the etymological sense of the term, with regard to the organs in which I choose to put my views before the public. It happened around about the spring of 1952 that I thought it would be a good idea to make certain suggestions to the readers of the Irish Press. The initiative was mine, and the responsibility for what I said in those article, was mine. The whole idea was to put certain ideas before the public and bring about intelligent public discussion of these ideas.

In the course of the second article, dated 14th March, 1952, which I should like to put on the records of the House because it is necessary to a complete understanding of this matter, I said as follows:-

"Why has our agricultural (unlike our industrial) arm been so comparatively static in its output in recent years? In a recent lecture to the Institute of Bankers, Mr Meenan has pointed out that between 1926 and 1946 the number of persons occupied in agriculture diminished by over 75,000, and 50,000 more males had left agriculture by 1950. On farms up to 30 acres in size, the diminution (mostly of family labour) was as much as 47,000 up to l946. On the larger farms the number remained comparatively stable. By 1949, gross output was practically 100% of the 1938 level, but it was the output of perhaps 100,000 fewer persons. Output per person has increased substantially and encouragingly and there is good reason for thinking that it is capable of further substantial increase. If this can he accomplished without further decline of rural population, gross output will increase, and with it taxable capacity and export capacity. "Why have the surplus members of small farm families been fleeing from the land in such large numbers, especially since 1939? The small farmer is pre-eminently a processor of raw materials (much of which he must buy from sources other than his own farm), and cannot possibly make a tolerable living by the production and sale merely of cash crops. As I explained in my recent book Irish Agriculture in Transition the Second World War created conditions in which it was no longer possible for the small farmer to make a tolerable living. His traditional specialities, pig and poultry production, depended upon imported Indian meal as a necessary component of the ration, and during the war to obtain this was a physical impossibility.

"After the war, for a year or two, Indian meal was obtainable at a price which bore a favourable ratio to the prices at which pigs and eggs could he sold, and the small farmer's production again began to expand. But the devaluation of 1949 raised the price of Indian meal considerably, while the price of eggs continued to be depressed by the rigid policy of the British Ministry of Food. A reviving export trade in bacon was annihilated and an expanding export trade in eggs was checked and reversed. Poultry production is now declining, and pig production is static.

"The problem is to recreate conditions in which the small farmer (numerically our most important productive agent) can afford to expand his productive effort without inviting financial bankruptcy.

"The traditional dependence on Indian meal as a raw material for live-stock production must be brought to an end. Fortunately, a new cereal - Ymer barley - has been increasingly grown in Ireland in recent years, and it is capable of becoming an almost perfect substitute for the Indian corn which is now no longer to be relied on. Here again there are problems of quantity and price. We would need to grow this year an additional 200,000 acres of Ymer barley without diminishing the acreage under other cereals if we are to make a serious impression on the problem. As we also require an additional 200,000 acres under wheat if we are to be reasonably self-sufficient with regard to this all-important cereal, it looks as if the total area under the plough would need to increase by nearly 500,000 acres in the current year. This additional programme is primarily a job for the owners of the middle-sized and larger farms, especially those of them who have access to tractor power and modern implements.

"Live cattle are now commanding nearly 120/- a cwt. There is no reason to suppose that there would he any fewer cattle reared or matured if the price were only l00/- per cwt. They might perhaps he fed less generously in the winter-time, but silage will do quite well, along with hay and roots, and there is reason to think that feeding barley, produced on the larger farms, is now being fed to cattle, whereas it would be more in the national interest if it were sold to small farmers and fed by them to pigs and poultry.

"If the price of cattle were only 100/- a cwt. instead of nearly 120/-, the price of beef in the shops would be cheaper and the cost of living would come down. During the war, the British Ministry of Food kept the price of beef cattle here down to around 60/-. They overdid it, of course, and there were reactions on the rearing of calves, but the relatively low price paid in those days for beef cattle was a material factor in keeping down the cost of living for us in Ireland.

"According to a recent broadcast talk from Finland, the Finns have lately imposed an export tax on food products, and have thus successfully reduced their cost of living. I suggest that our Government impose an export tax of £5 a head on all cattle exported 'on the hoof'. This would bring in, perhaps, £3,000,000 in a full year. The effect would be to cheapen all cattle and beef in the home market, and to give a rapidly expanding dead meat trade a valuable boost.

"The yield of such a tax should not be treated as ordinary revenue, but should be earmarked to subsidise and encourage the productive efforts of small farmers, now handicapped, as explained above.

"During the eighteenth century there was a bounty on the inland carriage of corn (mainly by canal to Dublin), which is said to have had a considerable effect in expanding tillage. The proceeds of the cattle tax should be used as a bounty or subsidy on the production and sale of Ymer barley as a raw material for live-stock product production. The larger farmers, of course, won't like the cattle tax (but they can 'take it', for they have been doing pretty well in recent years).

"As growers of a largely increased area of Ymer barley, they can get back all or most of the tax in the form of a suitably guaranteed price. I see no reason why the guaranteed price for Ymer barley should differ at all from the guaranteed price for wheat. Offaly County is a typical area in which much wheat and barley are grown and relatively few pigs and poultry are kept. County Galway is the exact reverse. If the Offaly County farmer could count on selling Ymer barley at £32 a ton, and the County Galway peasant could count on buying it at £22 a ton (plus transport), would there not be a considerable expansion of barley growing in Offaly County and pig and poultry production in small farm areas, even at present prices of eggs and bacon and is not this precisely the result we now need to achieve? I am assuming a yield of 300,000 tons of Ymer barley, produced and sold, and a subsidy of £10 a ton in respect of it."

That seemed to fall flat for the time being but, as I said, I made some further reference to it in my speech on the Finance Bill in this House two years ago, the speech from which an inadequate quotation was made in the proceedings of the Dail the other day. I stressed the fact that the price of beef was at that time so high that farmers were turning into beef cattle young heifers that should in the ordinary way have been turned into cows, that we were killing off what should be heifer replacements of our future cattle stock and, therefore, doing something which made it impossible for us to increase the total cow population in the long run.

Everyone knows that the first condition of any real, permanent increase in agricultural output in this country is that the number of good milch cows should substantially increase. I recommended the discouragement of the practice of turning potential cows into prematurely killed beef. Again I stressed the fact that if it was not considered desirable to use the tax for ordinary revenue purposes it should be and could be used to subsidise the price of Ymer barley, for use as a feeding stuff on farms specialising in pigs and poultry.

An Leas-Chathaoirleach: Would the Senator consider that he has sufficiently met the case now that was made in the Dail and come to the present Bill?

Professor Johnston: I have not met it fully yet. I thought that for the time being it had fallen flat but people down the country would hardly speak to me because I had made the suggestion of an export tax on cattle. I also came to the conclusion that the Government, however much they may have been interested in the matter in a purely academic way, were not in the least likely to take it seriously and that, however desirable it might he in theory, it was not practical politics. I sent a letter to the Press on the 11th July, 1952, which I would like to put on the records because it has not been adequately noticed since then. It was certainly printed in the Irish Times of that date and also in other newspapers.

An Leas-Chathacirleach: Dealing with this present matter?

Professor Johnston: It relates to the whole matter.

An Leas-Chathaoirleach: Would not the Senator consider that he has sufficiently explained 'the case? He has given us many quotations. Would he now come to the present Bill?

Professor Johnston: I merely want to put it on the records of the House because my name has been mentioned in a way which I do not approve of.

An Leas-Chathaoirleach: It was on the public Press but you want it on the records of the House.

Professor Johnston: Have I not a right to put it on the records of this House?

An Leas-Chathaoirleach: I wonder.

Professor Johnston: This matter has been referred to and is on the records of the other House. I want to put on record in this House what I really said.

An Leas-Chathaoirleach: The Senator may proceed.

Professor Johnston: I am quoting a letter I wrote to the Irish Times which was published on the 11th July 1952:

"Some time ago I suggested that it might be a good idea to put an export tax on all cattle exported 'on the hoof'. There is not the least likelihood of the suggestion being adopted."

I underlined that sentence.

"Desperate diseases may indeed require desperate remedies, but our present Government is not so desperate as to consider this remedy seriously, however persuasive the theoretical consideration I may have urged in its favour. The remedy, then, being out of the question, the problem (or the disease) remains, and I would he glad to hear of other solutions for the problem which are politically feasible.

"The problem is to secure the maximum possible increase of agricultural production in the shortest possible space of time. There are at least two aspects of this problem. In our agricultural set-up we cannot in the long run increase the output either of beef cattle or livestock products unless we increase the total number of well-fed, fertile cows.

"There were 1,189,000 milch cows in the Republic in 1951 - just 1,000 more than there were in the same area in 1911. In the interval the number has rarely exceeded 1,300,000. Last autumn the price situation was such that, if you tried to sell a two-year-old heifer that seemed likely to make a good cow, the first question the dealer would ask was - 'Is she in calf?' If the answer was affirmative, you could count on getting about £5 less than if she were suitable for the store and beef trade.

"The relatively high price of beef and store cattle must have caused the destruction of tens of thousands of heifers which in a normal price situation would have been retained to replenish and increase our in- adequate stock of milch cows.

"From 1947 to 1950 the number of heifers in calf on June 1st was abnormally high, and total milch cows increased from 1,156,000 in 1947 to 1,209,000 in 1950. The long term trend was then satisfactory. In 1948 the number of in-calf heifers on June 1st was 128,000 - the highest number in any year since 1931, and about 40,000 above the average. In 1951 the number was down to 80,000. If this present situation continues, what is the outlook for total milch cows, total cattle population, and total agricultural production in two or three years' time?

"The other aspect of our major agricultural problem is how to make it worth while for our small farmers and their families to expand poultry and pig production. You can't make a living out of store or beef cattle on 30 acres of land. In 1936, 386,000 males were trying to do so on farms under 50 acres in size, and since then over 50,000 of them have disappeared from our agriculture, largely because under war conditions and under present conditions the expansion of poultry and pig production is financially precarious. With Indian meal nearly 40/- a cwt., the price of eggs and pigs would need to be fantastically higher than their present high level to justify an expansion of pig and poultry production based on Indian meal as the primary raw material.

"The Minister for Agriculture has rightly pointed out that we must rely, increasingly on home grown barley and fodder beet as feed crops. It is satisfactory to note that the acreage under barley is increasing though somewhat at the expense of other cereals.

"Anyhow, these are our two main problems - to prevent the destruction of heifers that should be kept for breeding, and put the small farmer and his family back in a situation where it will not be financially suicidal for them to increase production."

Those problems, like the poor, are still with us. I bequeath the solution of those problems to the present Government and the new Seanad. The success or failure of the Government in solving this problem will make or mar the prospects of that Government and the welfare of the country in the very near future.

Some navigational notes:

Copyright Dr Roy Johnston 1999