Finance Diary November 1978

In introducing a £5 weekkly job subsidy for everybody employed in the textile and shoe industry, George Colley is really only fiddling about with a much larger prooblem in an ad hoc manner tyypical of most politicians of all shades. Of course he had been I put up to this by the British Government with its now two-year-old £20 a week temmporary employment subsidy.

The British scheme gives out larger payments but it is limited.only to those employyments threatened by redunndancy. Because of the diffiiculty of proving jobs are threatened, Colley has, in a way, sensibly not duplicated the British scheme but rather given a flat subsidy to everyylone employed in two indusstries but this of course does nothing to help companies like AET -also suffering from the British scheme.

By simply abolishing the social insurance stamp, Colley could have more equitably helped all labour intensive industries. Charlie Haughey is working on restructuring the whole Social Insurance sysstem but the £7 weekly stamp is so b latan tly regressive, hitting the weakest most, that it is difficult to see why he should delay a moment lonnger.

Guinness's boss Bob McNeile really shook the marrket when he announced a hefty fall in Guinness's first half profits. At the last AGM there was no talk of an immpending decline so it looks as if a number of things have started to go wrong.

Profits actually fell by 16 per cent from £ 17.1 million to £14.2 million. The UK also suffered with profits down 16 per cent to £5.8 million and worst of all overrseas profits fell, although by only 4 per cent.

It was overseas growth that the market was looking for in Guinness as well as reecovery in the home market, particularly in Ireland. Unnfortunately, Guinness often disappoints when most is exxpected from it. More vigorous management is needed as is clearly shown from the

Robert McNeile £200,000 lost in confectionnery, an area where Cadbury's and Rowntree's are presently booming.

The Irish Glass Bottle Co. should have sold off its stake in Waterford Glass years ago. This was too small to be siggnificant and brought only a small dividend to 1GB shareeholders.

The receipts from the sale of its 2 1/3 per cent stake in Waterford brings 1GB almost £1 Yz million cash, enough to wipe out all its debt and still leave it £1 million surplus in the bank. This could indicate that the delayed expansion plan will now take place.

The Coalition Government learned the very hard lesson that excessive State borrowwing tends to end up in an inncreasingly intractable mess which can only be resolved by severe fiscal measures aimmed at cutting the budget deficit.

Fianna Fail will no doubt learn the same lesson. George Colley's first budget showed the State borrowing requireement up to £670 million, representing l3Yz per cent of the nation's GNP. This is allmost three times the level of the profligate British Labour Government. If the UK is "the sick man of Europe" Ireland must be a case for the Intensive Care Unit.

Martin O'Donoghue, of course, plans to reduce this rate of borrowing to I OYZ per cent in next January's budget and to 8 per cent by 1980. This will orily be achieved by a combination of increasing taxes, probably cerltred on beer, tobacco and petrol, and restricted Government spendding.

Even at 8 per cent in 1980, Ireland will be borrow' ing at more than twice the rate of any other European country. This is what lies beehind the recent strictures in the annual report of the EEe Commission. It calls for inncreased taxation to cut "the high level of Government borrowing" and a stricter "control in the expansion of credit to individuals".

The Central Bank's recenntly announced credit squeeze fits in with this but it is difficult to see George Colley reducing State borrowing faster than the targets laid down in the Green Paper .•