These results, particularly the swing towards Fianna Fáil of 11 per cent and 13 per cent respectively, were the first real sign that the Inter-party Government was losing support. As we saw in Chapter 11, Government candidates had done reasonably well in by-elections up to then. Now the pressure was on, and Labour in particular was restive.
As early as February 1956, US Ambassador Bill Taft was speculating on an early election, suggesting that Labour could pull the plug on the coalition if austerity measures were taken. He thought Norton could keep his party in line “so long as things were going along fairly quietly, but the odds were that they would bolt if anything controversial like a new economic programme came up”. His British counterpart, Alexander Clutterbuck, thought an immediate collapse unlikely, predicting a compromise over the Budget which “may tide things over for a while”.31 Clutterbuck was right. Sweetman’s budget at the beginning of May increased taxes to further tackle the balance of payments problem, including a heavy rise in duty on petrol and cigarettes, and cut £5 million from spending. But it also increased welfare benefits. In Costello’s words, the Government had “carried out a difficult task in difficult times in this Budget in the most humane way possible”.32 In the assessment of Labour’s most recent historian, the Budget “did not lead to Labour losing much face, but neither did it provide anything for those who wanted the government to adopt a positive policy to halt the economic crisis”.33 There was more gloom to come.
On 1 June, preliminary results from the census carried out in April were released—and those results were devastating. The population was 2,894,822, the lowest ever recorded. The natural increase in the population was the highest recorded since 1881, but was more than wiped out by increased emigration of over 200,000, or more than 40,000 people in each of the five years since the previous census. Since 1951, the population had declined by 65,771.34 It was, according to the Provisional United Trade Union Movement, “a great shock to our people … The future of the nation is at stake and it is against this background that all economic questions must be judged.” In a memorandum to the Government, the unions argued that the “alarming trends” revealed by the census should put the “temporary economic problems” of the balance of payments into their proper perspective.35
In the midst of this gloom, the death of Fianna Fáil TD Pa McGrath of Cork Borough precipitated another by-election, which was held at the start of August. Fianna Fáil had moved the writ with unusual speed, in order to “seek profit from the Government’s difficulties”, as Costello put it when opening the Fine Gael campaign. The Taoiseach said the country was suffering from “a serious but not an incurable disease”. Complete recovery was certain “if the patient himself co-operates in the efforts to cure him”. That co-operation, he suggested, should start with a vote for an inter-party candidate in the by-election. He appealed to voters “to strengthen the hands of the Government to deal with our very serious problems and difficulties, and not to weaken them in these critical times”. He accused MacEntee of having deliberately caused the cost of living to rise when he was Minister for Finance. By contrast, the Inter-party Government had “adopted every device, orthodox and unorthodox, in an endeavour to keep down the prices of essential commodities, and allowed them only to rise where such increase was inevitable and beyond our control”.36
The Dáil debate on the Taoiseach’s estimate came in the middle of the campaign. During that debate, in the words of the New York Times, both Government and Opposition “faced up to the fact that the country was in a critical situation”.37 Costello spoke of a “trinity of problems” facing the country—emigration, unemployment, and the balance of payments deficit. “Any one of these problems would be formidable by itself; taken together, they are both a warning and a challenge to the country.” He said there were two dangers—that of overestimating the difficulties, thus causing “panic and despair at home and a lack of confidence abroad”, or of underestimating them, which could lead to apathy and a failure to take corrective measures.38
Among those measures was another dose of austerity. Sweetman complained on 20 July that despite the earlier introduction of import levies, “virtually no net improvement has so far been achieved. It is essential that further reductions in imports be effected.” He urged colleagues to review their departmental purchasing programmes to reduce or defer any imports.39 And on the twenty-fourth, just over a week before polling day, the Government agreed to increase import levies and extend them to new items, and to cut a further £5 million from Government spending.40 The Leader noted the Government’s promise “that if this shirt is not hairy enough to make the citizen itch into economic virtue a still more penitential garment will be provided”.41
It was not, to say the least of it, an ideal background for a by-election. Costello made a virtue of necessity in his eve-of-poll speech. The fact the Government had taken such measures in the middle of an election campaign showed “its confidence that the people want the truth and won’t be frightened by it … Recent events have demonstrated the unity and strength of the Government and their resolution to do what is right even at the risk of losing support.” He admitted some hardship had resulted, but said it was nothing like that caused by the 1952 Budget. He claimed his Government had “tried to temper the wind to the shorn lamb” by taxing inessential, or less essential, expenditure.42
His confidence in the voters was somewhat misplaced. The Fianna Fáil candidate, John Galvin, won 53 per cent of the vote, up 10 percentage points since the general election. Fine Gael was down 12 per cent to 29 per cent, and Labour down 2 per cent to 11 per cent. Costello put a brave face on the result, observing that it was based on “the smallest poll possibly ever recorded in Ireland”, and merely showed that “the Opposition has obtained a temporary electoral advantage” from the country’s economic problems. “The result does not dismay the Government. It will continue to perform the duty of carrying out those policies which cannot be popular but which are demanded in the national interest.”43
If the domestic economic and political situation was parlous, it was about to get a whole lot worse, thanks in large part to international factors. In July, Egypt nationalised the Suez Canal. In response, Britain, France and Israel cooked up a fairly disreputable—and transparent—plot to get rid of the Egyptian leader, Colonel Nasser. At the end of October, the Israelis invaded; a week later, the British and French landed, ostensibly to keep the warring sides apart, in reality to seize the canal. The operation was a military triumph and a political disaster. Eisenhower was having none of it, forcing the British into a humiliating climbdown which destroyed the health and the career of Prime Minister Anthony Eden. The other consequences included an oil shortage which threatened to paralyse the western world. The British Embassy advised that oil supplies would be about 60 per cent below normal for some months, because the canal and the Iraq pipeline were both out of action.44 The result was an intensification of the economic problems facing Costello.
There was already significant discontent within inter-party ranks, expressed forcefully by the Taoiseach’s son Declan. At a meeting of inter-party TDS, the younger Costello directly challenged Sweetman’s policies, calling for a much more radical approach. Declan was applauded by many of the Labour TDS—Sweetman was not amused. He told Declan privately that his speech was “shocking and unfair”, and a breach of his responsibilities as a Fine Gael TD. At the next party meeting, he made those criticisms public. Jack Costello had been due to chair the meeting, but tactfully absented himself when Sweetman warned him of what he was going to say. It was an awkward situation for all concerned, especially as the Taoiseach and his Minister for Finance were not getting on at this stage45 (although it should be noted that Ken Whitaker, the Secretary of the Department of Finance, was not conscious of any friction between the two men46—presumably they didn’t parade their differences in front of civil servants).
Labour backbenchers were also deeply disaffected by now. Jim Larkin, in many ways that party�
�s conscience while it was in government, was severely critical of the coalition in September 1956. He told a meeting of Labour’s Dublin Regional Council that the economic situation was a warning to the Government, but a “danger” to Labour. “It is contrary to Labour’s whole traditional policy to pursue and support negative measures, such as the curtailment of capital investment, reduced housing activities, and economies through disemployment. Labour has a positive policy, and before it is too late Labour must declare for progress and against retrogression and decline.”47
But as far as Sweetman was concerned, the only realistic policy was further austerity. At the beginning of October, he got Government approval for yet more import levies, although he held off actually introducing them when the trade figures for September showed some improvement. But he publicly warned that Ireland was “not out of the woods yet. Let us behave like adults and not like children … We must keep our heads. We have no cause or excuse for relaxing our efforts until we have closed the fatal gap in our Balance of Payments.”48 In private, Sweetman warned colleagues of the need to keep spending under control. “To ignore that need must make for a disastrous worsening of an already serious economic and financial situation. Present difficulties will be aggravated if decisive action … is not taken immediately to limit public expenditure.”49 In later years Costello was to state his belief that his government “went too far and too quickly” with austerity measures, that they could have sought alternative economic advice “and we might consequently have taken the chances and let matters right themselves and let the balance of payments right itself without all those remedial measures”.50
It was not, to put it mildly, a good time to be in government. After a particularly depressing Cabinet meeting, new Minister Patrick Lindsay recalled feeling “thoroughly dejected”. Brendan Corish tried to cheer him up, telling him it wasn’t always like that. Lindsay, ever the realist, replied, “Well, I’m afraid it’s going to be like that for my time anyway, because we’re going out the next time.”51 That was certainly likely as long as the only thing the Government could offer the public was more of Sweetman’s austerity. But was there any possible alternative, along the lines suggested by Declan Costello and Jim Larkin, that could offer the country—and the Government—some hope?
In fact the Taoiseach had been working on just such a policy for some months, and was to make a major speech outlining his Policy for Production in October. Because it was announced after Larkin’s criticism of the Government’s economic policy, many assumed it was a reaction to those comments. Others have credited Health Minister Tom O’Higgins with the original suggestion for a policy initiative. In his memoirs, O’Higgins said he called for a fresh declaration of aims and a new policy for development in a memorandum to Government.52 This memorandum doesn’t seem to have survived, but is referred to in a later document by Costello, which quotes O’Higgins as saying they must give “evidence of a Government in action getting down to the job”.53 Even if O’Higgins was the first to formulate the idea, he was pushing an open door as far as Costello was concerned. It was clear that something needed to be done.
The pressure for positive action was increased by looming by-elections, in Dublin South-West and Carlow-Kilkenny, following the deaths of Fine Gael’s Peadar Doyle and Fianna Fáil’s Thomas Walsh respectively. In mid-August, Alexis FitzGerald urged his father-in-law that “everything from all over the country should be thrown into a desperate battle in Dublin and Carlow-Kilkenny”. He offered a very comprehensive list of ideas for improving the Government’s image, including moves on health insurance, developments in foreign policy, and economies in the Civil Service. He wanted to maximise the publicity surrounding the establishment of the Department of the Gaeltacht by holding a news conference in Irish—which would be the first ever held by any government. FitzGerald also suggested that Costello should announce a change to the method of electing the Senate. As he observed, this would “delight nine tenths of the people”, although it would upset Fine Gael senators “who will feel that they wouldn’t get in if the Senate were any good”. FitzGerald also proposed a move on a National Concert Hall, more capital for agriculture, and the establishment of a Rent Tribunal. He warned his father-in-law that Fine Gael propaganda was “terrible”, recommending the appointment of “some clever young person” such as “that young genius Garret FitzGerald” to improve it.54
All of this should be included in what he called Costello’s “Queen’s Speech”, a reference to the British practice of outlining a government’s legislative programme in a speech delivered by the monarch. FitzGerald advised the Taoiseach to get a strategy planned, and a timetable from ministers for the implementation of policy. “A spirit of siege warfare and urgency should be encouraged in the Government and party.”55 His father-in-law later said it was Alexis “who outlined and thought up the various schemes which were put into operation and which are now … bringing benefit to this country by way of the export trade”.56 The “young genius” Garret FitzGerald also credited Alexis, along with Patrick Lynch, for the initiatives that “started the reorientation of the inward-looking post revolutionary Irish economy to the world outside”, a process later “brought to fruition” in the First Programme for Economic Expansion.57
Certainly, many of Alexis FitzGerald’s ideas were reproduced in a memorandum by Costello (unfortunately undated) which outlined the economic and political necessity for a major initiative. “Positive steps must be taken without delay to bring about a radical cure.” He stressed that the restrictive measures which had been taken were “temporary and palliative”; now it was time to try something else, specifically an attempt to promote exports. “A clear and bold policy must … be announced … Such a policy would give hope, show that the Government is alert and alive to the necessity not merely of restriction but of expansion which they appreciate is the real and only permanent remedy for present difficulties … In my view the public … are really groping for signs of hope, and some positive action to give grounds for relief for the future. I am convinced that if a plan … for increased production were now put before them the public would react very favourably.” He observed that Fianna Fáil were accusing the Government of making false promises of early prosperity. While this was not true, it was true that Costello’s own speeches before and during the election had led people to believe “that changes of a constructive nature would follow the formation of the new Government. It is no answer that these constructive proposals were honestly made. None of them have been followed up. This is what matters.”
Costello followed this bleak assessment of his government’s performance with an analysis of the political difficulties facing them. Far from being exaggerated, he believed, “they are insufficiently appreciated”. There was no guarantee the Government could survive two more by-election defeats, and if it fell without having introduced at least a number of constructive measures “distinctively not Fianna Fáil in character”, the whole idea of inter-party government would be discredited. Therefore, the Government must be bold and decisive. “The people will forgive mistakes. They will not forgive inactive caution.” He wanted the new policy to be announced in a major speech, by him, around 20 September. This would set the scene for the raising of a new national loan, as well as preparing the ground for the by-elections. Legislation would be required, and this should dominate Dáil business in the weeks before the by-elections, so the Government could recapture the political initiative. The Taoiseach wanted one piece of legislation, “which should be given some striking title like the Expansion of Exports and Productivity Bill”.58
The Taoiseach wanted as many decisions as possible, even on minor matters; he wanted them to “comprise new ideas, show originality, create public interest, and be different from Fianna Fáil policy”; they should also relate to what had been said while they were in opposition, so they wouldn’t be seen as panic measures. “The object must be … to garner for the Government the psychological advantages of making the public fee
l that this is the beginning of a new chapter … The people want a tonic and unless we can give it to them there can be nothing but disaster.” One of the more important suggestions was a tax break for extra exports. He also wanted the Government to finally establish the long-promised Capital Investment Board. Significantly, the Taoiseach accepted that much of what had been called capital spending could not really be described as such. While “desirable and necessary … it has not added to the income-producing power of the community”. He drew a distinction between building a hospital, which would lead to expenses rather than income, and establishing a factory which yielded incomes for workers.59 This was something of a reversal of his previous attitude to capital spending.
Costello’s blunt memorandum struck a chord with his ministers. Liam Cosgrave complained that the Government was failing in its propaganda, and hadn’t explained to the public why the import levies had been imposed. Many people thought they were a revenue raising device, rather than an attempt to correct the balance of payments. “Finally, this Government lacks originality and is in effect merely administering the affairs of State with varying degrees of efficiency.” He strongly endorsed Costello’s proposals, which should be pursued vigorously. “Otherwise, we will continue to lose public support because we have failed to show the public that we are capable of giving the leadership which the Nation requires.”60 McGilligan warned of the “danger that Fianna Fáil may come back not because the public really desire them but because those now in power have failed to come up to popular expectation”. He believed there was still time to win back public support, but the budgets of 1957 and of 1958 (“if the Government last out to the latter date”) were pivotal. The people must be made to understand the difference between the inflationary Fianna Fáil proposals and the Government’s “selective remedial measures”. There must be action on the cost of living, taxation and rates, the cost of government and local services—otherwise “defeat for the present Government is inevitable and inter-party collaboration in Government is doomed”.61
The Reluctant Taoiseach Page 53
