I wish to talk to you this evening about the state of the nation's affairs, and the picture I have to paint is not, unfortunately, a very cheerful one. The figures which are just now becoming available to us show one thing very clearly. As a community we are living away beyond our means.

I do not mean that everyone in the community is living too well. Clearly many are not and have barely enough to get by. But taking us all together, we have been living at a rate which is simply not justified by the amount of goods and services we are producing. To make up the difference, we have been borrowing enormous amounts of money, borrowing at a rate which just cannot continue. A few simple figures will make this very clear.

At home, the Government's current income from taxes and all other sources in 1979 fell short of what was needed to pay the running costs of the State by about £520 million. To meet this and our capital programme, we had to borrow in 1979 over £1,000 million. That amount is equal to one-seventh of our entire national output for the year. This is just far too high a rate and cannot possibly continue.

The situation in regard to our trading with the outside world in 1979 was bad also. Our income from abroad fell short of what we had to pay out by about £760 million, which led to a fall in our reserves. To fully understand our situation, we must look not just on the home scene but also on the troubled and unstable world around us. There are wars and rumours of wars. There is political instability in some of the most important areas of the world. A very serious threat exists to the world's future supply of energy.

We can no longer be sure that we will be able to go on paying the prices now being demanded for all the oil and other fuels we require to keep our factories going and to keep our homes and institutions supplied with the light, heat and power they need.

We will, of course, push exploration for our own oil ahead as rapidly as possible, but in the short term the burden of oil prices will continue to be a crushing one. All this indicates that we must, first of all, as a matter of urgency, set about putting our domestic affairs in order and, secondly, improving our trade with the rest of the world in so far as we can do so.

We will have to cut down on Government spending. The Government are taking far too much by way of taxes from individual members of the community. But even this amount is not enough to meet our commitments. We will just have to reorganise Government spending so that we undertake only the things which we can afford.

In trying to bring Government expenditure within manageable proportions, we will, of course, be paying particular attention to the needs of the poorer and weaker sections of the community and making sure they are looked after. Other essential community expenditures will have to be undertaken also.

But there are many things which will just have to be curtailed or postponed until such time as we can get the financial situation right. There is one thing above all else which we can do to help get the situation right and which is entirely within our control. I refer to industrial relations.

Any further serious interruption in production or in the provision of essential services in 1980 would be a major disaster. I believe that everyone listening to me tonight shares my anxiety about our situation in this respect.

Strikes, go-slows, works-to-rule, stoppages in key industries and essential services were too often a feature of life in 1979. They caused suffering and hardship; at times it looked as if we were becoming one of those countries where basic services could not be relied upon to operate as part of normal life.

Immediately following my election as Taoiseach, I received countless messages from all over the country from people in every walk of life, appealing to me to do something about this situation. Let us clearly understand, however, that this in not a one-sided affair.

Managements that do not give first-class attention to their firms' industrial relations, who ignore situations and let them drift into confrontation, are just as blameworthy as the handful of wild men who slap on an unofficial picket and stop thousands of workers from earning their living.

Apportioning blame, however, is not going to get us anywhere. What we need is a new way forward, and that is my primary purpose, as head of the Government, in talking to you tonight. I am asking for a universal commitment to industrial peace in 1980. I am asking every worker and employer, every trade union, every employers' organisation, every farmer and every farming organisation, every housewife, in fact every individual citizen, to play a part in ending this humiliating, destructive industrial strife and put in its place discussion, negotiation and peaceful settlements.

In our present economic situation, it is madness to think that we can keep on looking for more money for less work or to think that if we have sufficient economic muscle there is no limit to what we can extract from the community. I want everyone to know and understand this simple fact and with that understanding to form his or her own personal attitude as to what he or she should be entitled to.

Demands which cannot be sustained in the public or the private sector push up either prices or taxes or both and lead to chaos. There is only one way forward and that is through peaceful negotiations based on reality. To employers and managements I would say this. The welfare of your workers, their conditions of employment and their wellbeing are your primary responsibility. Deal with claims and grievances promptly. Keep in touch and head off trouble.

If you remember you have a workforce only when trouble breaks out and if you don't have an active policy of personnel management directed at the highest level of people in your organisation, then you won't survive in today's conditions.

To the workers I would say, think of a strike as the very last step, only to be resorted to when every other procedure has been exhausted. And before you vote for strike action, think carefully about how you are going to come out at the end of the day, about the effects of the strike on yourself, your family, your fellow workers and the community as a whole.

Listen to the advice of your trade union leaders. Give them the support they need in protecting your position. Your union is there to stand up for your rights, to ensure that your just claims are met. Through your loyalty and through your discipline help your union leaders in their task of looking after your interests.

Of course, there are hundreds of settlements made regularly as a result of patient, skilled negotiation by trade union officials and personnel managers. Their efforts must be supported in every way, and if they fail, there must be machinery like the Labour Court available to them to fall back on for further assistance in resolving difficulties.

A commission established in May 1978 to examine the field of industrial relations is expected to submit its report in about six months' time. Meanwhile, the Government are looking at what might be done immediately.

As a first step we are improving the services available to employers and unions so that they can produce settlements no matter how difficult the issue may be. Legislation may also be required. Any such legislation would not be directed against trade unions. On the contrary its purpose would be to strengthen them and to protect and support our system of voluntary agreements, freely negotiated between trade unions and employers.

We must all recognise, however, that no legislation can succeed unless there is the will and determination throughout the community to approach this difficult problem of industrial relations calmly, sensibly and responsibly.

As a nation we have made great gains in recent years. Despite current difficulties, we can face the future with confidence. With such a young population, our country has great potential.

As we stand on the threshold of a new year and start out on another decade, let us firmly resolve that we are not going to be submerged by the difficulties now facing us. We can and we will overcome them, if we act intelligently as citizens of a mature nation.

Let us make 1980 the year in which we found a better way of doing things; the year in which sensible discussion and negotiation took the place of strife. Let us make it the year of industrial peace. If we do, I am certain the improvements in our affairs by the end of 1980 will have been dramatic and decisive. At the time Mr Haughey made these comments, his financial adviser, Des Traynor, was fending off Allied Irish Banks on behalf of the newly elected Taoiseach