asked the Minister for Finance whether he has any proposals to make the prize bond scheme more attractive, having regard to current high interest rates.
Ceisteanna—Questions. Oral Answers. - Prize Bond Scheme.
12.
Current interest rates are not of primary relevance to holders of non-interest bearing prize bonds, most of whom are attracted to such bonds in the hope of earning one of the substantial tax-free prizes which amount annually to about £1.6 million.
The scheme is kept under continuous review, and revised when deemed appropriate. It is not proposed to amend the prize bonds scheme at present.
Surely the Minister will accept that, where a sum of money is deposited with the Government on which interest is not paid as such, interest rates are relevant in the sense that, if the prize money corresponds in some way to current interest rates, he will attract more money in. Failure to adjust the prize fund in relation to the movement in interest rates is, to say the least of it, a short-sighted policy. Having regard to the answer he gave me yesterday, which shows that the net withdrawals in prize bonds in the first seven months of this financial year, of the present Government's year, amounted to a quarter of a million pounds whereas in the corresponding period last year there was almost £1 million increase, does this not underline the necessity for the Minister to take account of the movement of interest rates and increase the prize fund?
No. Withdrawal was negligible having regard to the total size of the prize bond fund. The real rate of interest from the point of view of an investor works out at about 7 per cent when the figure is grossed up for income tax purposes. When you consider the principal incentive to investing in prize bonds is the possibility of a tax-free speculative gain you will see it is not quite correct to be comparing prize bonds and the rate of interest which controls the size of the prize fund with interest rates on other investments. If they were strictly comparable then, of course, the interest rate which governs the size of the prize bond fund should always be related to the going rate compared, for instance, to the most recent national loan; but it is always at a lesser figure because of the possibility of a substantial gain, which can be anything from £25,000 for the first prize to £10,000, £5,000 and so on. There are several non-taxable gains which can be made and it is quite wrong to overlook that aspect of the fund. As I said, I am prepared to keep a continual look at the situation, but we are satisfied that at the moment such small withdrawal as there has been is not because of the size of the present prize fund.
I think the Minister has mistaken the principle involved but, whether we agree on that or not, I would be prepared to offer him a little advice.
A question, please, Deputy.
The Minister, in the interest of gaining further capital, which he is badly in need of and is going to need even more badly, would be very wise to consider increasing the prize fund.
The Deputy is, of course, aware that I have, since the beginning of November, given very substantial increases in the interest rates available on savings certificates and other forms of Government savings and we are quite satisfied these will attract the necessary funds and that the prize bond situation will continue to attract sufficient funds.