In connection with this Vote there are one or two matters which we, on this side of the House, are anxious to raise. The first of these is a matter which was raised, I think, not only on this year's financial statement, but on the financial statement for the year preceding, that is the matter of the Industrial Trust Company of Ireland, in which the State, through the Minister for Finance, has a certain interest. This company, as most of the members of the House are aware, was formed in 1926. Its directors include a number of well-known men, including the Chairman of the Independent Newspapers, Ltd. It was formed, I believe, to finance industrial and commercial undertakings in the Free State, and particularly to make loans in respect of which the service as to interest and redemption was guaranteed by the State, by the Government under the Trade Loans Act. The capital of the company is £250,000. The capital issued and paid up amounts to £162,878, and in this company the Minister for Finance holds something like £50,000.
There are one or two remarkable features common to all the balance-sheets which have been issued by this company to which I think it is proper to direct the attention of the House. From the first balance-sheet covering the period from the inception of the company to the 31st December, 1927, it is clear that all the money advanced by the company under loans guaranteed by the Government had been borrowed from the Bank. That left virtually all the paid-up capital of the company, including the Minister's £50,000, which was originally intended to finance and develop Irish industry, free for investment in other securities. The loans made under the Government guarantee carried interest at 6 per cent., and the value of such loans made was £208,363. The gross interest earned on these loans, therefore, could not have exceeded £12,500, and we may assume that the banks which advanced the money to finance the loan would have charged a rate of interest at, say, five per cent. on their £208,000. So that against £12,000 gross earnings on loans we have to set off interest due to the banks upon the money used to finance them at £10,418, leaving net earnings on guaranteed loans about £2,000. Assuming that the entire capital of the company which, as I have shown, was not invested in these Government guaranteed loans was invested, say, in gilt-edged securities either of this State or of some other State, that capital would not have earned more than £9,773, and if we set aside about £2,000 to cover working expenses and management, we find that the net profit for the first year's operation of this company should have been, say, about £9,512. But the first balance-sheet reveals that the total profit made by the company in the first year of working was £20,367; and that is a very remarkable figure for this company, the business of which was strictly limited, or, if not strictly limited, should have been strictly limited. In view of the fact that the Minister and the Government were making a substantial investment in this remarkable profit of £20,000 compels us to ask the question: in what way and for what purposes were the funds of the State which the Minister made available to this company used? It is quite clear that they were not used for and were not devoted to the purposes of the Trades Loans Guarantee Act. They were not devoted and were not used to finance and develop industry in this country, and the question which I would like to put to the Minister —he should be in a position to give this information to the House since he is represented on the Board—is what use was made of this £50,000 of the Irish people's money?
Of course, when the first balance sheet became public property rumour got busy and we were told that the money—as I would like to repeat and emphasise so that there may not be any misunderstanding in the mind of any Deputy as to the purpose for which it was originally voted—which was intended to finance and develop Irish industry was utilised in a wild gamble on the London Stock Exchange. Fifty thousand pounds of the Irish people's money was used to buy bogus gramophone shares, and probably used to buy Ner-Sag or other flimsy shares. It was used for every other purpose except that for which it was voted by this House.
Though, as I have said, the matter was raised twice, not only on this year's financial statement but on last year's financial statement, we have never succeeded in extracting from the Minister a clear statement of his attitude towards the company and as to the uses to which the money of this State has been put. He has preferred to remain silent. The first year of the company was a remarkably successful one. As a general rule, neophytes in speculation have extraordinary success. We know the luck which attends the simpleton in these matters. The following year, however, presented an unpleasant contrast, for in that year, the earnings of the company on trade loan advances at 6 per cent. did not exceed £13,856. If the earnings on other investments had averaged five per cent. they would have amounted to £14,957, and interest on the company's bank loans and overdrafts at five per cent. would have amounted to £16,158. If we add the first and second of those sums and subtract from the total we would get the gross earnings at £12,315. That represents the gross amount that would be available for expenses and dividends if the company had confined its activities to the purpose for which it was originally established.
There is another side to the picture. Some of the most prominent figures in financial life were on the Board, assisted by some of the Minister's nominees. It will come as no surprise to the House, because the House is familiar with the methods of the Minister in making the national balance-sheet budget, to learn that though the actual profit returned by the directors was something like £24,982, that is, nominal earnings, and in the second balance-sheet certain investments were taken in at a cost of £291,947, the auditors appended a note to the effect that the market value on the 31st March, 1929, of these particular items which the directors returned at £291,947, was only £233,189. Therefore, the difference between the nominal profit returned by the directors and the actual figures of the balance-sheet showed a real loss of £58,757, exceeding by over £13,000 the total earnings of the company since its inception. That was the story on the 31st March, 1929.
On the 31/3/1930, we again had a profit of £14,851. Again, in making up this profit, there were investments in industrial and other undertakings returned by the directors at a valuation of £271,547. Again, we have the auditors' note to the effect that the market value of these investments was only £199,000, showing a net deficiency on these investments, which were altogether outside the advances made by the company under foot of a Government guarantee of £72,547. Therefore, instead of a book profit of £14,851 returned by the directors, there was an actual loss last year of £57,696.
What is the present market value of the shares of this concern? It has a capital, as I have said, of £250,000, and last year there was a loss of £57,696. In the preceding year the loss was £58,757. It has lost at the very least, so far as I can see, anything from 23 to 25 per cent. of its capital. This loss has occurred, not as the result of investment in well-established undertakings, not as the result of any ventures in manufacturing or productive activity, but purely as a result of Stock Exchange speculation, indulged in by the directors of the company, including nominees of the Minister for Finance.
What value would any person with a knowledge of finance and with a knowledge of the Stock Exchange, what value would any prospective buyer place on the shares of that company? I am certain that he would never be so foolish as to value them at par. No matter how new to the game he was, no matter how inexperienced, he would never return the 50,000 shares which the Minister holds as being worth £50,000. What does the Minister do? What value did he place on these shares in his financial statement? He valued his 50,000 shares at £50,000, putting par value on the shares of a company which already lost 23 per cent. of its capital. Even if his nominees had failed in their duty, the Minister was not, I take it, unaware of what was being done by the company because the chairman, to give him credit, in his first speech at the meeting of the company, held, I think, in February, 1928, stated that the company, in addition to advances to Irish industrial concerns, also made advances without the guarantee of the Government. That amount, however, was comparatively small. He went on to state that the company had participated from time to time in underwriting public issues and had invested approximately £250,000 in a very wide range of securities which were so spread over various forms of enterprise and in various countries as to obviate any risk in any one direction.
The chairman and the company, unfortunately, had not been so prudent and far-sighted as they anticipated because, though they spread their investments wide and though apparently they did not exceed the bounds of prudence in the amount invested in any one particular undertaking, for two successive years the balance sheet shows a loss of between 23 and 25 per cent. of its capital.
The Minister, as early as 1928, knew that these sorts of investments were being made. The point which I wish to put to the House is that when he knew that this was being done he was guilty of breach of confidence and trust to this House, because this money was not voted by the Dáil to finance undertakings in any other country but this. It was voted, I will almost say, to finance no undertakings except those carrying a Government guarantee. Therefore, the moment that the Minister was made aware, through his nominees or through the public statement of the chairman, that the directors were exceeding the authority given to them by the Dáil, he ought immediately have come to the Dáil and ask either for additional sanction or to be authorised to withdraw the money and cut his losses. There is one thing certain and that is, with the crying need which we have for capital to run our industries, that the people of this country would never contemplate this money being used to finance other industries, possibly in competition with their own.
The secrecy which has shrouded this whole transaction from the beginning is remarkable. I mentioned a name at the beginning of my speech which indicated why the daily newspapers have been silent about this scandal—because it is nothing less than a scandal. We know why the newspapers are silent. I would like to know why the Minister is silent. This is not a matter which the House can afford to take easily. When the Government takes the unusual step of investing public money in a private company it is most desirable that the company concerned should confine its activities as strictly as possible to the particular purpose for which it was formed and for which the Government gave its support. It is equally desirable that full information should be available concerning the company's operations and financial results. If any other course is followed it is inevitable that suspicions will be aroused which will damage not merely the credit of the Government but the nation as a whole. It is quite clear from the figures which I have put before the House that this company exceeded the limits within which its activities should have been strictly confined. It is quite clear that the Minister had full information in his possession that it was exceeding those limits. It is quite clear, therefore, that it was the duty of the Minister, as I have said, either to wind up the company or to come to the House and make a full disclosure of the position. The newspapers have been silent. The Minister has been silent. I ask him why. I say that it is an ugly thing from any point of view that he should be silent. If these men abused their trust the first duty of the Minister, no matter whom he offended, no matter whether they were close friends and political partisans, was to expose that particular abuse.
It should not have been left to the Opposition, after questioning the Minister on two previous occasions, to make this particular company the object of public debate in this House. It would have better served the reputation of every man and of every interest connected with that company if the Minister had been candid in the matter. If these men suffer either in their public or in their private reputation as the result of this debate, then responsibility for that will lie on the shoulders of the Minister. There were a number of other issues which I should have liked to raise on this Vote. However, I shall leave the Minister to deal with the question of the Industrial Trust Company.
