Currency (Amendment) Bill, 1930—From the Seanad.

The Dáil went into Committee.

I move: That the Committee agree with the Seanad in the following amendments:—

Section 2. All deleted from the words "as follows" in line 25 to the letter "(a)" in line 27, and also lines 29 to 32 inclusive deleted and for the lines so deleted the words "that sub-section shall have effect accordingly" substituted.

New section. Before Section 3 a new section inserted as follows:—

3.—(1) If and whenever the Commission shall unanimously request the Minister to add any particular security or class of securities, currency, balance, or other form of assets to the forms in which the Legal Tender Note Fund or the Note Reserve Fund or both those funds may be held under the Principal Act, the Minister may make an order declaring in accordance with such request that the particular form or forms of assets specified in such request shall be and is or are thereby added (as the case may require) to the list of forms contained in sub-section (3) of Section 61 of the Principal Act or to the list of forms contained in sub-section (2) of Section 02 of the Principal Act or to both those lists.

(2) The Minister may at any time upon the unanimous request of the Commission by order rescind, vary, or amend in accordance with such request an order made by him under the foregoing sub-section of this section.

(3) No order made under either of the foregoing sub-sections shall be of any force or effect unless or until it has been laid before each House of the Oireachtas and has been approved by resolution of each such House.

(4) Whenever an order is made by the Minister under sub-section (1) of this section, the Principal Act and in particular Section 61 or Section 62 thereof or both those sections (as the case may be) shall, so long as such order is in force but subject to any variation or amendment thereof, under this section, be construed and have effect as if the Principal Act were amended in accordance with such order.

Section 3. The section deleted.

Section 5, sub-section (4). The words "(so long as such note remains identifiable as a particular note)" deleted.

Amendments Nos. 1, 2 and 3 achieve simply one purpose. In the Bill, as it left the Dáil, it was provided that in addition to removing the limitation on British securities which might be purchased by the Currency Commission—securities which matured in twelve months—it was thought that the Currency Commission might also purchase securities of the Government of the United States of America. In the Senate reference to the securities of the Government of the United States of America was deleted and there was substituted a provision which provided that on the unanimous request of the Currency Commission the Minister might make an order adding any securities to those which they already held and that such order, having been approved by the two Houses, would come into effect in the same way as if it had been included in the original Bill. I indicated in the House that I did not see any Government whose securities were likely to be purchased other than those of the Government of the United States of America. I also indicated that I did not think that if was likely for a considerable time that a situation would arise to make it advisable for the Currency Commission to purchase such securities.

It may be that conditions throughout the world will change and that securities other than those of the Government of the United States of America may be suitable for purchase by the Currency Commission. In any case, it would not be possible to purchase securities of any kind where there was not substantial agreement amongst the members of the Currency Commission. I have no doubt that if circumstances arose in which it was suitable for the Commission to purchase securities of the Government of the United States of America there would be no difficulty in getting the Commission to agree. I pointed out in the Seanad that the Currency Commission consisted of seven members, three appointed by the Minister for Finance, three by the banks, and the Chairman appointed by the ordinary members. I have not noticed in the representatives of the banks any disposition to be prejudiced against the purchase of securities of the Government of the United States of America or against borrowing in that country as the case may be.

I indicated that when our Second National Loan was issued we had the co-operation of all the banks and, in fact, the suggestion that half the loan might be issued in the United States of America came from the banks. I do not believe that any prejudice would operate in this matter. Therefore, if circumstances were such that it would be desirable to have securities of the Government of the United States of America purchased by the Currency Commission, I do not think that there would be any hesitation on the part of the Currency Commission in making an unanimous request to the Minister. If there were not an unanimous request it would mean that a substantial body of opinion was against such a thing being done, and in that case it would be desirable to proceed with very great circumspection in the matter. I think that there is no objection to the acceptance of the amendments. They provide a method, without great delay, assuming that it is desirable, of making arrangements by which the Currency Commission can purchase such securities.

These amendments in the form in which they have been presented by the Minister put the Bill in an entirely different position to that in which it was when it was first introduced. We are now asked to decide "whenever the Currency Commission shall unanimously request the Minister." The really important principle which has been introduced here is to make unanimous consent of the Currency Commission essential before any departure may be made from the terms of the original Act.

When the Bill came before us, we were asked to agree that the securities of the Government of the United States of America should be added to the list of forms in which the Legal Tender Note Fund might be held by the Commission or on its behalf. In that Bill the principle of unanimity was not included. When you read the Act it is obvious that substantial agreement, by which I presume we must take it means a mere majority of the Commission, would have been sufficient, if the Bill as originally introduced by the Minister were adopted by the House, to legalise any investments which the Currency Commission might make in the securities of the Government of the United States of America.

In the course of his speech the Minister has been quite frank and has told the House that so far as he can see—so far as anyone can see—for a considerable period to come, the only possible securities, other than those already detailed in the list, in which the Currency Commission might invest the Legal Tender Note Fund would be the securities of the Government of the United States of America. It seems to me that those who were responsible for the amendments in the Seanad hesitated to come out and openly oppose the enlarged powers which the Minister proposed to give to the Currency Commission and endeavour to secure their purpose in another way by drafting an amendment, which ostensibly enlarged the powers of the Currency Commission in regard to the forms in which it might invest its funds, but in reality confined them within the limits originally laid down in the Act. If there is not at present, and if there is not likely to be within any period that ordinary human intelligence can envisage, any possibility of these funds being invested in securities other than those of the Governments of Great Britain and the United States of America, what is the purpose of requiring unanimity on the part of the Commission before such investments can be made?

There is no suggestion at the present moment, at any rate, though Heaven knows what may come in the future, that we ought to invest the Legal Tender Note Fund in the securities say of the Government of Siam or the securities of the Government of Tibet. There is only one possible alternative field of investment open to us and those who were responsible for this amendment suggest that before we can take that alternative field we should impose the condition that on the part of the Currency Commission there shall be unanimity. The Minister endeavoured to gloss that over by saying that of course no investment could be made unless there was a considerable measure of agreement, but a considerable measure of agreement and unanimity are worlds apart. A considerable measure of agreement, in my opinion, would be indicated by four members being in favour of one course and three against it. Unanimity means that all of the members, including possibly some representatives of the banks who might have a substantial interest in the manner in which these funds were invested, would have to agree to the investment being made in the United States of America. The Irish banks who nominate representatives on this Commission are very large and important holders of British securities. If the Commission proposes to realise any substantial proportion of their holdings in these securities, and to invest them elsewhere, there would possibly be such an effect on the market as would react very unfavourably on the position of the banks which had large holdings in those securities. Therefore to my mind it is almost impossible to contemplate that on a matter of this kind there would be secured the necessary unanimity to enable the Currency Commission to do what was in the Minister's mind when he first introduced the Bill, to enable it, if it so desired, to invest in the securities of the Government of the United States.

I said that those who had been responsible for moving this amendment elsewhere had not disclosed their real purpose. Lot us see the arguments which were adduced in support of the proposal. First of all, I would like to remind the Dáil that it was sought to do two things under the original Act— first, to remove the limitation which existed as to the class of British securities in which the funds of the Currency Commission might be invested. Under the original Act, investments were confined to securities which matured within twelve months. By the amending Bill it was proposed to remove the limitation as to the period within which the securities could mature, and, as we on those benches stressed at the time, and as Deputy J.X. Murphy, who has had considerable experience in banking, supported us in stressing, the elimination of that condition increased the element of risk which is present in these investments.

One of the characteristics of those who introduced this amendment in the Seanad, and of the daily journals which support their political attitude, has been that they have always played for safety. Whenever a proposal has emanated from these benches it has not been discussed without prejudice in a logical, rational way, but instead an attempt has been made to create panic in the minds of the public. We have been told about our hare-brained financiers and about all the other ills with which this Party, in the opinion—possibly not in the opinion, but in the public statements —of the President, the Vice-President, and the Press which supports them, is supposed to be afflicted. Yet here is a proposal which I doubt, if considered in any other Parliament, would secure the assent or the support of that Parliament, a proposal to invest the reserve, upon which the whole currency system of this country is based, in securities which may mature within twenty or thirty years, and which, when they mature, may not be redeemable at all. Though, as I say, when we propose to discuss vital questions like the land annuities and matters like that, at once the element of risk looms up and is stressed in the speeches of those opposed to us, here is a foolhardy proposal coming from the Minister in relation to the Currency Commission, and endorsed in the Seanad by those who would make "safety first" their watchword.

Of course while the long term securities, as the experience of the past sixteen or seventeen years has shown us, of Germany, Russia, or Austria, might not be free from danger, the securities of Great Britain, whose position in the world is much more vulnerable than the position of these countries must be immune from risk, even should the term of such securities extend as I stated for twenty or thirty years. The Party in the Seanad responsible for these amendments allowed that—to my mind the most questionable feature of the Amending Bill—to go without question and instead proposed a radical amendment to the other sections of the Bill to which I refer.

What were the arguments used to justify the second amendment? In the first place, said the mover of the amendment, which the Minister for Finance now sponsors in this House, it is rather invidious to confine this enlarged power of the Currency Commission in regard to Government securities to a single country. If the Irish people propose to invest their money in securities of the Government of the United States of America, let us beware that the Government of Czecho-Slovakia, of Finland, of Persia, of Baluchistan or of Afghanistan, do not take umbrage at the fact that we think that the securities of the Government of the United States are somewhat safer and somewhat more stable for our purpose than theirs. One of the reasons why it is proposed to give this power to the Currency Commission is that it would be invidious not to permit the Currency Commission to invest its money, say in securities of the Government of Afghanistan while permitting the Commission to invest it in the securities of the Government of the United States of America. The second proposal in the amendment, and it is even more astounding still, is that not only may the Currency Commission have power to invest funds in the securities of the Governments of the various countries but it may invest them in any form whatsoever.

I wonder has the Minister adverted to that fact: that if the Bill goes through in its present form the Currency Commission will have power to invest the proceeds of the Legal Tender Note Fund not only in Government securities but in industrial securities; so far as I can see, in any form of investment whatsoever, providing unanimity is secured? I will grant him that. There is no limitation upon the Currency Commission compelling it to invest its funds only in Government securities, and the person who moved this amendment in the Seanad said: "If they are to get increased power as regards investment of their funds they ought to have power to invest in other forms than this."

Let us see the forms in which the Currency Commission was empowered to make these investments. "Gold bullion." I suppose American or Chinese or German gold would be just as good as British gold any day, and there may not be any objection to buying gold in France if it is desired— although the Minister says that he does not wish the Commission to buy gold in any circumstances—rather than to have it purchased in Lombard Street. "Gold coins which are for the time being legal tender in Saorstát Eireann for unlimited amounts." There is no objection to that. "Money in any form which is for the time being legal tender in Great Britain for unlimited amounts." I do not suppose I can sustain at this stage an objection to that in view of the principles laid down in the Currency Act. If we were considering anything other than merely an amending Bill, and therefore limited by the Title of the Bill to discuss it with reference to the Act, we might have something more to say upon it. But let that pass. What I want particularly to emphasise is that if this Bill goes through it would be possible for the Currency Commission to invest the Legal Tender Note Fund in money in any form which is, or is not, for the time being legal tender anywhere on this earth. A proposal of that sort has come, as I have said, from the Party who stand for the programme of "Safety First" in the affairs of this country.

In summing up, the original mover of the amendment said:

"These amendments are designed to secure that if the Currency Commission. desire to extend their powers of investment the request for extension shall come from themselves." I wonder if that was really the purpose. I wonder if that was the only purpose of this amendment, because it is very significant that in moving it the Senator only dwelt on sub-section (1) of the proposed new section. He did not say anything about sub-section (2). Has the Minister studied sub-section (2)? Has he realised the effect of it? "The Minister may at any time upon the unanimous request of the Commission by order rescind, vary, or amend in accordance with such request an order made by him under the foregoing sub-section of this section." The foregoing sub-section is the one which empowers the Minister, upon the unanimous request of the Currency Commission, to add certain forms of investment to the list. But this second sub-section renders the Minister powerless to remove from the list any one of these forms of investment which subsequent experience may have taught him is undesirable or dangerous. He cannot do it. Even though the whole currency of the country might be debased by the operations of the Currency Commission, or by some investments which they have made and which they were determined to continue to make, the Minister for Finance, except by an amendment of the law, could not remove a single one of these forms of investment from the approved list.

Now, there might be something to be said in favour of the first part of this section in so far as it empowers the Minister, upon the unanimous request of the Currency Commission, to add certain securities to the list, but surely there can be nothing advanced in justification of sub-section (2) which will not permit him to remove forms of investment from the list unless at the unanimous request of the Commission. I think that is a dangerous section; I think it is an unnecessary section, and I am surprised that the Minister should have agreed to it.

To return again to sub-section (1) of the section. One of the strongest objections which we on this side have to the sub-section in its present form is the vague generality of its nature. The Minister, whether wisely or unwisely I am not going at present to discuss, has chosen to base the currency of the country upon paper, not upon gold—the term "gold exchange standard" with which the Minister played in the Seanad is merely a euphonious way of saying that our currency is based upon the paper security of another country and of another State. Now when so important an instrument of commercial and industrial activity as the currency is based upon paper then I think that the limits within which investments of the nature here involved may be made should be set down in black and white in the Currency Act, and it should be a matter to a certain extent not for the Currency Commission to determine. but for the Dáil in the first instance to say, within what limits the Currency Commission may make these investments. The only limit imposed upon the Commission at present is the limit implied by unanimity. Provided they can be unanimous, they can invest in any form of security they choose and that form of security need not necessarily be Government securities, need not necessarily be what we call gilt-edged securities. I hope for the sake of the country that they will be. But we cannot legislate merely on hopes. There are a number of people who have speculated on hope. There are a number of banks, and particularly some of the big British concerns during the last twelve months which, relying upon little more than hope, have brought destitution and penury to a considerable number of investors in that country and this.

The real thing in this matter is this: that you cannot depend upon the honesty, upon the integrity, or upon the ability of any person when you are investing in paper. There is a large element of trust which enters into what are regarded as the soundest securities and we say, therefore, that, so far as the basis of the currency of this country is concerned, we ought not to give to the Currency Commission the general power that this section proposes to confer upon them; that we should lay down that the fund shall be invested in the securities of such-and-such Government. Instead of depending upon the gold exchange standard as we have been, I feel that the future of the country will be more secure if, accepting for the moment the gold standard principle, we based our currency upon gold bullion and upon a tangible gold reserve. That is beside the question however. I am dealing with the proposals now before the House and I say they are dangerous proposals. Are the proposals themselves consistent with the original Act? I wonder whether the Minister has studied the effect of this amendment upon the Act of 1927. I would like to direct his particular attention to Sections 47 and 49.

Section 47 says: "If and whenever any person on or after the appointed day applies to the Commission at the place in Dublin appointed for the purpose by the Commission for legal tender notes and delivers to the Commission at such place and in accordance with the regulations in that behalf made by the Commission" such and such things including "money (in this section called British money) in any form which is for the time being legal tender in Great Britain for unlimited amounts the Commission shall issue to such person legal tender notes of an amount equal (as the case may be) to the value under this section of the gold bullion or to the nominal amount of Saorstát gold coins or"—to shorten the matter, other consideration offered by persons for the legal tender notes.

And Section 49 says: "Every legal tender note shall be payable by the Commission on presentation at the London Agency and shall be so payable in money in any form which is for the time being legal tender in Great Britain for unlimited amounts."

These two sections taken together plainly imply this—and I am not arguing that it is wise or a judicious thing to have done, but it is a thing the Minister did do: that the funds of the Legal Tender Note Fund should be invested in British securities only. As I am emphasising I am not saying that that is a wise or a justifiable thing but, it is a thing the Minister did and, having done it, I question whether the amending Bill which he originally introduced was consistent with his action and I am quite certain that the amendment accepted from the Seanad is not consistent with that action.

Possibly it may be that the Minister is walking a little bit of the way with us and I do not wish to be hard upon him. I have always thought, particularly during the recent four or five years, that one of the most regrettable things from the point of view of the general economic condition of this country is the fact that we have not an independent currency. It is only by the fluctuations of an independent currency that our adverse trade balance and a whole mass of similiar statistics, can be properly judged and their real significance appreciated. As it is, at the present moment, whatever one may think and know about it, no person is in the position to say whether this country is purchasing more than it can afford. We on these benches believe it is, but the needle of the indicator or the instrument which should show whether we were living beyond our means has been tied down by the Currency Act of 1927. If we possessed an independent currency at the present moment, and if we were purchasing more than the country could afford, the slump in our rate of exchange would at once give us not only warning but also a check upon such communal extravagance.

At the present moment that check does not exist, and as I have said this country may be going down the slope of bankruptcy, simply because the Minister chose in 1927 to link up our currency with the currency of the country from which we buy virtually all the things which we ourselves do not produce and manufacture.

As I say, it may be that in accepting this amendment the Minister is going some part of the way with us. I believe that the acceptance of this amendment, and the consequent amendment which will be made in the Currency Act is going to drive a coach and four through the whole theory upon which the Currency Act is based. For that reason we are not going to quarrel with the principle in the amendment, though we certainly are disposed to quarrel, in the interests of the economic welfare of this country, with the manner in which it is proposed to give effect to that principle. We think the powers conferred by sub-section (1) of the proposed new section are far too wide. As I said a few moments ago, if we must base our currency upon paper, let us at any rate specify the class of paper on which we are prepared to base it. I hope the Minister is not going to justify sub-section (1) by sub-sections (3) and (4). We know how the affairs of the Legislature are conducted. It is not right that the security of the currency of this country should depend upon whatever political party may be in power. You might have in power to-morrow a party which would be fired with enthusiasm for the Utopian proposals of certain financiers in regard to the management of the currency. That is how the "Irish Times" and the "Independent" would describe them, and we can see the editorial hair rising up at the contemplation of gentlemen of that description sitting upon the benches opposite, packing the Currency Commission and, when the Currency Commission recommended investments in certain forms, coming to the House and appealing to the authority of the Currency Commission as a justification for adding to the list of securities in which the Legal Tender Note Fund may be invested a number of very questionable propositions.

To my mind, so long as the Minister for Finance has to accept in this House responsibility for the Currency Commission—and I do not, so far as the present development of politics is concerned, see any possibility of its changing in our time—and so long as he can rely on the unquestioning support of the majority in this House to carry through his proposals there is no safeguard or precautionary measure whatever in sub-sections (3) and (4) of the proposed new section.

They might as well not be there, and we might as well face that fact. For that reason, therefore, I hope that the Minister will reconsider his attitude in regard to these amendments from two points of view: first, that he should not require unanimity, since, so far as one can see, the only alternative forms of investment at the moment— and I am taking the Minister's case as he made it himself—are securities of the Government of the United States; and, secondly, that he should therefore delete the word "unanimously" and the whole sub-section and return to his first love and the principle he first embodied in the amending Bill—that the forms in which the Legal Tender Note Fund and the Reserve Fund of the Consolidated Issue may be invested should be clearly specified in the Currency Act. If he does that I think he will have got back out of the morass into which his friends in the Seanad led him.

When I read these amendments I rubbed my eyes. I said, "My goodness, if they had been introduced in the Fianna Fáil Benches we would have had the ‘Irish Times' out with an editorial headed ‘The Rakes' Progress,' or something of the kind, talking of the hare-brained schemes of the Fianna Fáil financiers." I am astounded that they should have come from so responsible a body as the Seanad purports to be. I can only imagine, therefore, that the purpose behind them is much more subtle than appears on their face, that in fact the purpose is not to enlarge the powers of the Currency Commission, but to confine them within the limits originally laid down in the Act of 1927.

I think the amendment proposed would make it only very slightly more difficult for the Currency Commission, if it so desired, to invest in securities of the Government of the United States, because I do not believe that the Currency Commission would start investment in a new class of securities unless there was something like unanimity in its own ranks, even if that unanimity were not required by legislation. I think, moreover, that it would be a bad thing for the Currency Commission to take up a new class of securities on anything like a bare majority. Everybody knows how easy it is to create scares and panics in this matter. I think that even if the Currency Commission were not required to have more than a bare majority it would be practically the duty of the Currency Commission to refrain from going on any new line unless it had unanimity or something equivalent to it, say a single member standing out.

I think therefore in practice the requirement of unanimity will not make such a difference. I am satisfied that the Currency Commission has and will continue to have reasonable and responsible individuals and that there will be no tendency to obstruct the work of the Commission on merely cranky grounds, that if it is clear that the situation is such that it would be profitable, safe and generally expedient for the Currency Commission to purchase securities of say the Government I have mentioned it would not be difficult to obtain unanimity. I do think it does make it slightly more difficult for the Commission to purchase United States securities but I think the change effected in that respect is not at all as great as it may seem. It could only be as great as it seems if we were to believe that the Currency Commission by four votes against three would adopt a considerable change in its policy. I do not think the Currency Commission in practice would or could do such a thing.

With regard to the danger that a Minister holding certain views might proceed to pack a Currency Commission and cause all sorts of rubbishy securities to be purchased by the Commission that could not be done under the present Act, and it certainly could not be done so long as unanimity is required because there are three members of the Currency Commission over whose appointment the Minister has no control. It would be possible for a Minister if he had four or five years in which, to do it to change the majority of the Commission. As vacancies occur in the ranks of those appointed by the Minister he could appoint people with particular views to do a particular job and then, when the office of Chairman fell vacant at the end of the five years period he could arrange that there would be no agreement as to the appointment of a Chairman, in which case the nomination of Chairman would fall to be made by himself.

In that way he could, over a period of four or five years, obtain a majority of the Commission but he could not get an unanimous vote because three of the other members would be appointed by bodies over whom the Minister had no control. Therefore there is not any danger that you might have a Commission whose views might be unsound which would take a particular line of policy as indicated by the Deputy. It would require, even if we had not unanimity, four or five years and definite support in the two Houses because it is not merely a question of laying the Order on the Table to be objected to. The Order will have to be definitely approved by resolution of each House and in that way it seems to me that no Order can be made which will in any way be undesirable. In order to be made, the Order will have to have the support of the nominated members of the Currency Commission, including the Chairman; it will have to have the support of the representatives of the joint stock banks on the Commission, the support of the Minister who will have his advisers in the ordinary way, and the support of the majority in both Houses. On the other hand, if the Order to be made is obviously one to which there is no objection, against which sound reasons cannot be urged, then it would go through the two Houses, it is to be presumed, very easily and speedily. So that the Commission if it were found desirable to invest in new classes of securities could get leave to do it easily and quickly.

I do not agree with the Deputy that the provision with regard to the payment for currency notes in sterling implies that the Currency Commission shall invest its funds in British securities only. It does of course imply that it shall invest a very considerable proportion of its funds in British securities, but the Currency Commission need never contemplate that there will not be a single currency note in circulation in any circumstances that are likely to arise. So while the general provisions of the Currency Act do necessarily imply that a very large proportion of the funds will be invested in British funds it does not in the ordinary reading of the matter imply that the funds shall be invested in British securities only. I can well imagine that circumstances might arise in which it would be well to take advantage of the opportunity of a greater spread, which would be given under the amending Act.

The Deputy talks about the advantages of a fluctuating exchange. There would possibly be some advantage in having a fluctuating exchange, but, considering that by far the greater percentage of our business is done with one country, the disadvantages and losses involved in a fluctuating exchange would outweigh very greatly any possible advantages.

Amendment put and agreed to.
Amendment 2 put and declared carried.
Amendment 3 agreed to.

Amendment 4 is self-explanatory. It is to the advantage of the holder of a note which may have been damaged or defaced in some way.

Amendment 4 put and agreed to.
The Dáil went out of Committee.
Reported: That the Committee have agreed with the Seanad in all their amendments.
Report agreed to. Message to be sent to the Seanad accordingly.