Section 1, I take it, means that the Ministry will take credit in this account for the moneys that prior to 1922 were loaned by the British Government to local authorities. I should like to be clear on that point. The Central Fund is going to take credit for the moneys advanced by the British Government before 1922 to local authorities. Is not that the position?
Local Loans Fund Bill, 1935—Committee.
Question proposed: "That Section 1 stand part of the Bill."
I do not think one can say that the Central Fund is going to take credit, in view of the statement which I made here that the interest and sinking fund payable in respect of these loans would be paid into the Local Loans Fund Account.
Will they have control?
As we have now.
I want to be clear on that so as to understand the position when we come to Section 5. That money is not going to rest in the Local Loans Fund? It is going to go into the Central Fund?
It is going into the Local Loans Fund.
Can they utilise it?
Certainly.
Question put and agreed to.
Sections 2, 3 and 4 put and agreed to.
SECTION 5.
(6) The principal of and interest on all moneys borrowed under this section on behalf of the fund and all securities created and issued under this section for the purpose of such borrowing and all advances made to the fund under this section shall be charged on and repaid or paid out of the fund, and if and so far as the fund is insufficient for that purpose, a sum sufficient to make good the deficiency shall be advanced to the fund out of the Central Fund or the growing produce thereof.
I move amendment No. 1:—
In sub-section (6), line 53, before the word "all" to insert the words "the principal of and interest on."
This is purely a drafting amendment designed to remove all doubts that both the principal of and the interest on all securities issued by the fund are to be charged on the fund and guaranteed by the Central Fund.
Amendment put and agreed to.
Question proposed: "That Section 5, as amended, stand part of the Bill."
I should like to know from the Minister will the local authorities in future pay for the service of that debt to the Local Loans Fund or to the Central Fund?
The annuities payable under the Public Works Act and the Land Commission Acts will be payable into this fund, not into the Central Fund or the Exchequer.
Will that fund use it direct for further local loans?
Yes.
Without paying any interest to the Central Fund?
The interest and sinking fund of the pre-1922 local loans are to be paid into this fund and will be retained in this fund.
Question put and agreed to.
SECTION 6.
Question proposed: "That Section 6 stand part of the Bill."
I questioned the Minister on the Second Stage of the Bill about a detail that arises under sub-section (5). Sub-section (5) states:
The amount stated in the certificate made and issued by the Minister under the foregoing sub-sections of this section which is for the time being the latest such certificate shall be deemed to be an advance made under this Act to the fund by the Minister on the appointed day out of the Central Fund or the growing produce thereof for the purpose of making issues from the fund in respect of local loans.
These certificates relate to sums which may have been advanced out of the Local Loans Fund prior to 1922, and I understood the Minister to say in his concluding observations that it was his intention to deem repayments on foot of these advances as part of the capital property of the fund. Do the terms of sub-section (5) exactly implement that exemption?
The sub-section as it stands here gives the Minister power to issue a certificate and there is nothing in sub-section (5) or in any part of the section which would inhibit him from taking the course which I indicated on the last day.
Is there anything to compel him to take that course?
No.
Then it would be open to the Minister, in certain circumstances, to forbear to issue a certificate and allow these moneys as they were repaid to flow back into the Exchequer without finding their way into the capital fund of the new Local Loans Fund?
It would depend on the manner in which the Minister would calculate the asset which he was transferring to the Local Loans Fund.
Surely the object of this Bill is to set up a fund which will become a repository of all the moneys which at any time are appropriated by Dáil Eireann to the Local Loans Fund. Therefore, there ought to be some mandatory provision in this Bill to compel the Minister to return to the Local Loans Fund any moneys that accrued due in respect of local loans made prior to 1922.
I disagree that there is any necessity for anything mandatory, telling the Minister to do that, for this reason, that this possibly does not represent the final form of the Local Loans Fund. I should like to say that the Bill is a preliminary one. There may possibly be a later one, either by us or by some other people, after the report of the Banking Commission, which would give greater definitiveness to the Local Loans Fund. In any event, I suggest that there is no need for such a mandatory provision as Deputy Dillon suggests, in view of the terms of sub-section (6), which provide:
Every certificate made and issued by the Minister under this section shall, as soon as conveniently may be after it is made, be published in Iris Oifigiúil and laid before each House of the Oireachtas.
That would give the House an opportunity of discussing the certificate which the Minister has issued.
The Minister will bear in mind that he took occasion on the Second Reading of this Bill to decry the practice of his predecessor, inasmuch as he suggested that moneys coming in in respect of loans made prior to 1922 were taken into revenue. He omitted to mention that his predecessor had an annual charge on capital account to the tune of £600,000, which constituted a reception of these moneys into the Exchequer perfectly legitimately. My submission is that this section, as it stands, leaves it open to the Minister for Finance to do the very thing that he stigmatised as irregular.
No, I did not stigmatise it as irregular. I must protest against that misrepresentation of my speech. I merely stated what the present position was, and made no comment upon it.
The Minister will remember that I suggested——
I assume that the purpose of the Committee Stage is not to analyse or, in the words of Deputy Dillon, to stigmatise what was said on the Second Stage.
The Chair has no power to prevent the Deputy interpreting the speech of a Minister or any other Deputy as he pleases, provided that he does not misquote. The Deputy has not purported to quote. As the matter the Deputy is discussing is relevant to the section, he is within his rights.
The Minister suggested by implication on the Second Stage that receipts in respect of loans made prior to 1922 were being taken into the Exchequer. He forebore to add that the Exchequer was liable for £600,000 yearly, on foot of the financial agreement made with the British Government to repay local loans in 20 annual instalments of £600,000. If that agreement had not been in existence I would agree with the Minister for Finance that it was a thoroughly unsound practice to bring receipts from local loans into revenue. The Minister by suppressio veri was guilty on the Second Stage of creating the impression that receipts from local loans were brought into local loans when, in practice, they were not.
That would lead to a debate on the Ultimate Financial Settlement.
The Minister can rest assured that it will not.
I am suggesting that Section 6 as it stands leaves it open to the Minister for Finance to do now the very thing which he described as irregular when speaking on the Second Stage. What I am asking the Minister for Finance to do is to place upon himself, and his successors, an obligation to conform to the strict practice he laid down as a desirable practice. He points out now that the section as it stands leaves him and his successors a discretion in this matter, to take the moneys into revenue or to issue a certificate, with a view to appropriating them to the Local Loans Fund. I should be glad to hear from the Minister why he desires to retain that discretion. The only explanation he has given, so far, is that this is an emergency Bill—perhaps even a temporary Bill. That is a very interesting disclosure and it is the first time it has been made. Would it be unjust to infer from that disclosure that the reason why this Bill has been brought in now is to make the phantom surplus of the Minister's Budget a little more convincing than it otherwise would be.
I hope that the Deputy is not going to follow United Ireland in that.
It is to be observed that the Minister would have to provide this £4,000,000 for the Local Loans Fund unless he got this Bill passed and the result is that comfortable surplus to which the Irish Times refers so eloquently.
The question of a budget surplus does not arise.
The Minister says that this is only a temporary Bill. Therefore, we must not expect completeness in it. Why is it a temporary Bill? Why did he not wait to initiate this Local Loans Fund until he could establish it in a form which would be permanent?
The Deputy may not make a Second Reading speech now.
The Minister suggests that there may be imperfections in Section 5 because this is only a temporary measure. Why does he ask us to accept Section 5 in an imperfect state if it is not for the purpose of lending colour to the Budget critique of his ally, the Irish Times, which described him as the great Minister for Finance who, in 1934, produced a good Budget and who, in 1935, provides a comfortable surplus. In fact, there is no surplus. There is a large deficit. The deficit would have been £4,000,000 larger if the Minister had not executed this manoeuvre whereby he launches his Local Loans Fund and withholds from the expenditure of 1934-5 £4,000,000 odd to make it a little more easy for his financial agent—the Irish Times—to explain to the credulous public of this country that the Minister for Finance has a comfortable surplus.
That surplus is not relevant.
I suggest that sub-section (5) implements the conspiracy between the Minister for Finance and the Irish Times to delude the Irish people into the belief that he has succeeded in obtaining a surplus, whereas there is no surplus.
The surplus may be comfortable but the Minister for Finance is uncomfortable.
It is comfortable in the same way as I prophesied.
The Deputy should feel uncomfortable vis-a-vis the rules of procedure.
When the Minister introduced his Budget, I prophesied that legislation of this character would be necessary to cover up his nakedness. I reminded him that he was parading in a Chinese emperor's garment in the form of a surplus, and that some day some honest man would arise and say: "Do you realise that this garment of a surplus that you are wearing does not cover your nakedness?"
This section has no bearing on surpluses.
I suggest that sub-section (5) implements the conspiracy which is going on between the Minister for Finance and the Irish Times to cover his own nakedness. It is just as well we have succeeded on this section in revealing that it has become necessary for the Irish Times to cover the Minister's nakedness and that it has become necessary for the Minister to introduce emergency legislation to establish a Local Loans Fund in order to reduce expenditure in this year by £4,000,000 and drag some rag of decency on to the body of the Irish Times.
If ever nonsense paraded itself stark naked, it has done so in Deputy Dillon's speech.
Section 5 agreed to.
SECTION 6.
Question proposed: "That Section 6 stand part of the Bill."
I require some information which, I think, I can get on this section. I understood the Minister to say that interest and sinking fund on the old outstanding loans will be paid into this new fund and retained by him. Those sums amount at present to considerably more than £600,000 per year.
The actual amount is £375,000.
Perhaps I am mixing them up with the private local loans. The aggregate must be more than £600,000 a year, because, nine years ago, they were computed at £600,000 for 20 years.
The Deputy is forgetting the reduction of 50 per cent. in the case of some of these.
However, that is not the point I am really anxious to make. Is it correct that that interest and sinking fund will go into this fund and be retained there? Is it not the proposal of the Minister to borrow on the credit of that fund, the borrowed money to be paid into the Central Fund? Is not the Minister trying to get into the position of the original lender and is he not, in fact, going to capitalise the payments in respect of the loans made prior to those made by the Free State Government to the local authorities, which loans are being paid back regularly? Is not his proposition that he will get the present value of these payments until these loans are liquidated, according to the original agreement, by issuing a loan on the credit of these payments and putting that money into the Central Fund? I suggest that that is what all this juggling in Sections 5 and 6 means. I do not blame the Minister. He is getting handy money. He is getting money for nothing.
Would the Minister explain to the House the difference in the procedure which he has elected to pursue in Section 6 as compared with Section 9? Section 6 has reference to all the moneys advanced to the Local Loans Fund prior to the appointed day. Section 9 has reference to the moneys advanced to the Local Loans Fund after the appointed day. Why is different procedure provided in respect of these two sections?
Because they relate to absolutely different things. Section 9 merely prescribes that the Minister is to establish under the succeeding sections a sinking fund to which he can charge expenses incurred in connection with the issue of securities and matters of that kind. Section 6 merely provides for a computation as to the value of the assets.
And for their disposal when they come into the hands of the Minister.
It merely provides for a computation of the value of the asset to be transferred to the fund.
But there is no obligation on the Minister to do so.
He must compute the value of the assets, he must issue a certificate, he must publish the certificate in Iris Oifigiúil and he must have it tabled here, as pointed out already.
I should like an answer from the Minister as to whether he is going to borrow on the strength of the annual payments being made by the local authorities and if he is going to put the borrowed money into the Central Fund.
That is not in Section 6.
If the Deputy will refer to Section 5.
That is what I was trying to do when I was interrupted. I find that we are discussing Section 6. Then in a few moments, we are on to Section 9. I was trying to keep my eye on Section 5.
Section 5 is agreed to. However the Deputy may make his point briefly.
I just want an answer by the Minister. This charge on money borrowed is paid into the Central Fund and that money is borrowed on the strength of payments——
No.
Do you not borrow on the revenue of the Local Loans Fund?
Yes, we borrow on the security of the fund, but we borrow for the purposes of the fund.
But it is paid into the Central Fund.
No, no. It is paid into the Local Loans Fund.
Section 5 says "All moneys shall be paid into the Exchequer."
"Under the next preceding sub-section, the Minister may as and when he thinks proper make advances to the fund out of the Central Fund," and all moneys borrowed for the Central Fund will be paid into the Exchequer.
So that this Local Loans Fund will have the entire use of the money for lending if it so desires and the Central Fund will have no advantage—they may not take it and use it for purposes other than Local Loans work?
No, we will not do that. By the way, in connection with what I said, I take it that the Deputy meant that we would not take the pre-1922 annuities and use them for purposes other than the Local Loans Fund. If that is the case I want to say we will not do that.
Then any money borrowed on the strength of that fund will be exclusively for the local loans?
Oh, I do not say that.
Of course that is the snag.
You can put it this way, that any moneys borrowed and not required for the immediate purposes of the Local Loans Fund may be used to repay the obligations of the Local Loans Fund.
But the Local Loans Fund has no obligations, if it is going to have the entire use of the pre-1922 loans—it has no obligation to pay anybody then.
Oh, yes it has.
What is the obligation?
You mean there is no obligation to pay anybody loans?
This fund has no obligation to pay anyone if they are to have the exclusive use of the revenue arising out of the old loans. Whom are they to pay? It doesn't owe anyone, because the only body they have to pay is someone they are not going to pay. It is the Minister's authority I have for saying that these moneys were to be paid to somebody, and the Minister says: "We won't pay someone." Now he says he will pay someone.
That is not what I said. We are going to regard these as assets of the fund. They are going to remain in the fund. As to their ultimate destination in the distant future, I am not going to determine that.
Money borrowed on the strength of that fund goes into the Exchequer. I took the Minister's explanation of where they go until he amplified it, and after he had amplified it, it was not as clear as before. You borrow on the strength of that fund, then you put it into the Central Fund. I want an assurance that all moneys borrowed on the strength of this fund will go for the purposes of the fund and for no other purposes, but the Minister will not give an assurance on that.
I am giving an ample assurance. The purposes are set out in this Bill.
The Minister is hedging.
The section has been passed. The Deputy may raise further points on the Fifth Stage.
Thanks for the opportunity I got of asking the Minister to amplify it, which he did not do.
Section 6 agreed to.
SECTION 7.
I move amendment No. 3:—
To add at the end of the section a new sub-section as follows:—
A warrant issued by the Minister shall be sufficient authority to the Bank of Ireland to make such transfers and do all such other things as may be required to be done by it to give effect to any exchange agreed upon under this section.
The purpose of amendment No. 3 is to facilitate exchanges between the Exchequer and the Local Loans Fund and to safeguard the position of the Bank of Ireland acting as registrar for securities issued by the State.
Amendment agreed to.
Section 7, as amended, agreed to.
SECTION 8.
I move amendment No. 4:—
Before sub-section (3) to insert a new sub-section as follows:—
Notwithstanding anything contained in the next preceding sub-section of this section, but subject to the other provisions of this Act, any money for the time being standing to the account of the fund may be applied in payment of any sums charged on the fund or in making any payments or issues which fall to be made out of the fund.
This merely provides for the keeping of the accounts of the fund. It is designed to facilitate the management of the fund by permitting a single cash balance to be held instead of separate cash balances for the capital and income accounts. It will obviate the necessity for dividing of receipts into the separate categories of capital or income before this has to be done when the accounts for the year are being prepared. This new sub-section is based on sub-section (1) of Section 14 of the National Debt and Local Loans Act, 1887.
Do the concluding words of sub-section (3) of Section 8 imply that these accounts will come before the Committee of Public Accounts?
At any rate they will be laid here before the House. I am not quite certain at the moment but I do not anticipate that they will be included in the Appropriation Accounts and, therefore, will not normally come before the Committee of Public Accounts. The Deputy is aware that the Committee has on occasions, however, considered accounts other than accounts included in the Appropriation Account, and I feel that if an opportunity is required to discuss any particular set of accounts by the House, or by any Committee of the House, that opportunity would naturally be forthcoming.
Would it not be possible, in view of the changed procedure adopted by the Minister in regard to these moneys, that after the Comptroller and Auditor-General has audited all the accounts, he should include in the Appropriation Accounts, on which he makes a report to the Committee, a statement that he has audited them and found them correct, and that they are available for inspection by the Committee?
I should not like to accept that because there is a considerable number of accounts which do not come under the control of the Auditor-General and which are not normally referred to by the Public Accounts Committee, and I do not see any more reason for specifically referring these Local Loans accounts in this section of the Act than there is for specifically referring the other accounts to which I have referred. I have not any doubt that if there was a general demand or desire from all sections of the House to have these accounts referred at any time to the Public Accounts Committee or any particular set of these accounts, that it could be done by a resolution of the House in the same way as the ordinary Appropriation Accounts are referred.
Am I to understand that the terms would not give the Public Accounts Committee the statutory right to demand the accounts if they wanted them?
As a matter of fact, under the terms of reference laid down by the House they have not, but I do not know of any accounts which the Public Accounts Committee have expressed a desire to examine that that desire has not been acceded to.
I know that the Public Accounts Committee found great difficulty in getting the accounts of the Creamery Purchase Fund. For three years we were looking for them before we got them. What we got was a certain form of account but it was deemed in the public interest to suppress certain elements in it and I am not very sure that they were finally discharged. I am speaking from memory now; that is my recollection. I know that on two separate occasions the accounts were not forthcoming when I wanted them. My submission here is we are creating an entirely new fund which ought to be open to the Public Accounts Committee to examine, when wiping off bad debts.
These writings off have to be tabled also.
Precisely. It is necessary to have these accounts examined by a Committee of the House and that there can be no valid objections is evidenced by the fact that the Minister intends to lay the accounts on the Table of the House. He appreciates what that procedure means, the accounts go into the Library and are there forgotten, whereas if they are brought to the attention of the Public Accounts Committee the Committee will examine them.
There is one fault with Deputy Dillon. He imagines that every other Deputy in this House does as he does. There are many accounts which have been tabled here and went into the Library and were very closely examined by members of the former Opposition. If the present Opposition members do not take the trouble to do that I do not think we ought to be asked to do something that is unprecedented merely on their account. The Public Accounts Committee is a Committee set up here from year to year and it is quite possible that the House may decide some year not to set up a Public Accounts Committee. As far as I know it is only set up by Standing Order and it is unprecedented that there should be statutory compulsion to send any accounts to the Public Accounts Committee, but because of the general desire of the House to examine the Appropriation Accounts they are sent to the Public Accounts Committee in regard to the Supply Services. This is not a Supply Service. It is a totally different fund and certainly without a great deal of consideration on my part and on the part of the House I do not think that the Deputy's suggestion should be acceded to.
It has been up to to-day a public service and it is only this Bill that converts it into something else.
I can answer the point that the Deputy is now going to make.
Not the point I am going to make but the point you imagine I was going to make. The Minister has observed that members of the present Opposition do not consult the accounts with the care with which he used to consult them, and what was the result? The Minister examined the financial accounts with care and due deliberation, and the fruits of his consideration were that he published a promise to reduce expenditure on Supply Services in this country by £2,000,000 a year.
That is going a long way from this Bill.
If these are the fruits of the careful perusal of the accounts in the Library by members of the former Opposition, does not the House think it is nearly time that the system was changed and that the accounts were referred to the Public Accounts Committee to examine instead of being sent to the Library? The Minister, instead of reducing Supply Services by £2,000,000 a year, increased them by over £10,000,000. That was the result of the careful examination of the accounts in the Library. These accounts should be referred to the Public Accounts Committee and not left to a man with the Minister for Finance's past, and I am sorry to add, his Irish Times sponsored future.
Deputy Dillon would build up the great reputation for himself as a master of financial procedure of the House if he did not talk. The question of the reductions that could be made in expenditure is very largely one of policy determined by the Government whether you will or will not cut social services, whether you will or will not reduce the Gárda, whether you will or will not reduce the Army, whether you will or will not continue to honour an agreement which was not ratified in this House and pay out £5,000,000 a year.
This is even farther away than the £2,000,000.
Precisely. These are matters of public policy which do not come within the purview of the Public Accounts Committee. That Committee can only say whether the moneys have been spent in accordance with the Vote of the Dáil and whether they have been wastefully spent even within the authority which the Dáil has given to spend the money. These other things to which Deputy Dillon has referred are all matters of major policy and do not come within the purview of the Public Accounts Committee, and, therefor, those who came to the conclusion that certain economies might be made did not come to that conclusion upon their work—which, I think, was very praiseworthy work—on the Public Accounts Committee. Although it is April now Deputy Dillon has started a March hare. One of the difficulties of the present system, as I pointed out on the Second Reading, is that these accounts up to now have never come under the control of the Comptroller and Auditor-General at all. He has never been able to give the accounting officer the final discharge. That position will now be remedied by sub-section (3) of this section, which places the accounts directly under the control of the Comptroller and Auditor-General, and it is a desirable advance on the present position. The House can, by way of resolution, at any time refer these accounts to the Public Accounts Committee or to any other Committee of the House which it consider should deal with the matters.
Amendment No. 4 agreed to.
Section 8, as amended, put and agreed to.
Section 9 agreed to.
SECTION 10.
All sums paid to the fund in respect of the interest on any local loan or by way of dividend or interest on investments held by the fund (other than investments representing a sinking fund) shall be included in and credited to the income of the fund.
I move amendment No. 5:—
In sub-section (1), lines 61 and 62 to delete the words and brackets "(other than investments representing a sinking fund)."
Section 10 deals with the manner in which the general income will be dealt with, and the purpose of the amendment is to facilitate accounting. As the section stands, there would have to be a separate income account, forming part of the capital account, to hold interest received on the issues or investments made from the Sinking Fund. In addition, issues for new advances which were made from the repayments of previous advances would have to be distinguished in the accounts from issues from new borrowed moneys. This, as I think the House will agree, would prove to be very cumbersome in practice, and is unnecessary. The amendment provides that all income shall go into the income account and it does not in any way alter the financial basis of the Bill.
I should like to understand fully what the intention of this amendment is. Certain funds will be held in the Local Loans Fund and one of the purposes of this Bill is to make it possible to invest those funds while they are not being used actively. That investment will produce an income but the repayments by local authorities ought to be adequate to recoup capital and pay interest on any advances from the fund. That is so?
Yes.
So that we ought to have a constant balance between incomings and sums accruing due, and, if that balance is not maintained, somebody is defaulting somewhere.
That balance will be struck. Possibly, as the section was originally drawn, it would mean that there would have to be a day to day balance, but obviously that is not practicable. The balance between these accounts will be struck at the end of each year.
If you have an income fund into which the repayments of principal and interest by local authorities are pouring, you have a situation created there in which, on that income fund, sums accrue due. They ought to be obliterated by the incoming payments of the local authorities and, at the end of the year, you ought to have a line-ball, unless someone is defaulting in his obligations. Into that fund will also flow interest from the invested funds of the Local Loans Fund, so that that clear warning signal of default is going to be obliterated by the incoming funds of the investments which are held in the Local Loans Fund, because no definite account is going to be maintained to differentiate between the moneys coming from the local authorities and the moneys coming from interest on sums invested on behalf of the Local Loans Fund.
No. I take it that the general account at the end of the year would show quite clearly what the income from investments was and what the income from repayments was, but the purpose of the amendment is to remove the compulsion which, as the section stands at present, is there, to have a separate income account within the Sinking Fund to credit those moneys to that account and to make it impossible to utilise them over the period of 12 months for the other purposes of the fund. When the accounts come to be presented at the end of the year, there will be a clear statement as to the income which was derived from investments in securities, and income which was derived from interest repaid by the borrowers.
After all, the purpose of accounts is to keep persons who are charged with the responsibility of handling money aware, from time to time, of how they stand. The Local Loans Fund will have loans outstanding and the administrative authority will determine the sum that accrues due each year on the foot of interest and principal repayments. Assume that that sum is £1,000,000 per annum. There ought to be paid into him by the local authorities £1,000,000 and if such payment is made, he can close his account and certify to the Comptroller and Auditor-General that there is no default. If Section 10 stands as it is in the Bill, without amendment, he would have to keep a separate fund in which interest on the investments belonging to the Local Loans Fund would also be paid, but if the amendment is carried, a situation may arise in which the officer responsible for the fund establishes that £1,000,000 accrues due for repayment of principal and interest by local authorities and he, in fact, receives from the local authorities £900,000; he also receives for interest on the investments of the Local Loans Fund £100,000; and then you have a position whereunder the sum accruing due is £1,000,000 and the receipts are £1,000,000. The account has the appearance of balancing itself but, in fact, it is £100,000 short.
I am well aware that the office of the Ministry of Finance may be depended upon to keep tab on so simple a complication as that, but what I apprehend is that if we endeavour to simplify this account too far, largesse on the part of the Minister for Finance may very easily escape notice by a committee of this House, or by a Deputy examining the account, and it would also be possible so to draft the account as to make it more difficult for the Comptroller and Auditor-General to segregate the funds. I am not suggesting that there is any fell purpose in anybody's mind in that respect, but I am suggesting that this section proves that, in the first case, the Ministry of Finance felt that these funds ought to be kept separate. Then some genius came along and said: "What is all the necessity of putting this work on our shoulders? Will it not be simpler to let all the money flow into the one account and let us segregate it afterwards." Not having had the experience the Minister has had as head of a Department of this kind, I do not know with what measure of safety we can consent to such a simplification, but I regard it as a somewhat dangerous departure to mix funds of this kind in such a way as might produce obscurity and a false sense of security in those responsible for the supervision as distinct from the administration of the Local Loans Fund.
I think Deputy Dillon's fears are unfounded and I think he himself will recognise that if he bears in mind that one of the duties of the Comptroller and Auditor-General is to see that these accounts are presented to him and, by him, vouched, to the House, in such a way that the House will understand what the true position of the fund is. That is part of his duty in regard to the accounts which he is appointed to examine and I do not think there is going to be in this State, with the consent of the House as a whole, any Comptroller and Auditor-General who would be a party to the presentation of accounts in a way which would mislead the House and which would conceal any of that largesse on the part of a Minister for Finance which Deputy Dillon seems to fear.
This is done purely and simply as a means of simplifying matters. In practice, it means nothing —the money comes in and it is all put into the one fund. That is the practical side of it. Is it not a very simple thing to keep a separate account—one for interest arising from investments and the other for interest arising from advances to local authorities? Is that not the safe thing to do? It is only a question of having two pages in a book. Is that not the safe and wise thing to do? Is it not acknowledged by everybody who has any experience of these matters that it is a highly dangerous thing for anybody who is dealing with public money and trust funds to mix one with the other in any way? This is being done purely for simplification, but one is as simple as the other, and the other is safer. The question of the money coming in does not affect it at all. It is merely a question of keeping a record so that anybody looking at the accounts will find, clearly and definitely set out on one page, the interest from investments and, on another page, the payment of interest and capital by local authorities. I object to this amendment because I think it is a dangerous thing to do.
I would ask the Minister to look at sub-section (3), in which he takes power to pay all expenses in connection with the issue of securities under this Act on behalf of the fund out of the income of the fund. If this amendment were not passed, would those expenses be defrayed from the fund created for the reception of interest on investments belonging to the Local Loans Fund or from the fund itself?
I do not think that the amendment has anything to do with that in any way. It would still be possible for the Minister to charge them on one or the other.
Would he normally charge them on the fund created by the interest from investments, or on the body of the Local Loans Fund itself?
The interest from advances on the fund will be fixed at such a margin as will cover the expenses of the fund, but the sinking fund will, in general, be invested in further local loans advances which will earn money to cover the normal expenses of the fund. I contend that it is really of no practical importance to which part of the fund you charge the expenses: whether you charge them on your sinking fund which is invested in further local loans bearing a rate of interest which covers the expenses of the fund, or whether you charge them on what would be regarded as the normal income of the fund, that is, the repayment income which is going to meet your sinking fund obligations. It seems to me that it is immaterial how you allocate the expenses of the fund because your interest element in both cases is carrying the expenses of the fund. This is really an additional reason for simplifying the general procedure. The really important section from the point of view of what the Deputy and the House have in mind is sub-section (2), which prevents the Minister from borrowing to meet deficiencies in the income of the fund.
Does that sub-section meet a point of really wider interest than arises in this connection? What happens in the case of moneys that go to local loans which prove to be of an unremunerative and of an unsound financial character? In such cases, on whom does the brunt of the loss fall?
On the General Account.
For example, if sinking fund money coming back were put into another local loan which proved to be unsound, would that particular sinking fund money really be gone?
That would be the case if, in general, local loans borrowers were not credit-worthy, but that is not the position.
Surely there are some such cases?
That contingency naturally has to be provided for in the rate of interest charged in the bond, and while there may be, if you like, a defaulting borrower in respect of one particular instalment to the sinking fund, the fact that he does default is covered by this: that you have a number of other credit-worthy borrowers who are paying a slightly higher rate of interest to cover such losses. The fund, in fact, must be self-supporting. It makes neither a profit nor a loss.
Is it contemplated to lend money from this fund to anybody except local authorities?
Yes. Small farmers can avail of it for the provision of hay barns.
I take it that the Board of Works will deal with that matter as heretofore?
The Board of Works will administer the loans as an agency department.
Amendment agreed to.
Section 10, as amended, agreed to.
SECTION 11.
(1) All balances standing from time to time to the credit of the capital of the fund (otherwise than by way of sinking fund) or of the income of the fund and not immediately required for making payments out of the fund...
(3) All sums from time to time held in the fund by way of sinking fund and all income derived from the investments for the time being representing any such sum shall be invested and kept invested at the discretion of the Minister in all or any of the following ways, that is to say, in advances in respect of local loans, or in the purchase of securities issued under this Act on behalf of the fund, or in the purchase of any stock, fund, or security in which trustees are authorised by Section 18 of the Adaptation of Enactments Act, 1922 (No. 2 of 1922), to invest trust funds, or in the purchase of any stock, shares, or security the principal and interest of which are guaranteed under statutory authority by the Government of Saorstát Eireann.
I move amendment No. 6:—
In sub-section (1), lines 14 and 15, to delete the words and brackets "(otherwise than by way of sinking fund)."
The section provides for the general investment of the fund. As the section stands, investments of the sinking fund would have to be in long-term securities. It is correct that, generally speaking, sinking fund moneys should be held in long-term securities and should cumulate at the long-term interest rate, but in the present case the real sinking fund investments will, as I have already said, consist of reissues by way of local loans, and the question of investment in marketable securities will only arise if, and for so long as, repayments of old loans exceed issues on foot of new loans. During such an interval an investment of the surplus sinking fund would be necessary, but it is not desirable that it should have to be in long term securities if the market position indicated that these securities were standing at an unduly high figure and that a capital loss was likely to be incurred on their realisation after a brief interval. The amendment will allow investment in short-term issues pending such time as these surplus moneys can be applied by way of reinvestment in local loans. If, of course, there was a permanent surplus of repayments over new issues, then investment in long-term securities of sinking fund moneys would be resorted to.
The position is, as I have already indicated generally, sinking fund moneys will be invested by way of fresh advances through loans. We are not able to foresee the future, but it may happen that demands for new advances would, at a certain season of the year, slack off. We have then the choice of holding the sinking fund moneys earning nothing, or of investing them in securities standing at a high premium. But there may be the danger that we should lose capital if we had to realise for fresh advances. The purpose of the amendment is that where a surplus is likely to be in existence for a short period only we should have power to invest sinking fund moneys in short-term securities.
Amendment put and agreed to.
I move amendment No. 7, which is consequential on amendment No. 5:—
In sub-section (3), lines 29 and 30, to delete the words "and all income derived from the investments for the time being representing any such sum."
Amendment agreed to.
I move amendment No. 8, which is consequential on amendment No. 6:—
In sub-section (3), lines 30 and 31, to delete the words "shall be invested and kept" and substitute the words "may be."
Amendment agreed to.
Question proposed: "That Section 11, as amended, stand part of the Bill."
While this now gives the Minister the right to invest sinking fund moneys in short-term securities, does the section still retain any provision specifying the types of short-term securities in which he may legitimately invest?
Yes, I think that is fully covered in sub-section (3) and in sub-section (1) also.
I gather from sub-section (3) that the moneys may be invested in no security which is not either a Government security or which is not guaranteed by the Government.
Yes.
Sub-section (1) purports to legislate by reference to sub-section (1) of Section 17 of the Finance Act, 1930. Perhaps the Minister would remind us what that proviso is?
Shortly, it gives the Minister power to invest in short-term securities of the United Kingdom.
Rank imperialism!
So that the Minister is going to depart on a new excursion into imperialistic ventures and can invest local loans money in securities connected with the base, bloody and brutal British Empire? The influence of the Irish Times on the Minister is positively dramatic.
This power has been in existence since 1930 and, quite frankly, it is a very useful power, because the amount of short-term securities available for investment in the Free State is nil.
Does the Minister not feel in taking that line that he is accepting the principle of the Penal Laws and roofless monasteries?
Does he not realise that in taking that line he is subsidising the Protestant succession with Irish money?
Section 11, as amended, and Section 12, 13 and 14 agreed to.
Question proposed: "That Section 15 stand part of the Bill."
Section 15 has reference to penal interest. A submission was made by Deputy Cosgrave on the Second Reading that penal interest is scarcely a proper instrument to incorporate in enactments of this kind. Penal interest had its origin at the time when the Central Government had grave reason to believe that local authorities might be induced, for one reason or another, to withhold their co-operation from that Central Government; in fact, that there might be a conflict of policy between them, and that the Government required some kind of a screw wherewith to compel the local authority to fall in with whatever scheme of things the Central Government laid down. It does not seem reasonable to apprehend that there will be, for any protracted period in this country, a clash of interests between the Central Government and the local authorities which would justify the incorporation of provisions enabling the Central Government to impose penal interest on local authorities if they fail to meet the obligations which, the Central Government is of the opinion, have accrued and are due.
In that connection I would like to draw attention to the fact that when it was recently suggested that certain interest charged on moneys outstanding in connection with the River Suck Drainage Scheme was more or less penal, the Parliamentary Secretary to the Minister for Finance was extremely indignant at the suggestion that the Department with which he was associated would exact penal interest from the Roscommon County Council. I would be glad to know now from the Minister, in view of these facts, why he thinks it necessary to provide statutory power for the exaction of penal interest and whether he would not agree that the improbability of his having to do so in future is so high that he might with safety dispense with the powers given in this measure, for the present at least.
I think Deputy Dillon is under a misapprehension if he thinks that the origin of levying penal interest in the case of borrowers who fail to meet their obligations arose out of any weakness of the Central Government with reference to the local authorities. Penal interest has been a feature of all local loans advances since 1892 and it applied to Great Britain as well as to Ireland, so that any argument based on the assumption that, following the introduction of local government here in 1897-98, this procedure had to be devised to meet the situation which was created by that Act is fallacious. It is in fact merely the adoption in regard to these loans of what was the general custom of lenders, particularly of banks and loan societies, that is to charge interest, compound interest, in all cases in which borrowers failed to meet their obligations. Here, instead of charging compound interest from the moment that the default is made, we give the borrowers a month's grace before we charge that penal interest. It is quite obvious, human nature being what it is, that if you had not some penalty of that sort, compelling borrowers to meet their obligations on a given date, a number of them would default and fall into arrear and they would be more liable to do that if they felt there was going to be no redress or that they were incurring no penalty.
I cannot see that a case can be made against this provision. What would be the position of the Local Loans Fund; what would be the position of the sound borrowers from that fund and what would be the position of the local authorities which meet their obligations punctually and promptly in regard to further advances which they might require from the fund? The fund has to be self-supporting. It makes no profit, but it can incur no loss. If people do not come along and pay their interest promptly their defaults and advances become a charge on the credit-worthy borrowers, upon the people who do discharge their obligations promptly, and when the fund would make further issues, when it would make further advances, it would have to charge a correspondingly higher rate of interest. The possibility of having to charge a higher rate of interest would be obviated if it is made clear to everyone that people incur a further liability by way of penalty.
If the local authority fails to discharge its statutory duty in paying the money which accrues and is due on an appropriate date, the responsibility rests with the members of that local authority. If they fail, the penalty should fall upon them and not upon the ratepayers of the county. The penal interest system provides that the money can be raised out of the rates. If the Minister finds a local authority recalcitrant, and refusing to do a thing which it is bound by law to do, he can mandamus them in the morning and make the councils who have refused to co-operate liable for the costs of their default.
We have no power to do that. There is nothing I know of making local councillors severally and individually responsible for defaulting in the case of a local loan.
If the Minister seriously apprehends that there is any danger of that occurring in the future, the proper persons to make liable for the default are the persons who are responsible for it, and the ratepayers are not responsible for it.
Will the Deputy bring in a Bill to do that?
To do what? To give the Minister power to mandamus a local authority to do a statutory duty? If the Minister will introduce a Bill I will support it.
The Deputy has suggested the alternative.
Yes. I am of opinion that that is the procedure which should be adopted in this case. Let us be clear. The Minister says that he has no power to mandamus a local authority in order to compel it to pass the necessary resolution to release moneys to meet the charge in respect of a loan made to it from the Local Loans Fund. I doubt if that is true; I think he probably has such power. I am not in a position to contradict him, but he should consult with his colleague, the Minister for Local Government and Public Health, and I think he will find that he can mandamus a local authority and compel them to do anything which they have a statutory duty to do.
We now come to the question of penal interest. The Minister says this is a perfectly normal and regular procedure. Does he not realise that a statute is necessary to make the collection of the penal interest possible; that the common law of this country for 500 years has held that penal interest is not admissible in respect of any debt, and that the closest analogy which common law can stand over is a sum of liquidated damages, which will do no more than compensate the creditor for any loss he may have sustained through the withholding by the debtor? There is no suggestion in this penal interest scheme that the Local Loans Fund will be compensated for any loss which may result from the local authorities' default, because the penal interest goes into the Exchequer. Is not that so?
I do not think so. I do not see anything to put the penal interest into the Exchequer, only if the interest has been deducted——
But the penal interest goes into the Exchequer. You can see I know more about this Bill than the Minister does himself. No case can be made that this provision is for the purpose of compensating the Local Loans Fund for a loss. Therefore, I suggest to the Minister that the penal interest system should be done away with, and that he should depend upon the Ministry of Local Government and Public Health to compel the local authorities to do whatsoever is necessary to be done to comply with the law, and to make persons who are really responsible for any default pay whatever penalty the Oireachtas may decide to be appropriate.
There is just one matter which I might point out. The Deputy has asked why we should penalise a local authority for the negligence of individual councillors. Penal interest, I understand, is usually surcharged by the auditor to such members of the local authorities as may be wilfully negligent in incurring a penal interest charge.
The Minister has got the most exquisite likeness to a comedian. He can change his position like a dancing master. A moment ago he was challenging me to bring in legislation to make councillors responsible. He was daring me to do it. He was saying he would not do it, but he should like to see me do so. Two minutes later he jumps clean round and says that is already the law.
No.
The Minister observes that what I have recommended to him is the law; it is the law that he is enforcing, and it is what he thinks should be the law; in fact, if there is a default the members of the council who are responsible for it should be made to pay the piper.
Might I point out that there is a difference between the Deputy and myself?
On this matter?
On this matter. I understood the Deputy to say why not surcharge the members of the local authorities—all the members. The surcharge at the present moment is on those who are wilfully negligent. That is the difference. It is because I understood the Deputy to have made that absurd suggestion that I challenged him to bring in a Bill.
The Minister knows perfectly well that the surcharge in respect of mandamus proceedings is on those councillors who took the action which made the mandamus proceedings necessary. He knows that as well as I do. He was himself concerned in proceedings not twelve months ago in which he recovered mandamus costs from councillors.
For what?
For a default in respect of some resolution passed.
For refusing to strike a rate.
Precisely. If they refuse to pass the necessary resolution to pay whatever is due on local loans borrowing they are liable in the same way. However, I submit to the Minister since he agrees with me that defaulting councillors should be made liable, and not the ratepayers of the county; since he agrees that no damage accrues to the Local Loans Fund, because penal interest goes into the Exchequer, that this penal interest system should be done away with, and we ought to depend upon mandamus or such other legal proceeding as common law will approve.
Of course the real point is that if we cannot charge penal interest we cannot surcharge negligent councillors.
Unless you mandamus them.
That is a rather expensive procedure.
It is your only remedy.
Of course the lawyers will say it is the only remedy. From their point of view it is a very desirable one. Ask the opinion of some of the people who were mandamused and had to pay costs. Even from the point of view of the negligent councillor this is a very much more economical way. He is only charged the penal interest; he is not charged the costs on both sides as in a mandamus case.
Question put.
The Committee divided: Tá, 55; Níl, 23.
Tá
- Aiken, Frank.
- Bartley, Gerald.
- Beegan, Patrick.
- Boland, Gerald.
- Boland, Patrick.
- Bourke, Daniel.
- Breen, Daniel.
- Carty, Frank.
- Cleary, Micheál.
- Concannon, Helena.
- Corkery, Daniel.
- Corry, Martin John.
- Crowley, Fred. Hugh.
- Crowley, Timothy.
- Daly, Denis.
- Derrig, Thomas.
- De Valera, Eamon.
- Doherty, Hugh.
- Flinn, Hugo V.
- Flynn, John.
- Flynn, Stephen.
- Fogarty, Andrew.
- Gibbons, Seán.
- Goulding, John.
- Hales, Thomas.
- Harris, Thomas.
- Hayes, Seán.
- Keely, Séamus P.
- Kehoe, Patrick.
- Kelly, Thomas.
- Keyes, Michael.
- Kilroy, Michael.
- Kissane, Eamon.
- Lemass, Seán F.
- Little, Patrick John.
- MacEntee, Seán.
- Maguire, Ben.
- Moane, Edward.
- Moore, Séamus.
- Norton, William.
- O Briain, Donnchadh.
- O Ceallaigh, Seán T.
- O'Doherty, Joseph.
- O'Dowd, Patrick.
- O'Grady, Seán.
- O'Reilly, Matthew.
- Pearse, Margaret Mary.
- Rice, Edward.
- Ruttledge, Patrick Joseph.
- Ryan, Martin.
- Ryan, Robert.
- Sheridan, Michael.
- Smith, Patrick.
- Traynor, Oscar.
- Victory, James.
Níl
- Beckett, James Walter.
- Belton, Patrick.
- Brennan, Michael.
- Burke, James Michael.
- Coburn, James.
- Costello, John Aloysius.
- Davis, Michael.
- Dillon, James M.
- Doyle, Peadar S.
- Keating, John.
- MacDermot, Frank.
- McFadden, Michael Og.
- McGovern, Patrick.
- McMenamin, Daniel.
- Morrissey, Daniel.
- Mulcahy, Richard.
- O'Donovan, Timothy Joseph.
- O'Leary, Daniel.
- O'Mahony, The.
- O'Sullivan, Gearóid.
- O'Sullivan, John Marcus.
- Redmond, Bridget Mary.
- Rowlette, Robert James.
Tellers:—Tá: Deputies Little and Smith; Níl: Deputies Doyle and G. O'Sullivan.
Question declared carried.
Sections 16 and 17 put and agreed to.
SECTION 18.
(1) The amount by which the expenses incurred by the Minister in any financial year in or in relation to the management of the fund (including the audit of the accounts of the fund and the issue and management of securities issued under this Act on behalf of the fund) exceed the aggregate amount received in that financial year by the Minister by way of fees, preliminary expenses, and penal interest paid in pursuance of this Act shall, to such extent as shall be determined by the Minister, be recoverable by the Minister from the fund.
(2) All moneys recovered by the Minister from the fund under this section shall be paid into or disposed for the benefit of the Exchequer in such manner as the Minister shall direct.
On Section 18 I would like now to point out to Deputy Dillon that if he reads this section as well as Section 16 he will see that the amount deducted as penal interest shall be paid into the Exchequer in such manner as the Minister may direct, and that such sums as are collected in penal interest are allowed for when recovering from the fund the cost of its administration.
The section says "to such an extent as shall be determined by the Minister."
The section says "the amount by which the expenses incurred by the Minister in any financial year... exceed the aggregate amount received in that financial year by the Minister by way of fees, preliminary expenses and penal interest paid in pursuance of this Act shall, to such extent as shall be determined by the Minister, be recoverable by the Minister from the fund."
But part of the expenses is the management and security of the fund which includes the under-writing of any issue.
I just wanted to make that clear.
Section 18 agreed to.
Sections 19 and 20 and the Title put and agreed to.
Bill, with amendments, ordered to be reported.
Report and Final Stage fixed for Wednesday, 10th of April.