I move that the Bill be now read a Second Time. The purpose of this measure is to facilitate the conversion of the First National Loan. This Loan, as the House is, of course, aware, was the first issue made on behalf of the Government of the Irish Free State. When Stock of that Loan was first offered to the public it was an issue of a novel character here, and the offer was made in circumstances of great difficulty. It was not unnatural therefore that, from the Exchequer view-point, the conditions governing the issue were somewhat onerous, particularly in regard to the provision to be made for the ultimate redemption of the Loan. For it was covenanted that no less a sum than £750,000 would be set aside each year for the service of the interest and Sinking Fund on the debt. It is not by way of criticism, but rather in justification of the step which we now propose, that I point out how very heavy indeed was the burden which was thus imposed on our annual Budgets.
The very ample provision thus made for the service of the Loan, in time created a certain difficulty for the Exchequer. Each year, as the amount required to meet the interest charge was reduced by the operation of the Sinking Fund, an increasing proportion of the £750,000 went to swell the latter, and each year it became more difficult to utilise this money advantageously to redeem the Loan in accordance with the terms of the prospectus and with due regard to the interests of the State. As the first redemption date drew near, it would, therefore, have been the duty of whatever Government and Minister happened to be responsible for the public finances at that period to consider very seriously the possibility of reducing the Sinking Fund allocation to more manageable proportions, apart altogether from the desirability of securing a reduction in the interest charge.
I have referred to the somewhat exacting provision which, under the terms of issue, has to be made for the Sinking Fund, as that, from the point of view of the Exchequer, happens to be the main feature of the First National Loan. There is another aspect of that matter, however, which in present circumstances I think ought to be stressed. It is, in fact, largely due to that more than ample Sinking Fund provision that the State is in a position to undertake the conversion of the Loan at the present time. If the allocations to the Sinking Fund had been less generous, it is doubtful whether, in all the circumstances, there would be the same incentive to undertake an operation of this kind. One clear thing is that our capacity to undertake it, as represented by our cash resources, would have been considerably less. I, therefore, very willingly acknowledge that we are fortunate to find ourselves in the position that, at the earliest date which the prospectus allows for the Loan's redemption, not only has the amount of the original issue been reduced year by year until the amount outstanding is only £7,000,000, but that, as well, we have in the Sinking Fund approximately £1,150,000 in cash —and this at a time when interest rates are ruling very low. An opportunity of converting the Loan upon such advantageous terms as may not soon be again available is thus afforded us. It is our duty on behalf of the State and the taxpayer generally to avail ourselves of it, and accordingly we have brought in this Bill, to provide facilities for undertaking the conversion.
There is a point of some importance in relation to the introduction of this Bill at the present moment, to which, at this stage, I think I ought to refer. That is as to the reason why its introduction has been delayed until now. The House is, presumably, aware that in connection with the great conversion operation which was carried through in Great Britain in 1932, powers to facilitate the conversion, similar to those which we are asking for in this Bill, were taken in the British Finance Act of 1931. We might have adopted the same course here and have sought such powers in the Finance Bill of this or of last year. There would have been, however, in my view, a number of disadvantages in taking that course.
Firstly, while it was clear that, under the terms of the Constitution, the powers which are sought in this Bill could be asked for in the general Finance Bill of the year, a consideration of some importance, having regard to the nature of the proposed operation, was the fact that the Budget and the annual Finance Bill are often the subject of very acute controversy. I felt that any proposals to facilitate the conversion of the Loan should, if possible, therefore, be considered altogether apart from the annual Budget and, I hoped, in a different spirit, and in a different atmosphere, to that which sometimes prevails, particularly at the end of what is ordinarily the most laborious and prolonged session of the Oireachtas.
Apart altogether from this objection, however, there was another one of greater practical importance. The Bill is one to facilitate the conversion of a certain Government Stock. It would not be unreasonable if, before giving the Government such facilities as we are now asking, the Oireachtas were to seek some information as to the terms upon which the conversion was to be carried out. Whatever may have been the practice up to now in regard to Government issues of the ordinary kind, I would not feel justified in resisting a request for such information in relation to a conversion operation.
It is obvious, however, that until the Minister for Finance, guided by the best advice available to him on the matter, had come to a decision as to the terms upon which conversion might be offered to the stockholders, and had made the necessary arrangements therefor, he would not be in a position to give the information to the House. Moreover, I think that it will be agreed that, in the circumstances as they have existed internationally for the past few months, it would not be possible to make the necessary financial arrangements for the conversion at any period far in advance of the actual conversion date. Thus, on the hypothesis which I have laid down, that, in regard to a conversion operation in connection with which special facilities are asked for, the Dáil is entitled to know the terms upon which conversion will be offered to the public, the introduction of a Bill of this kind must, in practice, synchronise as closely as is practicable with the conversion offer. In accordance with this view, I shall, with the permission of the Dáil, take an opportunity to-morrow to announce the terms upon which conversion will be offered to holders of First National Loan Stock.
To come now to the Bill itself. As the Long Title explains, this is a Bill "to make provision for the conversion of holdings of stock of the Irish Free State 5 Per Cent. National Loan, 1935-45, into stock of a new security to be created for that purpose, and to provide for matters incidental to such conversion." It should be appreciated that while the Bill will materially facilitate the operation of conversion, it is not introduced for the purpose of seeking authority therefor. The Minister for Finance already possesses powers to effect a conversion on the general lines proposed, and the operation could be carried through without any additional statutory provision. This is to be a facilitating Act, not an enabling Act.
Before going on to discuss the actual provisions of the Bill, I should, perhaps, briefly refer to the circumstances which, in our view, make it desirable that such facilities as the Bill proposes to grant should be provided. There are about 11,300 separate holdings of the First National Loan and of these over 9,000 are in respect of parcels of stock not exceeding £500 apiece. In view of the large number of holders, it is clear that even if the terms of the offer were definitely attractive — as, indeed, we believe they will prove to be when announced— mere apathy or delay on the part of any large number of holders may result in a failure of the conversion operation. It has, therefore, to be remembered in this connection that many of our investors may not be familiar with the various incidents of a conversion operation, for this is the first operation of its kind in the history of the Saorstat; and that, therefore, they may not appreciate the necessity for positive and urgent action on their part if the operation is to be carried through successfully. Accordingly, it is desirable to provide by legislation that where a holder does not, before the date specified in the Bill, lodge either an application for conversion or for redemption, he shall be deemed to have accepted the offer for conversion, and shall be regarded as having lodged an application, accordingly, on the closing date. Incidentally, this provision will be advantageous to such stockholders who, while desiring to convert, may wish to be relieved of the necessity for sending in a definite conversion application.
Section 3 of the Bill provides for this procedure which, as I will indicate later, has a very notable precedent. I wish, however, to make clear from the outset that the purpose of this Bill is not in any way to take advantage of the investor. The Bill is designed to facilitate holders of the First National Loan (whether it is their intention to apply for conversion or redemption) as much as to facilitate the Department of State which is carrying through the Conversion scheme.
The second main object of the Bill is to facilitate stockholders, especially those who hold the Loan, not in a beneficial but in a fiduciary capacity, as trustees, executors, and administrators. It will simplify the procedure for such persons and will perpetuate Powers of Attorney and other instruments governing investment. The provisions to this end will be found in Sections 4 and 5 of the Bill.
The precedent in relation to all these matters and upon which the proposals in the Bill are mainly based is, of course, that of the conversion of the 5 Per Cent. War Loan by the British Government in 1932. The Bill now submitted closely follows the lines of Part III of the British Finance (No. 2) Act, 1931, in so far as the powers of conversion and the facilities for joint and fiduciary holders are concerned. It does not incorporate certain other features of that Act which we are satisfied are not required for our purposes.
There is another point in connection with the Bill which should be referred to. It will be observed that the Bill is expressed to apply to a Conversion scheme, whether announced before or after the passing of the Act, provided that it is so announced before the 16th November, 1935. It was necessary to adopt this course as, if action had been deferred until the Bill became law, the notice given to holders as to the terms of the proposed conversion would have been short. Care has been taken, however, in all the forms prepared for the operation not to anticipate the decision of the Oireachtas. It will be appreciated, however, that an early enactment of the measure is most desirable in order that holders may be cognisant of their legal position. I understand that all sections of the House are prepared to assist us in that regard.
On this question of notice, I may, perhaps, say a few words also. It will be remembered that last May, in the course of the Budget statement, I announced that in the coming December we should undertake the redemption or conversion of the First National Loan. I think it will be agreed that this was a clear intimation to all holders that they ought to consider what, in either event, they would elect to do with their investment. The preliminary announcement made in the Budget speech was followed up in due course by the formal notice to all holders of our intention to redeem the Loan at par which was published in the issue of Iris Oifigiúil dated August 30, 1935. This notice was published in all the Saorstát daily newspapers and, simultaneously with it, there was also published both in these newspapers and in Iris Oifigiúil an intimation that holders of the Loan would be given an opportunity of exchanging their stock for stock of a new Government loan, the terms of which would be announced in due course. Consequently, holders of the stock have, in my opinion, been given ample notice of our general intentions regarding it.
As I have indicated in the opening part of this speech, the exact terms of the conversion will not be announced until to-morrow. But I have no doubt that the market has been making shrewd guesses at them for some time past, so that I do not think any significant interest has been detrimentally affected by their deferred publication. It may be thought, however, that some special consideration should be given to the position of persons who may be outside Saorstát Eireann at the date of the conversion announcement, and an amendment will be brought in on the Committee Stage of the Bill to provide for this.
There is one other matter to which, before I conclude, I should refer. When holders of the stock in a joint or fiduciary capacity receive their forms they will note, no doubt, that, whereas the form of request for conversion need be signed by a majority only of the holders, executors or administrators, in the case of the form of request for redemption it must be signed by all the holders, executors or administrators, as the case may be. Once again, we are following a notable precedent in that regard, and for a very sound reason. Conversion of an investment from one stock to another is not a material change, since it remains an investment. But the redemption of an investment and its replacement by money is a material change. There would be a very grave risk in omitting any of the safeguards which the ordinary law and administrative prudence dictate and in allowing a majority of holders of an account to act on behalf of the whole number, so as to secure the redemption money without the formally expressed concurrence of the whole number of beneficiaries. It has always been a requirement that, when redemption money comes to be paid out, the formal concurrence of all the holders must be obtained, their signatures being attested by competent witnesses. It would be most injudicious and unfair to holders if this safeguard were now to be omitted. That is not to say, however, that the majority of a body of joint holders are not competent to decide upon redemption rather than conversion, but only that all the body of joint holders by their signature to the form of request for redemption must signify that the decision to redeem has, in fact, been properly taken by a majority.
I do not think that there is any other point in the Bill which calls for comment at this stage. Therefore, in conclusion, I merely wish to say that in undertaking the conversion of the First National Loan, I have received the wholehearted co-operation of the Irish banks on terms which indicate that they regard the operation, as we must all regard it, as of the very greatest importance to the community. I think I may say also that they feel that, in dealing with this matter, I have placed myself, so far as is humanly possible to do so, above all Party considerations. For, as I have endeavoured to make clear here to-day, we are able to undertake the operation largely by reason of the present favourable monetary conditions and as the result of the ample Sinking Fund which, under successive Governments, our citizens have built up. It is, I feel, the duty of us all not to allow the propitious moment for this operation to pass without doing our utmost to take advantage of it. We rely, and I think I can say confidently rely, on the co-operation of all sections of the community to make the undertaking a success. As I have said, our banks will do their part. We hope and believe that our ecclesiastical institutions, our stock exchanges, our commercial houses, our stockholders large and small, and, equally important, all sections of our public representatives with a common zeal and patriotism will combine to do theirs. If our expectations in this regard are realised, the significance and success of the conversion will be heightened by the fact that after all our years of differences, all sections of our citizens, without prejudice to the respective views they hold, have been able to unite in one great effort for the good of the State.
