Dáil Éireann debate -
Wednesday, 8 Feb 1939

Vol. 74 No. 1

Trade Loans (Guarantee) Bill, 1938—Second Stage.

Minister for Industry and Commerce (Mr. Lemass)

I move:—

"That this Bill be now read a Second Time."

This is a Bill to continue the Trade Loans (Guarantee) Acts of 1924 and 1934. Those Acts, as Deputies are no doubt aware, empowered the Minister for Industry and Commerce, subject to certain conditions and the sanction of the Minister for Finance, to guarantee or grant loans proposed to be raised for the purpose of carrying out a capital undertaking or carrying on a manufacturing undertaking where the expenditure of such loans in the manner proposed was calculated to promote employment or were loans the application of which was calculated to promote a reduction in the retail prices of essential commodities. As Deputies are possibly familiar, no case of the granting of a loan arose and such loans as were guaranteed were for the first of the two purposes I have mentioned. There was no case of an application which had any bearing on the question of retail prices. The powers conferred to grant or guarantee loans expired in June last in accordance with the relevant section of the Act of 1933.

Following the general lines of the earlier Acts, the Bill now before the Dáil proposes to revive the powers which were exercisable under these Acts and, after consultation with an advisory committee and with the concurrence of the Minister for Finance, again to empower me as Minister for Industry and Commerce for a period of five years to guarantee or grant loans for the same purposes.

I presume that, in moving the Second Reading of this Bill, it is necessary to refer to the fact that the majority report of the Commission of Inquiry into Banking, Currency and Credit, recommended the repeal of the trade loans system on various grounds. The majority report of the Banking Commission was a valuable document in many respects, but I think many of those who read the section relating to the Trade Loans Guarantee Acts will agree with me that it was unconvincing and that the facts adduced do not appear to lead at all to the conclusions which the majority of the members of the commission reached. They supported their recommendation to repeal the trade loan system on various grounds. They said that the high rate of loss falling on the Exchequer had led them to the conclusion that such machinery is unsuitable for handling industrial loans in a manner that provides adequate safeguards for the interests of the taxpayer and that such business should be left to the ordinary financial organisations, although it is quite clear from the body of the report that ordinary financial organisations do not regard that type of business as coming within their sphere of activity. They said, further, that the trade loan guarantee system amounted to a State guarantee of banking accommodation which was, in the opinion of the majority of the commission, peculiarly objectionable, so long as loans for working capital were made available. Thirdly, they argued that the operation of the system resulted in the Government having a direct financial interest in industries, the success or failure of which might be largely dependent upon the exercise of Ministerial powers, which would be a source of embarrassment when decisions which should have regard to the general interest, or the public interest in general, had to be made. I should like to deal with these points in order.

With regard to the first point, I think I should point out that the losses which have so far fallen on the Exchequer, since the coming into operation of the 1933 Act, constitute a very small percentage indeed of the total aggregate sum, in respect of which guarantees have been given. Since 1933, I have given guarantees in respect of loans amounting approximately to the principal sum of £847,500, while the amount lost to date in respect of principal and interest does not exceed £13,000. As against that loss, I think it is fair to mention that there are at present, or there were at the end of 1938, the latest date for which figures are available, 66 industrial concerns being actively carried on, in consequence of the facilities available under these Acts. The total number of persons employed in the industries concerned exceeded 5,600 and the salaries and wages paid for that year exceeded £500,000. The number employed and the wages fund in the assisted industries, would appear to be a very good justification for any risk assumed by the State in the past in guaranteeing loans.

It is quite true, however, that the net loss to the Exchequer in respect of guarantees given prior to 1929, under the first Act, were very heavy. The total amount lost was £195,000 out of guarantees amounting to the principal sum of £334,000. That very heavy loss was due almost entirely to three cases which I think are familiar to Deputies —the Irish Glass Bottle Company, Alesbury Bros., and the Fresh Meat Company. The circumstances of each case were debated here in the Dáil and I do not think it is necessary to refer to them again. I suggest, therefore, that there is little foundation for the objection to the continuation of this system in the financial results to date. In any event, it is clear that some arrangement must be made which will permit of industries of a particular type getting financial accommodation within this country. The great majority of our industrial concerns are comparatively small. I mean that they are not of a size which would permit of their going to the public for capital and, where those immediately associated with the conduct of the enterprise, or the friends of those people, are not in a position to put up the capital required for their conduct from their private resources, some means must be found by which the additional capital can be made available. The banking and the financial institutions of the State contend that it is not their function to provide financial accommodation of that kind and, in the absence of a trade loan guarantee system, there would, in fact, be no arrangement for the provision of that accommodation.

It is true, of course, that the type of case, in respect of which trade loan guarantee applications are made, are more speculative than those in respect of which no approach to the Department of Industry and Commerce is considered necessary, consequently some percentage of loss has to be anticipated. I think, however, our experience to date is sufficient to enable us to come to the conclusion that the percentage of loss at any time is not líkely to be so great as to offset the very substantial advantages which have accrued so far, and which will accrue in future, from the operation of the system. The commission's conclusion that State machinery is unsuitable for handling industrial loans in a manner to provide adequate safeguard for the taxpayers is I think, therefore, unsustainable and their contention that such business should be left to existing financial institutions is pointless in the absence in the country of any financial institutions which regard the making of such loans as their business. In our endeavours to establish new industries and to extend and develop existing industries, we would not have met with the measure of success attained if there had not been available machinery of the type provided by the Trade Loans Acts.

I have already pointed out that the banking houses and other financial organisations of the State have made it quite clear that they do not as a rule regard as acceptable applications for loans expressed to extend over long periods of repayment. The majority of the loans so far guaranteed by the State are for periods up to 12 years, and, therefore, would not be dealt in at all by the ordinary financial organisation without the State's guarantee. Further, the matter of security has to be taken into consideration, and it will be readily appreciated that in many cases, particularly in those cases where industries new to this country are about to be established, the promoters would not have been able to procure all the capital required if they had not at their disposal the services of the Trade Loans Acts. Ordinary financial institutions will not advance money except on adequate security, which is not always available in such cases, and that in itself was proof of the necessity for reviving the trade loans system. The commission's objection to the guarantee or granting of loans for working capital is a purely theoretical one, and even the theory is open to question. I can only say that since 1933 such borrowers have in the main found no more difficulty in repaying their annual instalments than has been the case where loans were guaranteed solely for the carrying out of capital works. When the terms of the legislation were framed to debar the giving of guarantees in respect of loans for working capital, our predecessors had to devise tortuous ways and means of getting round that legal provision in order to give the assistance they wished to provide in the cases that came before them, and the rather bad financial results of the operation of the trade loans system in their term of office cannot be entirely separated from the existence of that limitation upon their freedom of action. In any event, the matter was debated here in the Dáil at considerable length in 1933, and the Act of 1933 gave power to guarantee loans for working capital. I propose that that power should be continued.

With regard to the commission's objection that the operation of the trade loans system resulted in the Government having a direct financial interest in industries whose success or failure was largely dependent upon the exercise of Ministerial powers, which might prove a source of embarrassment when decisions had to be taken, I can only say that in deciding such matters as industrial protective policy no embarrassment was experienced, nor was the public interest disregarded. It is, in fact, rather difficult to know where the majority of the Banking Commission got the information that any such embarrassment was caused, or likely to be caused. Certainly, those who have read the minutes of evidence will find nothing therein which would justify the commission in arriving at that conclusion. So far as the public is aware, they had before them no information which would justify them in reaching it. In any event, we consider that in the circumstances of this country it is necessary that those powers should be retained. Cases will inevitably arise where industrial projects of reasonable soundness will be unable to get capital subscribed by the public for various reasons, the main reason being the relative smallness of the amount of capital required, or will be unable to get their capital by reason of the fact that their existence depends upon the maintenance of Government protection. There will be other cases where new industrial projects will be unable to get capital subscribed in the ordinary way here by reason of the novelty of the enterprise in this country. Even if there were no other reasons, those alone would, I think, justify us in our decision to continue this system.

Furthermore, however, there is a type of cases in which it may be necessary to take into account factors other than purely financial factors. The view was taken that in the case of companies whose loans are guaranteed by the State, the trade loans system permits of the extension of accommodation or leniency in the occurrence of arrears to a greater extent than the administration of a public organisation would permit. Again, the majority of the loans guaranteed in recent years have helped industrialists to capture portion of the import market, and that was and must still be an important industrial objective. A further important reason for reviving the trade loans system is to be found in the type of case where the location of the industry is, because of social considerations or Government policy, fixed in a rural area, where purely financial considerations would dictate its location in Dublin or some other large centre.

The whole matter has been very carefully considered, and the Government is satisfied that the wiser policy is to continue this trade loans guarantee system for another period. The Bill now before the House proposes that such revival should be given legislative effect, that is to say, that for a period of five years guarantees may be given or loans granted, and that a sum not exceeding one million pounds be fixed as the limit up to which guarantees or loans shall be given or made under this new Act. The Bill, with the exception of certain clauses relating to the provision of any moneys required to fulfil guarantees already given or those which may be given under the proposed new Act, the payment of certain sums into the Exchequer, and the statements of accounts to be laid before the Oireachtas, follows the lines of the Trade Loans (Guarantee) Acts of earlier years. I consider that it is very desirable that the proposals embodied in the Bill should receive legislative sanction as speedily as possible, so that the rendering of any further financial assistance required by an industry may proceed without delay.

General Mulcahy

The speech the Minister has made is a very disappointing one. Recently, as he indicated, we had the report of the Banking Commission, and part of the work of the members of that commission was the investigation of the whole ground of the capitalisation of industry. The Minister proposes the adoption of a continuance of a policy that the members of the Banking Commission recommended against. The Minister suggested that the majority of the Banking Commission recommended against, but, as a matter of fact, there was only one voice raised in favour of the continuance of the Trade Loans (Guarantee) Act, and that was the voice of the chairman of the Industrial Credit Corporation, who simply made the recommendation that it should be continued, without going out of his way to make any case at all for it, or to deal with the particular point of objection to the Trade Loans (Guarantee) system by his colleagues on the commission. We do not propose to oppose the Minister's proposals in this measure, but we think this was an occasion on which the Minister should deal thoroughly with the matter. The only object in introducing this measure is to help to provide capital for the development of Irish industry, either to establish new Irish industries or to provide capital for existing industries, where additional capital is wanted. The commission pointed out that there were two things necessary for the provision of capital for industries, the availability of capital, and the desire of the people to put it into industry, and the machinery for doing so.

The Minister complained that for providing capital for certain classes of industry there is no machinery, except the machinery that is either provided or introduced by the presence of an Act empowering the Government to give a guarantee. The attitude, as I understand it, of the members of the Banking Commission was that the Industrial Credit Corporation was practically entirely capitalised from the State, to the extent of about £812,000; by only a few pounds from any other source; that all risks were borne by the State; that the machinery itself ought to be able to deal with whatever capital was required for any industries that gave any promise of satisfactory development or stability here; and that it should be able to supply additional capital to existing companies that wanted it. It is because of defects in that particular situation, that the members of the Banking Commission consider should be remedied by some action of one kind or another, that the continuance of these powers are tolerable. Indeed, they are only tolerable. The Minister attempted to make the case that the State has not recently suffered any great loss as a result of the operations of the Trade Loans (Guarantee) Act. I think in view of the presentation of the side of the case that has been made public the Minister ought to be more explicit. The Banking Commission have pointed out that under the Act for the first period—that is the period before the present Government came into office—a substantial sum of money was lost.

On page 279 the report indicates that outside guarantees given in respect of the Harbour Commissioners of Dundalk and Waterford guarantees to the extent of £240,840 were given. In the same paragraph it indicates that the State had to pay in principal and interest in respect of which there was default £194,549. If we eliminate from the total amount of loans given and guaranteed in the first period, the total amount of loans guaranteed to these two bodies, the amount of loss to the taxpayers was 82 per cent. of the total amount of capital guaranteed. If we turn to page 3 of the Minutes of Evidence, question 24, the Secretary of the Department for Industry and Commerce in reply to a question said: "I do not think I am at liberty to express a personal opinion." On the same page, in answering question 19, he said: "I do not think that there is anything in the present procedure which would lead us to expect a lower ratio of liability; but, of course, I should say that any conclusion about ratios in a matter of this kind may be entirely fallacious." The Secretary, in reply to another question, would hold out he hope that the proportion of failure would be lower than in the past, and this view would seem to be corroborated by a certain tendency in recent policy in this connection. As to any thought out expression of opinion on the matter, we have it in the report issued in December last, that the Secretary of the Department was not at liberty to express a personal opinion. Therefore, we must imply it is his official opinion that the proportion of failure was not likely to be less than in the past.

Mr. Lemass

I do not want to interrupt the Deputy, but when he says that the Secretary of the Department, in his evidence, said that he did not express a personal opinion, that was in relation to a particular matter that was dealt with in the previous question, as to whether any defects in the system, as operated up to date, could be remedied in some reasonable way. He replied that the Minister was satisfied generally with the position as it exists at present, and said: "I do not think there is any defect that he thinks calls for legislative remedies." It was in relation to that matter that the Secretary of my Department was asked if he had a personal opinion, and not in any relation to any other matter, on which very frequently he would have his personal opinion.

General Mulcahy

Then there is question 202, by Mr. Sweetman:—

"You told us earlier that you were unable to anticipate any very considerable improvement in the immediate future in the amount of failures under these loans. Is not that right?"

The answer was "Yes." The only thing we are left in doubt about is whether it was the personal opinion of the Secretary of the Department of Industry and Commerce, or whether it was the official opinion he gave, when he said, as recorded in the Report, that he could not hold out any hope that the future proportion of failures would be lower than in the past. It is an unsatisfactory position for the House, concerned as it is with the satisfactory provision of capital for Irish industries, and for the secure development of industries, and the increased employment that would result. The report indicates that the important thing is the question of facilities for linking up capital with the necessities of Irish industries, and the psychological factor in the industrial or economic situation here, that will induce people to invest in industry. They point out that it is the psychological factor is the important one.

I am sure the Minister intends the Industrial Credit Corporation to make a contribution to the building up of Irish industries. What else is it there for? What else was £812,000 put into the Industrial Credit Corporation for? The Minister is aware, as is pointed out in the report, that no interest has yet been paid on any capital put into the Industrial Credit Corporation. That is one reason why I feel, while sharing the opinions of the Banking Commission Report on the objections to the Trade Loans (Guarantee) system, that I cannot oppose this. There is nothing but State money in the Industrial Credit Corporation, and there does not seem to be any factor in the situation that would induce loose capital to filter through the Industrial Credit Corporation into Irish industries. Another factor in the situation is that there are onerous regulations to be kept by people accepting a guarantee under the Trade Loans (Guarantee) Act. In some cases there are even more onerous and more objectionable conditions to be complied with when money is got from the Industrial Credit Corporation, in that the Industrial Credit Corporation very often insist that they will nominate members of the board carrying on the industry that applies to them for assistance, and may, in that way, interfere with the mentality and interfere with the direction of the people originally applying. So that, what the Minister has to deal particularly with at the present time, if Irish industry is to be established and put on its feet, is the psychological aspect of the situation. I think he should be more explicit and make clearer to the House what is meant by the opinion expressed by the Secretary to the Department with regard to the future proportion of failures. I have said that in the past for the loans guaranteed in the first period the State had to pay in defaulting interest and principal 82 per cent. of the total loans that were guaranteed outside those given to public bodies. The Minister says that he has only lost, since 1933, £13,000. I took it to be £13,000. I know an industry at the present time that is going to lose the Minister about £8,000 of a loan guaranteed for £10,000. I thing it is an industry that others in industrial life in the country who have been affected by it complain that it has been the cause of the Minister's interference with them, and has interfered with the safety and the security of their industries. So that, the Minister's figure of £13,000 is fantastic as an estimate of the losses that have been sustained since 1933 in the light of what, in the first place, some of us know, and, in the second place, the opinion given by the Secretary to the Department.

I think that the House should get some explanation from the Minister as to what are the conditions that have to be fulfilled by companies who get a guaranteed loan. It would be essential that we should have from the Minister information as to how the companies are expected to so operate their finances as to keep money in their industry after the loan has been paid back.

One of the things that has been said in favour of the Trade Loans (Guarantee) Act is that it enabled industries of a particular type to get a loan of a percentage of the capital that they had already invested when they might not easily be able to get it outside. I think somewhere in the report or in the evidence one particular company has been specially mentioned as having benefited materially by the fact that it was able to get a guaranteed loan under the Trade Loans (Guarantee) Act of an amount that was a substantial amount but that was only part of its capital. I take it that every company that gets a loan from the Minister under the Trade Loans (Guarantee) Act is expected so to conduct its business that by the time that loan is paid back there will have been added to the amount of capital in the company an amount equal to the amount that was guaranteed by loan. So that, on the guarantee side of things alone, I think the Minister has a lot more information to give the House and I think it would be essential that he should give it.

But, there is another aspect of this matter. The Minister suggests that it is only the more speculative businesses that are going to take advantage of trade loans. I do not see how that squares with the suggestions he makes to the House that there is no other way in which industries as a whole can capitalise themselves, except this particular way. I would like to hear the Minister review the sources from which he expects Irish industry to get capital outside this particular machinery because it is certainly a fact that the greater part of the capital that will be got, say, in the next five years for Irish industry must be got outside the trade loans guarantee system. The very fact that he says it is the more speculative type that are going to come looking for a trade loan makes us ask him to explain very fully and very completely to the House what he has in mind and to say what range of industry he contemplates is likely to be financed under this Bill in future because the taxpayer or the ratepayer is not going to be able to bear any substantial losses in the future.

It seems to me an extraordinary thing that the opinion of the Secretary to the Department should be given in this particular way because, while the losses that were occasioned pre-1932 were occasioned by firms who were working under a moderate tariff, and some of them under no tariff at all, the companies that have been assisted since 1932 have been assisted inside a wall of big tariffs, quotas, restrictions, every blessed kind of protection and assistance that could be thought of. The question arises as to whether that type of assistance is going to be continued or not but there again, bearing on the psychological factor in the situation of financing Irish industries, I think this occasion also should have been taken by the Minister to develop the statements that he has already made on several occasions that he foresees substantial development of Irish industries in the near future.

There are a number of things affecting the people who have capital at the present time and it is naturally the people inside Ireland who have capital that the Minister should be looking to to assist Irish industries. There are various sources from which we can get capital. We can get capital by repatriating some of the Irish capital that is abroad. We can get capital by the surplus of the agricultural industries. We can get additional capital by the profits of our manufacturing companies here and we can get some of the capital that is loose and free in the hands of people at the present time.

Now, a leading article in the Irish Independent this morning points out that since 1933 there has been a fall in our external assets of £21,595,000, and that the Banking Commission Report draws attention to the great undesirability of reducing the amount of capital that we have abroad if we are going to make any systematic way to avoid the bad influences on this country of the continuing adverse trade balance that we have. So that we cannot expect any considerable amount of capital to be repatriated from outside in order to build up Irish industry in the future. We cannot get much from the surplus profits of agriculture at the present time. The trade agreement with Great Britain was made in the early part of last year. If the Minister examines the trading accounts for the exports of live stock and live-stock products for the last six months and compares them with the exports of live stock and live-stock products for the year 1931, he will see that for the half-year alone in the export of these products we are over £4,000,000 short of what we were in 1931, although normal agricultural trading relations were established with the British under the Anglo-Irish Agreement.

The depression that hit the world in 1929 and 1930 hit agriculture in this country only in 1931, and hit it to its greatest effect in 1931. That only reduced the export of live stock and live-stock products between 1930 and 1931 by something over £2,000,000.

With the income of our farmers from the export of these matters £4,000,000 better the year of the deepest depression, we cannot expect any definite substantial contribution from the surplus moneys made in agriculture to assist Irish industries. We are dependent upon influencing the people who have loose money internally in the country to use that money for the building up of our industries here, and except the Minister deals systematically and thoroughly with the matter and takes both this House and the country into his confidence as to what he foresees in the sound development of Irish industry in the next five years, he will not get over the shyness that people have about investing capital in Irish industry. I think the Minister is aware that people are very shy about doing that at present, and one of the reasons is the atmosphere that has been created around those sections of the agreement made with Great Britain in the early part of the year as to the position of price control here.

I ask the Minister, both from the point of view of getting clear his policy in dealing with the British, and standing on solid ground from the point of view of encouraging people with capital to continue to develop and foster Irish industry, to give us, or if he is not in the position at present to give us, to set about giving the country clear ideas as to the particular direction, the particular branches of Irish industry that he hopes to stand over, foster, and secure here in such a way that will give us sound Irish industry without people feeling they are being robbed, fleeced or sat upon by a monopoly.

For the purpose of encouraging him in that direction I should like to draw his attention to the position that exists between Great Britain and Australia. In the agreement made between Great Britain and Australia at Ottawa there were a number of clauses that might be said to be analogous to the clauses that are causing concern to Irish industrialists and, as a matter of fact, to a large section of the people. That Treaty was entered into in 1932. In the summer of this year, and after the agreement between Great Britain and this country was signed, Australian Ministers and British Ministers had to meet again for the purpose of discussing a break down in their joint outlook on what the Treaty of 1932 actually meant. When they came to discuss the matter the British, at any rate, signed a document agreeing that for the future they would accept the Australian opinion on what these clauses meant; that they would not, in fact, seek to impose on the Australians the British interpretation of these clauses. In fact, the clauses which were supposed to embody some principles governing their mutual trade were found to be impracticable and they set about seeing whether they could find a new principle to enshrine in a new clause that would be practicable.

This statement occurs in Section 7 of the agreement signed between three British Ministers and three Australian Ministers on 20th July, 1938:

"They realise that it cannot be adopted without determining, subject of course to an exception in favour of manufacture of defence materials, as to which no ruling could be laid down in advance, what lines of development of secondary industry will be followed by Australia during the next few years".

So that they allowed Australia to interpret the clauses with regard to price control and fair competition which are included in the 1932 agreement and they said that they could not adopt new principles and, therefore, could not come to any definite new agreement for trading until the Australians had decided what lines of development of their secondary industries would be followed by them during the next few years.

Mr. Lemass

They did not say anything about a Trade Loan (Guarantee) Act.

General Mulcahy

What is the Trade Loan (Guarantee) Act for if not for the purpose of building up and making industry here secure? Are we out of order in discussing the lines upon which the development of Irish industry should be made secure? What use is a Trade Loans (Guarantee) Act. guaranteeing the taxpayers' money, except an atmosphere is created which will enable industrialists, on the one hand, and men with capital, on the other, to make up their minds that the position here is such that they will have a chance of building up industry here?

Mr. Lemass

I suggest that that line of argument would take us very far afield. The Deputy could go on to say: "What good is a Trade Loans (Guarantee) Act if you do not deal with trade unions" or something else, and proceed to discuss the question of trade unions or some other problem remotely associated with industry. I am prepared to do it, but I submit that we should take a more suitable occasion.

General Mulcahy

I entreat the Minister to do it and I ask him to tell us now on what other occasion will he have a better opportunity? On what other occasion will an explanation of the matter and a review of the matter be more called for than when he is introducing a Bill that goes flagrantly against the recommendation of the Banking Commission in those chapters in their report where they deal with the capitalisation of industry here? I think the Minister is unfair to himself, to the trade unions, and to the manufacturers in not facing up to the matter.

Mr. Lemass

I am prepared to discuss on this Bill the question of the capitalisation of industry, but I understood the Deputy was dealing with the Australian trade agreement.

An Leas-Cheann Comhairle

Going into the whole question of trade unions and the capitalisation industry would be entirely irrelevant

General Mulcahy

I put this matter to you, Sir——

An Leas-Cheann Comhairle

The Bill sets out in the Long Title what it is for.

General Mulcahy

Yes, it is for the purpose of asking this House to accept risks in order that capital may be provided to set up industries here, and I submit to you, Sir, that the industries that are going to be set up are the important things that require to be discussed here, because we would not be discussing capital at all, and we would not be discussing the risks we are asked to undertake here about that capital, if it were not that we wanted the industries. I am speaking here on the text in the opening of the Banking Commission's Report. I shall read it out. Paragraph 418 says:

"... There are at least two elements in this problem. In the first place, it is necessary that owners of savings should have the disposition to invest them in domestic enterprises. Secondly, it is necessary that, given such disposition, facilities should be readily available to enable the would-be investor to place his investment. While it is true that, to some extent, the provision of facilities for investment may create or stimulate a disposition to invest, it is clear that the psychological factor is the more important of the two."

How is the Minister catering for the improvement of the position so far as the psychological factor is concerned? He is introducing a measure here against the Banking Commission Report, and he is controverting, without doing it in any kind of a satisfactory way, the statement given by the Secretary of his Department that the losses that may be anticipated in the future in this particular way are not likely to be less than in the past, and he is telling us that it is only the more speculative industries that are likely to be developed in this particular way. He has also told us that there is no other machinery for capitalising industry except this particular way. I am arguing here that, both for purposes of this particular Bill and for purposes of clearing the air in the country for the people whom we expect both to carry on industries and to finance them, he ought to clear the minds of this House and to clear the minds of the people as to what branches of industry he wants to concentrate on in the next few years. I am encouraging him in this by drawing his attention to the fact that the Australians, who made in 1932 a trade agreement somewhat similar to what we made in April last with the British, were, after six years, driven to meet the British, driven to get the British to accept their interpretation of the clauses that were in that agreement, driven to agree that they were really impracticable, and to find another principle, and, for the mutual benefit of the two countries, they themselves abandoned it and induced the British to sign an acceptance of the situation that they could not get that principle until it was known in what way Australia was going to develop the secondary industries in the years that were immediately coming. In relation to that, they signed also this particular clause which, I think, should be quoted in full:—

"In making such an inquiry, the Commonwealth Government proposes to have regard to, inter alia, such important factors as—

(a) the necessity for increased Australian population;

(b) the economics and future growth of primary production in Australia;

(c) the necessity, on national and economic grounds, for a continued development of Australian secondary industries;

(d) the defence needs of Australia;

(e) the maintenance of United Kingdom-Australian trade by effective preferences to the United Kingdom in Australia and to Australia in the United Kingdom;

(f) the need for new markets for Australian exports, and for foreign trade arrangements."

Now, a considerable amount of industry has been developed recently in this State since 1922. It has been built up in a quick way and there are many unsatisfactory aspects with regard to it. Both owners of industries and employees of industries, as well as the consuming public, are vitally interested in what is going to be the future of these industries: their maintenance from the point of view of the conservation of the capital invested in them and the continuance of the employment in them; also the consumers, from the point of view of whether the goods to be turned out by these industries are going to be economically turned out, so far as the purchasing public is concerned. The Minister is quite aware that there has been considerable, shall we say, irritation, and considerable difference of opinion, as well as, perhaps, a lot of general misconception and misrepresentation with regard to much of the recent Irish industrialism. It is perfectly well known that some companies are taking elaborate profits and that some of them may be in a very weak position: that some of them are not giving value for the money, but that, with a little attention, they might give more value for the money and be more secure. When, however, the Minister turns his mind to any aspect of providing capital for industries in the future, apart altogether from the way he is doing it, his mind should turn to the psychological factor of the present situation, and his mind should turn to clearing out of the situation, at the earliest possible moment, those doubts and misunderstandings that at the present time are injuring the Irish situation more than the want of capital.

There is much more demand in the minds both of Irish workers and Irish industrialists for some kind of confidence in the continuance of their industries as they are at present than there is a demand for additional capital going into Irish industry. I want to repeat that the capital we want is the capital that exists with the Irish people here inside in Ireland: that the Industrial Credit Corporation ought to be the type of machinery that would finance Irish industry, but that, while the condition exists that no public capital can be attracted to the Industrial Credit Corporation under the circumstances that exist, the Government stands responsibility for the whole of the capital that is in it; that the conditions under which the Industrial Credit Corporation work are, in many instances, onerous and objectionable to people who have the management of industry here. Apart from the question of the continuance of the present machinery, we do ask the Minister, even inside the small area that is covered by this Act, to give the House, even there, something that would give them more confidence in the general proposals. He ought to disabuse the minds of the House and of the country of any misconception that may have been caused by the evidence given by the Secretary of the Department before the Banking Commission. He ought to re-examine the things that he did examine and brought into the House to tell us that, since 1933, only £13,000 had been lost as a result of guarantees given under the Trade Loans Act. He ought to recapitulate to the House what the regulations of his Department are in respect of bodies who take guarantees under this Bill, things that are calculated to make these companies financially sound when the hand of the State is taken away from them. He might tell us what steps are really to be taken to prevent speculative projects such as he speaks of bringing additional costs to the ratepayers of the country.

Mr. Esmonde

Sir, I welcome this Bill. I welcome it because I see one underlying principle there. By a sensible and reasonable expenditure of our moneys, we are proposing to create and continue very necessary employment in this country. I think any of us who looks ahead must realise that we are going to face, perhaps in a few short months, and certainly in a few short years, a very serious situation here with regard to unemployment unless things change. There are in existence at the present time in the country a number of schemes such as the digging of sewers, the building of houses, and so on. These schemes have absorbed into employment and are keeping in employment at the present moment a very large number of our population.

Mr. Belton

Is the Deputy sure of that? Does he not know that there was never more unemployment in the building trade than there is now?

Mr. Esmonde

These schemes cannot go on for ever. They are now gradually coming to an end, and we have to envisage a future where employment must be provided for our people. In so far as this Bill is an attempt in that direction I welcome it. But there are two matters in respect of this Bill to which I would like to draw attention. It is proposed that certain moneys be guaranteed or certain loans granted to corporations, companies or individuals. I would like to see some limitation by which Irish money, if advanced and guaranteed under the Bill, will fall into the hands and under the control of citizens of this country and not into the hands of people from outside this State. I do not want the word to go around in other countries that if you have a speculative factory to start or a speculative industry to establish, Ireland is the place for it, because you have only to go there, see the Government, and they will give you what you want. I welcome this Bill if the control of the money and the industries started under it are in the hands of our citizens alone.

The second matter is in relation to the definition section. The section setting out the persons to whom this money is to be made available is not broad enough in its direction. Since this type of legislation was first introduced in 1924, followed by the various other Bills which were passed from time to time, culminating in the last Bill which expired last June, the definition section has been gradually expanded, and it has come now to include—I do not know whether it did so in the last Act—the advance of money and the guaranteeing of money for the purpose of building houses. That is a very excellent scheme, and one that may help to reduce unemployment, but unemployment in this country will always exist and continue to exist until the Government and the Minister recognise that apart from small factories and the building of houses, there is one great industry in this country which needs sustenance and assistance.

If anybody is to get advantage out of this Bill, that advantage must come through some additional employment being created. It says that in the preamble to the Bill—"calculated to promote employment". Why does the Government exclude from the provisions of the Bill the biggest industry in this country, the only staple industry, the agricultural industry? Why are not the terms of this definition extended to the agricultural industry? Is the one industry in this country that is not to get a loan the industry carried on by the prospective employer of labour on the land? Why should not that person be put in the same position as the person who wishes to start a small industry or factory in a country town? Imagine the farmers of this country opening their papers to-morrow morning and, after all they have gone through, and the time that they have had this past winter, reading that there is going to be £1,000,000 of their money supplied for the purpose of starting little industries here and there, while their own farms are unstocked and while they have not got the wherewithal to purchase seeds and manures for the present season. That is how this Bill is going to react upon the farming community. That is how they are going to feel about this Bill. Yet they represent the biggest industry and the biggest trade in the country. That industry if properly handled and if legislation were properly introduced in its favour, would go a long way towards relieving unemployment. I am not asking the Government in connection with this Bill to introduce legislation, except to put the farmer as a prospective employer of labour on the same terms as a person coming here to manufacture, say, tin cans or wireless, or anything else of that kind. The man who is living on the land and who has been here for generations and generations should at least be put on the same level as the man who comes from some part of Europe into this country to start a factory.

Mr. Belton

I would have preferred that my colleague, Deputy Mulcahy, when speaking on behalf of this Party, had said that they would oppose this Bill. We have now for 17 years our own Government in this country. During all that time, to a greater or lesser extent, industry has been spoon-fed. There are few industries on behalf of which a huge protective wall has not been raised in order to give them a monopoly in the home market. But a monopoly for these industries places a burden on the other industries that are not so protected. I notice the distinction drawn by the previous speaker, Deputy Esmonde, when he referred to agriculture. He referred to it as a staple industry. He did not say it was a stable industry. He need not be a bit afraid with regard to the suggestion that he made about the agricultural industry being given the benefits of this Bill. Agriculture will not and cannot be given the benefits of this Bill, because one cannot lend money to a bankrupt. One cannot lend money to an industry that during the last few years has been made bankrupt by the Government. During the last six years I have warned the Minister for Industry and Commerce that he, above all Ministers of the Government, should look after agriculture and see that it is prosperous, because it is the profits arising out of agriculture that are going to make industry profitable. A famous European statesman said on the eve of the European War a remarkable thing about agriculture. Prince Von Bülow, addressing the Agricultural Council of Germany on that occasion, said——

Mr. Lemass

He did not say anything about this Bill.

Mr. Belton

No, but he spoke sense and I listened to the Minister for Industry and Commerce when he was introducing this Bill and he spoke nonsense. I will now try to speak a little sense to the Minister. It will help him along the road even though he brushes aside the productive words of the investigations of the Banking Commission which his colleague set up. Prince von Bülow said and it is no harm to quote it for the Minister, that

"Agriculture is the mother of the nation's wealth which industry employs."

No wonder that agriculture here, in view of the history of the past six or seven years, is not able to provide the capital which industry now requires.

This Bill proposes to lend a maximum of £1,000,000 to industry, and the Minister has admitted the money is to be lent to doubtful industries—to industries that nobody else would lend money to. Why? There is one industry, the building industry, to which this Bill applies that I can speak of. I am associated with a firm that, in the last ten years, has put up buildings to the value of in or about £500,000. We never found any difficulty in getting money to finance the industry, provided we honoured our bond. I do not believe there is an industry in this country that our banking institutions will not finance if they are satisfied that there is a fair prospect before it, and that the men connected with it are people who will honour their bond. It is time that we got down to realities in this matter of industry. What we want in this country is to start economic industries and not political industries: to start industries in localities that are suitable for them, and not in a locality or district suggested by a Fianna Fáil club. Industry is not going to flourish if started by political resolutions. If you want industry to succeed you must start it in a district suitable for its development by men of honour and honesty. If those conditions are present we do not want a Trade Loans (Guarantee) Act.

The Minister referred to the objections made by the Banking Commission to the continuance of this trade loans system. His comments on the reasons set forth in the report of the Banking Commission on that matter were laughable. Are we going to treat seriously the report of men whose profession is finance? If not, why did the Government go to the expense of setting up this commission to consider the financial position, and to report thereon? The Banking Commission reported against the principle embodied in this Bill. Yet the Dáil is being asked to pass something that financial experts have advised against. I think the House should be very slow to do anything of the kind. The losses sustained under this trade loans (guarantee) legislation, both under the previous Administration and the present one, have been so high as to sound a note of caution. I would advise the Minister to be careful in the matter of financing people in industry who are purely speculative because such people will not put their backs into industry.

The Minister suggested that money will be made available for the building of houses. I would remind him of some of the utility societies who set about building houses. I know of one which proposed to put up 500 houses. It offered a price for the land and its development that no business man would offer. It had no money of its own, but was counting on what it would get under the Trade Loans (Guarantee) Act. That particular scheme did not come off. Why? Not because any snag was discovered in it but because the local authority did not do the impossible. I do not want to go into the case in any detail because it is not my desire to say anything about it that might give people the opportunity of being able to identify it. I am sure the Minister has it before his mind's eye.

As regards the building industry, I want to say that it requires no money. Builders will be got to build houses and to develop land if there is money among the purchasing public who want houses to buy. As a builder who has 400 acres of land ready for building at the present moment, I would give this advice to the Minister: give no builder money to build houses, but give purchasers the facilities they need to buy houses. If the Minister does that, the builders will build and the purchasers will buy; so that instead of having 1,500 or 1,600 carpenters idle in the City of Dublin to-day, you will soon have every one of them working. No matter what amount of money you pump into the building side, you will not put a score of those carpenters working, but if you make money available for the thousands of people who want to buy houses, the builders will look after the rest, and you will soon have no unemployment in the building trade.

I notice that the amount here is limited to £1,000,000. At the moment, building schemes promoted by the Dublin Corporation are held up for the want of money. A proposition which the corporation put up is before the Minister for the past three months, asking him to guarantee a loan for their house-building scheme, but no reply has yet been received. We here, and those who will not investigate beneath the surface are told in this: "Here is the Government going to make money available for the building of houses; now we will have work." I say it will not put a man working. This measure may be availed of by a few speculators who have not a bob of their own to put into the industry, or a few strangers from some part of Europe may come and rest here, and get their naturalisation and citizenship papers in an easy fashion. They may start some bogus industries, and may even start building houses with some of this money, but no genuine builder wants the money. The people who do want money are the thousands of families anxious to purchase houses. If you do that, the builders, as I have said, will do the rest. I do not want any money; neither does any honest builder want any money to enable him to carry on his trade. What the builder requires is purchasing power. Therefore, abolish your old Trade Loans Act and give the people who are the consumers of your manufactured goods the wherewithal to buy them. The natural market for industry in any country is the agriculture of that country. The only market for the industry of this country is Irish agriculture, but you have it impoverished by a six-years economic war and you then gathered up all the capital that was in the country, £10,000,000, and shipped it to Britain to meet a debt which you swore was never due. That has improverished agriculture and has impoverished industry here.

As regards the conditions under which industry will thrive, there is nothing that will frighten capital away from industry so quickly as uncertainty and unstable conditions. What are the conditions in Irish industry to-day? On the radio last week, we heard that the Prices Commission sat—a Prices Commission at which the representatives of two English glass concerns gave evidence as to why there should or should not be tariffs on glass goods coming into this country. What right have they there, if we have fiscal freedom? Is it not enough to make the bones of Arthur Griffith turn in the ground when the very freedom to which he consecrated his life, and which he finally achieved, has been thrown away by those who howled him down as having sold the freedom of this country, and British interested manufacturers can sit at what is called a Prices Commission conference and supersede this House, which is the Parliament of the country and which was handed to us by Griffith and Collins? Who is going to put money into Irish industry which is built up on tariffs when the Prices Commission may be summoned at any time, and British interested parties may come in and give evidence at that conference table, and their case cannot be brushed aside without very good reason, according to the Agreement signed last March by the delegation which travelled to London. Where is the stability in that industry, and who is going to put money into it? The very fact that this Bill has to be introduced is proof that the people will not put money into it.

What in essence is this Bill? It is a means of extracting money from the people for investment in concerns in which the people of their own free will will not invest. This is where the Banking Commission must join issue with the policy of the Government. No banking institution or financial house will invest its deposits in a concern in which its depositors themselves will not invest. It is contrary to all the principles of finance. There is in the Minister's Party—I think he is a member of the Minister's Party—a gentleman who was a member of that commission and he wrote a Minority Report. I should like to hear him on this and I should like to hear him justify the financial principles involved in this Bill in the light of the fact that nobody, bank, Government or any other institution, will do with other people's money what those other people will not do with their own money. They will not invest it in industry. Of course, they cannot. I should like to ask the Minister where is his five-year plan? Where is the election plan? Will he, as a preamble to this Bill, say: "Here is our plan for industry for the next five years, as unalterable as the laws of the Medes and Persians"? Can he say that? Of course, he cannot, in view of the agreement come to last year by which our fiscal freedom was given away. Because of that, there is no stability in the industry and because of the poverty of agriculture, there is very little market for our industry.

In the Bill itself, I find a very peculiar provision which I cannot square with any financial principles that I know of. The Minister for Finance proposes to borrow money, but he reserves to himself the right, as I read the Bill, to lend that money in each particular case, according to conditions he himself will prescribe for each case. I think there should be a safeguard embodied in the Bill to provide that if money is to be borrowed in the open market and lent out to industry—it should be borrowed on the best terms possible, of course—it should not be lent out so that the Exchequer will incur a loss because of failure to charge an adequate rate of interest. Some regard should be had also to the length of time for which the loan is granted, and a maximum, as well as a minimum, period should be prescribed, because the administration of these loans is going to cost the Government something and the loans should not be for ridiculously short periods. There should be a maximum and minimum period for which these loans will be issued, and a rate of interest charged which will ensure that the Exchequer will not lose by granting them.

I understood the Minister to say that this is the only way to capitalise these industries. Surely, he must not feel comfortable about the industrial position, if this expedient has still to be continued, seeing that he has given a monopoly of the Irish market to industry. I would be glad to be in an industry where I had a monopoly. What staff and what experience are behind the Government in granting these loans? Let the Government have the best will in the world, what trained staff have they to decide for or against the granting of these loans? The Minister, I am sure, is aware that one man can go into a bank, or financial house, put up a business proposition and be rejected, and that another man can go in and put up a precisely similar proposition and be accepted. Why? Because people who are trained in reading the public and have long experience, such as bankers, grant a loan primarily on the personality asking for it. If people who were never in industry and have nothing behind them—I will not say the loan would be given for political reasons, because I do not think the Minister would do that; he is too much of a realist to do it and he knows the danger—cannot get accommodation from banking institutions in this country, does it not speak very badly for the personnel in the van of the industrial revival?

I am sorry this is not opposed, because it would give me far more pleasure to oppose this Bill than to support it. Whatever might be said for the Bill six or ten years ago, after 16 or 17 years of protection for Irish industry, if the Minister for Industry and Commerce has to come into this House and, say: "We have Irish industries, but we must finance them with the taxpayers' money because nobody outside will take up their share capital and no banking house will advance them working capital", surely there is something wrong with the industrial and economic policy the Government is pursuing. In conclusion, I suggest to the Minister that he should reconsider the whole industrial policy, because, if it can be continued only by this expedient of taxing the people, in the first instance, to give a monopoly of the home market to Irish industry while—according to the Minister's statement to-day—it is only resting on the surface and has not driven its roots into the soil, it is time to stop spoon-feeding these incompetent industrialists by pumping capital into their industries and providing them with a monopoly market in which to sell their wares.

Mr. Childers

In connection with this Bill, I want to refrain, as far as possible, from making anything in the nature of a political speech. I want simply to remind the House that the difficulty of procuring capital for industries here—particularly, small industries—is principally a technical one. This country has always been associated with the British capital market. There has been no capital market available to the small industries and there has been no machinery available for providing that capital. The agricultural population in this country have been accustomed to invest their very hard-won savings in British or Irish guaranteed securities. There is none of the atmosphere and none of the psychological background with which to provide small industries with working capital or capital for development. Speaking on behalf of small industries in general, I submit that this Bill must be considered in the light of providing capital for two kinds of industry. The first of these is the perfectly respectable, non-speculative industry, requiring from £25,000 to £40,000, established to produce articles which have received protection from the State, from the production of which there is every possibility of making reasonable profits. I am personally aware of industries which, at the present time, are earning reasonable profits, producing good articles at prices very little in excess of the British prices, whose promoters have had to pledge their own personal credit and mortgage their own private houses to provide sufficient working capital to carry on. Yet, they are successful, so far as one can judge, and are able to pay a small percentage on their capital. The promoters of these industries are not able to continue development, to replace obsolete machinery or to take advantage of any new tariffs unless they receive further capital. Trade loans have been valuable in helping, from the point of view of this country's industrial policy, the perfectly normal industry of non-speculative type to secure further capital for their advancement. We are not able to help otherwise because, owing to our tradition, it is difficult to procure capital for industry. Nobody can blame the agriculturist for deciding to invest his savings in trustee securities but, if we are to carry out the policy of the Government, which is a balanced economy, in an agricultural-industrial nation, as Arthur Griffith described it, we must make working capital available for these industries.

We know—we need not be ashamed to admit it—that, in the last six years, many industries were started for which very little skilled labour was available. People started to make articles they were not accustomed to manufacture, and some of the directors may not have had very long experience of manufacture. Their profits may have been very small. They may not have been able to save very much from their profits for re-investment in new machinery. Equally, it should be noted that industries started before 1900 had very low taxation and were able to provide themselves with gigantic reserves. No industry can possibly provide for reserves now because taxation in this country, as in all countries, is too high to make that possible. As a result, industries are unable to re-finance themselves in the ordinary way, as was done in the nineteenth century by other industries.

Now, I pass to the type of industry which the Minister happened to mention in a phrase which the Opposition has taken up and wrongly used—speculative industry. This country has a number of mineral resources, for the development of which the ordinary finance houses might not be willing to make reasonable advances, because it would be a matter of speculation whether the work would succeed or not. For this type of industry, where there is a certain amount of doubt but where sound businessmen feel there is some reason for development, the Trade Loans (Guarantee) Act should provide adequate facilities for procuring capital. So far as the effect on the consumer is concerned, there is no doubt that a small industry, working with reasonable success but which lacks adequate working capital, inevitably raises the cost of the material to the consumer, partly because it buys the raw materials in small quantities at inflated prices instead of being able to buy them in large quantities at reasonable prices and partly because it is unable to extend to the wholesale and retail trade the credit they were accustomed to receive when they imported the article from England. From the standpoint of the consumer, it is essential that the smaller industries should have adequate working capital in order that they should provide articles at as reasonable a price as possible.

I should like to add one more comment to the discussion on this Bill— that is, that this is not the only country which provides capital by State guarantees for industry. To mention a few, in Sweden, England, France and the United States, large amounts of capital are guaranteed in one way or another by the Governments, because they found that they had to extend aid to industries not able to receive capital through the normal channels.

Mr. Cogan

I support this Bill, and I do so as a farmer. Now that it has been decided to devote £1,000,000 to the development of industry, I hope it will be also decided to employ a proportionate amount for the development of the most important industry—agriculture. It gives me some satisfaction to find that the Minister for Industry and Commerce, in introducing this Bill, has torn up and trampled underfoot the report of the Banking Commission, because it confirms my belief that the Government attach no importance whatever to the reports of the commissions they set up. It shows the depth of the imbecility of those who believe that anything useful is ever derived for this country from commissions set up by the Government. We must view this question of trade loans from the broad national standpoint. We must ask ourselves whether we wish to see Irish industry develop or not.

If we wish to see Irish industry developed we must support a measure of this kind, which seeks to provide the necessary capital for industry. If we do not support a measure of this kind it simply means that we have no confidence in, no hope whatever for the future of this country, because there is absolutely no economic or political future for the country as a separate political and economic unit unless you have industry developed in conjunction with agriculture. Therefore, there is no reason why any Deputy, whether he be an agriculturist or an industrialist or anything else, should oppose a measure of this kind.

Taking a broad national view of this question, the Government must also take into consideration the question of putting industries on a sound economic and financial basis, and establishing a certain amount of confidence amongst those engaged in industry. So far as I can judge at present, there is a good deal of uncertainty in regard to the future of industry. There is a strong feeling amongst those engaged in industry that the recent trade agreement between Great Britain and Ireland will, in due course, bring about a termination of certain industries. It would be well if the Government would remove that impression.

There is another important factor in regard to the development of industry to which the Government must give primary consideration, and that is providing a market for industrial products. In this connection, the principal consumers of Irish industrial products are the people engaged in the agricultural industry, and if we examine statistics we will find that the number of people residing in rural Ireland is every year declining. Therefore, the market for industrial products is declining. The output of the agricultural industry and the income of those engaged in the industry are declining, thereby cutting off the purchasing power of the people and cutting off future prospects for industrial development.

It should be the duty of the Government, having decided to set aside £1,000,000 of public money for the development of industry, first of all to establish confidence among the industrialists, give them an assurance that their industries will be permanent and that no trade agreement or anything else will affect the security of their industries. Further, they must set about providing a remunerative market for industrial products by setting aside sufficient capital for the development of agriculture and by putting the agricultural industry on a sound economic basis.

Mr. Lemass

I think the majority of the Deputies who have spoken merely did so for the purpose of making speeches that they were anxious to make, regardless of their relevancy. Perhaps Deputy Childers alone was the one who confined himself to the Bill. I can understand the anxiety of Deputies to get steam off after the long recess and they will, I am sure, excuse me if I do not follow them over the very wide field they covered and deal with the various points raised. I was particularly amused to notice the progress of Deputy Belton. I hope he will pardon me if I say that his sudden conversion to a firm belief in the sacredness of financial experts is altogether unexpected. It is not ten years since Deputy Belton was campaigning through the country for the public expulsion or the execution of every bank director and financial expert who ever offered an opinion on Irish economic conditions.

Mr. Belton

Never.

Mr. Lemass

The Deputy has a very short memory.

Mr. Belton

I advocated a central bank as the hall-mark of freedom.

Mr. Lemass

The Deputy advocated quite a lot more than that. He tells us now we should not pass this Bill for the reason that some financial experts have recommended against it.

Mr. Belton

That is not the only reason. I think the Minister wants to let some steam off now. Answer the arguments.

Mr. Lemass

That is my trouble. The Deputy quoted some remarks of mine when introducing the Bill and he quite clearly missed, just barely missed, the exact meaning of either the section or the remark and consequently he was going further astray the more he proceeded. Quite clearly Deputy Belton had not the remotest idea of what the Bill was about until Deputy Childers spoke. I am sure he would admit that if it were politically wise for him to do so. It is necessary to provide, in connection with industrial development in this country certain machinery, and a lot of other things are necessary, too. When machinery is arranged by which the capital available for investment in industrial enterprises can be invested in those enterprises, these other things will be of no value. These other things are a disposition on behalf of our people to invest in industry, a feeling of confidence in the future of industry and also a reasonable prospect of industrial success. These things are essential, but equally essential is the existence of ways and means by which the desire of the public to invest in Irish industrial enterprises can be made effective. One of the main difficulties of promoting industrial development here until recently was the absence of that machinery. The Deputy will go back and read the document he once suggested should be publicly burned, the Report of the Banking Commission of 1926.

Mr. Belton

And the Minister concurred.

Mr. Lemass

The Deputy will find set out there that there were no means by which Irish industrialists could reach Irish investors except through the London market. We had to change that. When we contemplated a large-scale industrial drive here, it was necessary to change that situation, to create new machinery by which Irish industrialists could reach the Irish investors. The method of providing capital for industry through public investment can be applied only in respect of large-scale concerns. The Industrial Credit Company was set up for that purpose. Deputy Mulcahy inquired why that company could not serve the function that the Bill proposes to serve. The answer is that it provides a limited amount of money, not for the purpose of directing permanent investment in Irish industry, but to facilitate public investment in Irish industry. The function is to take up the shares of companies who sell them to the public. There may be a lapse of time between the purchase and the sale, until public confidence is sufficiently created. Again, the Industrial Credit Company needs a large capital at its disposal. Primarily, it is not the intention to purchase shares with the intention of holding them, but to act as a medium through which public money may be made available for the investment. There is a larger number of concerns —and from the national point of view a much more important number of concerns—which are not large enough to get capital through public investments. If you divide the industrial concerns into three classes, you get the one-man industry which depends very largely on the organising and industrial ability of the individual managing it and who has himself directly, or through his family, provided all the capital required for it.

At the other end of the scale you get the public company, the big concern, with a capital of £100,000 or £200,000 that can go to the public and seek from the public whatever additional capital it may require. In between, there are concerns which are too big to be financed entirely from individual funds, but too small to justify direct approach to the public and it is in relation to these concerns which in this country are really important and constitute the main bulk of our industrial organisation, that there exists, outside the trade loans system, no machinery whatever by which capital could be made available when required. Deputy Belton says that the banks will do it. The banks will not do it. The banks have publicly declared that they regard it as no part of their function to provide capital of that character.

Mr. Belton

Probably they have been bitten.

Mr. Lemass

It is not a question of their being bitten. The banks exist for a different purpose! The banks will provide industry with money on a day-to-day basis. They will provide an overdraft but the provision of long term loans on a 10 or 12 years' basis, to be repaid, not on demand, but by fixed regular sums, is not a function to which the banking system of this country is adapted. They do not regard it as part of their business. They have agreed to finance that business if, and only if, their security is protected by Government guarantee. Even in that connection, they have made it clear that a stage might be reached when, even though advances of that kind were secured by a Government guarantee, the amount of money taken up in loans of that kind, might be excessive and they would have to curtail their advances. That situation might arise. It probably would not arise in 100 years at our present rate of progress, but it is, nevertheless, a situation which could conceivably arise, having regard to the unsuitability of the banking system of the country to finance enterprise on that basis.

Mr. Belton

Why do you not put it right?

Mr. Lemass

We did put it right. The Deputy says nothing will give him more pleasure than to vote against this Bill. That is like the protest from the Deputy against the system by which the Prices Commission is to review the tariffs of certain Irish industries. Every single one of these tariffs was opposed by Deputy Belton. There is not one of them that he did not try to obstruct and defeat. Now, his heart is bleeding for the poor industrialist, whose tariffs may be reduced.

Mr. Belton

On a point of correction, my objection was to the principle of any English interest being able to come in and dictate to us as to whether we should have a tariff on certain commodities or not.

Mr. Lemass

What we did, we did in the exercise of our free choice. We made that agreement freely. We are free, when that agreement terminates automatically in the course of a couple of years, to tear it up, to refuse to renew the agreement on that basis but, if we take that attitude, it is open to the British Government to take a similar attitude. We think it is a good agreement but that is a matter of opinion. This argument that we sacrificed our fiscal freedom, that we threw away the freedom won for us by Arthur Griffith and Michael Collins, assisted by Deputy Belton, is just blithering nonsense. We, in the exercise of our free choice, made the agreement. It was open to this House to reject it and it will be open to the House again to refuse to renew it. It is idle to describe that process as a sacrifice or to say that we voted away our fiscal freedom. In any event, the Deputy need not be in the least apprehensive that our industrial progress, the industrial progress that was so strenuously opposed by Deputy Belton, is going to be retarded at all as a result of that agreement.

To come back to the Bill, let me say straight away that there is nothing in this Bill which limits its scope to manufacturing industries. There is nothing in it that debars us giving a guarantee in respect of a loan raised for agricultural purposes. I think most farmers would probably find that the system of financing, for which this Bill provides, is not entirely applicable to the circumstances of agriculture, but there is nothing in the Bill which precludes a farmer or a group of farmers, or somebody working a limited company for some agricultural purpose, seeking accommodation under the Bill if they think that that accommodation is suitable for their purpose.

The same applies in respect of housing. This Bill is not a solution of the housing problem. I agree with Deputy Belton, and I am sure anybody who knows anything about the housing question will also agree, that the extension of housing activities by private builders rests almost entirely on the financing of house purchase. The function of the Bill is to provide capital where it is required and it occasionally might happen that some large scheme of development by a private individual would require temporary accommodation or working capital. There was only one case of a loan given for a housing scheme under these Acts. That was the loan given in the case of the Mount Merrion scheme. That loan was entirely repaid and it is a matter of significance that those who got a loan guaranteed by the State for that purpose, discharged the loan almost immediately. Perhaps they found that that system of financing did not suit their purpose. In any event, the State's liability was wiped out in a very short period after the Government guarantee was given. As a result of the giving of the guarantee, however, a large scheme of housing development by private enterprise was provided. That is the type of housing development that could be contemplated under this Bill. Any other form of assistance for housing is not primarily a matter for the trade loans guarantee system or the Department of Industry and Commerce but the Bill is framed so as not to preclude us from giving a guarantee in respect of loans for some such large-scale development in the form of housing.

Deputy Mulcahy thought that I should have dealt more fully with the financial consequences of the operation of this system here, and he referred to the report of the Banking Commission, and particularly to the evidence given by the Secretary of the Department of Industry and Commerce before the commission. I am anxious that there should be no misunderstanding as to what the Secretary of the Department said. He was asked: "Can one say that there is anything in the procedure now or any other matter affecting the situation, that should result in less liability in the system, as now administered?" His reply was: "I do not think there is anything in the present procedure which would lead us to expect a lower ratio of liability, but, of course, I should say that any conclusion about ratios in a matter of this kind may be entirely fallacious." That is question No. 19. Nobody can say that we are likely to suffer a lower ratio of loss in the future than in the past. There is, however, the fact that we have suffered a much lower percentage of losses. It is impossible to foretell the future, and we must, in preparing estimates for the future, base these estimates on the experience of the past. But up to 1929, under the old Act, when our predecessors were in office, the total amount guaranteed in respect to which losses occured— that is, the total amount guaranteed in all cases in which ultimately a receiver had to be put in, and the assets disposed of for the benefit of the Exchequer—amounted to £181,000. Since 1933 the total amount of the loans guaranteed in respect of which there was default was £20,000. That is merely a fact. I do not want to draw any firm conclusions from that fact. I mentioned that included in the £181,000, amongst the very heavy sum lost by our predecessors in the short period during which they were operating this system, there were three very large sums, amounting between them to £168,000, lost because of the failure of three enterprises. When one talks about the ratio of loss, one may have regard to the total amount lost as against the total amount guaranteed, or to the number of cases in default against the number of cases in respect of which guarantees were given. Again, let me refer to the loans which have been given since 1933. The total amount in respect of which there was default was a very small fraction of the total amount guaranteed—£20,000 out of a total of £850,000—but there was included in that £20,000 a number of cases which involved small amounts.

There are other guarantees outstanding of very substantial size. Take the Peat Fuel Company in respect of which a trade loan guarantee of £90,000 was given. That was a type of case such as Deputy Childers referred to, and such as Deputy Belton refused to admit existed, in which obviously private enterprise would not be interested at all. We have taken a risk there, a substantial risk, in order to have carried out here an experimental development which, if successful, will be of immense benefit to this country, but which if unsuccessful is going to involve us in the loss of that amount. Clearly, one such failure as the failure of that company would increase out of all proportion the ratio of loss. Consequently, it is impossible to make any firm estimate as to what the ratio of loss is likely to be, and the only safe course to follow is to take it that it is going to be the same in the future as it has been in the past, even though we know there were special circumstances in the past which do not now exist.

I am sure Deputy Mulcahy noticed the number of occasions on which the members of the commission hearing evidence on this matter made a distinction between the period before 1932 and the period after 1932, and whenever they did so they always made it quite clear that the purpose of that distinction was something other than the actual thing that was in their minds, to our own knowledge. They said they made that distinction because there was a gap during which no loan was given before 1932; that they made that distinction because the Act before 1932 was of a different character to the Act after 1932. But we all know, although they were at pains to conceal it, that they made that distinction because a new Government came into office in 1932. That was an important factor. Having regard to the nature of the inquiry they were carrying out, the one factor they should not leave out of account was that there was a change in policy, and surely a change in policy must have a very direct bearing on what the ratio of loss is going to be under any system of trade loans guarantees. When our predecessors gave a substantial guarantee in respect of a loan to the glass bottle factory they were taking a risk which the present Government would not be taking in similar circumstances, because they were not prepared to protect that industry, and in the circumstances of 1929 it was almost inevitable that the money would be lost. It was lost, but in the new circumstances—the circumstances in which there is a Government following a different policy—the prospect of loss, either for the State which guarantees the loan or for the private individual who puts his money into Irish industry, is substantially reduced. That is the important factor which the members of this commission refused to take into account, and certainly were at great pains to leave out of account, when they were making their recommendations.

The number of cases outstanding at the present time is quite substantial. I do not know what particular case Deputy Mulcahy could have been referring to, of which he said he had personal knowledge, that is to say, the company which got a guaranteed loan of £10,000 and was likely to default to the extent of £8,000. Looking over my list here I cannot see any company which got a loan of £10,000 in respect of which a receiver has been appointed, or which is even in default in any way in the payment of principal or interest. There is a side of this picture which both the Banking Commission and Deputies here left out of account. We talk about a default of £20,000 because companies that got guaranteed loans amounting to that sum failed to make good and involved the State in a loss. We guaranteed loans amounting to £115,000, which have been repaid in full, and that is a much more important factor than the other one, because it means that, as a result of the State taking some risk in respect of those undertakings, permanent progress has been made, permanent employment has been given, and a new source of wealth has been created in the country. By the companies that were facilitated under this Act there are employed at the present day nearly 66,000 people. Those industries paid out last year nearly £500,000 in wages, and the creation of that situation was worth taking the risk of the loss of £20,000. We spent nearly £1,500,000 on unemployment relief schemes. Surely it is much better to risk a smaller sum in trying to create permanent employment which will be productive and give a new source of wealth to the country than to spend a much larger sum on the unproductive work on which relief workers have usually to be occupied.

I do not think there is any other matter which calls for particular reference on this occasion. I agree fully with Deputy Esmonde that in giving guarantees under this Act we should have due regard to the nationality of the applicants, but I do not think it is necessary to make any special provision to that end, because the Control of Manufactures Act gives us sufficient safeguards. It is in fact impossible for anybody other than a person of Irish nationally or a company conforming to the conditions laid down in the Control of Manufactures Act to carry on a manufacturing enterprise here unless licensed, and licences will not be given unless it is clearly in the national interest that it should be done.

Deputy Mulcahy referred to a leading article in the Irish Independent. The Irish Independent is a propagandist organ. Its intention is to make propaganda against the Government, and Deputy Mulcahy should have due regard to that fact, particularly when reading its leading articles. It had a leading article this morning which referred to the decline in the value of our external assets in the current year as compared with 1933. I think the very fact that the Irish Independent picked 1933 should have caused Deputy Mulcahy to smell a rat. Obviously there must have been some reason why they picked 1933 for purposes of comparison instead of the previous year, or three or five or 10 years ago. There was an obvious reason. In 1933, by reason of the financial insecurity that existed throughout the world and particularly in the United States of America, a very large amount of external assets were transferred to the Irish banks for security, for safe keeping, until the financial crisis had passed, and particularly until financial stability had been restored in the United States. When that financial stability had been restored those external assets were taken back again by the people.

General Mulcahy

How would a transaction like that affect the figures?

Mr. Lemass

The figures of the external assets in the possession of the Irish banks were those that the Irish Independent was quoting.

General Mulcahy

Did they come in before 1933 or after it?

Mr. Lemass

Before it.

General Mulcahy

Ought not that to increase our external assets abroad?

Mr. Lemass

In 1933 undoubtedly.

General Mulcahy

Ought it not to increase them in 1938 as against 1933?

Mr. Lemass

No. It would increase them in 1933 as against 1938. I am prepared to admit that there has been some diminution in the value of the external assets held by our banks. Not merely did we pay out £10,000,000 last year to the British Government in accordance with the financial agreement, but there has been a repatriation of capital for investment here. In fact, I think we must contemplate a much more substantial repatriation of capital, if the full capital requirements of our people are to be provided for. The Dublin Corporation is looking for capital at the moment, and if it is to get the money it wants, there must be some repatriation of capital now invested abroad; some diminution in the value of external assets held by Irish banks.

Mr. Belton

How will it be attracted?

Mr. Lemass

That is a question I am not prepared to discuss now. I am interested in Deputy Belton's denunciation of the Government because they paid out £10,000,000 last year, while covering up all the millions that were sent out previously, leaving the country without resources to finance agriculture. What was one payment of £10,000,000 compared with the millions that were sent out before the economic war began?

Mr. Belton

Have some regard for the truth.

Mr. Lemass

If the Deputy had the same regard for it we might get agreement. The main point is that this Bill is a machinery Bill. It is quite true, as Deputy Mulcahy stated, that machinery alone does not meet our problem; that, to attack our problem, there must be created the psychological situation in which Irish investors will be prepared to invest in Irish industries. The problem associated with the creation of the proper psychological conditions need not be discussed now.

General Mulcahy

When will they be discussed?

Mr. Lemass

I agree that they are of equal importance to the provision of machinery. The provision of machinery is itself essential, but with the best will in the world, without some means specially provided for the purpose, Irish investors could not get their money into industrial enterprises here. There was a period when they could not do it, because there was no means of doing it. Means having now been created, I do not think we can afford to do without this particular means. A time may come when we can do without it, but that time is a long way in the future. Certainly, within the next five years we will need the same facilities that we had in the past.

Question put and agreed to.

An Ceann Comhairle

When will the Committee Stage be taken?

Mr. Lemass

I suggest this day week, seeing that this is the same as the previous Act. However, it may not be available then.

General Mulcahy

There is no objection to putting it down for this day week.

Committee Stage ordered for Wednesday, February 15th.