The Tánaiste, by leave of the House, desires to make a statement in reference to a proposed loan.
National Security Loan, 1941.—Statement by the Minister for Finance.
I wish to make an announcement to the House concerning the new loan which I foreshadowed at the time of my Budget statement. It will be remembered that our Estimates for the year provided for a considerable amount of abnormal expenditure on defence, on schemes to relieve unemployment, on projects for the development of food production, peat fuel and other resources and on provision for the capital cost of shipping. All these have entailed considerable outlay and, despite the heavy increase in taxation, expenditure has been rising more rapidly than revenue. In reality, although neutral, we have been forced to adopt what could almost be described as a War Budget. We must make up for the deficiency in receipts and cover the various capital and abnormal services by floating a new issue.
The loan to which I am about to invite subscriptions from the public will be entitled the National Security Loan and will offer a total of £8,000,000 in stock, issued at £99 per cent. and carrying interest at the rate of 3¼ per cent. per annum, payable half-yearly. It will bear the dates 1956-1961, being redeemable at par after 1956 at the option of the Minister for Finance and being compulsorily repayable in 1961. Having regard to the trend of interest rates in recent times, I think it will be agreed that these terms are reasonable.
As is the case with all our previous issues, a substantial sinking fund is attached, amounting in this instance to 1½ per cent. per annum of the original total of the loan. The sinking fund will thus start with the generous provision of £120,000 a year. The subsequent annual provisions will be on an increasing scale as successive blocks of the loan become extinguished by purchase and cancellation. This allocation which will be made in half-yearly instalments will provide a substantial buttress towards maintaining the market price of the stock, and thus securing the holder against capital depreciation. In addition, he will, of course, receive a premium of £1 per £99, when the stock comes to be redeemed.
On behalf of the various funds under my control, I am applying on the terms of the prospectus for stock of the issue to the amount of £3,000,000, which I am taking firm. To facilitate the public, I propose to ensure that, as far as possible, applicants for amounts not exceeding £5,000 will receive allotment in full.
Deputies will remember that the last loan which we floated, the 4 per cent. Exchequer Bonds, in December, 1939, carried the privilege of conversion at par into any subsequent issues (other than Exchequer bills or similar short-dated securities) that might be made during the present emergency or for six months afterwards. Pursuant to that undertaking, an option of conversion is given into the present issue and holdings of 4 per cent. Exchequer Bonds, 1950-1960, may be exchanged in whole or in part for the stock now offered at the rate of £99 of the former for each £100 of the latter. Where applied for, the exchange will be deemed to take place as on 1st December, 1941, on which date the five months' interest accrued on the 4 per cent. Exchequer Bonds surrendered will be paid. A full half-year's interest will be payable on 1st June, 1942, on holdings of the new loan issued in exchange.
The prospectus of the loan will appear in the daily papers on Saturday, 1st November, and when the subscription lists open on the following Monday, copies of the prospectus and forms of application will be available at banks, post offices and stock-broking offices.
In view of unavoidable postage delays, the ordinary list of cash applications will be kept open, if necessary, longer than the usual week, but will close not later than Tuesday, 11th November. Conversion applications from the 4 per cent. Exchequer Bonds will be entertained up to 15th November.
I hope and believe that the issue will meet with a successful reception. The credit of the State has stood high under all Administrations and, as Minister for Finance, I am benefiting to-day from the high standard of financial prudence and integrity set by all my predecessors. I appeal to members of the various Parties in the House to co-operate with me in bringing this issue to a successful conclusion. The purposes for which it is being made will, I feel sure, commend themselves to every Deputy, and I accordingly enter a plea for their support—by precept and by example—of the forthcoming National Security Loan.
The Minister was good enough to refer to the prudence and the other virtues associated with his predecessors in office in the matter of finance, and hearing from him the terms of this loan to-day I feel that it has been a matter of great pity that there was not consultation on his part with those in other Parties in the House, who might have been either competent or intelligent enough to discuss the facts of the situation, before issuing this loan. The Minister has indicated that he proposes to issue the loan at 3½ per cent. at £99. I feel that the offer of the Minister is one that emphasises either a very great excess of generosity on his part in the first place or, in the second place, that he has not properly reviewed the facts that are very strong and very clear, at any rate superficially, on the situation. If he were somebody of a different disposition I might even say that the terms he offers show a lack of confidence, but the Minister, in matters of crying national policy, is a regular rock of national confidence, and so I hesitate, in discussing the matter seriously, to surprise him by suggesting that, but I say that the offer is characterised by extraordinary generosity.
The Minister has indicated that the Exchequer Bonds may be exchanged straightway into the new loan. I would ask him if he has taken into consideration the fact that the quotation, in the middle of September, at any rate, for Exchequer Bonds, so far as any such information is available, shows that the present yield per cent. on the price then paid for Exchequer Bonds would be £2 15s. 6d., and that price is based on the latest redeemable date. If, in fact, the yield is based or estimated on the nearest redeemable date, the yield per cent. would only be about £2 12s., and the Minister appears to me to be offering, in the case of people who in September and at the present time were prepared to put their money into Exchequer Bonds at a yield of £2 12s., to convert that into bonds that will give a yield of £3 5s. or £3 5s. 8d. I characterise that as an extraordinary display of generosity which, I think, requires some explanation.
Again, I understand that applications for this loan can be made to the High Commissioner in London. Now it seems to me that the only yield that is available to people in England with money to invest in loans at the moment is 2½ per cent., and we here are offering—to the extent, at any rate, of part of £8,000,000—£3 5s. for money that exists in very great plenty there, and which in England is only able to obtain £2 10s. Accordingly, if there had been consultation before these terms were fixed it would be possible to discuss whether this generosity was as great as it appeared to be, and what was the reason for it.
Again, I suggest that it shows that the Minister is not facing certain facts. Now, one of the facts which, I think, a little examination of the situation will show is that if we judge by the prices paid recently for Second National Loan, Fourth National Loan, Exchequer Bonds, or Conversion Loan, the credit of this State is higher than is the credit of Great Britain, because the people who have been investing in these securities recently are prepared to accept from 4/6 to 1/6 per annum less in yield than the people in Great Britain are actually getting from the main issue of Defence Bonds during the war. So that one of the facts in the situation is that Irish credit, even on the superficial facts of the case, is sounder than is the credit of Great Britain. Then let us take the rates that have been recently paid for Irish securities.
According to the published figures, on September 19 Second National Loan was bought on terms which gave a yield of £3 0s. 3d. per annum, Fourth National Loan on terms which gave £2 18s. 6d., Exchequer Bonds on terms which gave £2 15s. 6d., and Conversion Loan on terms which gave £2 15s. 3d.—these being estimated on the last redeemable date—but if we estimate the yields on the earliest redeemable date, then they are substantially less than these and, as I am sure the Minister is aware, the yields would be less in some cases by from 3/6 to 5/6 or 5/7. Those yields, based on the last redeemable date— £3 0s. 3d., £2 18s. 6d., £2 15s. 6d. and £2 15s. 3d.—are September figures, and here we are offering now to pay £3 5s. 8d., so that I say those facts appear to have been ignored.
Another fact which appears to have been ignored is the position with regard to the money that is available for investing at the moment. The statistical bulletin of the Currency Commission gives information with regard to the current, deposit and other accounts in the banks in this State. In the two years ended 30th June, 1941, we find that the current, deposit and other accounts in the banks within the Twenty-Six Counties have increased by £17,410,000. We find that the assets, in so far as they are investments in Government securities, inside the Twenty-Six Counties, have been increased by £2,613,000, but that the increase in Government securities held outside the Twenty-Six Counties is £14,600,000, so that, as against an increase of £17,000,000 in the current, deposit and other accounts in the banks, £14,000,000 have been invested abroad. I do not say that those figures can be exactly related to each other, but the fact is that, while the banks have put £2,600,000 into Irish securities during the two years ended 30th June, 1941, they put £14,600,000 into British securities, and in putting that there they are either getting 3 per cent. under the old loans or 2½ per cent. under recent loans, or—which is likely in respect of a very large portion of that amount—they are getting 1? per cent. Therefore, the money is there, passing through our Irish banks and being put abroad where the figures will show that there is less credit, even though there is more opportunity. They are satisfied to go abroad for interest varying from 1? per cent. for short-term loans to 2½ or 3 per cent. on longer loans. That is a fact which, superficially at any rate, seems to have been ignored in fixing the terms of this loan. Again——
On such occasions as this, the usual procedure is that a brief statement is made by the Leaders of the Opposition Parties, but that controversial matters are not raised. It is, of course, for the Deputy to decide how far he will follow established precedent.
I have no desire to start a controversy here——
The Deputy has started it already.
It is in the national interests.
I would be glad if I thought that I had started a discussion which would develop into a controversy at another point. I think that, in so far as the Minister is concerned, I am selling his loan like hot cakes at the present time.
The Deputy is advertising the loan.
If the House will bear with me on a very important matter, I should like to make a few additional remarks.
The Deputy will sell a few more million pounds' worth.
When we look at the position on the British side, it is estimated that they will require £10,000,000,000 to fight a four years' war. They have got all their money at present at an average of 2 per cent. The money has been standing on two legs; up to the recent loan it was standing on 3 per cent. Defence Bonds, and a very considerable amount of money was received from the banks at 1? per cent. Now the 3 per cent. has gone, and gone very definitely until long after the war, and ordinary Government loans will not be able to get in Great Britain more than 2½ per cent. The money that is being got there is not going to come back. The money we are borrowing here we are certainly borrowing for some constructive purpose, and, even in so far as some of it is not going to give any financial return, it is a security loan, and we are likely to require more money by way of loan if we are to conserve the resources of our men and our material resources here. By borrowing money for that particular purpose we will be strengthening our position; we will be strengthening our credit, rather than if we were failing to deal with those matters. I think, therefore, that what the Minister is doing to-day is of the utmost significance and the greatest importance. It is because of the fact that we will require further money on loan that we cannot afford to waste money in buying at any rate the one thing which is available in the country, and that is money. We are paying high costs for material and all that kind of thing; we will have to continue to do it; but where money can be got—and apparently it can be got, judging from superficial signs here—every 5/- additional that we pay, every quarter per cent. additional, means £20,000 on a loan of £8,000,000. I do express dissatisfaction with the rate, and I do express regret that, in a matter so important, both from the point of view of the present position and from the point of view of the future position, the Minister should launch a loan at this particular price without consultation. I think consultation would have saved a very considerable amount of money annually on that loan.
I do not want to debate the proposed loan in any detail. In so far as it will provide money for the Government for expenditure on schemes to relieve unemployment, as the Minister's statement indicated, on projects for the development of food production, peat-fuel production, and the development of our other resources, I am glad that the Government are taking steps to acquire that money, and I hope that the expenditure of the money will result in increased employment for our people, in increased food and increased resources for our people, and that it will add to the pool of national productivity in this country. Those who have money to sell will, of course, be very glad at the generous terms provided by the Minister, because the terms are exceptionally generous. I think, in fact, that they are more generous than any other State in Europe has offered during this crisis, so that money changers and money sellers will have no reason to complain that the Minister for Finance has treated them in anything other than the most generous fashion, notwithstanding the crisis through which we are passing. While I hope that the Government will get all the money they desire for the purpose of financing productive schemes, worth-while schemes of activity, I should like to say to the Minister that, in those days of crisis, in those days when what seemed sane yesterday has, in many cases, been certified as insane to-day, the Minister ought not to be so conservative as to anchor himself to a conservatism of the past. I see no reason in the world why the Minister could not to-morrow morning secure authority, by agreement in this House or under the Emergency Powers Act, to issue a State note issue of £8,000,000, paying no interest at all to money sellers, requiring no money sellers or money changers to lend him any money, but to issue a State note issue of £8,000,000 with which to finance those schemes. Orthodox financiers, those who live on selling money, those who have been able to establish very substantial edifices in this State by selling money, will, of course, say that that will immediately lead to inflation, but, in a relatively undeveloped country such as this, where there is an abundance of work still to be done, it seems to me to be just an absurdity to talk about inflation, when you can still put your people into employment, creating goods against the money which you issue. As I said at the outset, while I welcome any scheme which will enable the Government to get money for the development of useful schemes of activity, I am sorry that the Minister has not been more courageous. I am sorry that, in those changing times, when it is necessary to do things differently from the way in which we did them in peace times, he has not asked the House for authority to issue a State note issue which would be backed by the brain and the brawn and the industry of our people.
If he had done that, I think the Minister would get considerable support from a large number of people in this country. He would get even considerable church support, considerable ethical support, for the line he would take and in the long run he would not enshackle our people with the very substantial interest rates which will have to be paid to money sellers under the proposals he offers to the House this evening. If the Minister expects to get £8,000,000 under these proposals I wish him success, but I hope that the next time he comes to the House to ask for money he will not ask it from the money sellers but that the State, the real creator of credit, will issue the money itself and that it will repay what it borrows by the industry and intelligence of our own people.
Deputy Belton rose.
It is not customary for any member of the House, other than the leaders of Opposition Parties, to speak on a statement of this character, which is not open to general debate.
He leads his own Party.
The Deputy will have other opportunities to express his views. It would be contrary to all precedent for Deputies generally to intervene on this matter. Even the Minister may not reply unless by unanimous consent.
We should be very glad to hear what he has to say.
The matter is not open to debate, and that for obvious reasons.
I am not surprised that Deputy Belton wishes to speak on this matter, taking into account the very controversial statement made by Deputy Mulcahy. I thought that the usual practice would be adopted here, that we should have a few words from the leaders of other Parties—waiting for other occasions to criticise, properly, if they wished to do so, the actions of the Minister in detail—wishing the loan a success on this occasion. Deputy Mulcahy complains that he was not consulted. That is an entirely new line. Were we ever consulted at any time in the history of our Party in this House?
You were very glad to consult us on any national emergency.
We never got five minutes' notice during the five years this Party was in opposition from the Leader of the then Government, any time a loan was raised while we were in this House. What the Deputy says is, therefore, the severest criticism of the action of himself and his colleagues when they were the Government. I do not want to follow that example. I gave every bit of information I thought might be useful to the Opposition yesterday and to-day. I do not want to say any more on that aspect of the matter. This is not the time for that kind of talk and I deprecate very much the line taken by Deputy Mulcahy. I doubt if his Leader, who has longer experience and who is a wiser man, would approve of what the Deputy said or would have taken the same line if he had been here.
I gave the facts.
There are times and places for everything. I have no objection to the facts and I should be glad to discuss that matter with Deputy Mulcahy or anybody else at a suitable moment. It is true that to some, not knowing all the facts, the rate of interest offered here compared with the rates of interest offered on loans now on the market in England, would appear to be generous, but the loans now offered in England at 2½ per cent. are not comparable to the loan of £8,000,000 that is being opened on Saturday. Those loans are all short-term loans, and for short-term loans there is a big market. There are big wealthy corporations, big insurance companies and bodies of that kind, who have hundreds of millions available and who want short-term loans. There is a market there that does not exist here. That is known to everybody who knows anything about finance. The back-handed help I got from Deputy Mulcahy in regard to this loan——
It will sell the loan like hot cakes. It will be whipped up in 24 hours.
He did his best not to help. The loan is offered on reasonable terms. We have to take into consideration the fact that, as Deputy Norton says, those who have money want to sell their money and get their price. At the same time, the Minister for Finance has to bear in mind that he is imposing a burden on our people here in paying interest on these loans. The last loan was issued at 4 per cent. The rate of interest offered on the loan now being put before the public is considerably less— three-quarter per cent. less than the last loan. That is a considerable saving to us and a considerable loss to those with money to invest. There is no comparison proper to be made between the loan to be opened on Saturday next and the loans that are now on the market in England, offered by the British Government at 2½ per cent. for the war period.
There are very few places as safe as this country at present.
The loans are not comparable. This loan is offered on reasonable terms. I believe it will prove satisfactory to the person with money to invest and that the rate of interest is reasonable while not overgenerous. I hope it will be a success despite the cold water Deputy Mulcahy tried to throw on it.
I did not throw cold water on it, but on the Minister's approach to the matter.
Might I ask a question?
It would be inadvisable to initiate a debate.
In view of the Government's intention to introduce the Bill to establish a Central Bank, I wonder if the loan is opportune at this time?