I had, and indeed I still have, grave doubts as to the admissibility of some of the amendments submitted to this Bill, particularly Nos. 21, 45, and 66. Those amendments raise fundamental issues, issues which were debated on the Second Reading of the Bill. One of them was embodied in a multiple reasoned amendment which was defeated. However, in view of the general character of this measure, the Chair is reluctant to trammel discussion. I am, therefore, prepared to allow those amendments to be moved.
In Committee on Finance. - Central Bank Bill, 1942—Committee.
Section 1 put and agreed to.
SECTION 2.
Question proposed: "That Section 2 stand part of the Bill."
"The expression ‘service director' means a director who is in the permanent service of the State." What does that mean? Does it mean that he is a civil servant? We know that civil servants have been discovered to be dismissible at the will and pleasure of the Government. If it is intended to mean a civil servant——
It is.
Does it apply to a temporary civil servant?
I do not think so. It applies to an established civil servant.
And he may be dismissed at will, when we come to consider the removability of those officers afterwards. Does this refer to a civil servant who holds office at the will of the Government?
It refers to a civil servant who holds office under whatever conditions Civil Service appointments are made.
And the Minister agrees that civil servants can be dismissed——
They hold office at the will and pleasure of the Government.
I take it that this is a part-time position for the service director?
If a service director is appointed, yes.
Question put and agreed to.
Section 3 put and agreed to.
SECTION 4.
Question proposed: "That Section 4 stand part of the Bill."
On Section 4, I think it well to raise this point, because it may arise later on as affecting some of the arguments which we will hear on the other sections. It is proposed to repeal Section 62 of the Currency Act. Under the first Schedule, the whole of that section is to be repealed on the completion of the winding-up of the note reserve fund. I should like to direct the Minister's attention to Section 56 (4), where it is proposed to amend Section 4 of the Currency (Amendment) Act, 1930, by the substitution of the expression "currency reserve" for the expression "note reserve fund." As amended by sub-section (4) of Section 56. Section 4 (1) of the Currency (Amendment) Act, 1930, would read:
"Whenever during any half-year a profit arises on the realisation (whether by sale or maturity) of any capital asset of the legal tender note fund, the commission may, after making such allowance as it thinks proper for any depreciation which may have occurred since the beginning of such half-year in any capital asset of that fund, transfer from the legal tender note fund to the currency reserve capital assets in any one or more of the forms mentioned in sub-section (2) of Section 62, of the Principal Act equal in value at the time of such transfer to the amount of such profit remaining after making such allowance (if any) for depreciation."
It is proposed so to amend that. It is proposed to rely on that for certain things, while the section which is referred to there in this Section 4, and which is to be relied on for certain things, is being repealed under the first Schedule. It may affect some of the things that we will require to discuss, and perhaps the Minister will have it looked into the meantime?
Yes; I will have it looked into.
Question put and agreed to.
SECTION 5.
(1) On the appointed day there shall be and is hereby established in accordance with this Act a body to be called and known as An Bannc Ceannais or, in the English language, the Central Bank of Ireland, to fulfil the functions assigned to it by this Act.
(2) The bank shall be a body corporate with perpetual succession and an official seal (which shall be judicially noticed) and power to sue and be sued in its corporate name and to hold and dispose of land.
(3) The bank shall be conducted and managed in accordance with this Act by a board of directors consisting of—
(a) a governor, and
(b) three directors to be known and in this Act referred to as banking directors, and
(c) such number of other directors (not exceeding five and not including at any one time more than two service directors) as the Minister shall from time to time determine.
(4) The functions, powers, and duties of the bank shall be exercised and performed by the board of directors for and in the name of the bank.
(5) It shall be lawful for the board to do, by regulations made by the board, all or any of the following things, that is to say:—
(a) authorise the setting up of committees of the board consisting if one or more members of the board either solely or together with one or more officers of the bank;
(b) regulate the procedure and define the functions, powers, and duties of any committee so set up;
(c) delegate to any such committee the exercise and performance of any one or more of the functions, powers, and duties of the bank or of the board;
(d) delegate to the governor (including the deputy governor) or to any director or to any two or more members of the board or to any one or more officers of the bank the exercise and performance of any one or more of the functions, powers, and duties of the bank or of the board;
(e) impose conditions, limitations, or restrictions on the exercise and performance by any such committee or persons or person of the functions, powers, and duties delegated to them or him under this sub-section.
(6) Section 9 of the Ministers and Secretaries Act, 1924 (No. 16 of 1924), shall not apply to the bank.
I move amendment No. 1:—
In sub-section (1), line 29, to delete the words "An Bannc Ceannais" and substitute the words "Bannc Ceannais na hEireann".
The section proposes that there shall be established a body to be called and known as An Bannc Ceannais or, in the English language, the Central Bank of Ireland. I propose to delete the words "An Bannc Ceannais" and substitute the words "Bannc Ceannais na hEireann". At times, because it is the Irish language we are speaking, we are inclined to "Billy" and "Jack" and "Mick" our national institutions —as it were, to call them by their Christian names. We are talking in English of the "Central Bank of Ireland". I do not think there is one in 100,000 persons in the country who, when the central bank is set up, will talk about it as anything else but "The Central Bank", but from the statutory point of view it is to be called the "Central Bank of Ireland". If we are going to give the fully grownup description of this institution in the English language as "The Central Bank of Ireland" we ought not to colloquialise it in Irish. We should give it its proper description of "Bannc Ceannais na hEireann". I think "An Bannc Ceannais" is not a proper description. It is colloquialising our national institution, as it were, calling it by its Christian name. I think, from the statutory and legislative point of view, it is not right.
There do not seem to be many people interested in that point. I am responsible for the title myself, I must say, and I do not accept the suggestion that there is anything improper or undignified about it. I think the title in Gaelic is not likely to be used anywhere else but in Ireland, and I think "An Bannc Ceannais" is just as dignified a title as "The Bank of Ireland" in English, or "The Bank of Leinster," if there were such, or "The Bank of Munster." However, I do not feel very strongly on the point. I know that some of my colleagues feel like Deputy Mulcahy about it; they feel that it should be "Bannc Ceannais na hEireann." I thought the other was better; as Minister for Finance, I had the right to put in what I thought was better, and it is there. If anybody feels very strongly about it—I do not feel strongly about it—believing that it is dignified and proper, and the title that will be used, I am quite prepared to accept the amendment.
I ask the Minister to think over it.
I am quite prepared to accept it, if the Deputy feels strongly about it.
I do feel very strongly about it and if the principal supporter of the Institute of Advanced Studies feels very strongly about it, I should like to hear from him because I do not think he would overbear my feeling in the matter. I think it is a colloquialising of the language.
I do not see why the Deputy says that the use of "An Bannc Ceannais" is a colloquialising. We might have the title "The Central Bank" in English provided that it was quite clear that it referred to one particular institution. In another country speaking of their own central bank in their own language, they probably would not put the name of the country with it at all. It is really only a question of opinion. The only point is whether you want the shorter or longer title.
Is there not a Bank of England and a Bank of France?
Yes. In the case of central banks, if you have, so to speak, an international language, there is the question of distinguishing between them. Where a number of central banks are in question, it seems to me that you want to distinguish those of different countries, but I think there would be more distinctiveness in having it "An Bannc Ceannais". Far from colloquialising it, it would be quite distinctive.
We have the "Bank of Ireland" already.
I submit that there is a little more distinction added when we say "Bannc Ceannais na hEireann".
I shall think about it.
Is the amendment being withdrawn?
I was about to suggest that this is not the kind of assembly for settling these things, but rather an assembly for pointing out what we think about these things. I admit that in the ultimate we are likely to give as sound and as sensible an opinion on some of these matters, if we have anything on which to form a judgment, as any assembly; but I should not like to think that we were spending money on an Institute of Advanced Studies and not referring these matters to that institute, if necessary. I shall withdraw the amendment and put it down again on Report if the Minister will think over it in the meantime, but I have a sufficiently strong interest, in the matter to get a decision on it by putting it down for Report.
As a matter of fact, the point was considered from the purely linguistic point of view though not by the Institute.
What is the Federal Reserve Bank in America called?
It might be called the Federal Reserve Bank.
Is it?
I am not sure whether "of America" is added. It may very well be, but if it were the only bank in the world that was called a federal reserve bank, that would be quite sufficient to distinguish it.
The Federal Reserve Bank is a rather unique establishment. I want to know if there is a distinguishing addition, like "of New York" or "of America", to it.
I think there is "of the U.S.A.".
Although it is not as well known a name as "Central Bank"?
There are a dozen other reserve banks in the United States—State reserve banks.
I make this additional point that when we are all Irish-speaking again and talking about a central bank here, there and elsewhere, we shall have no other way of identifying our own central bank, except by the title, "Bannc Ceannais na hEireann."
Many of the others have very different names. They are not called central banks at all.
Amendment, by leave, withdrawn.
I move amendment No. 2:—
In sub-section (3) to delete paragraph (b).
Under this section, the Bill provides that the bank shall be controlled by a governor, three directors, to be known and referred to as banking directors, and not more than five other directors, and that control of the bank shall be vested in such personnel. It is mandatory on the Minister under the section to appoint three banking directors, and the object of this amendment is to eliminate that mandatory provision. The Minister has given us no evidence whatever that the appointment of directors of commercial banks is necessary for the continued existence of the central bank, and he has given us no evidence that they can render to the central bank any more assistance than could be rendered by non-commercial bank directors. If this amendment is carried, the Minister, if he still has a passion for appointing banking directors, may do so. The object of the amendment is to prevent the wrapping up in statute law of the responsibility for making it mandatory on the Minister, and inferentially on the Government, to appoint three banking directors to the control of the central bank.
If the Minister feels that he would like to see banking directors on the board of the new central bank, well and good. As Minister for Finance, he can make these appointments, but I suggest to the Minister that the fact that he has a preference for a certain number of banking directors as distinct from non-banking directors is no reason why he should for all time tie the hands of succeeding Governments, these hands not being capable of being freed from the standpoint of the selection of banking directors, except by an amendment of the law. It is quite possible that, tied up in the fashion the Minister is by the provisions of Section 5, he may be confronted with a position in which he may have to appoint, for instance, directors who are perhaps directors of banks in the Six Counties. or of banks in England, who may not look favourably on our efforts to establish a central bank here, particularly if the activities of that central bank are likely to or, in fact, do run counter to the desires of commercial banks here or elsewhere.
I do not know why the Minister wants to tie himself down to an obligation to appoint three banking directors. It seems to me that he would be in a very much stronger position if that obligation were not imposed on him by statute, and that he would have much greater freedom in the choice of personnel and, at the same time, be unrestricted in the matter of the appointment of banking directors, if he personally felt that the appointment of such directors was necessary or would contribute any substantial assistance towards the progress of a central bank here.
I think there is very good reason from the point of view of our history, and particularly our financial history, for seeking the assistance of three experienced bank directors, to help us to guide this new institution. The Currency Commission when it was founded looked for— I think, wisely—and got the help of directors of the joint stock banks of the country. The Dáil, in its wisdom, when it founded the Currency Commission, realised that there was little practical knowledge and experience of banking in the country to be got outside the banks and, in the way of direction, outside the directorates of the banks, and wisely, as I say, they sought that assistance and got it. These bank directors helped, during the years the Currency Commission has existed, to carry on that institution successfully; they guided it through many years of successful working. The savings of the country are deposited in the joint stock banks of the country and these savings are the foundation of our financial prosperity and of our success, whatever it is, in business enterprise of every kind.
The bank directors have, for a period of more than 50 years, carried on their banking institutions with credit to themselves. They conducted them through times of financial difficulty that had repercussions of a very disastrous, kind on banking institutions all over the world. Our banking institutions, owing to the fact that they were managed by experienced men, prudent men, wise financiers, during the times when banks were tumbling over and falling down, not alone by the hundred, but by the thousand in other countries, carried on successfully. Not one of them failed to meet its obligations and I think it would be a helpful thing and would enable this new institution to be well-founded in the confidence of the people, in the confidence of the depositors, who are, mainly, in this country, small depositors, if we have the assistance of bank directors. I am quite satisfied that it is a good and a wise thing to have their assistance and to provide for it in the Bill, as I propose to do.
This is an important matter, not from the angle of the sub-section we are discussing; but the relationship of the board to the Government and to the duties which the Government want this bank to carry out. I have before me what the Minister said on the Second Reading. It was this:—
"It is intended that there should be the fullest co-operation between the Government and the central bank. The Government does not, however, propose to interfere with the administration of the bank which will be independent in the carrying out of its functions."
That is the way the Minister placed it on the Second Reading. The board will consist of nine persons. The governor is to be appointed by the President on the advice of the Government. There will be three banking directors, two of whom will be chosen by the Government from a panel selected by the banks. There will be two civil servants, if the Government take the full leave given here, and there will be then three others, making the full board of nine.
When one looks at the method of removing people put on the board, the scheme seems to vary according to the various people. The governor is only removable because of permanent ill-health. Excepting that, he is removable only on the unanimous vote of the rest of the board. So far as the other directors are concerned, they may die or resign; but, leaving out these contingencies, they leave the board only if they become disqualified. The conditions that establish disqualification are set out in a later section and they include such thirigs as becoming bankrupt or ceasing to attend to their duties. On that make-up the board can be left independent, although the Government have the choice in the first instance, a free and unrestricted choice, of six out of the nine members of the board. Once they establish them, there is no way of getting rid of any of them. The only way of removing them is if they fall inside the clauses about disqualification.
I am quite satisfied that that aspect has been discussed and considered, but there is another important matter which may arise. When we come to discuss the clause in the Bill later on dealing with expansion or restriction of credit in the country, I hope we will not be told that the Government will have any interference in that, because, once your establish the board, the question of expansion or restriction of credit in the country depends on the bank in so far as it is monetary business. When we come to discuss the credit situation afterwards, we cannot be told, if the Government have certain ideas with regard to credit, that they can work their will on the board, because they cannot if this set-up is attended to.
So far as the Electricity Supply Board is concerned, it is possible for the Dáil to remove people inside their term of office for a cause stated. There is no such leave here. Once a director goes on the board, he serves his time, unless he suffers from incapacity due to permanent ill-health, or is disqualified for any of the reasons set out in the Bill. The Dáil does not retain such touch with the central bank as it does retain with the Electricity Supply Board, because, under the Electricity Supply Board Act, the Government at any time, in respect of the people appointed, can say: "For reasons stated we are removing this, that or the other man."
If the Minister does intend to have the central bank board completely independent in its functions, then I think it is wise to have these three bank directors. If the Government's idea with regard to certain big matters of policy, with regard, say, to such a vital matter as the expansion or restriction of credit in the country, is that they should have a say, then the complete tenure of office given to the members of the board would be possibly an undesirable thing. But, on the set-up of the board as it is. and on the Minister's phrase, accepting that the board is to be independent, I suggest that the Minister should stay as he is.
The Minister has not given any satisfactory reason why he should at this stage seek power to appoint three bank directors on the board. This section proposes to hand over the control of our monetary policy to a body of nine persons who will not be responsible to this House. I think it is an extraordinary proposal, particularly at a time like the present. It is extraordinary that the control of our monetary policy should be handed over to a body of outsiders who will not be responsible either to the Minister for Finance or to the House. That is why we view with very grave suspicion the proposal to include three bank directors under Section 5. If this was a genuine State bank providing for some kind of Ministerial interference with the policy of the bank, I would not have the same objection to the inclusion of three bank directors.
Answering some questions here in the House recently, in connection with the financial policy of the New Zealand Government, the Minister made many statements, among which was this, on the 16th April—column 624 of the Official Debates—dealing with the speech made by the New Zealand Minister for Finance in introducing his last Budget:—
"We have emulated New Zealand, as we have got similar results to those they got there, but there is a difference in degree."
I suppose that is correct: there is a great difference between the New Zealand Government system of controlling the monetary policy of the country and the control, or alleged control, that is supposed to be contained in this Bill, and particularly in this section of this Bill. I assume that the Government—if the Bill passes in its present form—will be able to find an Irishman who knows as much about this business as anybody else in any other country. I am sure of that. I dare say they will be able to find two service directors, if they decide to appoint two, who will have a general knowledge of banking operations and the conditions prevailing in this and other countries, and I doubt if these people would have anything to learn from the three banking directors who would become directors of the proposed central bank.
The directors of our banks are not supposed to know such a lot about banking. I venture to suggest that the principal officials of the banks know more about the operations than the directors. The directors of most of our banks are very busy men, associated with many of the key industries, and they devote only part of their time to the banking business. They meet once a week and devote, perhaps, an hour or two to the consideration of questions put up to them by the officials, who are really responsible for banking operations in the country. I know a couple of directors who are on as many as seven other boards of key concerns, and who naturally cannot devote much of their time to this business.
I dare say that, if the two service directors are ultimately appointed by the Government, they will be able to devote more of their time to the administration of this proposed bank than any of the three directors who may be appointed by the Minister. Does anyone think that any of those three banking directors will be a party to the doing of things that will be out of tune with the work of the joint stock banks? I cannot imagine their doing so.
The Minister was questioned here some time ago as to the reason why loans or overdrafts given by our banks, to people lucky enough to get them, cost 1 per cent. more in interest than was charged in Great Britain. The Minister replied by saying:—
"This is a question of tradition, and it is very hard to break down tradition."
This question of charging 1 per cent. more for loans given to the farmers and industrialists of this country has a very serious effect on the cost of production and on the amount of employment.
How does the cost of loans come under this section?
I am suggesting that, if you have the three banking directors on the board of this central bank, they will not agree to depart in any way from the present banking methods, and to that extent it would be a menace to the board of this bank, especially in view of the fact that Parliament and the Minister will have no control over the monetary policy followed by this board. The Minister said:—
"We have emulated New Zealand."
What is the position in regard to the control of banking policy in New Zealand? It is no harm to quote Section 10 of the State Reserve Bank of New Zealand. I wish we could get this into Section 5—I think that is the proper section—and then I would not have the same hesitation about supporting the Minister's proposals. Section 10 of the Reserve Bank of New Zealand says:—
"It shall be the general function of the Reserve Bank, within the limits of its powers, to give effect as far as may be to the monetary policy of the Government, as communicated to it from time to time by the Minister for Finance."
There is no such provision in this section of the Bill, and no right whatsoever is given to the Minister for Finance to interfere in any way with the policy of the board proposed in this section. The Minister is quite right when he says that the boards of the joint stock banks have carried on with credit to themselves. There is no doubt about that—and with considerable advantage to the shareholders of the joint stock banks and at the expense of the community as a whole. From the latest returns issued, it is evident that the average rate of interest paid to the shareholders is 12 to 14 per cent. That is certainly a credit—from the shareholders' point of view, at any rate—to the directors responsible for reaping such a rich harvest for their shareholders.
The Minister wants these banking directors to "guide these new institutions." That is what they will do, if they get their way. This Bill, as it now stands, makes provision for the doing of certain things by the unanimous wish of the board. Does anyone think that anything revolutionary will be done by the board while there are three banking directors to "guide these new institutions"—in the words of the Minister? I am inclined to think they will boss this new institution and, if they do, there will be no change whatever in our monetary policy. I am of the opinion that this bank and the governor and directors of this bank will stand between the people of this State and the preservation, maintenance and feeding of the people. The monetary policy of every country in the world will change, no matter who wins this war, when the war is over; and we should be very careful to see that the control of our monetary policy is not handed over, at such a period in the history of the world, to people who will not be responsible to this House or to the Minister.
The Minister talks about "experienced banking directors." He will have only limited power in the selection of the three banking directors proposed in this section of the Bill. If the Bill is passed in its present form, the Minister will merely have the choice of taking three from a panel of six submitted to him by the joint stock bank directors of the country. I daresay that the directors of our banks—those who are Irish nationals or residents of this area, as well as directors who live in the Six Counties —will have some say in the selection of the three directors to be included on this board. Is it right that that should be so? Is it not right that the Minister, if he is to exercise any control, should have the full say in the selection of the three who will be put on this board?
I and the members of this Party are entirely opposed to the proposal contained in this section, and we could only think of considering a proposal of this kind in circumstances where the Minister for Finance himself would have some say in the control of the monetary policy of the proposed board. I hope the Minister will reconsider seriously the terms of Deputy Norton's amendment.
There are several other amendments which do not aim at the deletion of this group from the directors, but which aim at a different set-up or different numerical strength. Would it be possible to have them discussed together?
Would there be subsequent duplication of the debate on each such amendment?
There would, if they are taken separately. They are amendments Nos. 3, 4 and 5.
The co-related amendments to this section might be debated together, if the Committee so desires. It would not be feasible to include amendments to later sections.
Amendments Nos. 2, 3, 4 and 5 deal with numerical strength.
I move amendments Nos. 3 and 4:—
In sub-section (3) (b), line 39, to delete the word "three" and substitute therefor the word "two".
In sub-section (3) (c), line 41, to delete the word "five" and substitute therefor the word "two".
The proposal embodied in amendments Nos. 3 and 4 is for a smaller board. As the section stands, it provides for a board of nine—a governor appointed by the Government, three from a panel of bank selections—presumably names, of which the Minister will select three— and five others of whom not more than two are to be service directors. In my view, a board of five would be sufficiently big to do the business that is likely to fall for consideration by a central bank under any heading. As it is unlikely that the business would take long to transact, it could very well be discharged by a board of five. The cost is considerable in the difference between nine and five.
Assuming that the board consists of nine persons, it is likely that the cost of the remuneration and fees paid to the members would be in the neighbourhood of £6,000. Assuming further, that one of the implied intentions of the Minister fructifies, the cost under that heading of the nine would be £7,000 because it is contemplated in one instance that the person nominated by the Minister will devote his whole time to the business of the board, and I presume in his case the remuneration paid would be £1,000 or £1,200. In that case the cost would be £7,000 per annum. Under the proposal in the two amendments the cost ought not to exceed £3,700. That is a saving of over £3,000. It is the Minister's responsibility to prove that we will get value for the expenditure of that £3,700. I do not know that we would. We heard from Deputy Davin a good deal about how banking boards are run. He knows all about that.
I do not.
I thought you did, unless you were speculating. The Deputy knows banking directors. He is well informed as to the length of time they spend at their work.
Yes.
His statements do not exactly fit in with what one banking director informed me on that subject. He has to spend several days on duty at that work on occasional weeks. The business of a bank director is very different from the business that will fall on a director of the central bank. It would be of some advantage to the House to know what length of time the business meetings of this board will occupy. I have the greatest doubt if it will occupy more than four hours a week. If it only occupies that length of time it is obvious that a board of five can do the work. There is a later section on which we can deal with the division of responsibility with regard to the board. So far as this work is concerned, it is more or less with investments, in having money at call on short notice, and is not comparable at all to the business that would devolve upon a bank director. If there is anything comparable let us hear about it. Bank directors deal with applications from customers for advances. There is no such business here. The banks will need on occasions to have money on call at short notice and to buy or sell securities. Although there is provision in the Bill for what is called "open market operations," it is very unlikely that they will transpire with any great rapidity. The business is altogether dissimilar. In one case you have the whole building up of financial institutions, and in the other case merely regulating investments and issuing currency notes. That does not devolve on this board, which is more concerned with administration than with control or anything of that sort. What are the circumstances of the last few years? This Government was not very long in office when the term of office of one of the members of the Currency Commission expired. Was anyone appointed in his place? No one. Some months ago another member died. Has anyone been appointed in his place? Not that I am aware of. So that the present strength of the board consists of five persons. That is the situation. In the Report of the Banking Commission, which went very carefully into every question in connection with currency, banking, economic development background, and everything of that sort they say:
"We have been informed that there is at present a vacancy on the Currency Commission, and that this vacancy cannot be filled, as the law stands, for the period within which nominations should have been made was allowed to lapse...."
The date of the publication of the report was March 23rd, 1938—four years ago. For four years the Currency Commission operated with a board of six persons, and it has been operating for some time with a board of five persons. If there is a case then for the extra expenditure of £3,500 we are entitled to hear it. With regard to what Deputy Davin and the mover of the motion said about knocking off the banking members I do not agree with that. They made no case for that. I think they would very much resent Civil Service experts being brought in to run one of the trade union organisations, and that they would not agree that a civil servant is so adaptable that he would soon become accustomed to the work of trade union organisations, that his knowledge of men and things would be found as great as that of Deputy Davin and that his wonderful adaptability would make up for his lack of experience. It so happens that nobody is so experienced in the practical work of finance, money and banking as bank directors.
What about the officials?
It may be that the officials know more about the details than the directors, but it is the directors who have to give the decisions and it is on them the responsibility lies. A board of five is, in my opinion, quite sufficient for the work to be done. We have not so much money that we can afford to expend public moneys unnecessarily on a large board doing work which could be as well done by a smaller number of persons.
Any Central Bank Bill could be approached from a variety of viewpoints. We were, to a certain extent, influenced by the position as we found it. There were three bank directors on the Currency Commission. The number three was chosen because it fitted in very well with the banking organisation here, and afforded representation to the variety of interests in the banks. From what I have heard them say, Labour Deputies would make the central bank a Government, State-controlled affair; the Minister for Finance would, probably, be chairman, and the whole direction of the bank would be closely in accordance with Government policy. The bank would simply serve the policy of the Government of the day. That is not the basis on which this Bill has been framed. To a certain extent, we were influenced by what we found, and we had no desire to make any changes except where those changes were obviously and clearly for the general good. The number three had been found to be suitable. If there were to be bank directors at all on the board, it was felt that it would be desirable that that number should be retained.
A good case could be made for having no bank directors on the board. On the boards of quite a number of central banks, the commercial banks are not represented. It is really for the general direction of the credit policy of a country that a central bank is set up. Consequently, if you had the commercial banks represented on it, it might be suggested that these representatives would have regard to their own banks' profit-purposes rather than to the general interest. This Bill has been framed on the basis of an attempt to get co-operation between the commercial banks, on the one hand, and the central bank, as functioning for the general welfare, on the other hand. If it should prove, in practice, that that does not happen, and that co-operation does not exist, then the whole of the scheme may have to be changed.
For the present the Bill is based on the faith and belief that we shall get in large measure, in the operations of the central bank for the general welfare, the co-operation of the commercial banks. If there is to be a fight at any stage, then the Parliament and Government of the day will have to face that fight. At present we do not feel that any such fight is threatened. Our hope is that we shall get co-operation. Reference was, I think, made to the fact that we have removed the banks from the position of being shareholding banks. That was to make quite clear that this central bank was an independent national institution and that it was not, as the word "shareholding" might suggest, owned by the commercial banks. We have here provision for six persons to be chosen by these banks—not exactly representatives. I think that the banks can send up on the panel of six any names they choose. It is not specifically laid down that the persons on the panels must be directors of the commercial banks. The six names are to be sent up and the Minister is to choose three from the six. From the point of view of the board of the central bank, there is a definite advantage in having on that board persons who have day-to-day knowledge of the working of the commercial banks—the problems they have to deal with, the position in regard to demands for credit, the type of credit demanded and so forth. They will then have firsthand information in their own personnel on which they will be able to base opinions and they will not have to seek that information elsewhere. On the basis of this Bill, I think that there can be no objection—there is possibly an advantage from the point of view from which we approached the matter —in having on the board persons who are likely to know the day-to-day activities of the commercial banks.
Would the Taoiseach paint the other picture and say what the other three directors are intended to be representative of?
We deliberately left the matter open because, as the Deputy will realise, there is bound to be considerable difficulty in getting persons for this board, having regard to the responsibilities involved, which the Leader of the Opposition seems to be at pains to minimise. In most countries the central bank is one of the most important institutions, and the responsibilities of the members of the board are very heavy. Their actions could have very serious consequences regarding the welfare of the community as a whole. The responsibilities of the members of this board will not be light. If conditions are steady, so to speak, they may not have to spend a tremendous amount of time in transacting the routine work of the bank, but problems of various kinds will come before them, and to these they will have to give considerable attention. The nature of their duties will be much more clear when we come to deal with the broader questions regarding the functions of the bank. When considering these questions, I think there will be few who will refuse to admit that the responsibilities of this board will be fairly great. If a body has to decide very big questions, one likes to see that body of fair size. I have seen questions in which it was very, very difficult to know on which side the balance lay, which was the wiser of two courses that were being debated. Where there are big issues at stake there is an advantage in having the number fairly large. The Minister for Finance has here a list of central banks in other countries, and the numbers on the boards. The reason for their being so large is obviously because the decisions that have to be taken are of such importance that they must have a fairly large number to ensure that a variety of points of view are put forward, that different aspects of the question are apprehended, discussed, and so on. In the Argentine there are 12 on the board of the central bank; in Australia, eight; Belgium, nine; Canada, 11; Chile, ten; Denmark— curiously enough—25; England, 24; France, 20; Netherlands, 15; Norway, 15; Portugal, ten and Switzerland, 40.
I have no doubt whatever that the people in the Netherlands and elsewhere are as anxious about the pounds, shillings and pence that are spent on any remuneration as our people are. But, considering the magnitude of the questions and decisions they may have to take—it practically concerns the whole economic welfare of the country —I think we would be very unwise to cut down the number to five or to a small number. It may be even questioned whether the number, nine, is sufficiently large. If you want to maintain a balance and to make quite certain that it cannot be said that the central bank is being run by the commercial banks in the interests of the commercial banks, and you take three as the basic number, I do not think you can have the number less than nine. Whilst in our circumstances, it is right to have the commercial banks represented on it, I think it would be unwise to give them such a preponderance on the board that there would be any suspicion that the decisions of the central bank were taken solely in the interests of the commercial banks. When you weigh the various balances, I think the House will be satisfied that the number, nine, as the maximum—the Minister is not bound to fill the whole number if he does not choose—is not too high.
The less he appoints, the greater will be the strength of the three banking directors.
That is true and, from that point of view, it is possible he will appoint the whole nine. I do not know. A decision on that matter has not been taken because, obviously, a great deal depends upon the material that would be available, the qualifications of the persons you wish to put upon the board, and so on. So that, there is a certain amount of latitude left; but the number, nine, whether you take it as inevitable that the nine will be appointed or whether you take it as being the maximum, does not appear to me unreasonably large. I think it is very easy to be penny wise and pound foolish in matters of this sort.
I take it that I am more or less speaking to the amendment which I have down on this section.
Is the Deputy going to support ours?
Like the Taoiseach, I have an open mind. Deputy Cosgrave has stressed the question of economy.
I would like to approach it from a slightly different angle. When one considers this question one wonders who is to manage the central bank. The board will consist of five persons, plus the governor and three banking directors. The three banking directors, at least, will have a knowledge of banking. Most of us think that banking is a highly technical and complicated subject. From some of the remarks of previous speakers one would imagine that to get a suitable person for managing the bank one had only to go outside on the street and stop the first person between the ages of 25 and 60. If that is so, most of the people in banking have spent their lives in vain. I think the Banking Commission in their report recommended a higher percentage for the banking directors than is suggested in this Bill. I think in the control of the affairs of the Currency Commission the banking directors had a greater proportion. The Taoiseach has stressed the point that this is not a Government bank. I think he is very wise in that. The people are not prepared for what has happened in other countries where the banks have taken control of the finances of the country, with disastrous results in certain instances. We have heard complaint that we do not emulate New Zealand and other countries that have shown a very forward policy in connection with banking. It would appear as if the banks here are under some nameless suspicion in that they do not display the progressive attitude that is shown in other countries. Some other countries have undoubtedly shown a more progressive attitude but that has led to dangers of its own. There has been the financial crash in America. There have been lesser crashes in other countries. Certainly, it seems as if the only charge that can be levied at the banks in this country is that they have not had a financial crash. That seems to be a nameless charge that is hoarded against them.
I would like to ask the Minister why he desires to hand-pick the directors. I think the manner of election which is suggested in a later section—and I am only referring to it in passing—is unnecessary and derogatory. When one considers that there will be six directors nominated by the Government and three others hand-picked, it is quite conceivable that, out of nine directors considering a matter, six may be totally unprejudiced by any previous knowledge of the subject that is before them. I think that is the plain way to put it.
The reason that I have suggested a modest reduction of the directors from five to four is that I am envisaging a possible position where the three banking directors might find themselves in confict with the four directors nominated by the Government. I shall not refer any further to the three directors having already gone through the Caudine Forks that the Government would no doubt exercise in their selection. Say that they sit down to consider a problem which is very important from the point of view of the central bank. The four directors vote one way and the three banking directors vote another way. If the chairman votes with the three banking directors, there would be a tie and the chairman would have a casting vote. I should like to suggest that, in that case, the matter would be decided in the best interests of the country by those who knew most about banking affairs and by a governor who, although he would be selected by the Government, might feel it his duty to side with the banking directors. If the present numbers are adhered to, the proportion will be five Government directors to three banking directors, these latter being supposed to know most about the question under review and, as far as the general public are concerned, they will put the blame on the banking directors should anything untoward happen. They will say that if the banking directors did not know, they ought to have known; but the position is going to be, if the numbers suggested in the section are adopted, that they never can get anything done which is opposed by the other directors. That is a most unfortunate position and may possibly lead to the banking directors more or less handing in their guns and saying: "Well, there is no good in our making any protest. These people sit together and vote together as a solid block."
I should like to suggest to the Minister that, first of all from the point of view of proper control, and secondly, from the point of view of confidence by the general public, it is very desirable that the position should be modified. I am not suggesting that the banking directors should be put in absolute control, but a position could arise where the situation might be extremely critical if one of the nominated directors or the governor sided with the banking directors. In that case the governor would have a casting vote. I should like to press this amendment strongly for the consideration of the Minister and the House.
Neither the Taoiseach nor the Minister for Finance has given us any convincing reasons as to why they should insert in this Bill a mandatory provision under which they and their successors are obliged, unless they alter the provisions of the Bill, to appoint three banking directors to exercise their degree of control over the new central bank. If the Government feel disposed to appoint banking directors, why can they not do it? Let this Government do it, and let that be the measure of their appreciation of banking directors as such; but why not leave it open to some other Government, or open to experience, to decide the question as to whether the appointment of banking directors is desirable or not? In this section, the Government are making the appointment of banking directors mandatory. By the acceptance of our amendment the Government can still do that by the Minister simply naming three directors, but why do the Government tie their hands in this way to appoint three directors? Our view of banking directors is that they are not the indispensable functionaries envisaged by the Minister for Finance. The Minister for Finance will probably say that I am wrong in this matter and that he is right, but let me tell the Minister for Finance what the previous Minister for Finance thought of banking directors and Irish bankers in 1931 when he spoke of troy ounces and our loss in troy ounces owing to the way in which we were anchored to British sterling. Here is the report of a speech by the previous Minister for Finance as published in the Irish Press on the 29th September, 1931:—
"Even before that Party went into the Dáil its members had directed public attention to the dangers to which our people were exposed by reason, not only of our attachment to sterling but of the short-sighted policy of the Anglo-Irish banks in investing their depositors' funds in British securities.... The Free State Government, under Mr. Cosgrave, has been on the side of Britain. The Anglo-Irish bankers have been on the side of Britain. The Currency Commission has been on the side of Britain."
So the former Minister for Finance, who enjoyed the Government's confidence as Minister for Finance for eight or nine years, was of opinion that Anglo-Irish bankers were on the side of Britain and that the Currency Commission was on the side of Britain. With that kind of certificate before him and before the Government, with their ability to get the living testimony of the then Minister for Finance that this was so, the Government proceed to embark on a Bill which definitely ties them to appoint three banking directors who according to a Minister for Finance, who held that office for nine years, were on the side of Britain and against the best interests of the Irish people. The Currency Commission according to the former Minister for Finance was also on the side of Britain. It is from that group that this Minister for Finance and this Government are proceeding to appoint three banking directors. Why? Was what the former Minister for Finance said in 1931 all nonsense? Was it just said so that the boys at the cross-roads might cheer at the prospect of the destruction of the Anglo-Irish bankers and the emergence of financial freedom, or did he put it forward as the considered view of the Minister for Finance and his Government because, of course, in this speech the Minister for Finance spoke not merely for himself but for the whole Party? He said they realised that not merely in 1931 but before they entered the Dáil. What the Minister is now going to do is to anchor himself definitely to that collection of people—I use the words of the former Minister for Finance—who have been solely on the side of Britain and have done everything they possibly could to sabotage the efforts of the Irish nation to obtain financial independence. Can the Minister for Finance tell us why it is necessary to anchor himself to a liability to appoint three banking directors by statute? He can do it if he wants to, but before doing so he should ask his predecessor what he thinks about banking directors at the present time, and if he is still of the opinion expressed in his speech reported in the Irish Press in 1931. If after doing that, he still proposes to appoint three banking directors one can only begin to wonder where the Government stand in relation to this whole question.
The whole purpose of this Bill is simply to set up a central bank, and a central bank of a type that is not in existence in any other country in Europe, and that is not tied down to doing the things in any other country in Europe that this central bank is tied down to doing in this country. Our view of a central bank definitely is that we want the central bank to be a Government organisation, with the directors appointed by the Government and answerable to the Minister for Finance who, in turn, will be answerable to Parliament for the financial policy of that bank, which, in effect, is a reflection on the financial policy of the Government. Here, however, we are setting up what is virtually a private bank masquerading as a central bank, with complete control of our monetary policy and of our entire credit policy. It will not even be responsible to the Government, and the Government do not even purport to take power to be responsible to Parliament for the activities of that central bank.
In Section 6, then, we come along and find that certain functions are given to the bank—simply standstill functions, functions to carry on as at present, and no more functions than that because, of course, the verbiage of Section 6 deceives nobody. Is it any wonder that The Economist, commenting on the present Bill, said that the proposed central bank is likely to be little more than the existing Currency Commission under a new name, and that it can be more accurately described by the old title than by the new one. The Economist, in the same issue, took pleasure in the fact that there was no significant change in the Bill: everybody could go asleep and be perfectly happy that the currency of Éire was still based on sterling. Then the Times Pictorial, which also comments on the subject, assured its readers that the sterling link remains unbroken by anything in this Bill.
We do not believe that you are likely to effect any radical change in either the economic system or the monetary system of this country by merely rechristening the Currency Commission under the name of the central bank and merely transferring to it functions which, in the main, are functions similar to those possessed by our Currency Commission at present. Our view is that if there is to be any radical change in our economic policy and economic development here, it is essential that present banking practices, which have given us poverty and misery and an appallingly low standard of production as well as an appallingly low standard of living, shall be altered unless we are going to tread the same kind of desolate road that we have been treading so long. The Government have given no reason whatever why they should insist upon being tied to appointing three banking directors, and my fear is that the appointment of these three banking directors in a board of nine people is bound to have a very considerable influence on the policy of that bank in that sphere in which the bank may have some powers somewhat different to the powers which are conferred on the Currency Commission at present—and, if they have these powers, they are of a very microscopic variety.
I think the Government ought not to bind themselves to be obliged to appoint three banking directors. As I said, this amendment of ours is related also to an amendment which we are moving to Section 6, our viewpoint, frankly, being that we do not want the Government to be tied to the appointment of banking directors. At present, there is no evidence that they are necessary for a bank of this kind, and there is always the grave danger that they will be concerned with existing banking practices, and that they will hinder and stultify the efforts of the central bank to break new ground. Having got rid of banking directors, as such, and of the practices which they symbolise, we want to see the Minister for Finance giving direction to the bank, under public control, and that he, in turn, will be responsible to Parliament for the activities of that bank and for the direction of the whole financial policy of the nation.
Deputy Norton referred to some previous statements by members of the present Government. I am as ready as anybody else to believe that it is very hard to get an idea into the heads of the members of the present Government, but I think that they ought to be given some chance of learning something from the experience of past years, and I do not think Deputy Norton's criticism was relevant to the present business. What I want to speak about—and I have only a few words to say—is the question of the size of the board of control. The Taoiseach, I think, suffered from a confusion of ideas, judging by his speech. Having listened to Deputy Cosgrave, who stressed the amount of business that this new board of control had to do, he straightaway confused that with the responsibility and the importance of the work. Now, that is all right if it were a question of a sum in addition, but surely there is an immense distinction. Deputy Cosgrave did not deny the sense of responsibility that was required from this board. What he said was that the amount of time required would not be great in comparison with that required from an ordinary banking official. I was amazed to hear a person in the Taoiseach's position of responsibility taking up the line that you increase the sense of responsibility of any body by dissipating that responsibility over a larger number of people. I think you do nothing of the kind. You may make them a bigger debating society, and I think that that was all that was in the Taoiseach's mind, but certainly you diminish the sense of responsibility of the members of the board. If you want an increased sense of responsibility, a smaller board is preferable to a larger board, and what the Government ought to aim at, if they do not accept Deputy Norton's view of their Bill and if they believe that this is an important measure, would be to limit themselves to a board of a small number of expert people, and to realise that the more you increase that board the less sense of responsibility there will be on the part of each individual.
One would think we should have a dictatorship, judging by some of the statements that have been made.
We have it already.
We have too much of it, and it is completely inefficient. It is the most inefficient dictatorship that I ever heard of or experienced. We have that already, but if you want a board, then the sense of responsibility is certainly increased on the part of the individual members if you diminish the number. It is quite obvious, however, that what the Taoiseach has in his mind is a number of men who would not have the responsibility but who would simply discuss it and spend their time in discussing it—a debating society. I do not think that is good business. With regard to Deputy Norton's point, I cannot see why he is excited about the matter, because if his view of the Bill is correct it does not seem to me that it matters who you put on this board.
The Deputy should see our amendment to Section 6.
Yes, but unless you get that amendment it does not matter who is on the board.
Or whether or not there is any board at all?
Yes. I cannot think that that is seriously meant, and I would put it to the Taoiseach to consider whether a smaller board would not have a better sense of responsibility. I do not want to stress it any more, because I am afraid that if the Taoiseach gets up again to meet our point of view he will propose a board of 24, and he nearly did that in the course of his speech.
The only reason I am standing up now is to see whether we could get rid of the confusion which the Deputy is introducing into this. He wants to confuse the responsibility which I said would fall on that body, the board, with a sense of responsibility of the individual members. I did not speak of a sense of responsibility of the individual members. I spoke of the responsible work which will have to be done by the board. I am perfectly certain the majority of the members of the House will agree with me that——
Of course, they will.
——if you have responsible work to be done, and if important decisions have to be come to, it is desirable that the number should not be too small. In the Constitution we have a limit as to the number who will be in the Government. It is not to be less than seven. I do not know what the number in the previous Constitution was, but one of the obvious reasons for that provision is that if important decisions have to be taken it is desirable that they should be approached from the viewpoints of different individuals, and that the number should not be too small. When Deputy O'Sullivan talks about a sense of responsibility in individual members, I cannot see what his point is.
If you have responsible work to be done you do not diminish it by reducing the number.
Each individual member ought to have a sense of the responsibility of the work to be done.
I want to know what the objection is to appointing three directors other than from the commercial banks. Deputy Cosgrave said that the strength and integrity of the central bank will be based on the commercial banks. He told us about the little amount of work that will have to be done by the central bank. We believe that it should be the principal bank in the country. Deputy Dockrell, in trying to make little of our views about banking and of the responsibility of governing the country, said that the view seemed to be held by some people that you could go out on the street, call in any young fellow and make him a bank director. I think that was treating the matter too lightly. The Taoiseach talked about co-operation between the commercial banks and the central bank, but does he or anybody believe that we are going to have genuine co-operation between them since the central bank will be supposed to look after the welfare of the people of this country?
I do not believe we will have it. The Taoiseach also said that if there is going to be a row we will have to face it. Deputy Cosgrave spoke as if we all looked upon bankers as some evil influence in the country. We are not concerned about bankers but about the system they are operating. There are some facts that we cannot blind ourselves to. Take the record of the banks operating in this State and in Northern Ireland over the last 15 years, leaving out last year. After making provision for all bad and doubtful debts, and we all know what they mean, the net profit made by the ten banks operating in the whole of Ireland over that period, leaving out, as I have said, last year, amounted to £22,406,000, while their paid up capital was only £9,000,000 odd. In other words, they made over that period a net profit that was more than double their paid up capital.
Deputy Cosgrave tells us that there is a danger of upsetting the functions of the banks in this country. I would like to remind him that, some years ago, both he and I were members of a deputation that was asked to interview certain people with a view to getting money to build houses for the poor people in Cork. We were prepared to offer 4 per cent. on the money needed for that purpose. A short time before that the Cork Corporation floated a loan of £250,000 at 4 per cent. The Deputy knows that from the banks in this State we did not get as much as a shilling to enable us to build these houses, even though we were prepared to give them 4 per cent. on any money they might advance for the purpose. We had those poor people living in vermin-ridden houses, and that had been going on for years. The reports of the medical officer of health testified to that. Does the Taoiseach think for a moment that responsible men in the commercial life of this country could not be got to act as directors of the central bank instead of having three representatives from the commercial banks on it? Deputy Cosgrave in his amendment proposes that whatever decision is come to by the board it must be unanimous before any change can be made. In other words, one may say that there will be no change, because I am quite satisfied that the directors appointed by the Government and the commercial banks are not going to do anything that will be likely to upset the operations of this institution. Even though changes may be necessary in the interests of the country, they will not be made since one bank representative will be enough to prevent them. That is one of the reasons why we object to the commercial banks having three directors on the board.
The amendment raises two issues which cannot be properly discussed because the Government have not yet told us what their intention is with regard to the setting up of the board in its entirety. There is the issue whether the board should be composed of nine or five members or some number in between. The second point is that whatever the number turns out to be, the Legislature should insist that a certain number will be selected by the Government from a panel put up by the banks. It is only fair to say that the people put up by the banks need not necessarily be bankers. They may be anybody. There is hardly any doubt, however, but that they will be representatives of the banks. If I could get a clear idea of the functions of the board, and some better appreciation of the type of people who are to go on it I could speak on this with more decision. I think it would be better to have a small board of full-time experts than a large number of people who will be looking forward to a continuance of membership. The better idea, I think, would be to have a smaller number on the board with a longer tenure of office. If that were done it might relieve Deputy Norton and his colleagues of some legitimate fears.
With regard to those to be nominated in part by the banks, there is no doubt that if a person is a nominee of one of the banks—if he has to resign his directorship—and is given a three or four year period of office as a member of the board with the likelihood that he will be going off at a particular time, he will, during all the time that he is on the board, be thinking in terms of his own bank and of his services to that bank. On the other hand, if you set up a board with a small number of first class experts, even though they may come from what my friends on the right here might call a bad area, it is quite possible that if they are given a long tenure of office, they will divorce themselves from their old-time associations and look upon the functions of the central bank in a different way from those elected by the other method.
I do not share the views of the Labour Deputies or their suspicions about the people whom the joint stock banks may put up. I think these people know their business and have conducted it in a way that has earned the commendation of most people who have looked into the question of banks in this country. Even though certain individuals may have been held up to public odium and scorn, it is not likely they would find themselves on the banks' panel. From that panel it ought, I think, be possible to get three good representatives. I do not think that their old-time associations will hamper them in any way. They would hamper them less if they could be given the expectation of a longer period of office on the board of the central bank.
They do not have to resign.
No, but their period of office is to be a limited one.
They can be reelected.
Of course they can. I understand that the general view that the world is taking of central banking institutions is that they should have their policy under public control, but that they should have their day to day policy independent. Is there any suggestion here of public control? I do not see it to any great extent. More than any other opinion expressed, I share the opinion which Deputy Norton has expressed with regard to the Bill generally, and in fact what the Minister for Finance has expressed in comparison with the Taoiseach. The Taoiseach expressed the view that the Central Bank will be one of the important institutions of the State. The Minister in charge of the Bill rather threw cold water on that.
Only on the present-day practicalities.
I think the Minister for Finance knows the details of the Bill, and the Taoiseach knows the theory of central banks. But the modern theory of central banks is not carried into this measure or anything like it. It seems to me that we will have to make up our minds before this Bill goes through on a very big and important matter—people who may have had different views five or six years ago could be excused for having advanced views on it nowadays—and that is the question as to whether the provision of credit is a public function or not. If you make up your minds that it has to be approached in that way, then this Bill is radically and hopelessly wrong. If the provision of credit is to be a public function, there ought to be some more association of Government control through this House with the people on the board.
As the Bill stands, notwithstanding the high-falutin' language, when you cut that out and get down to the trammels put on the board of the central bank and the detailed provisions of the Bill, I think the Minister for Finance is right in saying that what happens in the country for the next generation will not depend on anything this bank does, but on things outside.
I do not know whether the Government, in introducing this Bill, had another idea. I half expected them to say that they recognised the functions of the central bank as established in this country were to be limited mainly to the provision of short-term circulating of capital to trade and industry. If they have any idea that long-term investment is something that the Government ought to control as a matter of Government policy with regard to the reconstruction and guidance of industry, they have no control and very little association. That is why at the beginning I called attention to the fact that they are establishing under this section an independent board. You are throwing them out distinctly at arms length from the Government, not allowing even, as with the Electricity Supply Board, the Government to say: " There is a policy being run. It is being sincerely run; but it is not ours, and it is not what we think the country needs, and we must replace it." There is no such provision here. I am told that we can get that by amending the Bill. That can always be done. That is inherent in every legislation. It does not bind another Parliament.
The Government have not told us that they have any plan outside this Central Bank Bill for anything in connection with industry, or agriculture, or reconstruction, or the development of an undeveloped country, so far as it depends on the exploitation of monetary resources. The Government are setting up this board of the bank in a narrowly restricted way and throwing them out, and from that moment this House and the Government have no touch with them. In these circumstances I agree that it is of little matter what number is on the board or whether they are all bankers or a sort of industrial, trade, or agricultural people. I think the Bill might be enlarged to give some better function with regard to credit and some better junction, although I recognise it to be dangerous, with the Government and with what the Government elected by the people will regard as the necessary functions of a central bank. Then I would be interested in the question of how many men ought to be on the board. If the bank is to be given proper functions, I should like to have some representatives of the banks on the board, because they will know banking work. I should like to have a number of people not so closely tied up with the banks—I do not mean suspicious of the banks, but not interested in the mechanism of banking. If that situation is to be accepted, I should like to see a number of full-time experts as well, to whom you would more or less say: "If you behave properly and carry out your functions well, then you are more or less there for life or until some age limit comes into operation." If you are to have a central bank and to have appointed to the board a large number of people, this idea of circulating the representatives will get going amongst the commercial banks. If you are to have a big number of them, some of them will certainly be thinking in terms of when they will get back to their own bank directorships and the background will loom up very impressively and inevitably in their discussions.
No case was made by the Taoiseach when speaking against my proposal. The mere fact that the Bank of Switzerland has 40 members on the board is not an argument that we ought to consider. It is to be hoped that there is no bank director listening to this debate this evening because he would laugh at the House. If the picture drawn from the opposite side of the House and from the Labour Benches is true, bank directors meetings are debates and discussions. They are nothing of the sort. They are mainly decisions, responsible decisions, and I have never denied it. That does not add to the length of time it takes to do the work. What is the explanation of not having appointed an extra person on the Currency Commission since the Banking Commission's Report brought the matter to the notice of the Government four years ago? They have been operating with five members for the last 12 months. The case made that the central bank will have control of credit to my mind has not been provided for in the measure, good, bad, or indifferent. So far as the provision of credit is concerned, the Banking Commission's report says that there is plenty of credit. They could not get from any responsible authorities representing business a complaint that there was not sufficient credit.
What is the cause of the emigration then?
Yet the Cork Harbour Board could not get £50,000.
They could get the £50,000. They could have got it from either of two banks. The two banks were in competition to give it to them. For some time past, I have been following the minutes of the proceedings of that board and I know that there were two banks in competition to give them the money. Originally, one of them required security and subsequently they offered it without security. In any case, it is a question of fact, and we are not going to argue a question of fact here. It is there in black and white on the minutes.
We got the £50,000 but only when we put down £37,000 of investments. They would not give it until we got an order from the Minister to earmark these investments as a security.
You can introduce any number of irrelevancies you like. When I had experience of local authorities, the local authority could discharge its treasurer, which meant its bank. The local authority can get an overdraft from a bank on the responsibility of the bank. But the local authority could leave the bank and leave the overdraft behind it.
It is not so now.
It was so when I had something to do with a local authority.
It has been changed since.
It may have been changed since. Deputy Hickey mentioned the case of the Cork Corporation having difficulty in floating a loan some years ago at 4 per cent. What I am stating here are facts—they are not arguments. I am not briefed by the banks; I am not speaking for the banks, and I am speaking according to the facts. If money is dear, neither the Cork Corporation, the Dublin Corporation, nor the Government can get it cheaply. If money is dear, it has a price in the world markets and it can get it and it must follow it, and, if it does not follow it, you have these catastrophic financial crises that occasionally disturb business.
It is a tradition.
There is very much more than a tradition. We can all rig ourselves up in immaculate clothes, and say that the responsibility for deterioration in employment, for emigration and everything else, is on somebody else's shoulders. Of course, people like members of the Labour Party, and people like those over there, now that they are gaining a little experience, find their ready scapegoat in the banking system. What public works were there in this country since this State was founded for which, when public money was required, it was not forthcoming?
A 5 per cent. issue at 96.
Precisely; that is the First National Loan.
Why was it issued at 96?
There is no use in asking a question of that sort unless you wait for the answer. The First Loan of this State was started within 18 months of the Civil War—96 at 5 per cent. At that time, what was the British Government borrowing at, and they had no civil war? 5 per cent. par. What was the Belgian Government borrowing at, at the same time? 93 at 7 per cent. The worst of this business of finance and all the rest of it is that people simply read something and come out with it as if they were authorities on the subject.
No wonder we have a world war.
You have a great deal more than a world war. You have a great many financial crises and slumps of one sort or another. Of course, Deputies there would trace them with unerring instinct in one direction. I wonder would they be honest with themselves and say that in this or in any other country somebody other than the bankers is at fault? I have asked where there was a public scheme in this country which suffered by reason of lack of money to carry it out. On the Order Paper this week we have had questions put to the responsible Minister as to how much money had to be put up by the State in respect of loans that were guaranteed by it. State Loans (Guarantee) Acts were passed by both Governments for the purpose of facilitating and helping those firms which required money on long-term loan. It was not the banks' business to do it. It is not banking, in practice. They have money on short loan, and they lend on short loan. If they lent money on long-term loans, you would have what occurred in America—a great many properties thrown on the market, a slump, and the depositors finding themselves without their money. In this age, are we expecting the bankers not only to do the banking business of the country and safeguard the depositors, but also to tell us what public schemes should be formulated which will give employment, stop emigration, develop the resources of the country and so on? You may hope to get bankers of that kind, but I do not know where you will get them. I think you should concern yourselves first with getting the sensible schemes, or getting the sound industrial concerns. If you get them, the money will be found to finance them.
The Deputy objects to the price of money, and he is quite right in doing so. One of the disadvantages of this country is that it is small, that its business, compared with larger countries such as Great Britain, France and America, is on a relatively small scale. It does not take a clerk in an office much longer to write 1,000 than to write 10. It is only a question of a couple of extra noughts, but it matters when you come to add up the expenses of doing business. It is possible to run a very big business, handling very large sums of money, with a small board. On occasions, you may require as large a board to conduct a business of half the size. If, by reason of our special circumstances here, and having no money market— that is what is given by the Banking Commission; I am not going further than that—extra costs are added to our system, that is one of the disadvantages of the State; but it is morally wrong for us to be trying to apportion the blame when the responsibility is on our own shoulders. It is quite likely that one of the disadvantages of the Shannon scheme is that for the next 20 years we will have a collection of dud politicians looking for something to beat it at the cost of the State.
Deputy Cosgrave takes the view that there should be no Parliamentary interference whatever with the control of our monetary policy, and that is the very clear difference between his attitude and the attitude of the members of this Party. We understand his position quite clearly. The provision of credit is a matter of major public policy, especially in present-day circumstances. I wonder whether the members of the Fianna Fáil Party, who can carry this Bill in its present form, realise that by voting for the Bill as it now stands they are handing over the control of our monetary policy to an outside authority? Personally, I do not care whether the membership of the board consists of nine or five.
It is a matter of minor importance compared with the power and authority given to the members of the board, and the outlook of the members of the board. The saving of £3,000 a year, suggested by Deputy Cosgrave in his statement, is a simple thing compared with the passing over by this Parliament to an outside body, including three banking directors, of the control of our monetary policy in present-day circumstances. Deputy Cosgrave is a very able debater, especially on financial matters. The monetary policy of every country in the world will be changed before another Budget is introduced in this House, and that is why it is a very serious matter in present-day circumstances to give to this proposed body, including three banking directors, the control of our monetary policy, and, to a certain extent, power over the provision of credit for the carrying out of works of a national development nature. I ask the Taoiseach does he think that the people of this country have authorised him to hand over this extraordinary power to this body?
The ultimate power is here.
The ultimate power is here, as was pointed out by the Taoiseach, and will be exercised by him if there is a scrap, or a lack of co-operation, to use his own words, between the three banking directors and the other members of the board. We cannot afford to take a chance at the present time with so many of our own people out of work, and so many more of them leaving the country because they cannot get work or wages or money to maintain themselves and their dependants. The Taoiseach read out the number of members on the boards of the so-called central or State banks in different parts of the world. He did not give the number of members or the conditions under which they are appointed in Sweden or New Zealand. He gave the number of members on the Board of the Australian State Bank. Strange to say, they are only eight in number, but the members of the State Bank in Australia are not guided, as the Minister for Finance said here to-day, by the experienced bank directors. They are guided by the Minister of Finance of the Australian Government, elected by the people of Australia and responsible to the people of Australia. That is the terrible difference between the position of the board now proposed under Section 5 of this Bill and the powers conferred on the members of that board here, compared with the powers and authority of the members of the Australian Bank Board.
I think Deputy Dockrell was joking —although his line of argument was very closely related to the line of argument put up by the Minister for Finance—when he said we were suggesting that you could go out on the street, call any fellow between the ages of 25 and 60, and say that he is a suitable person to become a member of the central bank board. I will furnish him with a list of the members of the Bank of Ireland Board, and I guarantee that he will not point out to me the names of two men out of the 15 who are under the age of 60. I saw in the "Social and Personal" notes in the Independent recently that one of the members of that board had celebrated his 77th birthday. I have as much respect as anybody for old age, but these facts do not fit in with Deputy Dockrell's suggestion—I think it was rather a “cod” suggestion— that we would take up every Tom, Dick or Harry in the street and say that he could be regarded as a suitable member of the board.
Personally, I would prefer to take responsibility for the putting of a majority of civil servants on this board instead of these three banking directors because, if there were a majority of civil servants on the board, we would have some say in their activities when we came to discuss the Estimates, whereas when we pass this authority to the board, with the limited powers in Section 5, we cannot say another word during the lifetime of the Dáil, or until the Bill is amended. If the Bill is passed in its present form, we can put down questions, if the Ceann Comhairle allows them to go on the Order Paper, but the Minister concerned will give us the same answer as different Ministers now give from time to time in connection with the operations of the Electricity Supply Board, the Turf Development Board, the Agricultural Credit Corporation and all these semi-State boards set up by the taxpayers' money.
I am very glad to see the first Minister for Finance in the Fianna Fáil Government entering the House, and I am surprised that he has been absent during the discussion of this very interesting section. Deputy Norton will, I am sure, quote again, if necessary, from the speech he made when he was a boy in matters of this kind in respect of the outlook of Deputy Cosgrave when he was head of the Government. The Minister has grown up, and, I am sure, has learned something from his experience, first, as Minister for Finance, then, as Minister for Industry and Commerce and later, as Minister for Local Government. We should all like to hear what he thinks of this amendment.
Deputy Dockrell and also the Taoiseach clearly indicated that they could see the time when, instead of co-operation, there would be a conflict between the banking and non-banking members of the board.
I did not say that at all.
I do not want to be unfair to the Taoiseach, but he said that if there is a lack of co-operation——
The policy of the board of directors as a whole, in which these would have something to say.
It is correct to say that the Taoiseach said that the banking members were introduced into the board for the purpose of having co-operation between the board of the central bank and the joint stock banks.
That is right.
And that if there was a conflict, Parliament would have to face up to that fight and settle it—perhaps when it was too late, when disaster had overtaken the people, and when the Government ceased to control, or to have any right to interfere in the control of monetary policy.
The Deputy wants to have " the scrap" here and now.
My opinion does not count in this matter and I am not anxious to press it, but I should prefer to have a majority of civil servants rather than the banking directors. The Taoiseach and his Ministers have experience of the working of the Agricultural Credit Corporation and they, with their predecessors, are responsible for inviting to act on that corporation the nominees of certain banks. Will the Minister indicate what services the nominees of the joint stock banks rendered to that board? They took damn good care to see that the bank rates of interest were maintained in connection with loans issued to farmers. You cannot get a loan from that corporation at a rate lower than 6 per cent.
Five per cent.
They advertise them at 5 per cent., but if you add up all the charges involved in getting the loans, in the case of those who are extremely lucky to get them nowadays, you find that the rate works out at 6 per cent.
The rate of interest is 5 per cent.
I invite the Minister to write to any of his friends who have got loans from this corporation and to ask them to state definitely whether they got them at a clear rate of 5 per cent. I have been told this by solicitors who have negotiated loans on behalf of constituents of mine.
The solicitors, of course, lump in their charges.
You took damn good care when the Agricultural Credit Bill was going through to make provision for the payment of legal charges and to pass these charges on to the people getting the loans. Will the Minister for Local Government, previously the Minister for Industry and Commerce, and, before that, Minister for Finance, contradict that statement? Deputy Cosgrave suggested that I knew a good deal about the activities of the bank directors. I do not. I know some of them to be extremely able men. I have a list of directorships in other institutions here, including key industries, which I will furnish to Deputy Cosgrave——
I shall be delighted to get them.
——and in which he will find that one of them well known to him has six other directorships, including a railway chairmanship, as well as being one of the directors of the Bank of Ireland. I do not think he could devote much time to looking after the interests of the bank. I admit that the Governor of the Bank of Ireland could call in there and spend half an hour signing documents two or three times a week, but that does not apply to the ordinary directors, and Deputy Cosgrave knows that better than I.
I notice that this list includes the names of several distinguished men who signed the majority report of the Banking Commission and these are the gentlemen whose names will be put to the Minister for Finance under this proposal. I dare say he will find that every one of the banker members of this commission will be in the list of six names handed over to him from which he will have the selection of three. I dare say he will be in the happy, or the unhappy, according to the point of view, position of taking from the panel of six three of the members who signed the majority report of the Banking Commission. That was not a banking commission; it was a bankers' commission; and Section 5 simply implements that commission's majority report.
It is inevitable that from time to time, in respect of every section of this Bill, we will have the general theory and general principles debated. I move to report progress.
Progress reported; Committee to sit again later.