Dáil Éireann debate -
Thursday, 21 May 1942

Vol. 86 No. 18

Central Bank Bill, 1942—Committee (Resumed).

Amendment No. 4 (Deputy Cosgrave) not moved.

Mr. Dockrell

I move amendment No. 5:—

In sub-section (3) (c), page 4, line 41, to delete the word "five" and substitute the word "four".

There has been considerable discussion on this section, but speakers from the opposite side have left this question of the number of banking directors severely alone. I think that the Banking Commission recommended a greater proportion of banking directors than is allotted by this Bill. There is on the Currency Commission a greater number of directors with technical knowledge of banking than is provided for by this Bill. Another point to which I should like to refer is the objectionable practice of hand-picking the banking directors. The Government having got the proportion they have, I do not see why they should not leave the selection of the people having technical knowledge to the place from which they are drawn.

The proposal in the Bill is not even in accord with the proportions which obtain on other boards. Take, for instance, the Pigs and Bacon Board. I think I am right in saying that the interests there are evenly balanced and that the chairman has a casting vote. I suppose that a much greater technical knowledge is required for the pig business than for banking but, if one examines the present situation, one finds that there is a preponderance of directors on the bank board with no technical knowledge. The minority of banking directors have technical knowledge but no authority. After a few trials of strength, perhaps the banking directors will say: "Let the game go on. We have pointed out what we think should be done and we are in a minority. Let the others run the show." I suggest that that would be a most undesirable state of affairs. The amendment which I have proposed represents the irreducible minimum regarding the number of technical experts on the board.

Under my proposal there would be three banking directors and the number of other directors would be reduced to four. If there were a conflict between the two ideas, the chairman would have a casting vote. As the chairman would be nominated by the Government, I do not think they might fear much regarding the result. The decision on any proposal emanating from the banking directors ought not to be a forgone conclusion if there is a conflict of opinion. I urge the Government to consider this matter very carefully because, so far as one can hear, the only accusation laid against the banking institutions of this country is that they are too conservative. In other countries they have been the opposite, with what disastrous results we know.

I do not know, as between conservatism and being too much the other way, where the dividing line lies, but a very short distance might bring us across the border line. This is an experiment on which the Government are embarking, and a little conservatism at the start would do no harm. A certain amount of caution ought to be displayed and the affairs of the central bank ought to be administered by people with the greatest knowledge that can be obtained of banking affairs. We are in a strong financial position at present, but things might change and a number of years with unbalanced Budgets of £7,000,000 might easily leave this country with all the credit on one side and all the authority on the other. I urge acceptance of the amendment.

Minister for Finance (Mr. O Ceallaigh)

We have already heard a good deal of the argument applicable to this matter in the debates which have taken place on the Bill. The Deputy suggests that we ought to be conservative. If the Deputy had been listening to the debates which have taken place so far —I think he did listen to them—he would be aware that, over and over again, we have been criticised for being too conservative in this Bill. It has been urged that we displayed too great a spirit of conservatism by giving banking directors a special position in the constitution of the bank. It would appear, therefore, that all the arguments are not on one side. I think that we have done a great deal for our own good, as well as for the good of the central bank, in providing for three banking directors from the associated banks. Many central banks have not any banking directors, as such, on their boards at all. On account of our history, financial and economic, and the history of the beginnings of the Currency Commission, we believed it to be wise, from every point of view, to make provision for banking directors and we are asking the banks to nominate three persons.

We put the banks in a very special position and paid them a special tribute. I am not saying that tribute was not deserved. The Deputy, again, objects to the fact that the Minister is hand-picking the bankers. The Minister would not be doing anything at all unusual if he hand-picked them or had not given them such a privileged position by allowing them to set up a special panel of their own. That is a special privilege given to the bankers and not given to any other class. It is done for a very good reason. I do not think we are called upon to do any more than that. It is not likely that the bankers would get "huffed" if turned down and placed in the minority on the board in a vote on some decision. They would not be so childish. Six men would be selected by the bankers and placed on their own panel; and the three whom the Minister will select will be men of knowledge of the world, experienced in business, wise, prudent men, aside from their experience as bankers. They will not be like children playing with toys who, if they are put into a minority, will run away and take their "chaynies" out of the play, so to speak. I am sure they will not do that. There is no discourtesy in the Minister giving the bankers the privilege of selecting a panel of six from which the Minister will take three. They have a privileged position, not accorded to anyone else, as far as the setting up of the board of the bank is concerned. It is a tribute to them and one that will work out for the best interests of the board.

It might happen that the non-banking members on the board may have paid more attention to a theoretical study of central banking than any of the banking members. The non-banking people may know more about central banking. We have had no experience of central banking in this country, and it does not follow that the banking members need be expert in central banking. There is not a wide choice of people here who have a knowledge of central banking: the number is very limited. It does not follow that all the knowledge to be got in Ireland on central banking is confined to the banking members of the board. I suggest that the arrangement is a good one, causing no discredit or discourtesy to the banking people, when they are offered a panel system of selecting names to be put forward to the Minister.

General Mulcahy

Would the Minister say what he means by privilege? I get an echo of the Minister for Supplies speaking about privilege last night. Is the new outlook of the State on things in this country such that it will be a privilege for a plumber to be allowed to work as a plumber and a privilege for a carpenter to be allowed to work as a carpenter?

The Taoiseach

I do not know what the Deputy is talking about when he talks about privilege in this case. It is a privilege for one particular section of the community to be singled out and put in a special position.

General Mulcahy

In banking matters?

The Taoiseach

In the question of a central bank the fact is, as the Min- ister has pointed out, that in most cases the central bank has to control the banking institutions and is kept deliberately separate; and the commercial banks, as such, have no members on it. They do it deliberately, because it affects all the interests of the people and not merely the banking interests. The whole idea of a central bank generally is to see that the control of credit will be in the interests of all sections. It is admitted then that the commercial banks are a special section, particularly interested in it from the point of view of profit making. This has been a compromise, as I indicated when speaking on a previous occasion, and this particular thing has been arrived at, as the Minister has just indicated, largely because of the history that we are developing from the Currency Commission, in which the commercial banks were given a very definite position.

In this connection, I should like to point out that they are placed on this board, not as representatives from the banks, as such, but as people who have special knowledge of the commercial banking system in this country. Having been selected by the banks, they will, presumably, be people with a definite knowledge of the commercial banking system. It is as people having that knowledge, and not as representatives, so to speak, from the banks themselves that they are put on the board. There is no doubt whatever that it is a privilege which is not accorded in most central bank boards, to say to the commercial banks that they will get three members, anyhow, that there will be three people on the board with a knowledge of their problems. An extra privilege can be pointed out. One of the Labour members, I think, asked why it was put in the Bill, why it should not be left open to the Minister for Finance to do this, if it is in the interests of the State that people with specialised knowledge should be on the board. We are going further than that, as we are specifying it here in the Bill. If it is enacted, and while it remains the law, the banks will have the privilege of selecting a panel of six, three of whom must be appointed on the board by the Minister for Finance.

General Mulcahy

The Taoiseach says that one of the functions of the central bank will be to see that the control of credit shall be in the interests of all sections of the community. We are going to be shown again, as we have been shown before, that the central bank may not be able to control credit.

An Ceann Comhairle

I would point out to the House that it has been decided that there be three banking directors on this board. The matter before the Committee now is the number of non-banking directors on the board. The general principles of the Bill were debated on the Second Stage and again for three days on this section. Discussion must be limited now to what is before the Committee.

General Mulcahy

I am putting a point which was introduced into the discussion by the Minister for Finance and now followed up by the Taoiseach, that is, that it is a privilege for technical people, whom the Taoiseach now admits have particular technical qualifications, to be put on this board.

An Ceann Comhairle

Despite the passing remark that it was a privilege for certain interests to be represented on the board, it was already decided that they be so represented. We cannot have discussion reopened on that issue. The Deputy raised it and he was answered.

Mr. Davin

Surely, we will be allowed to answer arguments put up by the other side.

An Ceann Comhairle

The matter arises on one point, which has been discussed and answered.

General Mulcahy

The one word used was a very important one and has a very definite bearing here on the amendment under consideration, where we are discussing the type of persons who form the balance. This amendment in Deputy Dockrell's name will affect that balance. The Taoiseach says that the control of credit shall be in the interests of all sections. The central bank cannot control credit. If any control is going to be there, apparently it is in the ordinary commercial banks, and those who will be on the central bank board will be men with very special technical qualifications.

Mr. O Ceallaigh

Not in central banking.

General Mulcahy

The Taoiseach was talking of the control of credit. I understand the commercial banks are going to control credit, and the people who have the technical qualifications are the representatives of the banks here. We want to know in what way this is to be described as a privilege for people who are the only technical people, who are the only people with experience of the control of credit, and who are the only people who will have the job apparently of controlling credit under the new situation. Why are we to regard as privileged people who are simply tolerated by reason of a past rather than by reason of their training, qualifications and experience?

The Taoiseach

Why cannot the Minister for Finance pick them out?

Mr. Cosgrave

I wonder we have not heard some reference to Deputy Dockrell's suggestion that the word "five" should be substituted by the word "four". That is the issue. Bringing in the banking directors now is just like drawing a red herring across the track. It shows the weakness of the case. One of the reasons we are invited to have five on is that this is to be a central bank and it is to have control of credit. There is no definite provision for controlling credit. The privileged persons are five nominees of the Minister. They are the only people who will get privileges. They may know nothing whatever about central banking.

Mr. O Ceallaigh

They may know more than the bankers.

Mr. Cosgrave

But they have not had banking experience.

Mr. O Ceallaigh

They may know less, but they could know more.

Mr. Cosgrave

How could they know more?

The Taoiseach

They are well informed, as a rule.

Mr. Cosgrave

That is according to your theory, and you know as much about it as the Minister.

The Taoiseach

Perhaps I know a great deal more about it than the Deputy.

Mr. Cosgrave

There is no such thing as a standard central bank.

Mr. O Ceallaigh

That is true.

Mr. Cosgrave

You are going to nominate five persons who know more than the bankers—is not that what we are invited to believe? Those people know more about central banks than anybody else.

Mr. O Ceallaigh

They know more than the Deputy.

Mr. Cosgrave

There is nobody in this country who would attempt that but the two persons who have spoken.

Mr. O Ceallaigh

Who will be the judge?

Mr. Cosgrave

Anybody you like, except a person from Grangegorman, who would probably decide in favour of the two of you, because you have longer tongues than most people and you are able to blow your own trumpets better. You have deluded more people in your time than anybody else ever could delude.

Mr. O Ceallaigh

We have long experience.

Mr. Cosgrave

There are some people who will never learn by experience.

Mr. O Ceallaigh

We have a good example in front of us.

Mr. Cosgrave

The Deputy is excellent at getting off the track.

Mr. O Ceallaigh

Not a bad hand at all.

Mr. Cosgrave

And so is his compeer on his left. They want to put five persons on this board, and not one of their names will be disclosed to the House before they are put on. We are given to understand they will be five knowledgeable persons. I have no confidence in the nominations that will be forthcoming from the present Ministry because of what they have shown themselves capable of doing so far.

Mr. O Ceallaigh

We would not expect you to have it.

Mr. Cosgrave

The Minister is perfectly correct in that. All that has happened up to this would be enough to destroy any confidence.

An Ceann Comhairle

We might now dispense with this exchange of courtesies.

Mr. Cosgrave

I did not interrupt either of the two long-winded Ministers who spoke before me. I did not interrupt either of them, and they can speak at great length and very much away from the point. Yesterday or the day before we were dealing with a Budget that is not balanced. We are adding on expense to this State in every respect that it is possible for the Ministry to add it on. It is not for nothing that they are getting the name of being extravagant, of being absolutely indifferent to the mountain of debt they are creating. Here is one case in which an economy could be made. It is a small sum, I admit, perhaps £300 a year, or perhaps £1,200 or £1,300 a year, because this is a peculiar measure. There is, in a particular section, provision for a pension for a member of the Banking Commission nominated by the Minister, a pension if he devotes his whole time to the work. There is no central bank formed on such a basis, at least none that I ever heard of, and I should be glad to know if there is a bank with such an arrangement in any part of the world.

The business that falls to be discharged by this particular directorate is summed up in these words, to preserve the integrity of the currency. So far as that particular work is concerned, it is more regulatory than it is constructive. If the means were not at present in the possession of the banks we have for preserving the integrity of the currency, this central bank might have something to do on a par with other central banks; but by reason of the credit position of the State, that responsibility does not fall upon them and, therefore, their work is more or less of a regulatory character.

Objection was taken here on another occasion to remarks of that sort that I made. It was sought by the Ministers concerned with this measure to place upon me the responsibility of stating that it was not responsible work. It is very responsible work to sign a cheque for £1,000,000. It is not heavy work, not by any means heavy work, but the class of work that has to be done by the directors of this central bank does not call for nine persons. Four persons or three persons could do it just as well as nine.

It is simply nonsense to say that there will be nominated on this bank persons much more likely to know about the work of a central bank than the banking directors. Who knew anything about the sort of work connected with the Currency Commission until it was formed? It was stated by the Taoiseach that this body is to control credit. We will deal with that when we arrive at the appropriate section, but there is no clause in this measure which puts that responsibility on the central bank. Nothing the central bank can do will release or restrict credit. I want to save money, and for that reason I am supporting Deputy Dockrell's amendment.

Mr. Davin

I think Deputy Dockrell would be well advised to take the Minister for Finance at his word and accept from him that the directors of the joint stock banks, in getting representation on the board of the new central bank, are being put in a privileged position. I do not think these people have any right to look for a privilege as citizens or as bankers. The Taoiseach goes further and says that this is a compromise, that there are three representatives from the joint stock banks, five non-banking directors and a governor.

I assume that is a compromise arrived at between the Minister for Finance or whoever acted on behalf of the Government and the standing committee of the joint stock banks. I do not know that any authority was given by the people of this country either to put the representatives of the joint stock banks in a privileged position or to make a bargain with them on a matter of this kind.

The Taoiseach

You can compromise between two different ideas.

Mr. Davin

The Taoiseach goes on further and says that these three people, who are privileged people, know your problems well. I challenge the accuracy of that statement.

An Ceann Comhairle

It has been decided that those three shall be on it.

Mr. Davin

I am dealing, with great respect to you, with words, weighty words, used by the Taoiseach in regard to the qualifications of the three representatives of the joint stock banks.

An Ceann Comhairle

The House has agreed to those three.

Mr. Davin

Unfortunately, I am painfully aware of that.

An Ceann Comhairle

The matter was discussed for three days and that discussion should have sufficed.

Mr. Davin

I am certainly not going back on the line of discussion that took place on a previous amendment, but I have yet to learn that the representatives of the joint stock banks—all of them—know the problems of the people of this country better than, for instance, the Minister for Finance, the Taoiseach or any other member of the Government. It is the duty of the members of the Government, elected by the people of the country, to understand the problems of the people. As far as I know, the only duty of the bank directors of this country is to understand the problems of their shareholders and to make as much profit for their shareholders out of the community as they possibly can.

An Ceann Comhairle

What about the four proposed in this amendment?

Mr. Davin

Deputy Cosgrave appears to think that it would be impossible for the Government, in present circumstances, to get any nominee in this country who would know more about the work of a central bank than the three joint stock bank directors, whoever they are going to be.

I think it would be possible to get people in this country who would know more than these three bank directors, whoever they are going to be. Personally, I would prefer to put my trust even in a civil servant. Some civil servants, at any rate, would know as much about the business of a central bank as any of the bank directors, whether they are going to be on the board of this central bank or not. If we are to accept the version given by Deputy Dillon of the ability and experience of the bank directors of this country, it is a regrettable state of affairs that such people, with such lack of qualifications as Deputy Dillon referred to here, should have any seat on a board of a bank of this kind. It is possible to get from the ordinary community, in the commercial life of this country, people who would know a good deal about banking business. Would Deputy Cosgrave suggest, for instance, that a retired general manager of a joint stock bank would not know as much about banking or about the operations of this measure, as a part-time director of any of our joint stock banks?

Mr. Cosgrave

He might know more.

Mr. Davin

I believe a general manager of any of our banks would know more about administering a measure of this kind than any of the directors that would be put on this board by the representatives of the joint stock banks. I may be wrong. I know very little about financial matters compared with Deputy Cosgrave or the Minister for Finance or other people who have experience as members of a Government in dealing directly with these people on behalf of the community. The Taoiseach said that credit should be controlled in the interests of all sections.

An Ceann Comhairle

We have that in Section 6.

Mr. Davin

He did not say that in any previous speech or in any statement made here.

An Ceann Comhairle

It is on Section 6 and was debated already.

Mr. Davin

It is to save the Taoiseach from repeating that statement, if he desires to do so, on Section 6. I would like some explanation of the meaning of that.

An Ceann Comhairle

The Taoiseach will not be allowed to give any further explanation on this amendment or section. Neither will the Deputy.

Mr. Davin

Do I take it that you are now ruling that the members on this side of the House cannot criticise or ask for further explanation arising out of statements that you allowed the Taoiseach and the Minister for Finance to make?

Mr. Cosgrave

Wait a few minutes. The Deputy will get that in the next section.

An Ceann Comhairle

That is an unfair way of representing what the Chair said.

Mr. Davin

He said that this body is supposed to represent all sections. You have three representing the interests of the shareholders of our banks. I do not know who the lucky five or six will be but, as far as I am personally concerned, strange as it may appear, I would support the Government point of view as against the point of view represented by Deputy Dockrell. I want as few as possible, none if possible, of the representatives of the joint stock banks on the board of this proposed central bank. Therefore, I am prepared to retain five as against four or any smaller number.

Mr. McMenamin

I support Deputy Dockrell's amendment. I do it for one reason only, namely that, if we are establishing a board at all, the House should take the utmost care that the board that is established should carry on the business of the bank in the best manner possible. I seriously dislike the suggested appointment to the board of three men who are supposed to be privileged by being there.

Anybody who knows anything about running affairs of that kind from experience knows that the position of these three men would become intolerable from that point of view. My suggestion would be that there would be lay men and technical men and a chairman who would decide an issue based on his experience one way or the other as between them. In the first place, these three men, if they were on that board, would be out-voted right away. Secondly, their influence on the board would be negatived by the fact that the non-technical men would have the idea and would know, from the speeches that have been made, that, so far as this House is concerned, these joint stock bank representatives were there purely as privileged persons. I quite agree with Deputy Davin that you will get thousands of men in the country who think they could run anything. I should say that in his own small Party you could pick out men who think they could run a central bank or run an empire, but I would prefer to appoint men to this board who had proved that they have the capacity for this job. That is the test I would apply to men that I would put in a position of that kind. Before I would appoint a man to such a position I would have to be quite sure that he was capable and worthy of being put into that position. I would suggest to the Government that this board should be well balanced, that all the men on the board, irrespective of where they come from, should be there as a right, that the status of all should be equal, and that in the case of a serious conflict between them the chairman should have the deciding vote. I certainly have no interest in any of these people. I do not know who the Government will nominate. I do not know who will be put on by the joint stock banks. I care less. But I am seriously concerned about the future of my country and I believe that we should not be petty about this matter. It is a very serious one. It is not a Party matter.

This measure will survive when all Parties in this House have passed away. The instrument we are creating now will either be a monument to the wisdom of this House or a confession of the inability of this House to devise a measure of this kind for the future welfare of the country. For that reason, no heat should be engendered in coming to a decision, particularly on a keystone section of this kind. This section is one of the keystones of this Bill, because on it depends the future success of this Bill when it becomes an Act. The structure of the board is absolutely vital and the success of the Bill, and of the bank which it creates, hinges on it. For that reason I should like to ask the Minister to reconsider this question and to allow it to stand over. The Taoiseach says it is a question of compromise, but I cannot appreciate where the compromise comes in. What is the compromise about? If you have five on one side and three on another, what sort of compromise is that? It might be said that there was a compromise where you had equal numbers, but I do not see the force of using the word "compromise" where you are giving one section three and the other five. There is a preponderance of numbers on one side as against the other. I think the Minister would be well advised to reconsider the matter as there is nothing terribly urgent about it. There need be no heat about it, seeing that it is the keystone of the whole measure.

Question—"That the word ‘five' stand"—put.

The Dáil divided: Tá, 47; Níl, 14.

Tá

• Aiken, Frank.
• Allen, Denis.
• Bartley, Gerald.
• Beegan, Patrick.
• Boland, Gerald.
• Bourke, Dan.
• Brady, Seán.
• Brennan, Martin.
• Breslin, Cormac.
• Buckley, Seán.
• Corish, Richard.
• Crowley, Tadhg.
• Davin, William.
• Derrig, Thomas.
• De Valera, Eamon.
• Flynn, John.
• Fogarty, Andrew.
• Fuller, Stephen.
• Gorry, Patrick J.
• Harris, Thomas.
• Humphreys, Francis.
• Keane, John J.
• Kelly, James P.
• Lemass, Seán F.
• Little, Patrick J.
• McCann, John.
• McDevitt, Henry A.
• MacEntee, Seán.
• Morrissey, Michael.
• Moylan, Seán.
• Mullen, Thomas.
• O Briain, Donnchadh.
• O Ceallaigh, Seán T.
• O'Grady, Seán.
• O'Loghlen, Peter J.
• O'Reilly, Matthew.
• O'Rourke, Daniel.
• Pattison, James P.
• Rice, Brigid M.
• Ryan, James.
• Sheridan, Micheal.
• Smith, Patrick.
• Traynor, Oscar.
• Victory, James.
• Walsh, Laurence J.
• Walsh, Richard.
• Ward, Conn.

Níl

• Bennett, George C.
• Brennan, Michael.
• Broderick, William J.
• Cosgrave, William T.
• Daly, Patrick.
• Dockrell, Henry M.
• Fitzgerald-Kenney, James.
• Hughes, James.
• Keating, John.
• Lynch, Finian.
• MacEoin, Seán.
• MacMenamin, Daniel.
• Mulcahy, Richard.
• O'Sullivan, John M.

Tellers:—Tá: Deputies Smith and S. Brady; Níl: Deputies Bennett and McMenamin.

Question declared carried.

Amendment accordingly negatived.

An Ceann Comhairle

Amendments Nos. 6 and 7 may be debated together.

Mr. Dockrell

I move amendment No. 6:—

In sub-section (5), page 4, line 49, after the word "by" to insert the words "the unanimous decision of".

There is no difference between these two amendments, but they are very important in principle and, in fact, in some ways are more important than the preceeding amendment. They are not transactions, such as would be carried out by a central bank, where very momentous decisions would be given which would form a headline for future conduct, but I cannot imagine that there would be any tremendous field there for the appointment of sub-committees. Certainly, if they were necessary, any decisions to appoint them ought to be come to by the unanimous decision of the board. The Minister has mentioned that he does not think bank directors would suffer from pique if they found they were in the minority. I am sure that is so. It would certainly be a most extraordinary procedure if powers could be delegated to sub-officers of the bank who could come to decisions and the bank found that the delegation of these powers had not been by the decision of the board. I suggest to the Minister that this is an amendment that he could very well give way upon, because if the decision is not unanimous then, in my opinion, for what it is worth, it would be better to make the decisions in the full board, and in the light of the experience of people dealing with the matter. I have great pleasure in recommending the amendment to the consideration of the Minister.

Mr. O Ceallaigh

I find it difficult to see a good reason why this amendment should be accepted. I find it more difficult to understand why Deputy Dockrell, whom I always think of as a practical man with his knowledge and experience of business, of boards and of committees, should put down an amendment of this kind, asking that the board be unanimous in appointing a sub-committee to do the ordinary routine work that a sub-committee might be appointed to do. There will be work, such as the signing of all sorts of documents, routine work of the type that is done in the ordinary banks— not to the same extent certainly, because the type of work to be done will be different—and it is not necessary to get the whole body of the board to deal with routine work. They can meet on other days of the week and there will be regulations, as provided in the Bill, drawn up to "regulate the procedure and define the functions, powers and duties of any committee so set up", so that the sub-committee will not have a completely free hand. The sub-committee will work subject to regulations, control and restriction of its powers, duties and functions, and ratification of any work done can be arranged for. If the board so decides, that will have to come before the board again for ratification. In my opinion it would certainly tie the hands of the board to such an extent that it would not be worth while making it necessary that there should be unanimous decisions of the board upon the committee. Committees will probably be necessary for every week, but this proposal would be making it impracticable and very difficult to work. If the Deputy looks back over the work of any of such boards or committees he will see that there is hardly one that he sat upon that at some time did not set up a committee, and it was not necessary, and it would not be wise, to have regulations laid down that there should be a unanimous decision of the board to set up such committee.

I think that the wording of the sub-section, as it stands, is reasonable. I think the board will be reasonable in the exercise of its powers, and I take it that it will certainly make regulations that will enable it to control fully any committee or sub-committee that may be set up and that, where necessary, it will insist on ratification of any decision come to by the committee or sub-committee.

Mr. Cosgrave

Sub-section (4) says:

"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."

Sub-section (5) then goes on to say:

"It shall be lawful for the board to do, by regulations made by the board, all or any of the following things",

and the sub-section then sets forth the various things that may be done. This gives to a selected minority of the board—either the governor, the deputy-governor, or one or more directors, associated with him or separately— powers the same as those which bank directors have themselves. There is no provision in the section, or in any of these sub-sections, for what the Minister describes as ratification. It is possible for the board, by a majority, to set up a minority board having the powers of the board, and there is no provision whatever here for bringing any of those matters before the board, as such. Now, it is the usual practice that where a committee of a board is set up, its report comes up subsequently for consideration by the board. That is the practice, but there is no provision for that here.

Mr. O Ceallaigh

In paragraph (b) of the sub-section.

Mr. Cosgrave

Did the Minister say (b) or (d)?

Mr. O Ceallaigh

Paragraph (b)—

"regulate the procedure and define the functions, powers, and duties of any committee so set up."

Mr. Cosgrave

It is possible for this board, with its majority, to set up a committee or to give to the governor power to regulate the procedure and define the functions, powers and duties of the committee, so that it is not necessary to have the matter ratified. That is my point. There is no provision made there for ratification. It simply says, in effect: "you have power to make regulations", but ratification is not one of the powers set out, whereas you do set out the other power. You have no provision whatever for ensuring that ratification has to take place, but you do take the other power: that a committee can be set up and that that committee can exercise all or any of the powers of the board.

As a matter of fact, that power can be delegated to a single member of the board, such as the governor—including the deputy-governor—or any director or any two or more members of the board. That would be bad enough, as it stands, but it goes on to say: "or to any one or more officers of the bank"—in other words, to an employee. Now, it is quite true that the board, as such, may originally make regulations providing for the ratification of those decisions, duties, actions, powers and so on conferred by any of these, but it is also possible for them, at a later stage, if they so desire, to rescind that original authority, and then have the case that a single member of the board or the committee enters into every power and authority that the board, as such, can discharge. That is the objection we have, and that is the reason for putting down the word "unanimous". Now, if I were met on the question of having these matters brought before the board for ratification, I would not insist upon unanimity, but I do say that if the powers that are to be given are such that, once given, the individual or officer of the board—governor, deputy-governor or any particular director— has then all the powers of the board and that the board cannot ratify, nullify, amend or alter, then I think that I must insist on having the word "unanimous" inserted. I have an amendment on the other point I made, amendment No. 8. I do not know whether that would meet Deputy Dockrell's point or not, but I think it would. That amendment, No. 8, is to the following effect:

"The board may at any time review the exercise by the governor or the committee or an officer of any of these powers and shall so review them on the request of any director and may thereupon reverse any decision taken and give general directions with regard to any action taken," etc.

That would place these powers that are given in a less oligarchical category than they are at present. I do not know whether it is intended to endow the governor, the deputy-governor, a director, or any member of the board, with oligarchical powers—I do not know whether that is the intention— but having read the various clauses of sub-section (5), it would appear as if that were the intention. I do not know if I am right, but it would appear to me that it would nullify the dignity of the board, its prestige, and everything about it, and force the members of the board, who did not agree with some particular thing, to resign and rid themselves of the responsibility of being saddled with the authority, if that were the case. So, I think we should have either of the two cases: (1) that it should be unanimous, or (2) that it should be a condition that whatever duty might be discharged, whatever action might be taken, or whatever administrative acts might be performed, could and should be brought before the board for consideration on the suggestion or direction of any one director.

Mr. O Ceallaigh

I suggest that all delegation of powers by such a body implies the right to ratify and to question. There is another reason for setting up a committee and delegating powers in this case, and that is that it might happen—it has happened before—that some act of a committee would be tested in court as to whether the committee would have the power to do a certain act or not, and if the power of delegation did not reside in the board and was not set out very definitely, there would always be the liability there that the court might decide that the committee had not the power. I certainly agree, however, that the power ought not to be given unless there was also power to review and discuss the work of the sub-committee and to ratify or refuse to ratify, as the case may be, or to impose conditions and make regulations and so on, and I take it that the regulations will be made under sub-section (b). I take it that the thing Deputy Cosgrave has in mind will be thus set out, the power to ratify being, I think, the most important one.

Mr. Dockrell

I am afraid that the Minister's rebuke to me leaves me quite impenitent after hearing his explanation, because I am more firmly fixed in my own mind that this amendment ought to be accepted. Apparently, the Minister has suggested to us that, of course, there will be ratification. I am afraid that I have the bad taste to agree with Deputy Cosgrave in that I cannot see where ratification becomes necessary under paragraph (b), as the Minister suggested. What can happen under this section is that some officers of the bank, totally unprejudiced by any previous knowledge of the subject, can be appointed to do a job, and the matter need never come before the board again. I refer again to the banking directors who, at least, might be supposed to have more experience in dealing with this class of affairs. They can be out-voted on the original proposition, and the committee may be set up, sxcula sxculorum, and its procedure will never be reviewed by the bank unless there happens to be a majority vote of the bank, which would not happen under the circumstances which I have in mind. Remember, these people will be dealing with very important questions. As Deputy Cosgrave said earlier, the writing of a cheque for £1,000,000 would not take very long. Important questions ought to be left to the board, or only delegated by it by a unanimous decision. I imagine that the powers of delegation would be readily granted where the functions of the sub-committee were of a purely administrative character. In matters, however, on which there was some conflict of opinion, I think it would be much better, in the interests of the bank and of the country in general, that the question at issue should be thrashed out by the whole board. I cannot find in the sub-section anything to suggest that it will be necessary for the decisions of the sub-committee to be ratified by the board. I propose to press my amendment.

The Taoiseach

I find it difficult to understand what exactly those who are pressing these amendments are after. Is the idea that your may have a majority and a minority on this board, and that the majority may seek to sidetrack the minority by having regulations made to enable them to set up sub-committees with, presumably, a majority point of view, and then endowing these sub-committees with all the powers of the board as a whole? It seems to me that you will not get over that difficulty by having a review, because if that state of affairs did exist, then, when the review took place, the decision would be the same. I think Deputies may take it that each member of the board will be very anxious to see that nothing contrary to his views is done by the sub-committee for which he will have to take responsibility and that he will have to be satisfied that the sub-committee will do its work properly. At the beginning, there will have to be a meeting to decide how the sub-committee will be constituted, what the numbers on it will be, what particular powers it will have, and so on. If the board decides that there is to be a review, then there will be a review. The board, in appointing the sub-committee, will have power under paragraph (e) to impose conditions, limitations, restrictions and so on, on the sub-committee. The object aimed at, as the Minister has pointed out, is to make it possible for routine work to be done in a convenient way without having all the members of the board present. On the other hand, if Deputies take the view that there is going to be a clash between the majority and the minority on the board; that there is, so to speak, going to be a conspiracy amongst the majority to oust the minority from any particular influence in decisions come to by the bank, I do not think you will be able to correct that by the power of review.

Mr. Davin

In my view Deputy Dockrell is entirely wrong in thinking that the board of this bank will have the power to take what he calls momentous decisions. When he gives more thought to the matter, I think he will find that the powers proposed to be given to this board are very limited, in so far as they may be of use to the community as a whole during the critical period we are passing through. The Deputy is one of the most prominent and popular business men in this city. I am certain that he has sufficient knowledge, as a director of some business concerns in the country, to know that it is not an unusual thing to have powers of the kind outlined in this section delegated to committees of a board of public and other companies. In one case that I know of— I am sure Deputy Dockrell knows it too—the most important work of the board of a bank—the financial side of its business—is delegated to a sub-committee. Deputy Cosgrave said that it was easy to sign a cheque for £1,000,000. The finance committees of some of the biggest concerns in the country—sub-committees of the boards as a whole—do the real business of these concerns without being required to go back to a full meeting of the board for authority, even to sign a cheque for £1,000,000.

Mr. Cosgrave

Apparently the Deputy knows the bank directors much better than he says.

Mr. Davin

I do not know so much about bank directors, but I know how directors of other business concerns conduct their business, and that they do delegate their powers to sub-committees.

Mr. Cosgrave

You were talking about bank directors a moment ago.

Mr. Davin

Deputy Cosgrave said he would be satisfied if the sub-committee suggested in the proposal before us had to go back to the full body for sanction of its work. As Deputy Cosgrave knows, that cannot be done where the financial work of big commercial concerns has to be carried out in a business-like way. Members on all sides of the House who have any experience of the work done by the directors of banks or other commercial concerns, know that to be so.

I have listened, and will continue to listen, very attentively to the speeches of Deputy Dockrell on this Bill, because I know that he represents a certain point of view. I hope he will not accuse me of misrepresenting him when I say that behind his speeches there seems to be the fear that the majority of the non-banking directors cannot do anything right without the full approval of the three directors of the joint stock banks, and that anything they do that may be right will still need to have the approval of the latter. That is the reason, I suggest, why the Deputy is asking for the insertion of the word "unanimous" in the sections of the Bill that do not contain that word. Deputy Dockrell, having failed to get a majority of the representatives of the joint stock banks on the board of the proposed central bank, now wants to insist that every decision of the board must be an unanimous one. That means that unless the three joint stock bank representatives agree nothing can be done. That seems to me to be the meaning of the Deputy's amendment and of the speeches that he made in support of it, as well as of his speech on the Second Reading of the Bill.

Mr. Bennett

The sub-sections of this section seem to me to be even more important than would appear from the arguments advanced by those supporting Deputy Dockrell's amendment. The main portion of the debate, so far, has been carried on on the assumption that a sub-committee will be set up. I think the Minister hinted that there is no obligation under the section to set up a sub-committee to do anything. The Minister did say that the regulations could confine the committee to doing certain things, but that it did not necessarily follow that a sub-committee would have to be set up. Under sub-section (5) it is laid down that it shall be lawful for the board by regulations made by it (1) to set up a committee, (2) to regulate the functions of that committee, (3) to delegate the exercise of powers to a committee; but under paragraph (d) the board need not have a committee at all, but instead can delegate to the governor or to the deputy governor or to any director or officer of the board the functions, powers or duties of the bank or of the board. I do not say that all that is necessarily going to follow.

The Taoiseach said a moment ago that we were debating this matter on the assumption that there was going to be a majority versus a minority complex amongst the directors, and that majority would so ordain things that the minority would have no say in the matter. Nobody assumes that that will arise. But something similar has arisen in connection with other institutions, and it might arise in connection with this central bank. Every common-sense person knows that, in general, committees are formed by the majority party. Take the local government bodies all over the country. Everybody knows that the majority rules them. The committees are formed by the majorities and they govern everything. It is possible that the same thing may occur in regard to the central bank.

There was a big debate on the question of banking directors. Some Deputies went so far as to say that there might be a difference of opinion between the banking directors and the non-banking directors. There were suggestions by some Deputies that the banking directors would not be as capable with regard to the central bank business as the non-banking directors. On the other hand, it was argued that the banking directors would possibly be more capable. In any case, if the board are as divided in their opinions as this House is as to the necessity for banking directors in connection with this Bill, it would be possible under this section, if the desire were there, to exclude any banking director from operating the powers, functions and duties of the board if the non-banking directors were of that mind. I do not believe it is at all probable that any such thing will happen, but the powers are defined here in this section if they desired to do so. There is no provision even for a quorum, as in ordinary banking institutions and other places. Two directors can meet and nominate one of themselves or anybody else they like to perform any of the functions, powers and duties of the board. I think that Deputy Dockrell's amendment safeguards the position. It will at least prevent all the possibilities that I mentioned—I will not say the probabilities.

Mr. Dockrell

A whole shoal of red herrings have been loosed on this amendment. First of all, the Minister for Finance suggested a course of procedure that is not provided for in the Bill. Then the Taoiseach proceeded to tell us that that would not do any good. I agree with a great deal of what the Taoiseach said, but it was not along the lines on which I had conceived the difficulties would arise. Taking the point of view of a board with very important decisions to be arrived at and possibly a whole lot of very minor, routine, detailed work, what would they proceed to do? They would proceed to draw up the terms of reference of the sub-committee very stringently and then they would give them all the detailed work. I believe that that is what would take place and what ought to take place. To come back to the analogy of the Pigs Marketing Board, you should not have a board meeting to decide whether a pig should be killed or not. The directors ought to be safeguarded that what they do send on to the sub-committee shall be of the kind that they understood and we are allowing absolute freedom of decision. I would go further and say that probably they will not want to see these minor routine matters brought back for ratification. That is why I suggest that this unanimous decision of the board ought to be adopted, because immediately the decks can be cleared of all the minor, routine, detailed matter and the really momentous questions left for the board. That is what the amendment seeks to provide, namely, that the board, when they unanimously delegate their powers with regard to certain functions, within those functions need not be troubled again. What is really important is that the board should not be cluttered up with these details but should have sufficient time to consider really important questions when they arise.

Deputy Davin takes the line: "Of course the Bill is so framed that these people will not have anything momentous to decide. They have not the control of credit and so on that some people would desire and really the directors will not have any important decisions to take." That is a matter of opinion. In the years to come you might find that the central bank directors have to take very important decisions. But, whether they have to take important decisions, or whether the stream flows on evenly, this much is certain, that by being able to get rid of agreed detailed matters by the unanimous decision of the board they will have lightened, simplified and improved the position of the central bank.

Amendment put.

The Committee divided: Tá, 18; Níl, 50.

Tá

• Bennett, George C.
• Brennan, Michael.
• Broderick, William J.
• Brodrick, Seán.
• Cosgrave, William T.
• Daly, Patrick.
• Dockrell, Henry M.
• Fitzgerald-Kenney, James.
• Hughes, James.
• Keating, John.
• Lynch, Finian.
• MacEoin, Seán.
• McFadden, Michael Og.
• McGovern, Patrick.
• McMenamin, Daniel.
• Mulcahy, Richard.
• O'Sullivan, John M.
• Redmond, Bridget M.

Níl

• Aiken, Frank.
• Bartley, Gerald.
• Beegan, Patrick.
• Boland, Gerald.
• Brady, Brian.
• Brady, Seán.
• Breathnach, Cormac.
• Brennan, Martin.
• Breslin, Cormac.
• Briscoe, Robert.
• Buckley, Seán.
• Corish, Richard.
• Corry, Martin J.
• Crowley, Tadhg.
• Davin, William.
• Derrig, Thomas.
• Mullen, Thomas.
• Murphy, Timothy J.
• O Briain, Donnchadh.
• O Ceallaigh, Seán T.
• O'Grady, Seán T.
• O'Loghlen, Peter J.
• O'Reilly, Matthew.
• O'Rourke, Daniel.
• O'Sullivan, Ted.
• De Valera, Eamon.
• Everett, James.
• Flynn, John.
• Fogarty, Andrew.
• Fuller, Stephen.
• Gorry, Patrick J.
• Harris, Thomas.
• Humphreys, Francis.
• Keane, John J.
• Kelly, James P.
• Lemass, Seán F.
• Little, Patrick J.
• McCann, John.
• McDevitt, Henry A.
• Morrissey, Michael.
• Moylan, Seán.
• Pattison, James P.
• Rice, Brigid M.
• Ryan, James.
• Sheridan, Michael.
• Smith, Patrick.
• Traynor, Oscar.
• Walsh, Laurence J.
• Walsh, Richard.
• Ward, Conn.

Tellers:— Tá: Deputies Bennett and McMenamin; Níl: Deputies Smith and Brady.

Amendment declared lost.

Amendment No. 7 not moved.

Mr. Cosgrave

I move amendment No. 8:—

Before sub-section (6) to insert a new sub-section as follows:—

The board may at any time review the exercise by the governor or the committee or an officer of any of these powers and shall so review them on the request of any director and may thereupon reverse any decision taken and give general directions with regard to any action taken or about to be taken on foot of such decision and shall have power in every respect to amend, alter or reject any decision taken or anything done arising from such decision.

As I said in the discussion which took place on the last amendment, this is a more satisfactory method of dealing with the question at issue here. It is futile to suggest that if there is a majority of non-banking members on the board there is no use in bringing up matters for discussion. There is every reason why it should be done. The board ought to be acquainted with whatever functions, duties, obligations or administrative acts are undertaken by any committee it nominates. It is for that purpose I have put down the amendment. As the section stands, it is lawful for the board to do a certain number of things. It can endow a committee or a single member of the board of the bank with great authority. It can also place such authority in the hands of an officer of the bank.

Mr. O Ceallaigh

Not in the hands of one officer only.

Mr. Cosgrave

"Any one or more officers of the bank".

Mr. O Ceallaigh

I refer the Deputy to sub-section (5) (a).

Mr. Cosgrave

Sub-section (5) (a) authorises the setting up of committees "consisting of one or more members of the board either solely or together with one or more officers of the bank". Sub-section (5)(d) gives power to the board to delegate to the 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". That means that they may be given all the powers of the bank. There is no limitation. No matter how well acquainted Deputy Davin may be with the work of banks, the duties of banking directors and the operations of committees of banks, no bank in this country does what is provided for here —and I say that knowing nothing about it. They would not be in the position they are in to-day if they did. It is inevitable that control be centred in the body with primary responsibility. No committee works on its own without reporting back or informing the board as to what it has done.

Mr. Davin

Even a finance committee.

Mr. Cosgrave

Even a finance committee. Even in corporations, the finance committee, which is all powerful, has got to report back. The only place where these things are not done is in Government Departments. Each Department of State is a government in itself. On occasion, a Minister may ask to be informed as to things being done in another Department. Apart from that, it is not the responsibility of a Minister to bring these matters before the Government.

Mr. Davin

With regard to the spending of money, is it not his responsibility?

Mr. Cosgrave

Off-hand, I would say "no". The money is voted here and is spent by the Department concerned, subject to the checks of the Finance Ministry. However, that is only an aside. We are not dealing with Governments. This provision gives the board authority to endow an officer of the bank with powers equivalent to those possessed by the directorate itself. I do not think that that is right. There is no doubt that these boards of directors of banks would not have achieved the success they have were it not that they act in combination with their officers. But the responsibilities of these directors can never be placed upon the shoulders of the employees. That is why this amendment is put Down. It does not interfere with the working of the Bill. It does not limit to any extent the authority of the board to set up a committee or empower an officer of the central bank to do the things he is empowered to do by the section in the Bill. It simply retains for the directors in the last resort—to use the phraseology of the report of the Banking Commission— authority to review, approve, reject, alter or amend any decision so taken.

Mr. O Ceallaigh

I am satisfied that an amendment of the type which Deputy Cosgrave has proposed would be necessary if the Bill did not contain sub-section (5) (b) and sub-section (5) (e). Sub-section (5) (b) says that the board shall "regulate the procedure and define the functions, powers and duties of any committee so set up". Sub-section (5) (e) says that the board may "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". If these sub-sections were not in the Bill, Deputy Cosgrave's amendment might be necessary.

I agree with Deputy Davin, though I was never on the board of a bank, that not alone banks but other bodies delegate their work to committees though they do not delegate unlimited power to any committee or sub-committee. Any power they would give would be limited, and that is implicit in this section. I am anxious that we should get, as far as possible, agreement on the different sections of the Bill. I am anxious to secure that no unlimited or unbridled power be placed in the hands of any committee, sub-committee or individual. It has been suggested to me that a way out of the difficulty would be to provide for submission of the regulations to the Minister and for sanction of them by him. Another way out, which I am prepared to adopt, would be to accept the principle of Deputy Cosgrave's amendment and have a provision drafted which will, perhaps, satisfy him and other members of the House. I feel certain that any board which any Finance Minister would be likely to accept would so limit the powers of any committee, sub-committee or individual that nothing would be done by that body, or person, with which the board would be likely to disagree and that anything so decided would have to go to the board for ratification. If Deputy Cosgrave is satisfied, I shall reconsider this matter and see if I can produce an amendment to satisfy him.

Mr. Cosgrave

I am satisfied.

Mr. Davin

I do not think that I shall be allowed to live long enough to learn as much about banking as Deputy Cosgrave now knows. There is no use in his suggesting that I know everything about banking and that he knows nothing. He could not have been at the head of a Government for ten years without learning something about banking and banks——

An Leas-Cheann Comhairle

What has this to do with the amendment which has been withdrawn?

Mr. Davin

If you had indicated that previously, I should not have risen.

An Leas-Cheann Comhairle

The amendment is withdrawn.

Mr. Dillon

It cannot be withdrawn without the leave of the Committee.

Mr. Davin

I would not have stood up if you had indicated that the amendment had been withdrawn. I am sufficiently acquainted with the procedure of the House to know I would not be in order.

An Leas-Cheann Comhairle

The Deputy may accept it now that it is withdrawn by leave of the House.

Mr. Dillon

Is it withdrawn?

Mr. Cosgrave

I asked for permission, but I do not like to interfere with Deputy Davin when he says anything complimentary to me.

Mr. Davin

I am sure the Deputy does not mean that.

Mr. Cosgrave

If the shower is on, I like to be under it.

Mr. Davin

I should like to point out to Deputy Cosgrave, though I doubt if it is necessary, that the word "officer" may refer to the general manager or secretary of a board, and that general managers and secretaries of bank boards, under the terms of their appointment, have very extensive powers delegated to them by the board, irrespective of what may be contained in the Act.

Mr. Cosgrave

I am going to ask for permission to withdraw the amendment. I should like to say to Deputy Davin in reply, that we have lived long enough to have seen in the Press very large and varied financial institutions crash by reason of the idiosyncrasies— to call it no more—of the persons at the head. It is to ensure that a thing of that sort will not happen here that I put down this amendment.

Amendment, by leave, withdrawn.

Mr. Davin

I move amendment No. 9:—

To delete sub-section (6).

I cannot understand the Minister's refusal to take the powers contained in Section 9 of the Ministers and Secretaries Act, 1924. He appears to have gone out of his way to deprive himself of the power to compel the board of directors to carry out the powers the members of this House appear to be willing to hand over to them. Under Section 9 of the Act referred to in Section 6 of this Bill, the Minister for Local Government and Public Health and the Government as a whole have exercised their powers in a very drastic way during the past nine or ten years, and particularly recently, to wipe out local authorities because they refused to carry out the duties imposed on them by Parliament. Nobody will suggest that the powers and duties conferred upon local authorities are in any way comparable, from the point of view of service to the community, to the powers contained in this Bill. I would like to hear the Minister say why he, by his own decision, proposes to deprive himself of the power to wipe out this board, seeing that it is possible that they may not carry out their duties in a satisfactory manner.

We have had speeches from Deputy Dockrell and from the other side of the House indicating that, from the very beginning, there is likely to be an issue between the representatives of the joint stock banks and the non-banking directors. My amendment proposes to leave power to the Minister, in case the members of this board do not perform their duties, to use Section 9 of the Ministers and Secretaries Act in the same way as the Minister for Local Government and Public Health has ruthlessly used that power to wipe out local authorities in the country. I do not see why this power should not be retained in the Central Bank Bill.

Mr. O Ceallaigh

If the Minister and the Government wish to have that drastic power, it should be brought in in a more straightforward way. I think the Deputy is not serious in moving the amendment. The power that exists to remove statutory bodies has been, as the Deputy says, for a long number of years used with regard to local bodies and, presumably, for very good reasons; but I do not think the Deputy or anybody else would seriously contend that that power deliberately put there for a certain purpose should be used in this connection. If the Deputy wanted the Government to have that power of taking over the central bank completely, if dissatisfied with the working of the board, he should put a definite straightforward section into the Bill or into the Act. I do not think it ever was the intention that that section in the Ministers and Secretaries Act should be used in this way, and I have no intention of having it used in this way.

Question put: "That the words proposed to be deleted, stand."

The Committee divided:— Tá, 63; Níl, 7.

Tá

• Aiken, Frank.
• Allen, Denis.
• Bartley, Gerald.
• Beegan, Patrick.
• Bennett, George C.
• Benson, Ernest E.
• Boland, Gerald.
• Bourke, Dan.
• Brady, Brian.
• Brady, Seán.
• Breathnach, Cormac.
• Brennan, Martin.
• Breslin, Cormac.
• Briscoe, Robert.
• Buckley, Seán.
• Corry, Martin J.
• Crowley, Tadhg.
• Daly, Patrick.
• Derrig, Thomas.
• De Valera, Eamon.
• Dillon, James M.
• Dockrell, Henry M.
• Doyle, Peadar S.
• Flynn, John.
• Fogarty, Andrew.
• Fuller, Stephen.
• Gorry, Patrick J.
• Harris, Thomas.
• Hogan, Daniel.
• Hughas, James.
• Humphreys, Francis.
• Keane, John J.
• Keating, John.
• Kelly, James P.
• Lemass, Seán F.
• Little, Patrick J.
• Loughman, Francis.
• Lynch, Finian.
• McCann, John.
• McDevitt, Henry A.
• MacEntee, Seán.
• McFadden, Michael Og.
• McGovern, Patrick.
• Morrissey, Michael.
• Moylan, Seán.
• Mulcahy, Richard.
• Mullen, Thomas.
• O Briain, Donnchadh.
• O Ceallaigh, Seán T.
• O'Grady, Seán.
• O'Loghlen, Peter J.
• O'Reilly, Matthew.
• O'Rourke, Daniel.
• O'Sullivan, Ted.
• Rice, Brigid M.
• Ryan, James.
• Sheridan, Michael.
• Smith, Patrick.
• Traynor, Oscar.
• Victory, James.
• Walsh, Laurence J.
• Walsh, Richard.
• Ward, Conn.

Níl

• Brodrick, Seán.
• Corish, Richard.
• Davin, William.
• Everett, James.
• MacEoin, Seán.
• Murphy, Timothy J.
• Pattison, James P.

Tellers:— Tá: Deputies Smith and S. Brady; Níl: Deputies Corish and Everett.

Question declared carried.

Question proposed: "That Section 5 stand part of the Bill."

General Mulcahy

I want to emphasise that the section is objectionable. In the first place, it is unnecessarily costly, in the sense that it provides a bigger board than is necessary to do the work, and, in the second place, it confuses the question of responsibility in the minds of a large number of people. The point is, whether the responsibility would not be better focussed in a smaller number.

Mr. Dillon

With regard to this board, I think it is a pity it should be passed away from without the Government giving us some indication of how it is to be constituted. I suppose the purpose of this central bank board is to advise the Government pretty generally on matters of currency and credit. My experience in this country so far has been that, in most central organs of opinions, interests situated in Dublin or Cork are very adequately represented, but the mercantile interests and the agricultural interests and the craft interests down the country are treated as if they did not exist at all. I should say that if you took all the small business men situated in the country towns and villages, you would find that they represent a very substantial part of the total deposits, the real deposits, in the banks of this country, and if you added to that the small farmers, I believe that together they would represent no less than two-thirds of the real deposits of the kind which the Leader of the Opposition has in mind—the bundles of notes, the bags of coin that are handed across the bank counters throughout the country for safe keeping.

On the other side, we all know that it has been the well-established tradition of the joint stock banks of this country and Great Britain not to engage in the policy so commonly practised by continental banks of providing long-term finance for industry. The main business of the joint stock bank in this country is to provide overdraft accommodation for its customers which they expect to have extinguished at regular intervals. I am going to suggest to the House that a very large proportion of that type of account is kept in the banks of this country by the small traders in the towns and villages as opposed to the cities. In evidence of that fact, if evidence be required, I direct the attention of the House to the fact that at the time when acute competition existed for business between the various joint stock banks, there was scarcely a town or village in Ireland in which you could not find two or three banks represented by branches. They all did not build branches in these small towns if there was not a good deal of profitable business to be got in these small towns and profitable business for the country bank is the overdraft of the local trader. That is the thing on which the bank makes its money.

I am acutely conscious of the fact that the rural mercantile community is a community that is peculiarly difficult to organise. From the social point of view, I think that is rather a good thing. I detest organised vested interests. The moment an interest organises and becomes a vested interest, the devil gets into it and they begin to adore at the shrine of the almighty dollar. They forget their social duty, and they think of nothing but what will line their own pockets. From the social point of view, I like the unorganised mercantile community of rural Ireland, the decent shopkeeper who regards his employees more or less as members of his family and to whom the nuns who are looking after the poor in the district would ordinarily turn if they were short of a few pounds to relieve an indigent family.

I notice frequently that when I take occasion to make representations on behalf of that class of person here, the Minister for Supplies is inclined to say: "Let their trade organisations speak for them." They have not got any trade organisation. They never had and, as I say, from many points of view, I hope they never will. They regard themselves as part of a parochial society, not as part of a great vested interest with its tentacles spread all over the land.

An Leas-Cheann Comhairle

Will the Deputy relate all this to Section 5?

Mr. Dillon

Yes, of course I will. I want to get these men represented on the board of the central bank and I am trying to explain to the Government that they have no organisation that will suggest to the Government the name of a man who would represent these interests. That being so, I do not want the Government to run away with the idea that they are not there or that they are adequately represented by vested interests which, in fact, are interested in nothing but the big shots in Dublin or Cork. I am talking for the little fellows. I agree with the Taoiseach in his natural bent towards the parochial unit and I do not think I misinterpret him when I represent him as thinking that those who live in the rural parishes should more or less turn their backs on the cities and look to their own community as the first sphere of their activities, and not to think of themselves as members of the all-Ireland rural drapers' association, or of the all-Ireland rural grocers' association, but rather as a figure in the parish, with parochial responsibilities, in addition to the national responsibilities shared in common with all their fellow-citizens. Is it the Minister's intention to try to secure some sort of voice for that type in the community on the central bank board? Their problems are quite different from the problems of the city merchant or the city mercantile community. Their whole approach to life is different and I pray God it may always be kept different.

If you want to find a very good description of what the philosophy of life should be for that kind of people, I think it should be found in a book like The Farm by Lough Gur or Never No More. I do not want the board of the central bank to make it impossible for those of us who live in the country to go on living that way. I do not want the Government to say to us, “You are a damn nuisance living that way. Organise. Get into a trade union. Bring pressure to bear on us as a national trades union and then you will get your interests represented on this board and your requirements considered by it as the economic adviser of the Government.”

Therefore, as I have often said in this House before, in reference to these unorganised sections of the community who are a socially desirable element, we here in the House should regard ourselves as their representatives in a very special way; we here in this House should regard ourselves as their trustees. I want the Government to tell me, when the times comes to put their nominees on this board, are they going to look upon themselves as the trustees and spokesmen of this section of our community, who have scorned to constitute themselves vested interests, but who have felt that their first duty was to the family, their second duty to the country and their third duty to the special parochial community in which they live? If the Government says: "Yes; we recognise their existence, we recognise their value in the social set-up and we mean to see that their interests will be looked after on this board by somebody competent truly to represent their interests," that is good enough for me. If the Government means to do that, they may not do it the way that I would like it done, but they are the right people to do it and, being the Government of the country, it is their responsibility.

The Taoiseach

On this particular matter of representation, I have with the Minister for Finance, naturally, considered the matter fairly fully. That is one of the difficulties about the size of the board. You can approach this from the point of view of representation of various interests. If you attempt that, you will have to have as many on the board as there are in Switzerland, where there are 45 or something of that sort. We abandoned that idea and, as a matter of fact, it is doubtful whether you would get the interests of the community as a whole served best by a board constituted in that particular way, because there would be rivalries in combinations amongst the particular interests. I think you have to abandon that idea. The word "privilege" was, used, I think, earlier by the Minister for Finance here to-day. We are really doing something so to speak for the banking interest that is not being done for any other section in the community. The reason for it has been given, namely, that the members who will be chosen will be chosen not so much as representatives of that particular interest, as people who, from their business knowledge of banking, their practical experience of it, will have the sort of knowledge which will be required on the board.

In answer to the Deputy, what I think, anyhow, is this—that it will not be possible, in the nature of things, to give representation to the different sections. If you are going on that basis you would like to have agriculture represented. You would like to have various types of industry, commerce and trade also represented. The result would be that even with the smallest representation—even with only one representative each—you would soon swell the board to a very much larger body than the body we contemplate here.

The other plan on which you might proceed would be, instead of appointing representatives of individual interests, to appoint people who know this particular business and who will carry out their responsibilities with a view to the common good, that is in the interests of all sections of the community rather than of any special section. I have tried to picture in my mind the type of individual who will be put on the board, but I do not think it would be possible at this stage for the Minister or the Government to say definitely who will be the particular members of the board. I was turning over in my own mind recently the persons whom we might possibly appoint and I saw that, by the addition of perhaps one or two more members, you would get a properly balanced board, but there is a limit to the distance to which you can go in this way. We have been blamed already for going too far in having nine members. I should like to have more than we have provided for here in order to have a balanced board but, as I have said there is a limit and I do not think it will be possible for the Minister to provide for what the Deputy has in mind, namely, that a particular interest, even such a very important interest as the rural community, should be represented as such. The people, however, who will be on the board will be supposed to approach all questions with which they have to deal from the point of view of what is best for the general interest, to deal impartially, so to speak, with all sections and only consider the greatest good of the community. I do not think it would be possible to meet the Deputy's view to the full extent.

Mr. Dillon

I appreciate the Taoiseach's difficulty in coming down to precise details, and I hope the Taoiseach will appreciate the difficulties of members of the Dáil in being asked to give general approval to something which at the present stage is pretty nebulous. At the present moment bank boards are constituted of business men, but you will not find any representative of small business men on them. You will find on them the large drapery wholesaler, the large importer, the chartered accountant, in fact all the men who deal on a very large scale with the banks. If you think of all the bank directors at present in this country you will find that they consist to a considerable extent of industrialists or large wholesale traders.

A very similar conflict has arisen in the United States recently. The Taoiseach's attention, I am sure, has been directed to what happened in the case of Jesse Jones, the Federal Loan administrator, who, being a big man and taking the orthodox view of bank directors, withheld federal loans from small businessmen on the ground that he would get less security from the small businessman than from the big chap. Small businessmen, however, organised an agitation, went to Washington and succeeded in reversing the policy of Jesse Jones. By Presidential order Jesse Jones has been thrown over, with the result that the small businessmen of America have been enabled to get loans to finance war work. I do not know that there is any such acute conflict of interest in this country, but I do know from any own experience and observation that that very important section of the community to which I have referred, and the survival of which I am most anxious to secure, has never got any representation on central bodies in this country. The only place they get representation is in Dáil Eireann, and such representatives as they have sent here usually sit in this House from one end of the year to the other without opening their mouths. We all know that these men can be very vocal down the country, but once they get into Dáil Eireann they seem determined to remain silent. It appears that they do not care to speak in such high falutin' places.

I see the Taoiseach's difficulty and, while recognising that he is constrained in order to keep the numbers on the board within reasonable limits to refuse representation to sectional interests, I should like the Government to bear in mind—the Minister may choose whom he likes to represent him on this board—that there should be somebody, perhaps not drawn from this section of the community to which I have referred, but somebody with a sufficiently intimate knowledge of it to ensure that the credit policy of this country will be operated in future, not in the interests of a select few but in the interests of the community as a whole. That is necessary if we are to avoid forcing that section of the community to which I have referred into organising itself into a vested interest to secure a square deal.

Mr. Cosgrave

I oppose this section almost root and branch. The more explanations we hear about it the more uneasy we get with regard to the composition of the board. The suggestion in the Report of the Banking Commission is that the members of the board should be representative of industry, commerce or some section of the community qualified by reason of its importance to have a representative on it. I would agree that it would not be necessary to select a person out of one of these different classes to be merely representative of that class, but I think that a person selected should at least have some business experience and qualifications. As the matter stands before us now, it may be that the board of nine would consist of three persons whom the Minister would select from the banks' own nominees, three civil servants or ex-civil servants as the case may be, and three other persons. These three others might be three politicians. There is no limitation, or suggestion of limitation, regarding the class from which they would be drawn. The suggestion made by Deputy Dillon is one worthy of consideration, but I think it is not in the central bank or on the central bank board that the interests of persons with whom he is concerned will be protected, as I see no prospect whatever of this bank either controlling credit or issuing credit at a lower rate than at present prevails. Whatever prospects there are of cheap money, it is from the commercial banks, so far as I can judge, that any facilities of that sort are likely to arise.

This new method of forming a directorate for the central bank is a very expensive method. You have nine directors. It is said, in a later portion of the Bill, that account will be had to the remuneration paid to directors of commercial banks, but the business of a commercial bank is very different from what the business of this bank will be. The business done in a commercial bank is conducted on a far more expensive basis than the business that will be done in this bank.

Take any one of the commercial banks. Take banks with deposits of something over £30,000,000, which might be £40,000,000 before this war is over. The maximum sum the central bank is likely to deal with, as soon as we get away from the inflationary tendencies of the moment, is under £20,000,000. This bank will not lend money to anyone. It has not to consider reports from the different branches regarding applications from individuals for loans. It has not to busy itself with regard to business fluctuations which might mean either large sums of money lodged in the bank or large withdrawals. It will not have even to consider the possibility of a fairly big reduction in the sterling assets. These are the main considerations of commercial banks and will remain so. This is mainly a money-changing institution, and it is becoming a greater expense upon banking in this country. Even in the year's estimates and receipts it is anticipated that £20,000,000 more will come from the Currency Commission than came in last year. Every single bank note that the banks use as soon as this Bill is passed into law will cost 3.5 approximately.

Mr. Dillon

Each note?

Mr. Cosgrave

At the rate of 3.5 per cent. Why is that so? We are setting up a board of nine persons, two of whom may possibly be awarded pensions. Is any bank in this country awarding pensions to any of its directors? What is the remuneration paid at present to the chairman of any bank here? I think it will be found that it is less than what is to be paid by this bank. They have much more diversified work and I venture to say, by reason of the extra sums of money, more responsible work than is being done here. I do not propose to go into these sections that have been the subject of immediate consideration, as the Minister is going to consider the principle of the amendment I put down. On its face, as the proposal stands, this is simply an addition to the cost of administration in this country. It may be a small sum. Where is it, in anything that we have been doing here for the last ten years, that there has not been an adding up? We seem to indulge in an orgy of squandermania at this time on all sides, when bread is short, petrol is short, tea is short, and sugar is going short. What is there that is in big supply except the cost of Government?

Mr. O Ceallaigh

I should like to say a word about the very irrelevant speech we have listened to on this section. There is nothing in the section about pensions for anybody, there is nothing in it about supplies, and there is nothing in it about the salaries of directors. We heard something about numbers. That is the kind of speech we get from a gentleman who criticises others for being long-winded. In my opinion, nine persons as directors of a board of this kind are not too many for the responsible work they have to do. Even in Deputy Cosgrave's own Party there are evidently striking differences of opinion as to the quality of the work that will have to be done. Deputy Cosgrave thinks it is of a very minor kind. If he had his way perhaps one person would be enough, though when he was head of the Government that appointed the Currency Commission he thought seven a justifiable number for a body with considerably less responsibility than this body is likely to have, seeing that it will have more important decisions to make. Deputy Dockrell who takes an interest in the matter said to-day that he thought this board was likely to make momentous decisions. He differs very much from the leader of his Party. In anything this Government does Deputy Cosgrave can see no good. That is natural enough, but there ought to be some sense of reason.

When talking about a new method of forming the directorate of the central bank, as there was never a central bank in existence in this country any method will have to be a new method.

It is a very small point, but I do not think we should be criticised for appointing a new board to a new institution. On the question of pensions, a person who has given his whole time to this work, and who is being asked to give his whole time in future, is entitled to be thought of and to be provided for. If we do not provide for a person put into a position of that kind, who gives his whole time, we would be open to criticism, and justifiably so. During his period of office Deputy Cosgrave gave us a headline in that way, so that he is only criticising himself for something he did which he, evidently, thought worth doing, and right and proper. He looked after people permanently employed in a whole-time job to see that they got something at the end of their time to enable them to live. That was a just thing to do. If he thought it right then I do not see why he should object to it now.

Mr. Cosgrave

It is quite true that there is nothing in this section about salaries, but there is in a later section. There is also provision for pensions in a later section. We are starting off now and we have a right to tell a man when he comes into our employment in connection with this matter whether he will have a pension. We are entitled to say to him that he will get no pension and that he need not come if he does not like those terms. The pensions that we gave to people we recommended this House to give. They were given for interruption of their lives, not for the whole-time service that they gave. Why should there be a change? What more responsibility is this body going to have than the Currency Commission had? I have not heard of it yet. Why should we pension off the old board which has done this work? Has it been unsatisfactory? Is it to be pensioned and put out so that we will have two sets of responsibilities? First of all, why put on a person extra, over and above what the Banking Commission recommended? The Banking Commission was your own child; it was set up by the Government, and yet you are putting on one more than that Commission recommended. When we put on seven in the Currency Commission, some 15 years ago, we did it on the recommendation of a body of experts which was set up to consider the matter. They considered it and, as a result of their recommendation, we put on so many, and we gave to the associated banks, who were then shareholders or who were to become shareholders, their representation on it. We at least had this much confidence in them: that in respect of the work they had done and what they had inherited from their predecessors, we were prepared to take their nominations and not to put on people who were merely political appointees. This whole thing is a compromise from end to end. It is an expansion, and, at this moment, what is there to prevent three selections from the panel of the banks being made by the Minister—three civil servants and three political appointees? What is to prevent that being done? Nothing, so far as can be seen there.

Mr. Davin

It is evident that every section and organised interest in the community cannot be represented on a board of nine persons, but I think that, if credit in the future is to be equated to the economic needs of the country, and if money is to be made available for the development of the country, the people who know most about the needs of the community, that is, the producers of wealth, whether organised or not, will have to get some kind of representation on the board of this bank. The operations of this bank, in my opinion, will decide whether it is possible for the Government now in office to give the citizens of this State the rights which are contained in the written Constitution which has been accepted by the majority of the people. I think it is a tragedy that any parliament of a democratic country should hand over to a body of nine citizens, without any responsibility to the Oireachtas here, the control of credit in the future, as long as this bank lasts. Now, the farming community are the producers of wealth. They are the people who need credit. If every acre of arable land in this country is to be tilled or worked to the best possible advantage, it will have to be done by the farming community, whether organised or not, and these are the people who are in need of money. If we have a large amount of arable land not being tilled or worked to the best possible advantage, it is because there is a shortage of money. That must be known to the Minister for Finance and to his colleagues in the Government, and these people will have to get some kind of representation, whether they are unorganised or organised sections of the farming community such as the Beet Growers' Association or the Irish Agricultural Organisation Society.

I hope that this board will not be overloaded by professors of economics or people of that type. Industry and commerce will be represented on this board by the three representatives of the joint stock banks. A good many people in the country, to whom I have been speaking about this matter, seem to think that the non-banking directors will be people who may have some kind of qualification for sitting on a board of this kind, but that their political affiliations will have to be closely related to the Fianna Fáil Government or otherwise they will not have all the qualifications that are needed. I hope that when the board is being set up by the Government they will take serious notice of the need for having some kind of representation given to the farming community, and, if they are going to think about an organised section of the farmers, there are two good organisations, representing large numbers of tillage farmers in this country, one of which is the Beet Growers' Association, and the other the Irish Agricultural Organisation Society. At any rate, I hope that the board will not be overloaded with professors.

Mr. McGilligan

As far as I can make out, we are discussing the composition of the board of this bank, and it has already been agreed that this bank will have nothing, or very little, to do with credit expansion, control of the rate of exchange, or interest rates. In the circumstances, therefore, I think it is to a great extent a waste of time to discuss the composition of the board.

Question put.

The Committee divided:—Tá, 49; Níl, 27.

Tá

• Aiken, Frank.
• Allen, Denis.
• Bartley, Gerald.
• Beegan, Patrick.
• Boland, Gerald.
• Bourke, Dan.
• Brady, Brian.
• Brady, Seán.
• Brennan, Martin.
• Breslin, Cormac.
• Briscoe, Robert.
• Buckley, Seán.
• Childers, Erskine H.
• Cooney, Eamonn.
• Corry, Martin J.
• Crowley, Tadhg.
• Derrig, Thomas.
• De Valera, Eamon.
• Fogarty, Andrew.
• Fuller, Stephen.
• Gorry, Patrick J.
• Harris, Thomas.
• Hogan, Daniel.
• Humphreys, Francis.
• Keane, John J.
• Lemass, Seán F.
• Little, Patrick J.
• Loughman, Francis.
• Lynch, James B.
• McCann, John.
• McDevitt, Henry A.
• Morrissey, Michael.
• Moylan, Seán.
• Mullen, Thomas.
• O Briain, Donnchadh.
• O Ceallaigh, Seán T.
• O'Grady, Seán.
• O'Loghlen, Peter J.
• O'Reilly, Matthew.
• O'Rourke, Daniel.
• O'Sullivan, Ted.
• Rice, Brigid M.
• Ryan, James.
• Sheridan, Michael.
• Smith, Patrick.
• Traynor, Oscar.
• Victory, James.
• Walsh, Laurence J.
• Ward, Conn.

Níl

• Bennett, George C.
• Benson, Ernest E.
• Broderick, William J.
• Brodrick, Seán.
• Cogan, Patrick.
• Corish, Richard.
• Cosgrave, William T.
• Costello, John A.
• Daly, Patrick.
• Davin, William.
• Dockrell, Henry M.
• Doyle, Peadar S.
• Everett, James.
• Fitzgerald-Kenney, James.
• Hughes, James.
• Keating, John.
• Lynch, Finian.
• McFadden, Michael Og.
• McGilligan, Patrick.
• McGovern, Patrick.
• McMenamin, Daniel.
• Mulcahy, Richard.
• Murphy, Timothy J.
• Norton, William.
• O'Sullivan, John M.
• Pattison, James P.
• Redmond, Bridget M.

Tellers:—Tá: Deputies Smith and S Brady; Níl: Deputies P.S. Doyle and Bennett.

Question declared carried.

SECTION 6.

Mr. Norton

I move amendment No. 10:—

In page 5, lines 16 to 25, to delete all words after the word "addition" in line 16 to the end of the section, and substitute the following words:—"to the functions, powers and duties vested, conferred or imposed on the bank the bank shall have the general function and duty of taking such steps as the Minister may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that currency and credit shall be issued in correct equation to the economic needs of full production and full employment.

Section 6, as at present drawn, reads:—

In addition and without prejudice to the functions, powers, and duties vested by law in the commission immediately before the appointed day and to such functions, powers, and duties as are specifically conferred or imposed by this Act on the bank, the bank shall have the general function and duty of taking (within the limit of the powers for the time being vested in it by law) such steps as the board may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that, in what pertains to the control of credit, the constant and predominant aim shall be the welfare of the people as a whole.

It seems to me that there were two minds at work when this section was being drawn. The mind which was responsible for the opening portion of the section was obviously the banker mind, the man who wanted to deal with the pure mechanics of banking and to ensure that so far as the central bank was concerned it was going to follow on traditional banking lines. I have got a kind of suspicion that, when the Taoiseach read Section 6, he thought that we ought to import into it a little piece of the Constitution so as to make it as palatable as possible and, generally, to give the people the impression that the new central bank was an instrument which was being established to promote their welfare in the highest possible degree. Between the hard metallism of the opening portion of the section and the flummery in the latter portion of it, I think we have now got a section in this Bill which is really a humbug, a humbug which has been seasoned with a little piety, because it seems to me to be quite impossible for the bank to discharge the functions set out in the second portion of the section if it has also got to carry out the functions and duties conferred by this Bill which have been transferred from the Currency Act of 1927. As the law stands at the moment the principal function of the Currency Commission is to maintain the existing parity with sterling. In this Bill we are transferring that function to the new central bank. The Bill does not in any way interfere with the statutory obligation imposed by, I think, Section 47 of the Currency Act to maintain parity with sterling. I do not want to go over the arguments already advanced against maintaining parity with sterling because that matter was discussed at great length on amendment No. 2. It seems to me that the bank, if it is to have the general function indicated in the second portion of this section, cannot possibly discharge that function if it is going to be tied up by the duties imposed by law under the existing statutes and the new banking duties which are imposed upon it under this Bill.

My amendment proposes that the Minister, and not the bank, shall decide what are the appropriate steps to take to safeguard the integrity of the currency. Under the amendment it will be the duty of the Minister to require currency and credit to be issued in correct equation to economic needs. In other words, when you had a serious unemployment problems, when you had a recession of trade, it would be the duty of the Minister to ensure that credits were issued for the purpose of checking that tendency of unemployment and correcting the deterioration which would ensue from it. If, on the other hand, you had a period of full employment, the Minister might find it advisable to restrict credit so as to avoid an inflationary tendency, but under Section 6 the Minister has no such functions. The whole matter of the issue and expansion of credit is left entirely to private individuals who will function as the board of the new central bank. The Minister has no power to insist on the issue of credits to correct an unemployment tendency and has, in fact, no power either to restrict the issue of credits where full employment and perhaps a scarcity of labour might inevitably result in an inflationary tendency. The purpose of the amendment is to give the bank a very definite function and to say that in addition to the functions, powers and duties vested, conferred or imposed on the bank, the bank shall have the general function and duty of taking such steps as the Minister may from time to time deem appropriate and advisable towards safeguarding the integrity of the currency and ensuring that currency and credit shall be issued in correct equation to the economic needs of full production and full employment. This whole question of the integrity of the currency takes on a very serious aspect and nothing that has been said from the Government Benches in connection with this Bill has at all convinced me that it is necessary to continue the present method of safeguarding the integrity of the currency.

The present position is that our currency, apparently, has all the integrity necessary so long as we anchor it to sterling, and although the overwhelming majority of our people desire to break the political union with Britain, in the Currency Act of 1927 and in this Bill we are maintaining financial union with Britain of our own free will. We are doing it with enthusiasm and we are doing it while this Government say that the maintenance of that financial link with Britain is absolutely indispensable for our economic development.

I do not accept the position at all that it is absolutely essential to maintain the link with sterling. I do not accept the position that it is necessary to maintain parity with sterling. In this Bill we are maintaining not only the link with sterling but parity with sterling as well. With all our talk about national independence and all our yearnings for political manhood what we are doing in this Bill is this: before an Irish pound note can be issued here someone must get a British pound note and deposit it in the central bank or somebody else must lend the British Government one pound. Before any Irishman can get an Irish pound note from an Irish bank he must have bought a British pound note and put it into the bank or lent the British Government one pound. That is a most amazing position for a country which claims to have political freedom. We are doing this with our eyes wide open. We are not merely saying that it suits us in present circumstances to maintain that link because we may not at this stage be able to break it, but we are imposing a statutory obligation on this new central bank as we imposed it on the Currency Commission to maintain that link with sterling since 1927 in statutory form. An Irish pound note seems to me to be as good an instrument of exchange as the pound note of any other country in the world. It may rest on Irish industry, it may rest on Irish character, it may rest upon the resources of the country; but apparently that is not good enough. Under this Bill we are insisting that, in addition to resting on our character, on our industry, and on our resources, it must also be under the patronage of the Bank of England because, apparently, it does not get integrity unless it comes under the careful patronage of the Bank of England.

In the section, as now drawn, we are told that the constant and predominant aim of the bank shall be the welfare of the people as a whole. I submit that the constancy and predominance will only operate when not interfered with by normal banking practice as we know it to-day. If promoting the welfare of the people means breaking with sterling, or if it means an alteration in the link with sterling on a parity basis, then the constancy and predominance are entirely worthless because the bank is anchored definitely to the link with sterling. I have not much use for this Bill at all; I have not much faith in it. I am inclined to agree with what the Taoiseach said on another occasion, that when we have established the central bank he thought we would still have to face the same difficulties we are facing now; none of our problems will be found to be soluble through the establishment of the central bank. I have not, as I said, much faith in this Bill or much use for it. The course of life in this country will still run its present turbulent path. It will be as difficult for people to exist as it is to-day. In case there should be any grain of resurgence left in it, I want to give the bank some purpose and some direction, and with that object in view I submit the amendment, the object of which is to place upon the Minister the responsibility for taking steps towards safeguarding the integrity of the currency and ensuring the issue of currency and credit in correct equation to the economic needs of full production and full employment. If the Government really want to give the bank a proper direction, it seems to me that they ought to alter the phraseology of Section 6 and put into Section 6 some words which have life in them, which have direction in them and which would not be as vacuous as the language of the section as at present drawn.

An Ceann Comhairle

Amendments Nos. 10 to 14 seem to cut across each other. It is my intention so to put the question on No. 10 as to permit of a decision being taken on Nos. 12 and 13. I fear No. 11 could not be so saved. Amendment No. 14 stands on its own. Deputies may desire to discuss the four amendments together or separately.

Mr. Dillon

Do you want to take a decision, Sir, on the point you raised.

An Ceann Comhairle

It is a matter for the Deputies concerned. If the question on amendment No. 10 were put in the usual form, amendments Nos. 12 and 13 could not be moved. That, however, will be achieved. If Deputies desire to reserve the points at issue in Nos. 12, 13 and 14 for a separate discussion they may do so. They seem, however, to cut across Deputy Norton's amendment, or vice versa.

General Mulcahy

I certainly should like a separate discussion on amendments Nos. 11, 12 and 13, if that can be managed.

An Ceann Comhairle

It is feasible.

General Mulcahy

I think they differ entirely in intent.

An Ceann Comhairle

It is for the movers of the amendments to decide. No. 11 might be retabled on Report Stage if the Deputy so wished.

Mr. Dillon

On amendment No. 10, I have already stated in this House that, in my opinion, the fundamental issue involved in the whole of this legislation is the question: to whom does the credit money in this country belong? Is it a proper subject for control by this central bank in the interest of the community as a whole or is it not? Since this discussion began I have been trying to establish the fact that the joint stock banks of this country and of Great Britain create credit money in the ration of ten to one of their cash.

An Ceann Comhairle

Does the Deputy propose to make another Second Reading speech on that theory?

Mr. Dillon

I wish to discuss this question on the functions of the bank, because this is the fundamental thing in the whole Bill.

An Ceann Comhairle

Is it relevant to the amendment to discuss how the existing banks operate?

Mr. Dillon

That is determining what the central bank may do. There can be no doubt of that. It is the only function of this central bank which has the slightest significance, and, mind you, up to this hour the Leader of the Opposition denies the validity of my contention altogether, and the Taoiseach says that he is completely bewildered by my proposition, although he acknowledges that there is some social obligation in the administration of credit money.

General Mulcahy

The case is also made that the only thing that will go on if this Bill is passed is what is going on with the banks already.

Mr. Dillon

In any case, I want to call in evidence facts which appear to me incontrovertible to prove the thesis which I invite Dáil Eireann to adopt. When the Taoiseach was commenting on my statement, he quoted me twice at column 1278, and, at column 1281, and having got himself into the most extraordinary tangle, he said:

"If I were to continue the argument along that line, Deputy Dillon can come along and run it up to £1,000,000, and there is no reason why you should not continue with it and run it up to £10,000,000 or even £100,000,000. In fact, you can go by the Deputy's process, and increase it indefinitely, and by a statement of that very sort he reduces the thing to an absolute absurdity."

Let me read for the Taoiseach in his absence what Mr. Hyde, General Manager of the Midland Bank in England, said in describing exactly the procedure which I described to this House. On the 7th day of the inquiry, 9th January, 1930, as reported in volumes 1-2 of the evidence before the Committee on Finance and Industry, at question 900, Mr. Hyde, General Manager of the Midland Bank, is reported as follows:

"Let me explain what I mean. At certain seasons of the year money comes out from the Bank of England by reason of the Government borrowings, or possible by the Bank of England entering into certain transactions which put more money into the market."

I have quoted Deputy Hickey as the source of the additional money; Mr. Hyde mentions the Bank of England. He goes on to say:

"That money, when it comes into the market, increases our cash. We, in common with the other banks, get our share of whatever money comes into the market. When we lend that money,"

—this is the bank in which Deputy Hickey deposited his money, lending to Deputy Davin, as I described—

"or when we employ it in buying bills, or investments, or whatever else we do, the money is still in the market, that is we lend it to A and A pays it to B"

—that is Deputy Davin borrowing it and paying it to Deputy Corish in discharge of his debt—

"and B pays it back to us again; so we have increased our advances but we have also increased our deposits, and if that additional abundance of money remains in the market as a base for a little time the deposits of the joint stock banks in the aggregate will increase to about nine or ten times the amount of the additional money that is at their disposal as their cash base."

Is that what I said in this House three weeks ago, when it was described by the Taoiseach as fantastic and absurd? At question 906, the members of the commission pressed Mr. Hyde further to elaborate this section of his evidence. A member of the commission asked:

"The operations of the Bank of England as the central bank responsible, of course, for the ultimate supply of credit affect you as the distributor of credit?"

Mr. Hyde replied:

"It affects our base, and, as we are always striving to keep 11 per cent. of cash against deposits, if you increase the total of cash by £1,000,000, we should go on lending or buying bills until we have increased the deposits by £9,000,000 and the £1,000,000 has been absorbed."

Is that what I said in this House three weeks ago, or is it not, except that I stopped at £100,000 and Mr. Hyde, of the Midland Bank, does not stop until he gets to £10,000,000, and goes on to say that, if £20,000,000, where put into the money market by the Bank of England and the joint stock banks in London could find solvent borrowers, they would create £200,000,000 of credit money, or at least, I should say, for the sake of accuracy, £190,000,000 of credit money. The Leader of the Opposition says, first, that that is not true at all, that the banks do not lend anything but the money actually passed into them across the counter; and that if they do they always have collateral deposited with them, which, in his judgment, in some way negatives the creation of credit money. That is not my experience. I would not cite my experience against the opinion of the Leader of the Opposition, but I do venture to quote the general manager of the Midland Bank in England, who must be a man of very considerable experience of joint stock banking, against the opinion of the Leader of the Opposition. At question 891, Mr. Hyde was asked if they stipulate for collateral security in respect of all their advances. He replied:

"We do not discriminate against advances which are unsecured; we are just as ready to lend to a customer without any security as we are to lend against collateral, provided we are satisfied as to the ability of our customer to repay the amount. If he were a trading customer we might ask to see his balance sheets for a number of years or make other investigation as to the business he was doing, and if we were satisfied we would be just as ready to lend without security as with."

Later on in his evidence he says that in London almost all the loans would be made on collateral security, but that, in the provincial branches, about 50 per cent. would be made without any security at all. That is what really matters. That is all that is left that matters. Deputy McGilligan has pointed out in a series of contributions on the Committee Stage of this Bill that there are virtually no other vital functions which this central bank is capable of discharging, and the Taoiseach and the Minister for Finance have been obliged to confess that, in the exceptional circumstances in which we find ourselves vis-á-vis Great Britain, that is true. The minor functions of a central bank are not operable by a central bank functioning in this country so long as our external assets and trading position remain what they are. Deputy Norton and the Labour Party are inclined to tilt against wind-mills. They want, by legislation, to declare that we are about to do that which everybody knows is impossible for us to do. I think it is much wiser to take up the position of the Taoiseach and the Minister for Finance and say: “Even though we would wish to be able to do those things, they cannot be done.”

Nobody has ventured to come to me and say in respect of the credit money created by the joint stock banks: "There is nothing we can do about it," because there is. If this House would only make up its mind as to who owns that money, we could proceed, equitably and prudently, to deal with it. I do not want to create the impression that there is something disreputable or shameless about the creation of this credit money. There is not. It is a most excellent thing that this credit money is created. If it were not created, the condition and standard of living of our people would, probably, be much lower than it is. When I speak of this credit-creation, the Leader of the Opposition takes up the balance sheets of the banks and says: "There are the balance sheets of the banks and this ten to one ratio is not to be found in them; that is evidential of the fact that the ten to one ratio does not exist." It is not that the ratio does not exist at all but rather that the circumstances of our banks are such that they never come near the ten to one ratio, not due to any reluctance on their part to approach it if it were physically possible for them to do so but because more than one factor must operate before it is physically possible for the joint stock banks to reach that ratio. They want to reach it because, the nearer they get to it, the more profit they will make but, in order to reach it, they have not only to be willing to lend but they must be able to find a customer who is solvent and willing to borrow.

In the City of London, where there are 8,000,000 people and the greatest mercantile community in the world, there is nearly always—though not always—a demand for accommodation greater than the banks are in a position to supply. Occasions have arisen, as Mr. Hyde, the General Manager of the Midland Bank said, when even so great an institution as the Midland Bank found itself for some days in the extremely embarrassing position that their ratio had gone beyond ten to one and had reached about 9 per cent. He said he spent anxious days drawing in money from the bill market to restore his cash position. There is no banker in Ireland who would be able to get himself into the 9 per cent. position unless he called in tramps and lunatics and lent money to them. If the banks here were to lend freely, authorising sample overdrafts to every solvent customer they had, they could not get enough people to draw money out and pay interest on it to enable them to reach the ten-to-one ratio, not to say exceed it. I imagine that that is due to our peculiar economic set-up.

Ten minutes ago, I was referring to the rural mercantile community on the small farms who, I believe, make the most substantial deposits of any section here. These deposits are in a form ever present to the mind of the Leader of the Opposition. These are the people who go in to the banks with bundles of notes and bags of gold coin, hand them across the counter to the cashier and ask that he keep them safely for them. We have a very large volume of those time-deposits but, not having a large money market functioning and not having a large industrial organisation, it appears that the demand for accommodation is not as brisk as the credit base we have here could easily support. The fact that the demand is not so brisk does not mean that the credit base does not exist. Even though the banks in this country are only operating on a ratio of 5 to 1 at present, it is still proved by banking experience that, could they find solvent borrowers, they might safely operate on a 9 to 1 or 10 to 1 ratio. That is where the functions of this central bank come in.

While I think it is correct to say that that ten-to-one ratio argument is unanswerable, we have to qualify it thus far: all the joint stock banks are continually emphasising the necessity for short-term investments. They are continually emphasising that their funds are not available for loans designed to provide capital over long periods, that what they want is to lend money for short periods, have the loan extinguished and then consider another proposition. If we were contemplating any plan whereby the joint stock banks would place at the disposal of the community at advantageous rates a part of the credit money available to them, we should have to bear in mind that that money would have to be advanced by some method which would preserve the liquidity of the banks' funds and secure them against the possibility of collapse, consequent on a run by their depositors. The fact that that difficulty exists should not deter us from facing the problem and calmly determining what we are to do. The fact that there are difficulties should not induce us to go on rambling about in the dark. If I could be persuaded that the members of the Government understood this thing and, having understood it, were resolved on a certain course of action, then I would know where we were. At this moment, I do not believe that they do understand it. I believe that they are in a state of bewilderment on this whole matter of credit-money and that they are still thinking in terms of the Taoiseach's observations in column 1281 of the Official Report when he said that, if you went on in this way, the thing would turn into absurdity, and not in the terms of Mr. Hyde who went as far as I went—and a good deal further.

The Taoiseach

No.

An Ceann Comhairle

Deputy Dillon is, I understand, contending that certain things should be done with the credit created by the joint stock banks.

Mr. Dillon

Yes.

An Ceann Comhairle

In that he is quite in order. There was a prolonged debate on this Bill in which the Deputy advocated that theory at some length.

Mr. Dillon

Yes.

An Ceann Comhairle

How is the financial education of Deputies relevant to this amendment? I suggest that the Deputy might assume the correctness of his theory for the purpose of his argument.

Mr. Dillon

What is the use of assuming a theory if the Taoiseach gets up and says that the whole thing is preposterous? What is the purpose of a deliberative assembly if it is not, by argument, to convert your foes? If this is not the correct method to convert the Taoiseach, I have no alternative but to cut a heavy stick and hit him when I meet him.

An Ceann Comhairle

Seeing that the Deputy devoted some 80 minutes on another occasion to that theory, I suggest that he might be satisfied and proceed in its application to the central bank.

Mr. Dillon

I am absolutely disinclined to accept the proposition so frequently put up by those concerned to preserve the present position—and I am not making any suggestion against you, Sir—and who say "the fellow is a bit daft".

An Ceann Comhairle

The chair made no such suggestion.

Mr. Dillon

That is one of the main armaments of the banking junta. Unconsciously the Minister is employing the armour of those people: "Shsh; that is nonsense; come along in if you want a loan and if you are a good fellow we will give you the loan; do not upset people with talk about credit money and credit currency; it is all good money and if you come in we will fix you up." I have been listening to that for the past 20 years. What I am trying to do is to get Dail Eireann to wake up to the fact that this thing has no existence and its existence the Taoiseach denies——

The Taoiseach

The Deputy will not admit once and for all that he made a mistake in the explanation he gave.

Mr. Dillon

Let us stop the argument about the Taoiseach's mistake or the Deputy's mistake. All I am concerned with is that the evidence of Mr. Frederick Hyde, put before the McGilligan Commission, is incontrovertible.

The Taoiseach

Nobody objected to that.

Mr. Dillon

And that evidence goes to prove that if Mr. Frederick Hyde gets £1,000,000 into the bank he is prepared to lend £10,000,000. Does the Taoiseach admit that?

The Taoiseach

I have said——

Mr. Dillon

He is getting coy.

An Ceann Comhairle

We cannot proceed by cross-examination.

Mr. Dillon

I did not start it; the Taoiseach started it.

An Ceann Comhairle

The Deputy should keep to the amendment before the House.

Mr. Dillon

I want to hear from the Government—recognising the ability of a bank in this country, with £1,000,000 in cash, to create £9,000,000 more money out of nothing—whether they regard that money as our money or as the bank's money. Is that not a fair question?

The Taoiseach

I have answered it.

An Ceann Comhairle

The Deputy must make his own case.

Mr. Dillon

I wish to deliver this challenge to the Government, on the Committee Stage. We want to know the Government's position. To whom does the Government think that money belongs? If the Government is prepared to admit that the money belongs to us, then we can so regulate the constitution of the central bank to enable us or our agents to use that money for the benefit of the nation. My point is that, once we determine that the money is ours, we can then further determine to constitute the joint stock banks our agents for its administration —and we might get much worse agents. If we did that, we could control it through these agents of ours and, accordingly, control it within the terms of their agency and not simply at their own sweet will. I cannot get either Minister to say that we recognise that credit money as belonging to us, or that we make a free present of it to the banks, to use at their own sweet will. I cannot get them to say that we appoint the banks as agents to administer the money in the interest of the country. If they would say that, and then tell us what restraints they propose to insist on the central bank imposing on the agency exercised by the joint stock banks, then we would be able to know whether the powers or functions in the section as drafted by the Government, or in the amendment as drafted by Deputy Dockrell, or in the several amendments proposed by Fine Gael, are adequate to give effect to that and to show effectively that this House will retain control through its joint stock banks or directly over the credit money of this country, as a result of the law-abiding allegiance of us, the people, to the established Government of the State.

Mr. O Ceallaigh

I think there is some evidence in Deputy Dillon's own suggestion of the tilting at windmills of which he accused the Labour Party. He admits that the joint stock banks in this country, so far as he is aware, do not put into practice that 10 to 1 ratio. I do not think they do, either. I do not know what ratio they operate on. I know that there are distinguished and experienced bankers, and economists who are not bankers, who maintain that that 10 to 1 theory is operating, and I have read of others who maintain the contrary.

Mr. McGilligan

They are a decreasing class.

Mr. O Ceallaigh

I think the Deputy is right. Some years ago that view did exist, but those who held it are modifying their views. At any rate, it does not operate here, so far as we know, to that extent. I do not think it can be denied that there is a creation of credit, but to a very limited extent, in this country. That does not do away with the principle Deputy Dillon has in mind. It operated here on a very conservative basis, on the basis usually of lending money where there was security or of giving overdrafts to people who may not have collateral security, but whose credit was good in other respects. That is my view, from my knowledge of banking operations, with which I had some little contact as a private individual before I became Minister for Finance. That is the basis that is worked on here. Bankers here do not work on any theory other than the practical application of their experience and knowledge of banking business.

I have talked to some of them recently on this subject and, so far as I can discover, it is by practical banking experience and knowledge of the trade and economy of this country that they are guided. To what extent they operate the principle that Deputy Dillon wants the House to accept as a working principle here, I do not know and I doubt if any banker in this country can tell you. As far as I know, they say they will lend money if they can get credit-worthy people, that they are glad to lend it and that the more they meet that type of person for an overdraft the more they like it, as the more profit they are likely to make. That is the practical working of the banking system by the joint stock banks here. The money in the banks is the money of the depositors and the shareholders.

The depositors of the country, taking them as a whole, are thrifty people, and we have had thrifty, wise and prudent people to manage our banks. But it is the money of the shareholders and, even if it is the money of the shareholders, if this Oireachtas thought well to legislate that that money could be used only in a certain way, to a certain limited extent, in the national interest, there is nothing to prevent the Oireachtas passing such legislation in order to regulate how that money, although it is private property, should be expended. We regulate property in lands and houses and we regulate other kinds of property and there is no reason why we should not, in the national interest, regulate money and currency.

Mr. Dillon

The Minister does not identify credit money with actual deposits of cash, does he? That is the whole bone of contention between us.

The Taoiseach

I should like to see the Deputy separating the two in a balance sheet.

Mr. McGilligan

Surely the balance sheet would not tie deposits or loans to actual cash?

An Taoiseach

I say that after a certain stage you cannot segregate the deposits into the class Deputy Dillon speaks about, those who put in bundles of notes.

Mr. McGilligan

Is there a bank in the world which has tied its capacity to make loans to its cash reserves?

An Taoiseach

They all do in practice. They have some ratio to work upon. We have all admitted that from the start.

Mr. McGilligan

I should like to know from the Minister for Finance if the banks here have at any time operated a credit expansion on a ten-to-one basis, or are they entirely governed by the Bank of England?

Mr. O Ceallaigh

I could not say what the ratio is. I do not think any bank here would.

Mr. McGilligan

Whatever the ratio may be, is it not admitted that, in the situation in which we find ourselves, credit expansion is controlled by the Bank of England?

The Taoiseach

No. I would say not in our position, because of the immense liquid funds. If you were to expand their loans would be far greater. Look at the deposits, the liquid assets of the banks.

Mr. McGilligan

When it comes to expanding credit, if the Bank of England decided on a particular occasion by market operations to expand credit, does not that expansion of credit automatically flow over here?

The Taoiseach

It need not.

Mr. McGilligan

I am not talking about actual loans, but about the availability of credit, Are we not governed by the Bank of England? Why hesitate to agree to that?

The Taoiseach

It is not true.

Mr. McGilligan

I understood that you recognised it to be true.

The Taoiseach

With regard to the Irish banks, they are in a peculiar position in relation to liquidity. They preserve a higher liquidity. I think the figure is 22½ per cent. There may be some very good reason why the liquidity of the funds of the Irish banks is much higher than that of the English banks.

General Mulcahy

Is not the liquidity in England about 34 or 36 per cent.?

The Taoiseach

My impression from looking at the figures is that there is a far higher degree of liquidity so far as the Irish banks are concerned than there is in any of the English banks. You will find there is a far higher degree if you take into account the money almost immediately available on call.

Mr. O Ceallaigh

I wish to say a few words in reply to Deputy Norton. We have taken the position that the central bank here should be independent and should not be at the beck and call of the Government at all times or at any time. It should be free to make a decision. If we accepted the Deputy's amendment, we would be abolishing that independence that we think is a necessary principle to be adopted here. We are anxious to leave the bank free to do its ordinary everyday work in controlling currency and maintaining the credit of the State. There are exceptions, I know, and New Zealand is one of them.

Mr. Norton

Sweden is another. The central bank there has done good work.

Mr. O Ceallaigh

They have done good work where they maintain their independence. The central bank should be free and independent to treat Government representations from the purely professional banking viewpoint, and they should not be subject to political squeezing. The Deputy's amendment suggests that the bank should be free to issue currency and credit in correct equation to the economic needs of full production and full employment. I do not know what that is intended to connote—full production and full employment. I take it to mean that ordinarily there has to be somebody to go to the banks seeking credit for enterprise. At present currency is issued in accordance with the needs of the community. Whatever currency is necessary, it is issued, and there is no restriction on it. What is more, Irish currency can be issued at least to the extent of £6,000,000 without going to the Bank of England for one halfpenny.

Mr. Norton

Why have we so many people unemployed and so many emigrating?

Mr. O Ceallaigh

That is another question. Apparently the Deputy wants to side-track. We can issue Irish currency to the extent of £6,000,000 without going to the Bank of England.

Mr. McGilligan

How does that come about?

Mr. O Ceallaigh

Consolidated notes are issued without having to go to the Bank of England to ask permission. Under Section 3 of the Currency (Amendment) Act, 1930, there is power to issue currency against domestic assets. It is restricted.

Mr. McGilligan

We were told last night that that has never been done. You said that not a single pound was issued.

Mr. O Ceallaigh

I said that not a single halfpenny was issued under that power to issue against liquid investments.

Mr. Norton

The machinery in Section 3 of the 1930 Act prevented the acceptance of other forms of assets.

Mr. O Ceallaigh

No, I do not think it did, but at any rate I am proposing to do away with the necessity that there should be a unanimous request by the board. I am proposing to abolish that and to make it a two-thirds majority—six members of the board. If the House thinks that is not sufficient, I would be prepared to consider going even further if they think there is a demand in that direction. But I do want to say that there is at present power. Deputy Norton did not tell the whole truth when he said that for every £ issued here we had to go to the Bank of England to get an English £. We have money available in consolidated notes to the extent of £6,000,000. We can also issue currency against domestic assets. Then there is another power, under Section 7 (h) to "make loans or advances to banks and other credit institutions (carrying on business wholly or partly within the State) on the security of such bills of exchange as the bank is hereinbefore empowered to rediscount", etc.

Mr. Norton

The Minister knows the reason that Deputy Cosgrave had for introducing the amending Act of 1930, yet it was never implemented.

Mr. O Ceallaigh

I know all about that but, at any rate, there is power there which has not so far been used, probably because it has not been necessary. Then again about the link with sterling, the Deputy cannot deny that we can abolish that in 24 hours if the Oireachtas decides to do it.

Mr. Norton

Why let private bank directors fix it and why impose upon them a statutory obligation?

Mr. O Ceallaigh

We here, of our own free will, in this Oireachtas, are responsible for that and we can change it at any time. It should not be said that we have not the power to break that link any time it serves our purpose or suits our economics here to do so.

Mr. Norton

Does the Minister know of any central bank in the world which is statutorily bound to link the currency of its country on a parity basis with the currency of another country?

Mr. O Ceallaigh

I cannot say I can quote them but I know there are central banks that have their links with other countries.

Mr. Norton

Of course, but not statutorily bound.

The Taoiseach

I am not so sure about that.

Mr. O Ceallaigh

Every central bank that exists in the sterling area is linked to sterling.

Mr. Norton

On a parity basis?

Mr. O Ceallaigh

Some of them on a parity basis.

Mr. Norton

No, surely not.

Mr. O Ceallaigh

They differentiate. There are Australian and New Zealand banks. We can do the same if it suits us.

Mr. Norton

Why do you not leave it free?

Mr. O Ceallaigh

Because those here, who are the best people to advise on that matter, do not recommend it. You cannot get the best advice on a matter like that in the Dáil. It is a highly technical matter and it is doubtful whether any Dáil Committee that we might set up—and I am sure we could get a committee that would leave out Party politics—would agree that it was the wisest body to advise on a matter of that kind without getting expert opinion. As long as those that we have appointed—the Currency Commission that have been there— advise us that from the financial and economic view of our own best interests, the best thing to do is to leave that alone for the time being because it suits us, we will leave it alone. When they advise us that that link ought to go, that we could do better business in Ireland, that farmers and industrialists could make a better profit and do better trade if that went and if we had a rate of exchange more suitable to us, when that recommendation is received, then we will change.

Mr. McGilligan

I do not know whether it has been decided to discuss these amendments together. It seems to me that there is not much difference between them except in small points of detail. Deputy Norton's amendment consists of various functions which he describes in general phrases which are to be given to the bank, which should be given to the bank under the control of the Minister. Some of the other amendments down here are really aiming at very much the same thing but leaving it still with the bank. So far as Deputy Norton's amendment brings in the Minister, and therefore this House, I can see an advantage in it and I can see considerable disadvantage under certain circumstances, but I think there is no doubt that the generalisation may be made from the tendency of the last 15 or 20 years, that the tendency is towards regarding this matter of credit provision as a public matter and, therefore, bringing it definitely if not under immediate control, under some sort of control by Government. Of course, one has to recognise that the complete control of the expansion of credit in the country is an amazingly dangerous weapon to give to a Government, particularly one that might be bewildered by the difficulties Governments fall into from time to time.

Most Governments are on the search at the moment trying to get over that dilemma of how they are going to put the provision of credit to the public where it belongs and how they are going to safeguard against the abuses that might arise, if too much power is given to the Government. Sweden has been mentioned by Deputy Norton. There, the directors, six of them, are appointed by the Parliament and by a system which is not our Parliamentary system a solution is possible that is not open to us. By their system, they can prevent Government interference while they still have parliamentary control. We have not that particular solution open to us here but there is a possibility that we might get over the difficulties in a number of ways.

One suggestion is that we might have something like an Electricity Supply Board link. Another is that we might give the Banking Board complete control and that we might insist on certain things in consideration of that from them, such as a review of their operations by the Minister, who would then have to bring an account of his review and of what has happened to the Dáil each year, so that we would have the functions of the bank under some sort of observation, but we would not attempt to interfere—as I think it would be absurd to have an attempt to interfere by a lay body such as this is—with such a technical matter as finance.

As to the direction of credit, apart from how it is manipulated, apart from the technical processes that it is taken through, it seems to me that this House should have a say in the direction of credit and as to whether an expansion movement or a restriction movement, leaving the details to be worked out, was an advisable or a wise thing at certain times. With regard to these functions, it does seem to me to be rather ludicrous to be bringing in this phrase from the Constitution into the circumstances of the situation as I have gathered from what I had been able to observe and from what I have heard from various speakers in the House. To anybody who reads about central banks—I am sorry if this seems to be repetition— there appear to be three functions: credit, its expansion or restriction; the preservation of a proper rate of exchange as between the currency of a country and the currency of outside countries; and thirdly, interference with interest rates, particularly long-term interest rates.

As far as I can read from outside sources, and even from the phrase used by our own Banking Commission, it is recognised—and it is not because we are tied by any political bargain with England, and it is not because there is anything going on behind the scenes which restricts us in doing what we consider right in the interests of the country, and it is not through any weakness or default on national lines, but simply because of the circumstances in which we find ourselves—that we are in this position, that we have to admit that a central bank in this country can do nothing with regard to credit expansion or credit restriction.

I am told we are suffering from an embarrassment of riches, that we have too much in the way of assets under our control and that that might not merely hinder a central bank in a restriction movement in respect of credit but might even hinder the Bank of England, its operations having the usual effects on this country. I cannot see how the central bank will make a particle of change in regard to expansion or restriction of credit as we are constituted at the moment and that is not a function that we are going to give them. It is a function we have taken from them. The Minister for Finance said here a moment ago that there is money available in this country and money that can be made available to the extent of £6,000,000, that is in consolidated notes.

There is one section in this Bill which is headed "Extinction of Consolidated Bank Notes." The way that extinction is carried out is that at a period somewhere after 1953 it will come into operation right away. It is reduced by one-fourth over four terms until eventually the entire consolidated note issue is extinguished. In so far as we approach that, we are approaching a situation in which we have almost entirely, or entirely, legal tender notes. As far as legal tender notes are concerned, I think I am right in saying that they are entirely dependent on what is called British money. If British money is created we must have an equal creation; if British money is withdrawn we must also have a withdrawal. If the Taoiseach says that that is not so, I can relate it to the sections in the Currency Act which brings about that position. For certain purposes, we are reducing the consolidated note issue by £1,500,000 over certain periods. We shall eventually arrive at the position in which we shall have only legal tender notes. As I understand it, they are entirely tied to what is called British money. If that is the situation we have clearly no control—not through any weakness or through political bargaining, but simply because we have to accept the circumstances of the time. This bank of ours then will have no function, or only a limited function for a small period of years, so far as the consolidated note issue is concerned, in regard to the expansion or restriction of credit. I do not see how we can prevent this. Supposing the Government in England decides that credit expansion is required on the other side, as I read the Act, they may go in for a very big increase in circulating currency. If any bundle of these British notes is presented—sometimes the money has to be presented at the agency in London; sometimes the operations can be done here—the party presenting these notes must get our legal tender notes in return. If that is the situation then for any £, any specimen of British money presented, we must give an Irish note. I do not see how we can control that.

The Taoiseach

I am not sure whether that is so.

Mr. McGilligan

I shall read the section. I suggest that is the situation.

The Taoiseach

I am not satisfied that that is the position.

Mr. McGilligan

I assert it is.

Mr. Norton

Is the British note not interchangeable with ours?

The Taoiseach

Ours is interchangeable with the British which may not necessarily be the same thing. If I have a certain number of pennies and the Deputy has ten times as many, the fact that my pennies are interchangeable with the Deputy's does not necessarily mean that all the Deputy's are interchangeable with mine. As I understand it—perhaps I may be wrong—it means that all Irish notes will be interchangeable for English ones to such extent as may be needed.

Mr. McGilligan

In any event there are two sections which involve this position, that on application made either to one of the banks here or to the central bank or the London agency, on British money being presented, we must give legal tender notes.

The Taoiseach

I do not think that that is so to any amount.

Mr. McGilligan

Does that mean that the amount is limited? We can very easily look at the sections. I am merely generalising from the section at the moment. If that is the position I think it is quite clear that the central bank has no power whatever with regard to the restriction of credit. Whatever credit policy is decided on in England, will direct our credit policy here. I am only putting it at the moment on the basis that what I have said is correct, that every pound presented at the London agency or certainly at some place where arrangements are made to present it, must be exchanged for an Irish legal tender note and, similarly, if people present Irish notes they must get British money. By certain avenues thrown open to people who have British money, they can convert it into Irish money.

That is a situation that may be necessary, but if that is the situation, what is the good of having this section telling the central bank to serve the welfare of the people as a whole? What in fact we are doing is that we are directing this pious prayer from our Constitution to the Bank of England and asking the Bank of England will they please, in any credit policy they are inaugurating, serve the welfare of the people of Eire as a whole—which is, of course, nonsense. If what I have said is true—and I think I am right—then the other thing must follow logically. If you concede that situation, it is for this reason: that you have determined on having parity of exchange between the two countries and when you determine, as a first principle, that you are going to have parity of exchange you must have one easily and immediately convertible into the other. That is the reason that we decided on exchange parity and therefore we follow that up by saying that every shilling of British money presented at our bank must be exchanged for legal tender note issue.

The Banking Commission in their report say that this matter of interest rates has been gone into and they show how rates for long term loans are dealt with on the other side. They go on to say that that could not be done here because first of all there are not enough securities to sell. If the central bank did sell against the Bank of England, that would cause a terrific inflationary movement in this country. The three things follow. Once you have exchange equality, you must have that position of the converting of currency of one country into the currency of the other. Supposing we decided to start a restriction movement and that the Bank of England decided on an inflation movement, how long could we last against them? If we have that situation with regard to the functions of the central bank, what is the good of saying that in all their operations the constant and predominant aim shall be the welfare of the people as a whole? Cannot we recognise that in our circumstances the position of the central bank vis-a-vis the Bank of England will be the position of the commercial banks vis-a-vis the Bank of England? That is a position which the Currency Act recognises.

That being the situation, I do not think that the central bank is going to have any great function, and that it is absurd to say that its constant and predominant aim shall be the welfare of the people as a whole. This Bill is not meant for five years. It must last the period in which as a creditor nation we have foreign assets piled up to our credit. My colleague, Deputy Cosgrave, has down an amendment to cut out the phrase that appears inside the brackets in this section. That would achieve very much the same object as Deputy Norton has. The phrase within the brackets would have a certain limiting effect on the powers of the bank, but if you take the two Currency Acts and this Bill, there is no good in saying that you are giving them general powers. We say that if circumstances change you can deal with them as they arrive, but, when circumstances permit, leave them free from the fetters of the law. Let them have power, that the circumstances allow, to embark on a policy.

That brings me to the other point, If that is going to be done—giving the bank general power, and not tying it up—I think it is dangerous to have it given to such a board as this, which is really elected. They are away from Parliamentary control, can operate any way they wish, and are free from any observation. If they are to be given some power or freedom, they really could function, if properly used, and might be of some benefit. I would like it to be a board under some Parliamentary control, either to report year by year, or half-yearly, or some Minister given authority, and to have imposed upon him the necessity of seeing that there was publicity for the activities of the bank, so that this House could give them directions on their general policy and directions as to credit which it thought to be good.

With regard to credit generally, I have been told by the Minister for Finance that he is prepared to make a change in the 1930 Act. As the board is framed, I would not like to see that change made. You must eliminate before you can add with certain security. Remember, if there is to be a change, the Minister said he would take two-thirds or a simple majority. What you are giving then is simply a majority on a board that we have lost control of and that can do all sorts of peculiar things with regard to currency. I would not mind if the board was somewhat under supervision or control. As the Minister for Finance spoke of removing something, I ask as an alternative whether we could get some tie by this House.

The Taoiseach

Unfortunately I was not in at the opening of the debate on this section, but there have been, in the main, since I came in, arguments more or less on general lines. It is only here and there that there was direct reference to the section. Of all I heard speak on the subject, I must admit that Deputy McGilligan approached it nearer to my own view. I largely sympathise with the view he has expressed. He sees difficulties in trying to do what he thinks to be theoretically desirable. He pointed out what the practical difficulties are. If he were on these benches he could not keep going from one side of the fence to the other. He would have to come down flatly and definitely to what he considered to be the best scheme. We are approaching this from the same point of view, trying to see what is desirable, finally dealing with it as a practical matter, and to do that which we consider best in all the circumstances. With regard to the power of control I think I pointed out at some stage in the debate, that the control, so far as it could be control, will not be of a coercive character. It will be in the character of leadership, in getting co-operation between the central banks, the commercial banks and the Government with regard to the policy that will best serve the interests of the community as a whole. Although central banks in many countries have greater coercive powers than we have, because of circumstances to which Deputy McGilligan alluded, as a matter of fact those who have observed their operations have come to the conclusion that they get their results, not so much by coercive measures which are in the background, and not usually used, and that even in the Bank of England open market operations are generally not regarded as the most effective way to get monetary policy put into effect.

What is happening in England and other countries is that the general policy adopted by central banks, on account of character and leadership, and their position of prestige, is followed. It is felt that the people who are directing the policy of the central bank have on the one hand closest contact with the Government, closest contact with industrial and commercial conditions in the country, and therefore there is direction by men whose ability to judge of these matters is respected. It is because of that leadership, with the willing and voluntary acceptance of the commercial banks, that they get results, and not so much by coercive measures. That is the only way that is open to us and this is built up on the faith, belief and hope that when we set up the central bank there will be such good relations between the Government on the one hand, commercial banks on the other hand and the directorate of the bank, that the policy of those in the bank will be steady, that they are experts, and that the policy they direct will be loyally carried out. If that is not so, then the whole thing goes by the board and somebody will have to come back to this House to get a better method.

General Mulcahy

The Taoiseach speaks of leadership. Who is to lead?

The Taoiseach

The leadership of the central bank has to be accepted, I hope, by the commercial banks. On the other hand the central bank itself in the direction of policy will have due regard to policy as suggested to it by the Minister for Finance. It is not bound absolutely to take it, but I certainly imagine that if a good case is put forward by the Department of Finance, speaking for the Government, for a certain policy, the central bank will be willing to accept it unless there is some very good reason of a public character which prevents it doing so. The leadership therefore will be by way of suggestion, on the part of the Minister for Finance and the Government, to the central bank, to give leadership in certain directions to the commercial banks. If that sort of chain consultation and leadership does not fructify and give the results hoped for, then the general scheme will fail. It is a question whether we could get any other in our circumstances.

There is no doubt that if it did fail, there would be people, the Government of the day or other public representatives, who would insist on another attempt being made and there would be a search, along the lines that Deputy McGilligan indicated, to try to get a satisfactory solution. The difficulty is that if you admit, as we do, the public aspect of credit, and if you try to make that aspect of it receive full recognition and full effect, and if you try to bring in the Government, then you have all the difficulties and dangers that Deputy McGilligan spoke of.

We are trying definitely this half-way house, trying to give that leadership to the central bank—to a body of experts that we hope will be impartial in the matter and consider the matter solely from the point of view of the public interest—and we hope that that particular body will be successful in finding policies to suit the public interest at any particular period. In regard to control, then, we have not said that there is no direct power of coercive control here. There are certain powers there, in connection with Section 45, which can be used in a certain sense to get the banks to try to make available here credits in so far as they can, and to put some of their assets into Irish enterprise. I spoke of that on a previous occasion.

Mr. McGilligan

But the initiative there is with the board. However, we can leave that till later on.

The Taoiseach

Yes, there are two topics that I do not want to bring in just at this stage, because they will come up later, and we will be able to understand each other better and get down to things properly if we do not bring too many topics into the one discussion. One thing that I have not been able to follow in Deputy McGilligan's argument was this question of the power of the Bank of England in regard to this particular matter. The power that the Bank of England has will really reflect itself here. In so far as the value of the English unit— the buying value, so to speak, of the English monetary unit in terms of goods—is changed, that will reflect itself ultimately in higher prices in Britain, and these, obviously, after a very short time, will reflect themselves in higher prices here. In that particular way, the action of the Bank of England, by appreciating or depreciating the buying value of the unit in England, will have a similar effect after a time here in changing the buying value of the unit in terms of goods. But, mind you, it is because of that method that any results will follow here, and not so much that you can exchange Irish notes for British notes. The Deputy's point was interesting with regard to that—that to any amount that you can tender British currency, you have to get Irish currency for it.

Mr. McGilligan

And vice versa.

The Taoiseach

Yes, I know that, but putting it the opposite way is another question. It seems to me, however, that there was faith, so to speak, in the practical application of that. Let us suppose that you demanded Irish legal tender notes for the total amount of legal tender notes that would be available in Great Britain, and that they were flooded in here to this country by some means or another, the thing would be completely topsy-turvy. Is not that so? It seems to me that if a demand were made for Irish notes for the huge number of English notes that would be available, you could completely flood this country with them.

Mr. McGilligan

But that is a situation which has developed since the Banking Commission reported. The amount of currency in England is enormous.

The Taoiseach

Yes, I know, and I admit that they can create it to any amount they want, but if it were possible for a huge volume of this money to be presented and, according to our Act, an Irish £ had to be issued for it, you can easily imagine that 20 or 40 or even 50 times the amount of notes issued in this country at present would have to be issued. That did not happen in the past. I never thought it was put in that particular form, but perhaps there is, somewhere else in the Act, some corrective.

Mr. McGilligan

No. The only corrective was the consolidated bank notes.

The Taoiseach

There is a corrective about gold. Curiously enough, they can refuse here to a certain extent, under Section 5, which relates to coinage——

Mr. McGilligan

That is only until Section 5 comes into operation. In other words, you could present bullion under the Currency Act until the Currency Commission took on itself the job of coining money.

The Taoiseach

Yes.

Mr. McGilligan

That is all it is.

The Taoiseach

Yes, but obviously there is a check there, and the commission is master of its own house. In regard to the other thing, I have not gone over the whole lot, but it would appear from that particular section that the other thing is possible. No harm, so far, has resulted from that because, in practice, there was no likelihood of any attempt being made to do it and, as the Deputy pointed out, the reason is that it would be difficult, if you are going to have the fixed parity, not to have it both ways. There would be difficulties if you tried to put a limit on its working both ways. In fact, however, it has not operated, because there was no reason why it should, and the dangers, which the Deputy has suggested might arise, have not, in fact, arisen. Now, with regard to the question of parity and the reasons for it, as I have stated, we had better leave that for the moment. Coming back to the narrow question of the section itself, I do not agree with the Deputy at all in his contention that the general direction—the general directive, if you like—is being taken from the Constitution there. It indicates an appreciation of what I might call the public aspect of credit and the creation of credit, and as a directive to the bank I think it is all to the good. It tells the board of the bank: "You have a public responsibility. It will be very difficult to discharge it. You are the experts who are put in charge from the point of view of trying to get it done." Now, in this matter of control of credit, there is the question of trying to effect control. The governor, if you like, on behalf of the bank, will see the governors of the commercial banks and try to get them to put up a certain policy. In doing that he is trying to exercise a certain amount of influence, if not control, and in the influence he is going to exercise it is put here as a directive that he must use that influence in the direction of getting a policy adopted which is in the public interest: that that is the prime duty of the board.

I think it is well to begin with the matter of taking out the limitation by law that is suggested in one of the amendments. The Deputy is a lawyer and knows that if you have general principles in one part and certain restrictions in another, there may be a conflict and you may have the bank, on the one hand, doing something which it says it has a right to do for a general purpose, of which it is the judge, and going in a direction for which provision might appear to clash in other parts of the Bill, and we do not want to have unnecessary legal actions in regard to this. So the idea in regard to limitations by law is that we are taking up this particular instrument of national welfare, giving it certain functions, defining these functions in a certain way, and we tell them: "Within the limit of these functions, as defined by us, we want you, wherever an individual, definite problem comes up for solution, to solve it within the terms of your powers, but always in the direction of the public good, and not for the benefit of one particular section or another or any particular interest other than the public good." Accordingly, I think it is desirable to have that.

I do not know how the Minister may feel about it. A further suggestion which occurs to me to make is that due regard in that particular matter of the directive should be had to the Government policy, as indicated by the Minister; in other words, a pointer to the effect that public policy, as indicated by the Government, should be had regard to by the bank directorate when they were influencing the policy of the commercial banks. I do not know whether he thinks putting in that would be good, or whether it would be going too far in the direction in which Deputy McGilligan, I think, is inclined to go.

At one stage I examined the suggestion with reference to the Electricity Supply Board, but I do not think it would help us very much. I looked into it some time ago when the Deputy mentioned the matter, and it seemed to me that it would not leave us in a much better position than we are in at the moment. You would have all the difficulties that arise in regard to it. There is another thing that might help in the direction that the Deputy suggests, although I have not had an opportunity of seeing what view the Minister would take of it. It is with regard to the period of time. The desire has been to give the directors sufficient security of tenure, so as to put them in a position of relative independence, because I am afraid it must be that. As to whether the length of time is too long, I am inclined to think that perhaps we have been overconservative by making it a seven-year and a five-year period. The Minister might be prepared to consider a shortening of these periods if there was a disposition on the part of the House to move in that direction. I do not think it is possible to get a more satisfactory compromise between the desire, on the one hand, to establish a monetary policy of, so to speak, a public character, and, on the other hand, the need for independence so as to obviate the dangers which Deputy McGilligan indicated—and they are probably true—would exist if the Government could directly and immediately cause the creation of credit for its own purposes.

General Mulcahy

It was rather alarming to hear the Taoiseach confess that he was aware of the position that exists under Section 47 of the Currency Act that we have to provide Irish legal notes to an unlimited extent for British money of any kind. It makes me further alarmed with regard to some matters that I raised with the Minister for Finance some time ago. I asked him whether he was observing the influx of British money here in buying up land and property of that kind, and he assured me that there was no influx of it.

The Taoiseach

That is a different question.

General Mulcahy

Yes, but nevertheless, it is bound up in this. The position with regard to the expansion of money in Great Britain is this: that as between the total amount of clearing bank deposits and the total amount of Bank of England Notes in circulation, the total was £2,049,000,000. By December, 1941, that had increased to £4,073,000,000, so that there had been an increase in monetary expansion in Great Britain of £2,024,000,000. During the same period the expansion here was only about £42,000,000, so that the expansion in Great Britain was 100 per cent., and here it was 23 per cent. It is inevitable, in that situation, that we are in danger from the increased expansion going on at the other side. We have it pushing up prices here in the form of the substantial amounts that are coming over in the shape of emigrants' remittances. These amount to about £2,000,000 a year, apart from any other British money that may come over in that way. You have there a position that the central bank cannot control. If there is to be control, it must be by Government action, either through an emergency order or legislation. As regards the expansion of credit here, it may be all very well to discuss and understand what the theory is, but it is the practical thing that we are working against at the present time that we ought to be prepared for. That is really what we want to keep in mind.

The Taoiseach

That is why I am anxious to see a central bank body set up.

General Mulcahy

But it is only going to be set up as a kind of island, in the traffic that you can stand on, and see what is happening around you.

The Taoiseach

Its first duty would be to take note of the present situation in exactly the way the Deputy suggests, and if it finds there is a way for dealing with it, then it can make suggestions to the Government.

General Mulcahy

How long are we going to have to wait for that? We have unemployment on the increase, we are borrowing money and there is no real Government policy handy for financing and dealing with the situation. We have Deputy Dillon talking about building up from our cash basis at a time when these theories are really gone by the board, and when it is the exigencies of the present situation that have to be dealt with. As far as the situation that has been built in there is concerned, there is a very serious danger, one that is going to continue to increase. We want to see if we are going to have some definite machinery for dealing with it. I do not know that, even if we had that definite machinery, it would save us from the disturbing economic results likely to arise from such a situation. We are told that this bank is going to have no control over the creation of credit and no control over the rate at which credit is going to be made available. Whatever kind of machinery is set up, it is Government policy, Government decisions and Government clearheadedness that are required. There is no limit to the amount of credit that we can create at the present moment with the machinery that we have, but the people who can handle that money and that must step in with it to deal with certain aspects of our unemployment and social situation are the Government. They could get up to £24,000,000 without disturbing in any way the stability of our currency. Let us see what the British have done recently. Up to the 31st March, 1942—I am quoting from The Economist, 25th April, 1942—we find that in order to finance the war Budget deficit the British had a floating debt of £2,144,000,000 at 1? per cent. They borrowed by the issue of national war bonds £1,316,000,000 at 2½ per cent. By the issue of defence bonds of one kind or another they borrowed £2,225,000,000 at 3 per cent. That is, they borrowed a total amount of £5,687,000,000 and they paid 3 per cent. for, say, less than half of it, 1? per cent. for less than half of it again, and 2½ per cent. for £1,316,000,000. They are able to do that and they are able to face their future with certain very clearly defined hopes that their finances will be quite all right, even if they spend twice as much as that again on the war. We are borrowing at a much higher rate, namely, 3¼ per cent., and it looks as if we will continue to borrow. I wish to emphasise that I have made it quite clear that we can borrow substantial amounts at lower rates of interest than we are borrowing at, and we can do it with a certain amount of profit for the banks and at a very cheap cost to the Government. These figures are there for examination and refutation. But the drive that we have to bring into our financial machinery and the energy that we have to get into our minds must be got into our minds by facing definite lines of constructive action either by the Government or through the Government.

On that I should like to direct Deputy Dillon's attention and the attention of the Taoiseach and those who have been talking about the rate between the holdings of cash and the deposit liabilities and the liquidity position to the banking supplement of The Economist of the 16th November, 1940, page 6. There it says:

"One of the most solidly ingrained traditions of British banking is that which requires the maintenance of a ratio of about 11 per cent. between the holding of cash and the deposit liabilities. It has been obeyed as unquestioningly as if it had received statutory sanction and consequently has provided one of the essential elements in the carrying out of open-market policy by the Bank of England."

That is one of the laws, as it were, of the Medes and Persians.

The Taoiseach

The statistical law of averages.

General Mulcahy

It is the law which actually holds in fact. Even when the causal things in their monetary system have been changed that has definitely been maintained, because in figures given there it is shown that the average of that ratio for 1938 for the London clearing banks was 10.6; in 1939, 10.9; for September, October, November and December, 1939, 11.7, 11.0, 10.5, 11.2 respectively; that for January, 1940 was 10.0 and in October, 1940, 10.1. The highest point it reached was in September, 1940, namely, 11.1. So that even through the great change in the amount of money, that ratio definitely remained. Again it says:—

"Another tradition which has crystallised in more recent times concerns the minimum below which the liquid assets of a bank—those which should in normal circumstances be convertible into cash at a few days' notice—should not fall. That minimum has been deemed to be a figure of 30 per cent. of the deposit liabilities."

For the same period it shows that the liquidity ratio average for 1938 was 32.1; for 1939, 31.8; then in the year 1940 it was 35.8 in January and 40.7 in October. So that the ratio there was a substantially higher ratio than the Taoiseach gave for the Irish banks, though he said the Irish banks stood for a very high liquidity ratio, the liquid assets being cash balances with other banks, cheques in course of clearing, short loans, bills discounted and, since July, 1940, Treasury deposits. While holding definitely to that statistical position, it points out that the causal significance of the cash basis has completely changed and the main cause now lies in a completely different direction. It says:—

"The traditional conception of that structure of banking assets is that of the inverted pyramid of credit resting on its cash basis. Under orthodox gold standard conditions, changes in the volume of that basis were determined by gold movements into and out of the country. It was on the volume of bank cash thus determined that the whole edifice of bank credit was built;"

and that even in the conscious management of the gold standard up to 1931, and even when it was ultimately abandoned in 1931, they did not alter the causal significance of the cash basis; it remained the starting point of the banking policy; but that, in the new circumstances, the cause is now completely changed. It says:—

"The propelling force in the growth of bank credit since the outbreak of the war has been the recourse which the Government has had to the banks—mainly by way of short-term borrowing—to cover the gap separating expenditure from tax revenue and the proceeds of Government loans issued to the public."

It is now the exigencies of Government policy in Great Britain. They require money for doing certain work. It is not the cash basis that is available there but the work that requires to be done that is the chief cause of the amount of credit put into circulation, and the amount of cash is deliberately brought, by manipulation, into the old statistical relationship with the amount of credit in existence. So that the article winds up:—

"Though it is permissible to doubt whether the immediately responsible officials are fully aware of the true import of their policy in effecting given adjustments in the volume of bank cash through the appropriate open market operations, there can be no doubting the fundamental reversal in causal sequence which has taken place. This new procedure of working from the given volume of credit, which the authorities regard as necessary to meet the circumstances of the day, to the appropriate amount of bank cash is not altogether revolutionary."

It points out that they were groping towards it even between 1925 and 1931. Finally it winds up:—

"It is only since September, 1939, that the adjustment of cash to the needs of the Treasury has become open and unashamed. We may hope that the objectives which the new technique will be called upon to serve in future will be more constructive than the deficit financing of to-day. But there should be no retreat from the principle involved. It is improbable that we shall allow ourselves to go back to a position where the amount of available credit is dictated by a total of bank cash, itself determined by factors such as the output of new gold over which we have no complete control."

If in Great Britain, with their present enormous expenditure on unprofitable operations, they are facing the future in that way, and if they are being dragged away from the cash basis and being forced to face up to the needs and the exigencies of their economic lives, we cannot be uninfluenced by what is developing over there. If we are to allow ourselves simply to think of a particular type of cash basis here to which we will relate our credit, then we will be sticking in the mud here while the actual economic and social facts of our lives are creating more and more difficulties for us, apart altogether from the likelihood of our being swamped by an inflation that is brought on to us here by reason of our being linked with sterling, which arises perhaps out of our trading relations with Great Britain. In figuring out what the power of the central bank is to be, and what its functions are to be, it seems to me that it has no functions and can have no power for good, either in controlling the commercial banks or in any other way, unless we have a definite policy being pursued. When the Taoiseach speaks of leadership, I think he feels that, too. He wants to direct and he wants to control the central bank, but he does not exactly see how he can definitely state it.

The Taoiseach

Without running those very big risks which Deputy McGilligan has talked about.

General Mulcahy

And without running the risk that he will have a very powerful weapon in his hand without knowing what he should do with it, and that, finding himself pressed by the particular type of circumstances and flurried rush such as we have got accustomed to in some Ministries, we might have some very serious mistakes made. What we are discussing here seems to be nothing but trimming and draughtsmanship, without any clear conception of how it is going to be used. We are simply setting up a kind of machine here. We are told it has no power to control credit, that it has no power to create credit, that it has no power to affect the bank rate, while we have circumstances in the country here which demand that we have some power of controlling credit, and some power of seeing that the bank rate is a rate of a suitable kind, and that, where credit is required for certain functions which are decided to be necessary in order to meet our present economic and social situation, that credit will be made available. It is quite clear, as I say, that we can make it available. The Taoiseach shakes his head, implying that it cannot be made available in the way I suggest. I say that those figures have to be looked at; they have to be questioned, and they have to be refuted; but I feel that all the necessary powers are there of getting whatever money we require to implement proper and suitable policies.

The Taoiseach

It is rather unfortunate that the Deputy went so far afield, because really he has been talking about the present emergency and the steps that ought to be taken to deal with that emergency, rather than about this particular section of the Bill itself. I think he rather exaggerated what has been said when he asserted that there is no control of this and no control of that. I have tried to indicate that there may be a very large degree of control by influence. I pointed out, I think, at the very beginning of the discussions on the Bill, that this Bill is not in itself directly designed as a measure to meet the emergency, except to this extent, that once you put up that board you will have put up, I hope, the most expert board we can put up in this country to look after the financial interests of the country in this crisis, and to advise, as a body of experts, how best we might be able to safeguard ourselves against anything that would tend to interfere with the integrity of our currency as a monetary unit. That is their primary function, and they will have to execute that function in normal times and in abnormal times. If there is a crisis in which our currency has to be safeguarded, and if they see a way of doing it—being an expert body, if there is a way they ought to be the first to see it —they will come to the Minister for Finance, and through him to the Government, and say: "Bring before Parliament a measure to do such and such a thing, because it seems to be the only way in which we can safeguard the country against such and such evils which we foresee." That is the power that is there, the power immediately to have a body of experts to use their influence to direct credit policy, and also to advise measures to safeguard the currency here against any adverse circumstances which might arise. The Deputy went back to some £24,000,000 of credit which he said were available here. The point is this, whether the credits will be made available from savings or by the creation of credits in the way which has been indicated by some Deputies here. Surely, if there are savings that can be utilised, it is very much better to utilise those savings than to create credits if it is proved to be unnecessary.

General Mulcahy

But those are savings already there.

The Taoiseach

But the point is you have got to get the schemes then.

General Mulcahy

That is what I say.

The Taoiseach

You have to get Government schemes for employing this money.

General Mulcahy

But the money is there.

The Taoiseach

Let us examine this. What are the schemes in which you can profitably employ it from the community point of view? In what directions? In housing, for example, you have a shortage of materials. There is a number of projects which in ordinary times we would be carrying out at full blast. We cannot do it now because there is a shortage of certain raw materials which are necessary. Your difficulty at the present time is not a shortage of cash; it is not a shortage of credit—credit, I would hope, at reasonable rates. What we are short of at present are raw materials for doing certain things.

General Mulcahy

Lack of policy.

The Taoiseach

The Deputy should get a policy to add a cubit to his stature. There are certain things for which no amount of thinking will provide a policy. We are not going to get a policy to bring the earth any nearer to the moon or the moon any nearer to the earth. There are certain things which cannot be got over simply by thinking. You may certainly try to do it. If a board is coming down, and there are some stones which you do not want to come down with it, you may get those stones out of the way because you do not want them to come down. There are certain things that you can do. I agree with the Deputy that the effort on the part of the Government must be to do the utmost that can be done in the circumstances to avoid those reactions. In England at the present time there is no doubt that there is a vast creation of credit, and it would have certain consequences unless they had side by side with it two things.

One is that they are putting the people at work producing shells or munitions of war which are being used. There is an immediate use for them; they regard them as of national consequence. That is one thing; they have an immediate purpose for which the credit is employed. The other thing is that they take care that that credit which is going around is not used to send prices soaring. If the prices did soar, we would have a corresponding reaction here, and we would have to take appropriate measures, perhaps the same type of measures as they are taking in England, or other measures. The measures which they have taken in England have been taken to try to get rid of certain of the consequences of the expansion of credit. They have rationed goods, in order to see that those who get hold of the purchasing power do not use that purchasing power to such an extent that they would drive prices up too high.

With us, at the present time, the difficulty is not the unavailability, if I may use the word, of credit. The difficulty is to get schemes in which we can employ credit in such a way that the community, as a whole, will be better off after employment of the credit than it was before. When considering whether credit should or should not be employed, one must have regard to the question whether or not additional wealth can be got out of its employment. If you can create a much greater amount of wealth by its employment, you have a case for going ahead. Perhaps, I should not narrow the matter down to the creation of wealth. It may be possible to improve amenities or to raise the standard of life and the well-being of the community. Improvement of well being may be as worthy of expenditure as any other project but, in making your plans, you must provide that the well-being will not be that of the spendthrift, that it will not be merely for the time being, leaving those who come after us in an impossible situation. It should be a standard which it will be possible to continue, so that those who come after us will also benefit.

The nature of this Bill is such that emergency considerations cut across it. The main purpose of the Bill is to set up for normal times certain machinery. Once set up, it will be able to take note of abnormal conditions such as those obtaining at present. I believe that it is the best body to do that. If there is a way of shielding this country from the repercussion of events, say, in Great Britain, this body will be able to do that better than any I can think of or than anybody else has suggested. Even at present, I hold that it is the duty of the directors of the Currency Commission, their fundamental purpose being to safeguard the internal and external values of our currency, to be considering possible repercussions here of a nature which would interfere with the integrity of our currency and to advise the Government accordingly. What is done in this Bill is to give them more extended powers. If they can show that powers in addition to those are necessary, on behalf of the Government I promise that—if this Government is dealing with the matter—we shall go to any extent necessary to enforce any measure that may appear to be in the public interest. So many topics come up in this regard that it is almost impossible to keep to any particular section.

Mr. Cogan

The Taoiseach and the Minister for Finance, in defending this section, have, again and again, repeated that this central bank can do very little—that its powers are very much restricted. I notice that, so far as banking in Britain is concerned, the result of the activities of the banks there since 1914 has been to increase the total deposits from £1,000,000,000 in 1914 to £2,991,000,000 in July, 1941. If the banks have power so to expand the amount of money, surely banking control by the State has an enormous power over the very life and livelihood of every citizen. The function of this amendment, proposed by Deputy Norton, is to ensure that this power shall be exercised to promote production to the fullest possible extent and that, instead of our best young men and women having to go across to Great Britain, where credit has been expanded to that enormous extent, they will have an equal opportunity in this country. That opportunity can be created only by the State vesting in this central bank the power to undertake such expansion of credit as may be necessary to inflate both production and consumption.

I have said here already that what is wrong in this country is that production in all spheres of activity is too low and that consumption is also too low, because a large section of our people have not the means wherewith to consume. Those are the people who are leaving the country to seek means of livelihood, afforded by expansion of credit, in another country. It is frequently said that the reason why the banks have not expanded credit in this country in equal proportion with the expansion in Great Britain is that the opportunities do not exist here. That is true to a certain extent. Private enterprise does not make the demands on the banks of this country which it does in Great Britain. Great Britain, as the centre of an empire, has unlimited opportunities for private enterprise of various kinds. If we could get our Minister for the Co-ordination of Defensive Measures to send out an expeditionary force to Malay, or some place like that, opportunity might be provided to private enterprise here to seek credit from the banks and invest the money abroad. The only means of expanding credit at present is through the enterprise of the State and, to facilitate that, it is essential that the State, from the outset, should exercise a fair and reasonable measure of control over the central bank and direct its activities in the manner suggested in this amendment.

We have been told by the Taoiseach, again and again, that money does not get us very far, that there are insurmountable obstacles to the development of our various resources and that, even if we had the money, it would not be possible to undertake works of development which would increase our production and enable us to employ all our adult workers.

The Taoiseach overlooks one point, that is, the crushing fact of interest charges upon any private enterprise that may be undertaken. I have instanced the case of housing. There you have, for every £400 expended on the building of a house, an interest charge of, say, £20 per year; and that interest charge ties up completely and paralyses completely any housing effort. If that money could be made available at a much cheaper rate of interest, as it could be under a State directed bank; or if it could be made available free of interest, it would be possible for the tenant to repay the entire capital out of his own resources, without requiring any assistance from taxpayer or ratepayer. That applies to the reclamation of land, to drainage and to all those big works which would give extensive employment and enormously increase the assets of this country and which increase the potential wealth-producing power of the country. All these works are completely held up by the interest charge which must be paid upon the money expended. If we were to expend, within the next year, £10,000,000 or £20,000,000——

The Taoiseach

Why does the Deputy stop at ten or 20? Is there any limit? What is the limit? Can the Deputy not see, if he goes on in that way, what is to happen?

Mr. Cogan

There is a definite limit: we cannot expend as much money on the production of permanent assets as would reduce our production of consumable goods. For example, we cannot divert people to any extent from the production of food and fuel or other commodities which must be consumed immediately, and send them into production of permanent assets such as roads, the reclamation of land and housing, without endangering the existence of the State. That is the limit, and that is the only limit that exists to national development. That should be the guiding principle of the State in regard to economic matters, and it should be the guiding principle of a body of experts, such as is suggested, to control the central bank. That principle should guide them to maintain the production of consumable goods at such a level as would enable the community to go on consuming and at the same time maintain a decent standard of living.

If the production of goods were allowed to continue in excess of the demands of the community, and if there were no markets to be found externally for the surplus, then it would be necessary to divert a section of the population to permanent work on housing and land reclamation, as I have suggested. At the moment, it is not possible to employ all our available labour on the production of the goods which can be consumed or exported and, therefore, there is room for works of national importance which could be financed.

The Taoiseach

I want to know what the Deputy means by national development. For what purpose, and in what direction?

Mr. Cogan

I mean reclamation of land, housing or anything like that— the creation of permanent assets as against the production of consumable goods.

The Taoiseach

Supposing it were shown to the Deputy that, in fact, the ultimate thing he is aiming at is better secured by the present system than by any other, what would he say? If it were shown to the Deputy that the ideal he has in mind were better secured under the present system than it would be by what he has in mind, on account of the evils that would follow by pursuing those lines?

Mr. Norton

How is it that it has not been attained?

Mr. Cogan

The Minister for Finance stated recently—on another stage of this Bill, I think—that the last 100 years in this country were 100 years of progress. I cannot accept that view. I think they were 100 years of national decay, which has not been slowed down in any way during the past 20 years. There must be some real obstacle to our work of preserving and extending the life and improving the conditions of this country. There must be some almost insurmountable obstacle or something wrong with the financing system.

The Taoiseach

Why does the Deputy relate it to the financial system? If there is something wrong, why does he say it necessarily must be in the financial system?

Mr. Cogan

I have instanced the case of housing, which has not been extended at the rate which the community requires. It is not well recognised how far behind we have been in regard to housing. To put the rural population in healthy conditions, it would be necessary to double the amount of housing in rural Ireland. I hold that the reason why that housing development on a very extensive scale has not taken place is the interest cost which would be incurred by the capital expenditure. For example, no farmer's son in this country can dare to marry until he reaches 40 or 50, for the simple reason that he has not a house. That is one of the aspects of our national life which must cause concern to everyone who wishes to see the nation extend.

The Taoiseach

He would want something more than a house.

Mr. Cogan

I consider that the first essential to a settlement of our younger generation upon the land is the provision of homes. After homes, it would be necessary to improve the economic conditions, but the first step is the provision of a home for every young man and woman in rural Ireland who wishes to marry. We have the fact that, while the farming community are not marrying and settling down, the labouring community in rural Ireland are marrying, simply because, through our social legislation, we provide houses. After the provision of houses there comes the provision of a livelihood. These young men and women of the working-class community do not pause to consider that question, and unemployment becomes a social problem, which has to be solved afterwards by the State.

That financial system also prevents our rural population from obtaining the employment that is so necessary. If you have work of reclamation and land improvement, fencing, drainage, the clearing of rocks, and so on, you will have a large number employed in the rural areas who, having taken advantage of the housing scheme I have suggested, would then be able to take advantage of the employment which would be created through these works. They would find a livelihood in the rural areas and would, through their work, be increasing the wealth and productive power of the nation and later on that increase would enable the nation to feed a still larger population.

Mr. Norton

The Minister for Finance gives me the impression that he gets unreasonably annoyed when one asks him why he put into this Bill the statutory obligation to maintain the link with sterling on a parity basis.

Mr. O Ceallaigh

I do not say I was annoyed.

Mr. Norton

I accept the Minister's assurance in that respect. He seems to find some curious kind of consolation in the belief that at any time in the future, by an amending Act, we can alter the link with sterling on a parity basis and fix some kind of ratio.

The Taoiseach

If the Deputy will leave over the discussion of the parity basis until we come to the appropriate section, we will discuss it with him. We have refrained from dealing with that particular aspect until the proper time arrives.

Mr. Norton

I am not going to deal with the parity basis at any great length. I will merely put this to the Minister for Finance, that there is no other country in the world that I can discover where a statutory obligation is put on the central bank to maintain a parity basis of exchange with any other currency, and, in these other countries where several banks exist, the fixing of the exchange rate is a function which is reserved to the Government. The Taoiseach says that if you fix it here you reserve it to the Government.

The Taoiseach

You are exercising your right here.

Mr. Norton

My submission is that there ought not to be a statutory obligation on the banks; they should not be obliged to function under an Act which definitely links them with sterling on a parity basis.

The Taoiseach

I wish the Deputy would wait until we come properly to deal with that particular aspect.

An Ceann Comhairle

The Deputy has an amendment, No. 66, which endeavours to achieve his purpose. That being so, he might leave his main argument over until we come to deal with the amendment.

Mr. Norton

I intend to do so, but I cannot understand why the Minister for Finance, against the broad lesson from the rest of the world leaving the rate of exchange to be fixed by the Government, insists on putting a statutory obligation on the banks here to maintain the link with sterling.

The Taoiseach

He is working in accordance with the broad principle. We are depriving the bank of the power of doing it, and you are doing it in the way you consider best.

Mr. Norton

The Government did not always consider it best. I do not want to quote the indiscreet speeches of the Minister for Local Government of other days.

An Ceann Comhairle

The Deputy might reserve the quotation until later. We seem to be getting deeper and deeper into this parity question.

Mr. Norton

It is a very important question from the point of view of our people.

An Ceann Comhairle

The Chair has no intention whatever of restricting the discussion when the proper time comes.

Mr. Norton

The Taoiseach is now compelled to admit that by a link with sterling on a parity basis we may find ourselves in very considerable difficulties. Britain is engaged in a war in almost all parts of the world. Her expenditure has reached astronomical figures. The backing up of note issue by gold has ceased. The note issue is now being backed by bombing and fighter planes and all types of armaments, and the money with which we are buttressing up Irish note issue is the type of money which Britain is issuing in this gigantic scheme of expenditure in which she is involved. Under the Currency Act and under this Bill we are providing that before you can issue an Irish note, other than a consolidated note, you must get one of these now very ubiquitous British pounds, deposit it with the Currency Commission and, if you do that, then you will be able to issue to Irish people a pound note in exchange. I want to know do the Government realise the kind of link we now have, the kind of backing that it is now insisting upon for the issue of Irish notes?

The Taoiseach

Obviously the Deputy cannot get off Irish parity.

Mr. Norton

Do the Government realise that with Britain simply producing notes on her present gigantic scale and these notes being interchangeable with our notes, what may very well happen in the evolution of that type of scheme is that British notes, which will buy, perhaps, an increasingly smaller quantity of goods, may be exchanged for Irish notes, which may be capable of buying a much larger quantity of goods? In that situation what you will be doing by this stability of exchange and this parity with sterling is, you will be compelled to give away Irish assets for British pound notes which have a nominal equality with Irish pound notes but, at the scale upon which they are being issued, they may not be able to purchase the same quantity of goods as Irish notes will purchase. Notwithstanding the passage of this Bill and the establishment of a central bank, that bank will have no power to stand against that flood of British credits and, unless the Government seriously think over the situation which is developing vis-a-vis the expansion of credits in Britain and the reaction of that situation here, a dangerous element will arise.

The Taoiseach

Of course we have done that, but I maintain that this is not the place to discuss that particular matter. If the Deputy wants to deal with it, he will have to deal with it separately. This is not the appropriate place.

Mr. Norton

Then where is the appropriate place?

An Ceann Comhairle

When we reach amendment No.66.

The Taoiseach

The argument in relation to parity can be fully developed then.

Mr. Norton

This is an important question.

The Taoiseach

It is, but we cannot have it discussed ten times over.

Mr. Norton

There is no reason why the Taoiseach should be annoyed.

The Taoiseach

I am not annoyed, but I think we agreed several, times to leave this over until we could deal with it in a proper manner. We purposely refrained from dealing with it up to this, in order to have an orderly discussion at the proper time.

Mr. Norton

I have not penetrated the realm of parity with sterling to any greater degree than other speakers.

Mr. O Ceallaigh

The Deputy was the first to introduce it and I answered, to some extent, the points he raised.

Mr. Norton

I was obliged to introduce it in developing an argument on an amendment to a section, the section imposing on the central bank an obligation to maintain a parity with sterling. My case was that an obligation to maintain a parity with sterling, and the transfer of other legal functions to the central bank, made it quite impossible to give any effect to the pious sentiment contained in the last portion of Section 6. But, apart from the whole question of parity with sterling, Section 6 is intended to indicate the public policy of the bank towards the nation. Section 6 puts upon the bank certain obligations safeguarding the integrity of the currency and ensuring that, in what pertains to the control of credit, the constant predominant aim shall be the welfare of the people as a whole. I say that in so far as that section represents the public policy of the bank, it is not possible for the banks, tied up with the conditions imposed upon them, to influence in the slightest degree the financial policy in operation in this country for 100 years. We have had parity with sterling for 100 years and we will have it when this Bill is passed. That parity with sterling gave us unemployment, emigration and a low standard of living. All these things ran side by side.

Let us see what the Minister for Industry and Commerce said on that subject at one time. As reported in the Irish Press of the 14th September, 1931, he said:—

"It was a very long time since the Irish people had experienced circumstances so bad as those now existing, and this was due to our financial subjection to England. When the Free State Government decided to tie up its currency with British currency and to permit Irish banks to maintain their English entanglements, it destroyed with one blow the greatest benefit secured by the Treaty. When the Irish people struggled for independence, it was not merely to enjoy the spectacle of green pillar boxes and uniforms, and payment of taxes to an Irish-speaking Minister for Finance; but also that forces which have produced depopulation and poverty in the country in the past could be checked and harnessed for the public good. Poverty persisted and depopulation continued because in financial matters the same conditions prevail now as before the Treaty. The Free State Government's policy was to leave everything to chance and hope for the best. Fifty-five thousand families in this country were being maintained on home assistance, and the number was increasing."

That was great stuff for the boys in Collooney, where the speech was delivered.

Mr. Cosgrave

Who said that?

Mr. Norton

That speech was delivered by Deputy Lemass, the present Minister for Industry and Commerce.

The Taoiseach

Is it right or is it wrong? Will the Deputy say what he thinks?

Mr. Norton

Ask the person who made it.

The Taoiseach

For what purpose is the Deputy quoting it then?

Mr. Norton

Strange as it may seem, I think the Deputy was right. If he makes the speech to-day I will say he is right.

The Taoiseach

It is well to know where the Deputy stands.

Mr. Norton

Everybody who made these speeches in the past will be very carefully kept out of the House during this debate.

General Mulcahy

I am afraid the Deputy has given too complete an absolution to the Taoiseach.

Mr. Norton

We can get a few of the Taoiseach's speeches too.

The Taoiseach

Go ahead.

Mr. Norton

I will wait until I come to the parity section.

The Taoiseach

Good.

Mr. Norton

This is what the present Minister for Local Government said——

Mr. O Ceallaigh

We heard it all several times before. Get something new.

Mr. Norton

As a matter of fact you would not have heard it now—I do not want to haunt the Minister with the ghost of these speeches at all——

Mr. O Ceallaigh

That does not worry us.

Mr. Norton

——but the Taoiseach apparently did not agree with my method of arguing and, probably, it was a most unusual one. Now, I have produced for him the speech of one member of his own Government.

Mr. O Ceallaigh

But you produced it several times before.

Mr. Norton

The Taoiseach apparently did not hear it.

Mr. O Ceallaigh

He did. I am sure he did.

Mr. Norton

He did not.

The Taoiseach

The Deputy could not deal with any other subject here to-night but parity. He cannot deal with anything else and he is not prepared to postpone it.

Mr. Norton

I am going to deal with them all in good time. This is what the first Minister for Finance in the Fianna Fáil Government said:—

"Even before the Fianna Fáil 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."

Again, strange as it may seem, I think the first Minister for Finance in the Fianna Fáil Government was right when he expressed views of that kind. I think the Minister for Industry and Commerce was right when he made the speech he did in Collooney. He saw clearly then that the continuance of a financial policy——

The Taoiseach

Will the Deputy explain what has happened? If we saw the thing clearly then, what has happened that we are not seeing it in the same way now?

Mr. Cosgrave

That was the first ten years of their study of banking. In the second ten, their eyes are opened.

Mr. Norton

Here you had a declaration by the then Deputy MacEntee and Deputy Lemass that, so far as the Fianna Fáil Party were concerned, they were going to reverse the whole financial policy which, according to Deputy Lemass then, brought about depopulation and emigration, gave people green pillar boxes and the privilege of paying taxes to an Irish-speaking Minister for Finance. He was then concerned with the fact that that condition of affairs, that financial subjection to Britain, created a situation in which 55,000 families were being maintained on home assistance. There are 105,000 families now on home assistance. The same financial policy that he stated gave us 55,000 families on home assistance is being continued and we get the same kind of results— 105,000 families on home assistance to-day. Aside from that, I think the expansion of credit, the issue of credit, the utilisation by banks of credit which they themselves create out of public assets, not banking assets, is a very vital operation so far as the whole nation is concerned.

The Taoiseach

Certainly.

Mr. Norton

It ought not to be in the hands of nine people appointed by the Minister for Finance. The vital character of that service to the whole community is such that there ought to be Governmental control, not in its day to day activities, but Governmental control and Governmental responsibility for a banking policy which is of such vital importance to the country. The amendment which I have moved seeks to impose upon the Minister for Finance the obligation of taking such steps as he may deem proper and advisable from time to time towards safeguarding the integrity of the currency and ensuring that currency and credit shall be issued in correct equation to economic needs. That, at least, has the merit that, so far as the public policy of the bank is concerned, it gives it a very definite bend and direction and, associated with other amendments which I have submitted to this Bill and which are submitted by members of this Party, it seeks to enable the bank, so far as it has any powers at all, to recognise that it is the aim of the central bank, at all events—whether the aim is achieved is another matter—to try to direct its banking policy in a new line and that its purpose is to serve the interests of the people rather than to exploit the needs of the people.

The Minister for Finance seems to abhor any suggestion that he should exercise control over the bank in the direction of its banking policy. I cannot see why the Minister is so willing to shed responsibility in that connection. I think, from the point of view of the public, it is desirable that there should be some Governmental responsibility for the actions of the central bank. There is no Governmental responsibility indicated in this Bill. Speaking on an earlier amendment, the Minister stated that the only degree of control they could get over the banks was such as could be obtained by discussion with the banking directors and the expectancy that that discussion would in due course lead to co-operation with the banking directors in such a way that they might, if they so desired, give effect to any Governmental suggestions or directions. I object to leaving the whole thing in that unsatisfactory way. I object to nine individuals being put in the position of controlling the central bank of this country. I want, so far as I can ensure it, to provide that a Minister of the Government is held responsible, so that Parliament all the time will have some voice in the activities of the central bank, will be able to indicate by public criticism here the direction which we think the central bank should take and will at all times be able to focus attention on the financial policy which is being pursued by the central bank. This Bill does not provide for that.

As I said earlier, while I have not much use for the Bill—I believe with the Taoiseach that, when it is passed, all our difficulties will remain as they are; life will go on with all the stern reality at present associated with it— but as far as this Bill is an effort to indicate what the public policy of the central bank ought to be, circumscribed in its activities as our central bank must be once it is fashioned on these lines, I think that there ought to be an effort to indicate a vigorous line of public policy in relation to the utilisation of credit and currency for the benefit of the people. The section as it stands does not do that. The section as it stands is sheer "ballyhoo". It is quite impossible to implement the second portion of it so long as the first portion stands. If the Government really want to ensure that the bank has a vigorous public policy, I do not see that it can have any objection to accepting the amendment.

Mr. Cosgrave

I should like to deal with the practical rather than the theoretical issues that are involved in this section and, in fact, in the amendments before the House. There is a phrase in this clause which refers to what is called "the integrity of the currency." Perhaps either of the Ministers dealing with this Bill would tell us exactly what they mean by that, whether it has relation to parity or to prices.

The Taoiseach

Soundness, I take it.

Mr. Cosgrave

I do not propose to go into the parity question now as it will come up at a later stage, but it was mentioned in the course of the discussion that it was open to British investors, if they so wished, to come in here with showers of British currency and have it converted into Irish currency. That is quite true. They can change, if they like, £100,000,000, but it would happen to be a fairly costly operation and it is with this aspect of the clause that I should like to deal. Every person who changes a British note and gets Irish currency, parts with something in so far as the largest holding is concerned, to the value of about 3½ per cent.

The Taoiseach

If he brings over £1,000,000.

Mr. Cosgrave

Does the Taoiseach mean English currency?

The Taoiseach

If he brings over £1,000,000 he does.

Mr. Cosgrave

Suppose they bring it in English currency. They could purchase £100,000,000 worth of war loan. £100,000,000 of British currency will buy £100,000,000 worth of war loan.

The Taoiseach

Suppose the Irish currency is more valuable?

Mr. Cosgrave

Take the present position.

The Taoiseach

I say I agree with the Deputy but there were practical reasons why it was not done.

Mr. Cosgrave

I am not concerned with what the Taoiseach believes. I am concerned with what is before the House. I am not concerned with the difficulties of the Taoiseach. I have my own speech to make and I propose to make it. The Taoiseach will have to learn some manners here.

The Taoiseach

I will not be taught by the Deputy.

Mr. Cosgrave

He speaks without interruption as far as I am concerned, and he will treat me in the same manner.

The Taoiseach

I shall do so.

Mr. Cosgrave

It is time he did so. If money is brought over here for investment, likewise we can bring money over and invest it there. It is open to our people to go over and invest in equities, and there is a bigger field for investment than is available here. We think that there is an opportunity for dealing with a matter of that sort as it arises. If it should so happen that there is an expansion of credit in Great Britain, which would endanger our situation here, there is no provision in this measure for dealing with that. When we are theorising on that subject, perhaps it would be just as well to point out what is going to happen. As far as one can judge, far more suitable steps are being taken over there to prevent a rise in prices than have been taken here. What is the comparative rise in prices in the two countries? Over there it has been 27 per cent. Here it has been very much more. We are so very glib in criticising other people that surely we should examine at some time or other the situation that has been developing here, and see how we stand. In so far as the integrity of the currency is concerned, I should like to know whether that refers to prices, to parity or to both. The section goes on to say: "In what pertains to the control of credit." What is the meaning of that?

The Bill has no reference whatever to the control of credit and does not pretend to refer to it. What this measure does in regard to credit, is that it stabilises in so far as £20,000,000 of our money are concerned, a charge of 3½ per cent. That money will be subject to a charge of £3 10s. 0d. per cent. per annum and if war loan has to be bought, at the time of the conversion, it will mean that we will be charged £3 10s. 0d. per cent. When people speak of the advisability of having cheap money here, is it not worth while to see what it costs us for the money in our pockets or what it costs the banks in order to provide us with that money? Is that a contribution towards the cheapening of credit?

I could not support the amendment proposed by Deputy Norton, for many reasons. Firstly, apart from the older established countries and even in the case of some of them, central banks have been set up to deal with scandals that arose from interference with currency, expansion of currency and other abuses of that kind. In the older established countries the central bank has very little interference from the Government and the Government in this country is not as experienced in these matters as even the latest established Government on the Continent. If we take the case of practically all Continental countries where there are central banks, nearly every one of them had adopted a policy in its earlier stages for expanding currency. Perhaps they had in mind for a period the idea of cheap money, but if it were cheap at that time it turned out to be very dear ultimately.

I think that in this discussion we should have two questions prominently before our minds: (1) what is the best system to deal with our situation as it is and as we have inherited it, and (2) whatever we have inherited and whatever there is here, it is our duty not to belittle it. To take one matter that was mentioned by at least two speakers, everything has apparently gone wrong in this country by reason of our financial system or our banking system. Let us examine that from one angle alone. Take the agricultural industry, and goodness knows I shall not claim that during the last ten years it has had a prosperous period. The Banking Commission examined the circumstances of the agricultural industry, taking the two years 1854 and 1936, and the comparison was very much in favour of 1936. I am not speaking on behalf of the Government, nor is it to the credit of the Government that it is so. They inherited it from their predecessors. Over the whole period there was an improvement in the agricultural industry. Cattle figures, as recorded from the year 1854, were 2,739,000 then, and the corresponding figures for 1936, 3,955,000. It is true that the number of sheep was down by half a million, pigs by a few thousands, while poultry increased threefold. The number of horses is about the same.

Mr. Davin

What about tillage?

Mr. Cosgrave

The tillage situation is rather interesting.

Mr. Davin

During that period.

Mr. Cosgrave

While the acreage diminished the increased yield almost balanced that diminution. It is scarcely to be wondered at that, with such an increase in the number of cattle, there should be some reduction in the amount of land under tillage. In addition, there was from 1910 down to 1922 a very considerable increase in our banking deposits. From 1910 to 1920 most of us were under the impression that due to big borrowings in Great Britain, that was likely to endanger the stability of the £ and perhaps the credit-worthiness of this country. It did not happen. That is the situation as it stands and the facts are as stated. It is not a question for argument. In these difficult and rather disconcerting times, it is well that people should understand that there was that expansion and improvement. Another consideration was dealt with at some length by the Banking Commission, apart altogether from either private money or the security and the integrity of the currency, and that was price increase by reason of Government policy. As far as one could learn from the report, and from my experience, Government policy has been responsible for a rise in prices and a rise in prices has a depreciating effect upon currency.

I only intend to say a few words on parity. We are at present in the position that we are importing much less than we export. We are in a war situation, when it is difficult to import goods, and while it is quite true that the price of goods imported are high they are not high by reason of cost, but by reason of the difficulty of insurance and other expenditure of that sort, not specially related to the production of goods. I hope I am making that point clear. It is quite true that the £ will not buy anything like the quantity or quality of goods that it could buy two or three years ago. Apart from these considerations if correct allowance were made for freight on goods and insurance costs, it is possible that there would not be a very great difference in the purchasing value of the £. The second consideration is that prior to the emergency crisis, war, or whatever it is called, we were for the last ten years on a rough estimate importing practically twice the value of the goods we were exporting in money value. That was one of the reasons why parity was first recommended by the first Banking Commission and also by the second commission.

Mr. Davin

Is not the position completely changed now?

Mr. Cosgrave

It is changed owing to the emergency, and without venturing into the realm of prophecy, I should say that it is likely to be seriously discounted as soon as the emergency passes. How long that is going to be I am not going to suggest. The price factor, as far as the British £ is concerned, is more affected by freight and insurance than by the cost of the articles. If we are going to import goods at anything like the proportion that we were importing them before parity would appear to be the best business, apart from changes, fluctuations, or other things of that sort. From what I have seen of Continental central banks and the need for them, and the association of the Government with them, I dislike them. If you take it only from one angle, that change of Government takes place in all countries, we are not going to be different from the rest in that regard. Assuming for a moment that a central bank was established prior to 1932, I think what Deputy Norton read out was a measure of the views then held. Would it not be rather quick to have a change of policy like that almost overnight? Suppose there is a change in a short time again, those who have been putting forward particular views are presented with another side. It is one of the disadvantages of those who have not held office that they are to a considerable extent speculating, politically, economically, and financially. Even in the interests of succeding Governments, is it wise to have that particular heritage in any community, to change everything overnight without having the advantage of a second period of education in connection with banking and financial matters? That has been the great advantage of this Government.

Mr. Norton

It does not operate in such a way as to keep a Government in office.

Mr. Cosgrave

None of them do. There have been changes in all countries. There is only one place where there has been the same Government for years, in Northern Ireland. It is scarcely what might be called a comparable case. I do not think there is any other example of that sort. It is not advisable to have any discussion about that. They are our own kith and kin.

Mr. Norton

Why did not the Deputy leave it then?

Mr. Cosgrave

There is one thing in common up there. They have a far higher sense of Christianity than we have. They love one another.

Mr. McGilligan

The last comment of Deputy Cosgrave leads to this observation, that it is rather amazing to find that this country, which has adopted a policy of neutrality, should be in such a position between belligerents, having regard to the extent that it is neutral. Our assets are piling up in respect of one belligerent since the war started at the rate of £20,000,000 a year and we are left to consider whether we can control that, although we pretend to be a self-sufficient country. We are piling up for the future to the extent of £20,000,000 per annum with one belligerent although strongly neutral. As between the two sets of amendments before the House there is only one point of difference. Deputy Norton wants the Minister to have control, and the other amendments would leave whatever control is given, to the bank. I am against giving it to the Minister. It would be a most abject part he would have to play. The Minister would be subject to question as to what he did towards handling the credit of the country with the object that Deputy Norton sets out and the Minister would have to make the abject answer: "I have not done anything, because I cannot." I move to report progress.

Progress reported; the Committee to sit again.

The Dáil adjourned at 9.30 p.m. until 3 p.m., Tuesday, 26th May.