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Dáil Éireann debate -
Wednesday, 27 May 1942

Vol. 87 No. 2

Central Bank Bill, 1942—Committee—(resumed).

Question again proposed: "That Section 6 stand part of the Bill."

Before we come to Section 7, I want it to be made clear what power we get in Section 7 for the creation or extension of credit. I should like to say that, having heard the discussion yesterday on Section 6, I am now of the opinion that, outside whatever power for the creation or extension of credit we may be persuaded later on that Section 7 contains, there are only two ways at present in which credit can be created. One is where a bank makes an advance to a person in this country. Let us say that a bank makes an advance of £1,000,000 whether to a person or the Government. That does not necessarily create an additional £1,000,000 of credit. It depends on how that £1,000,000 is immediately used. Some of it may be used to wipe out other advances; some of it may be taken in cash. If we look at the banking returns for the March quarter of 1942 in the quarterly statistical bulletin published by the Currency Commission we see there a list of the liabilities and assets of the Irish banks in which there is discrimination between liabilities within the State and elsewhere and assets within the State and elsewhere. Now in the creation of credit in the way I speak of, if the banks here advanced £1,000,000 either to the Government or some person, then on the asset side within the State, under the heading of loans and advances, that would add £1,000,000. If £200,000 of that £1,000,000 went to wiping out other advances that had been made, then the net amount that would appear there would be £800,000. If, as well as wiping out £200,000 of previous advances, the person or persons who got the £1,000,000 took £100,000 in cash, that would reduce the amount under heading No. 1, "Cash Balances with London Agencies," by £100,000, so that the net change in the total amount of assets within the State would be £700,000. Of the £1,000,000 there would be left to appear on the liability side of the banking system £700,000 to balance that, and there would appear under heading No. 4, "Current, Deposit and other Accounts," £700,000. The extension of credit that would have been created under that transaction would be £700,000. In my opinion, that is one of the only two ways in which there can be an extension or a creation of credit here, except in so far as it can be shown that we are going to extend it under Section 7.

The second way in which there would be an expansion of credit would be if, say, a farmer sold in Great Britain £6,000 worth of cattle. He would get a cheque on a British bank for that sum of £6,000, which he would transfer to an Irish bank here and get credit for £6,000. If he took £1,000 out in cash, then there would be left under the heading "Current, Deposit and other Accounts" £5,000, and that £5,000 would be the extent to which credit available inside this country had been expanded by that particular transaction. So that, as a result of the transaction, somewhere on the assets side elsewhere, as cash, or money at short call, or investment of some kind, £6,000 additional would appear which would increase the assets elsewhere by that £6,000. Under the heading of cash there would have been a reduction of £1,000, so that there would be a net reduction on the assets side of £6,000, and the £5,000 would appear under the heading of Current, Deposit and other Accounts on the liability side, the change on the liability side indicating the extent to which there had been an expansion or creation of credit. Now I am anxious as we go along here to get clear what the facts are, and it is for that reason, before we leave Section 6, I want to say that after the discussion that is the way my mind is left: that there are only these two ways of creating or extending credit in the country.

I want to correct what I think was an unconscious representation by the Minister for Finance yesterday of my position. He said that I advocated unlimited expansion of credit. I did no such thing. I was arguing on a thesis that, in modern life, with all its commercial, economic, industrial and agricultural complexities, the State must necessarily interest itself in the expansion and restriction of credit. If it desires an ordered industrial life, an ordered agricultural life, or a planned economic development, it is essential for the State not to adopt the policy adopted by States in the Victorian period of leaving the handling of currency and credit to professional bankers. I did not advocate an unlimited expansion of credit. What I did suggest was that, in an under-developed country, with considerable potentialities, industrial and agricultural, with a relatively underdeveloped national asset, the State should intervene to ensure an expansion of credit so as to provide for full-blooded industrial and agricultural development on the one hand, and for an enrichment of the national asset by the creation of public amenities on the other hand. In my advocacy of the expansion of credit I was concerned with ensuring that credit was made available for the creation of sources of wealth which would enrich the whole community, or for the expansion of the national asset by the creation of public amenities. I do not think it was a fair deduction from what I said to suggest that I advocated an unlimited expansion of credit.

My point of view on the whole matter is briefly epitomised by saying that, in times of recession, when unemployment tends to increase and trade conditions tend to go back, due to internal or external causes, in order to correct that tendency the State should have some authority to try to catch up that lag by the expansion of credit so as to encourage the maintenance of industrial or agricultural activities, or so as to divert those activities into some profitable channel which will keep employment going and stop the lag in employment which might otherwise occur. If, on the other hand, you reach a period when labour is scarce due to the fact that you have intense agricultural or industrial development, the State might think it prudent, in order to avoid inflation, to restrict credit, if it is shown that in fact the availability of credit is so great as to bring inflation within the realms of possibility. My advocacy all the time was based upon a planned expansion and restriction of credit. If things are bad, expand credit to take up the sag; when things are good, then you can keep the reins of credit expansion in your hands, and not issue credits as easily as you would in other circumstances.

The Minister was at pains to say that I was pinning my belief for economic stability, the abolition of unemployment and the creation of high social standards, purely to manipulation of the financial policy. I was not doing any such thing, but I realise that any Government, no matter how carefully thought out its plans may be in the matter of providing employment, in the matter of avoiding emigration or in the matter of developing an underdeveloped country, cannot implement those plans unless it has under its control the expansion of credit and the general financial policy which the country is to pursue. If this Government were a Government of economic wizards sitting in Merrion Street, and having all the ability to find a solution for our various economic and social problems, with the best will in the world they would be powerless to implement their plans unless they could ensure that they had control over the means of giving effect to them. So long as the wages envelope is the passport to food and clothing and shelter, so long as it still represents the passport of the ordinary man and woman to live, it would be impossible for the Government to implement any economic policy, any development policy, unless it had within its control the power to harness the credit potentialities of the country to whatever economic plans it had laid.

It is quite obvious to anybody reading this Bill that it is based upon the Majority Report of the Banking Commission, and, if ever there was a bankers' report, the Majority Report of the Banking Commission is a bankers' report. One has only got to read that report to realise the extent to which that is so. The Majority Report indulged in adverse comments on the subsidisation of housing schemes, schemes which, in the circumstances, were very good. It describes those as wasteful and extravagant expenditure on the part of the State. It disapproved of State borrowing for revenue, a thing which, I think, is quite understandable in the circumstances. My only cavil in that respect would be that you cannot keep on borrowing and you cannot keep on taxing when the productivity of the country is falling, but, so long as it is rising, borrowing for revenue purposes is quite a legitimate activity on the part of the State, particularly in times of crisis and times of stress. It disapproved of the Land Commission's policy in acquiring estates and settling thereon as many economic holders as possible. Whatever views we might have as to whether a particular holding is economic or otherwise, or whatever we might think of the advisability of making capital available for stocking such lands for small and relatively penniless people, I think everyone approves, at all events, of the transition from the big prairie ranch to the self-contained holdings which tend to anchor our people to the land and stop the drift to the towns. But, if one reads the Majority Report of the Banking Commission, one gets the impression that those who signed that report were perfectly satisfied to let things drift on as they are. Their policy was: "Things have gone along as they are for a long time. Why rock the boat now? If anybody does not like the boat, he can get out of it, but do not upset the boat; do not change the boat's course; let things sail on as they are."

The report even dogmatises on the possibility of emigration, the possibility of rearing Irish lads here and sending them far afield where they might obtain some temporary eminence, where they might forget the country that gave them birth, and where they might assimilate conceptions of right entirely different from ours. One gets a viewpoint on the Banking Commission's Report when one discovers the reference to the possibility of emigration. Those who signed the Majority Report of the Banking Commission were saturated with this mentality, that people will not live here, that it is all "cod" and all fraud to try to get them to live here if they want to emigrate and, therefore, so long as they want to emigrate, let us keep as close as we can to the financial hub of the world; do not let us change our policy at all; let us follow meekly and sheepishly in the financial paths which Britain has blazed. That has been the whole line of the Majority Report of the Banking Commission. That is the line of this Bill, because, like the Majority Report of the Banking Commission, it makes no perceptible contribution to the solution of any of our difficulties here.

I said yesterday that I wanted an ordered expansion of credit to meet the necessity for a development policy here. It is not possible under Section 6; it is not possible under this Bill, one of the reasons being, apparently, that the joint stock banks have so much of the volume of credit at their disposal that the central bank in the circumstances is relatively powerless to set the pace for them or to curb the activities of the joint stock banks. Contrary to what the Minister for Finance said yesterday, I do not believe that the existence of good intentions on the part of the Government is sufficient to ensure an adequate contribution to the relief of our economic difficulties. You may have good intentions. I do not doubt that this Government have good intentions. I do not doubt that any Government sitting here will have good intentions but, even if they are tattooed with good intentions, it will be of no use unless they have the wherewithal to implement them. My answer to the Minister for Finance is that, though the Government may have good intentions, it is necessary that they should have control over currency and finance to ensure that these intentions will be given full play. One would think from what the Minister for Finance said yesterday evening that the Government had all sorts of high ideals in respect of the solution of our financial and social difficulties. Notwithstanding the ideals of the Government, we shall have all the existing evils with us in an intensified form if present currency conditions continue. Why are so many of our people idle? Is it because we have no work for them to do in a relatively undeveloped country? Why do so many of our people emigrate? Is it because they have a passionate longing to leave their wives and families and tear up the roots of nativity that they have here? Why do we continue to export beef when our own people do not get a sufficiency of beef? Why are our people insufficiently housed when there is an abundance of material to house them and sufficient craftsmen to operate a housing policy—craftsmen who, even before the war, were forced to go to Britain for work? I might ask, also, why our land is not properly planted and why so many of our industries are struggling.

These things are not happening because the Government desire them to happen, but because they have no plan for dealing with them. There may be theoretical plans in the Government Chamber, but theoretical plans in the possession of a Government without adequate access to currency and without power over credit-expansion will remain theoretical. Our people will continue to suffer because it has never been possible, divorced, as the Government are, from control of credit-expansion, freely to anchor to their good intentions the necessary means to implement them. What I say is probably outside the realm of Section 6, but I want to make clear that the Government are making a profound mistake in being satisfied with their good intentions regarding the solution of our various economic and social difficulties while, at the same time, they handcuff themselves so that they cannot obtain access to the means for implementing whatever good intentions they have in the economic field.

The predominant interest of the directors who will be appointed to control the central bank is to be the welfare of the people. I do not think that that can be brought about merely by the setting up of a central bank. It would require the cooperation of the people as a whole. In fact, many people take the view that the people would do as well without State interference at all. I was rather amused last evening when the Minister for Finance had a tilt at Deputy Norton for advocating the giving of credit indiscriminately. The Minister said that that would be bad policy, and he quoted examples in support of his argument from other countries, notably the U.S.A. I think that the Minister said that President Roosevelt set out to do the very thing Deputy Norton asked him to do last night. That was about ten years ago and, if my memory serves me, I stated on that occasion that President Roosevelt, after spending all these millions, would be a sadder and a wiser man; that he would find that what he set out to solve was not possible of solution by any Government—the unemployment problem. The Minister has the same view now. The same thing could be said of his own Government. I do not say this by way of criticism but, after ten years of office and the spending of many millions of pounds in trying to solve this problem, the Government finds that it is as big to-day as ever it was. That problem cannot be solved in its entirety by the efforts of any Government. It must be solved by the people as a whole. I recall that when in Opposition the Taoiseach thought that this question was as easy of solution as Deputy Norton thinks it is to-day. He stated, if my recollection serves, that he saw no reason why unemployment should prevail in this country at all and that the country could support a population not of 3,000,000 but of 11,000,000. We are a bit far removed from the 11,000,000 mark so far.

The setting up of this central bank may be a good thing inasmuch as it may enable the directors to take stock of the position of the country at different periods. It may also do good in so far as any Government in power will be able to implement legislation passed here which has as its object, as set out in Section 6, the welfare of the people. Many of the speakers gave the impression that this country was a vast, undeveloped empire. I do not agree with Deputy Norton when he says that. Leave out Dublin, Cork, Waterford and a few big towns and what do you find? A lot of green fields. If you examine the position you will find thrifty people engaged in and about these fields looking after cattle, pigs and poultry. They could do that if we never existed or if the central bank was never set up. They are really the people who are going to carry on the affairs of this country with their thrift and hard work. The mere setting-up of this central bank is not going to cure all our ills. So far as credit is concerned, my experience is that, at the moment, many of our farmers are doing fairly well. I am glad to be able to say that. To those who, through misfortune or otherwise, are not in a position to obtain 100 per cent. return from their farms, the provision of credit might be very useful.

Deputy Cogan referred yesterday to the question of housing. I do not think he has studied the question. So far as my experience of housing goes, it is not an activity that gives a vast amount of employment. Any employment it gives is of a temporary nature and the cost of building houses now would be very high. My own opinion— I give it for what it is worth—is that, even if we were willing to spend large sums on housing, it is questionable that it would be wise to go on now with an intensive scheme of house building. We have no material here at the moment of the proper type for house-building. Only a man out of his senses would start to build houses and rely exclusively on native timber. After a few years he would be left with a legacy of repairs far above the resources of public bodies. Even if we have to wait for a year or two, it would be wise policy on the part of the Government to wait until we can import the essential material for the right type of houses. House building gives a certain amount of employment, but it is only of a temporary nature and is non-productive. It is a good thing to take people out of hovels in which they may be living and give them decent houses, but there is also a strong argument against the building of houses for poor people when it means that they change from houses where they paid 2/- and 2/6 per week to houses at rents of 7/6 a week and upwards.

The Deputy is now far from the section.

I am only answering Deputy Cogan, who thinks that, if credit were advanced under this section for house-building, it would put an end to the unemployment troubles.

Other Deputies might be drawn to reply to Deputy Coburn on the construction of houses.

We have also the unemployment question. That will be with us year in and year out; we will always have a certain number unemployed. Deputy Norton has mentioned the drift from the land. On a farm of 15 or 20 acres there may be three or four sons and three or four daughters. When they come to the age of 16 or 18 there is no use for them on the farm. Is the farmer to keep them there doing nothing? These people will drift from the land and find their way into cities and towns, or go across the water. No young fellow is going to stay on a farm like that, to get 6d. or 1/- for pocket money at the end of the week, and be lucky to get it. That type represents the vast majority of farmers in this country, with farms of 15 or 20 acres. Sometimes, the smaller the farm the larger the family. It is impossible for a family of six or seven to sustain themselves comfortably on a farm of that size.

Some people believe the central bank will cure all our ills. It will do no such thing. The acid test of the value of the measures taken by the Government—in good faith, I admit—is that, after all these years of spending so many millions in trying to achieve desirable results, the population is less to-day than it was ten or 20 years ago. Deputy Norton referred to the policy of drifting on. I suppose he would consider the policy of those years as one of drifting on, but, on looking back, one finds that the population was much higher, and possibly the people were better off and much happier, years ago. Of course, they did not look for so much as we do to-day.

The mistake that has been made is that we have over-estimated the resources of the country, financial and otherwise, and the sooner we realise that the better. The more the directors realise that—through the instrumentality of the portion of Section 6 referring to the welfare of the people—the more we will be able to do for the people. However, the people must help themselves, and one of the ways to do that is to recognise that we are only a small people. There are less than 3,000,000 people in the Twenty-Six Counties; including the other six, it is only 4,000,000. Our resources are not unlimited. We are not an under-developed country, as Deputy Norton makes out. Taking a bird's-eye view of the country, one can see that our future success will depend on the exertions of the people, supported by whatever Government is in power. By wise and useful legislation tending towards the welfare of the people, the Government can help them in the most efficient manner possible.

Having listened to Deputy Coburn, one would imagine that the bank had all the powers he stated. I would like to ask the Minister if the bank is to have any power over the volume and price of credit, and if it can do the business of the Government. If I had any money to put in a bank, I would be anxious to put it into one under Government control. Can the central bank accept deposits from the ordinary people of the country? If the bank can do these things, we are only wasting time in debating the Bill.

Deputy Hickey asks if the central bank can do the business of the Government. That question answers itself—it cannot.

Can it underwrite loans for the Government?

It can not. I am not proposing to enable it to take deposits from individuals. These things were debated over and over again on the Second Stage of the Bill, and on the second Second Stage we had a week or two ago. Many of these points were dealt with yesterday.

I am sorry if I misrepresented Deputy Norton, as I would not like to misrepresent him or any other Deputy. I got the impression that he expected this central bank to be able almost to create a new heaven and a new earth. It cannot do anything of the kind. There is no suggestion that it can, or that it will attempt it. It does not propose to take power to do any revolutionary things, but proposes to make an important step forward in providing this country with central banking machinery and with the opportunity to develop monetary technique suitable to our particular conditions. One of its duties will be to provide credit in order to give as full employment to labour and to the productive capacity of the country as can be maintained continuously. That is probably far from doing what Deputy Norton and others wish it to do. It can influence an expansion of credit—I would even use Deputy Muloahy's word, the one he would like used, "creation" of credit. It can do that.

We have gone over that often enough. I know we have not convinced Deputy Mulcahy, but I suppose we would not convince him if we spent another month at it.

Would the Minister comment on my opening statement to-day?

I am not going to comment on Deputy Mulcahy's statement.

There were not many figures in it.

The Deputy quoted millions and hundreds of thousands, and I am not going to follow him in that.

I will make it simpler for the Minister.

There are powers in the Bill which will enable it to influence the expansion of credit or, to use the Deputy's word again, the creation of credit, and also influence the cost of credit which, I agree with Deputy Mulcahy, Deputy Cosgrave, and everybody else interested in the matter, is equally important. It can do those things to a limited extent. There are certain powers which I need not indicate again, because they were indicated yesterday and many times during the course of the discussion here. Some Deputies are not satisfied that there are sufficient powers; other Deputies think we are going much too far in setting up this central bank; they say that it is unnecessary and, if we do set it up, that we are giving it powers that might be used to the danger of the State unless they are in safe hands. I hope they will be in safe, experienced and prudent hands.

There is power to do, within limits, the things that Deputy Norton would like to have done. I think his statement to-day was a more modest and moderate statement than the one he made yesterday. I agree it would be wise that there should exist here a power having certain control over credit; but if you set up a central bank with unlimited power of control you would probably risk doing more harm than good. If the central bank is to be dictated to and to be under the control of the Government, and is to take the orders of the Minister for Finance to expand or create credit to any extent that the Government at a given moment may desire, that is a power that it might be unwise to put into the hands of even the prudent Government we have.

When we talk of the welfare of the people, there are many things that we might like to elaborate upon. I am confining myself as far as I can to getting clear the structure and the powers of the Bill, and I do not want to confuse the Minister for Finance with figures of any particular kind. I want to have certain matters clarified before we get to Section 7, so that when we are discussing that section we will have a fair idea of what is behind us. I have come to the conclusion that there are only two ways of extending, expanding or creating credit in this country.

The Deputy should not repeat himself.

The Minister has declined to comment on my question, for the reason, as he stated, that I confused him with millions. I am indicating that there are no millions involved and if I did use figures it was merely for the purpose of making my point. There are only two ways of creating credit. One is by the banks when they give an advance to a person, and the extent of the creation of credit by an action like that is the amount of that advance, reduced by the amount of any advances that are wiped out by the person getting that advance and the amount of cash that he withdraws as part of the facility. The creation of credit is the total advance, less any previous advance that is wiped out as a result and less any cash withdrawn. The second way by which credit can be expanded, created or extended is when a person makes a sale abroad, hands over his claim on the bank abroad to a bank here and gets a deposit here with that bank; it is that amount, less any cash that he withdraws as part of that transaction. Am I right in thinking that these are the only two ways, prior to the operation of anything there is in Section 7, by which credit is expanded or created in this country?

It appears to me that, for the last three days, the Taoiseach and the Minister have been telling the House that, owing to the peculiar circumstances in which this country finds itself vis-a-vis Great Britain, it is not within the power of the central bank to increase credit in this country. Is not that so? Now the Minister for Finance tells us the direct opposite. Did I misinterpret him? I do not think so. Sometimes when the Minister intervenes in this debate I find myself completely bewildered. He told us last night that cheap money in Great Britain arose out of the war, although cheap money started in Great Britain in 1932, and the war did not take place until 1939. He tells us now that this bank will have power, within limits, to expand credit, and the Taoiseach has been telling us for the last two days that it has not.

He merely says it can influence the expansion of credit.

I heard the Minister say it could increase credit in this country —I understood him to say that. He said that in the peculiar circumstances in which we find ourselves it could, but our central bank could not discharge all the functions that a central bank might be expected to discharge in other countries. Deputy McGilligan hammered that point home and there are some Deputies who might be inclined to think that Deputy McGilligan's description of the situation was pretty accurate. Now, is Deputy McGilligan right, or is the Minister for Finance right? Somebody ought to tell us that. Perhaps the Taoiseach will tell us who is right?

Both are right.

If they are, I should like to see the two statements put side by side and co-related.

There is no difficulty in doing that.

I wish the Taoiseach would do it for us.

I have stated it 50 times if I stated it once. I do not know if it is wise to say it again, because when it is said somebody will say that he is becoming confused. People confuse themselves by not looking at the thing as a whole. Every act of the central bank or an individual bank that leads by itself to an increase of the purchasing power may be regarded in a sense as the creation of credit. But none of these acts is isolated. At the same time as one bank is lending, another bank is cancelling its loans, getting in its loans, and there is a whole variety of transactions taking place. You have to check all these transactions in order to know whether or not the net result is an increase of the purchasing power. You consider one particular aspect to see if you can do a certain thing. The central bank, by making cash balances available, enables an increase of credit. If the banks take advantage of the position given to them, then there will be an increase, assuming that they all do it. But you cannot say that a number of individuals will all do it. They may cancel each other out by going in opposite directions. The difficulty experienced when one person says you can do it and another that you cannot do it is caused by the fact that one is thinking of the net result and the other is only thinking of individual acts. We have said that the bank cannot compel—I hope you will underline the word "compel"—an extension of purchasing power or an extension, if you like, of credit. It cannot compel it for the reasons that were stated already. It can take actions which tend to influence it and, as I have said several times, by its leadership, by convincing the banks that to follow a certain policy is wise, it may in fact effect that extension of credit. Of course, we are looking for extension. That is the purpose in view. Where is the contradiction? I do not see it. The Minister for Finance says it can influence it. It can, by discounting bills, make the cash balances of the banks bigger than they were. It will enable the banks, if they desire it, acting on the old basis, to extend their loans and, to that extent, increase the money, the purchasing power, if you like, available to the community.

There is a definite statement: it can do it; but if the banks were to make up their minds that they would not go in that direction—as they might— then it could not coerce them. It cannot make sure that the particular results that it desires will in fact follow. The difficulty here is that the power of compulsion does not exist in our particular case. The power of influence, the power of acting does exist. If you take up any one of the books on central banks—there has been quite a number of them published in recent times—study what particular powers are generally regarded as proper for a central bank by those who have studied the matter, check them with our Bill, and see if we have any particular power, you will find that the central bank has legally the powers which a number of these other banks have or which the authors and those who have studied central banking think a central bank should have. It has these powers but, in our particular set of circumstances, the coercive power that is attached in other countries does not exist here, and it does not exist, not because they have not the legal powers, but because, in the set of circumstances, the results would not follow from their action that would follow in other countries. Where is the conflict? Where is the difficulty? The Minister for Finance says on the one hand that the central bank can create credit. So it can. By discounting bills it does tend to create credit, and that particular act by itself will tend to a creation of credit, but it is not in a position to compel right through the action which it initiates. It takes the initial steps. Certain consequences would flow naturally from it unless there was an attempt to counteract these by other types of actions. Therefore, the Minister for Finance says it can create credit, and so it can. I have said that it cannot compel a creation of credit because of the fact that the steps that it initiates may not be followed up in the right direction; in fact, might be counteracted by actions in an opposite direction, and the net result of the action of the bank tending to create credit and the action of the other ones tending to diminish or to annihilate it if you like, may be a plus or minus, according to which is stronger.

What does the Taoiseach mean when he says they can create credit by discounting bills of the joint stock banks? Are these open market operations?

No, not necessarily open market operations.

What does he mean by saying discounting bills of the joint stock banks? That means, in the London money market, the Bank of England going out and buying bills.

I am talking of our own set of circumstances here.

How can you buy bills in the bill market here when there is no bill market? There never was a bill market and never will be a bill market, and everybody in the House knows it.

There is to a certain extent.

The Taoiseach knows as well as I do that there is no bill market here.

It is not a big market.

There is no bill market, as the term is ordinarily understood, in this country. There never will be. Everybody knows that. I quite agree with the Taoiseach that these powers are in the Bill. It is just like the Constitution. We have a whole lot of pious sections in the Constitution, but when you come down to examine them they have no effect except to dirty the sheet of paper they are written on. I quite agree that in the Central Bank Bill we have a whole lot of lovely powers set out, but with no more effect than the pious sections in the Constitution. All they do is dirty the sheet of paper they are written on because we all know that, though you turn the handle of this particular Bill, nothing comes out. It is like putting a pump into an empty well. It is a lovely pump and it pumps away most vigorously, but because there is no water in the well nothing comes out the other end. The Taoiseach knows that. Nobody in the House knows it better than he. I do not think the Minister for Finance fully appreciates that. But, whenever the water gets too deep, the strong swimmer of the Government team turns up and swims through. The powers are there in the Bill, but nobody can use them and nobody ever will be able to use them because the conditions under which they can be used do not exist.

Would the Deputy spend a little of his time trying to get ways and means by which these powers could be made effective in the Bill?

I am not blaming the Taoiseach. All I am doing is rejoicing in the fact that the man has learned sense. It took about 25 years to teach him the fact that this country is within 25 miles of Great Britain and that that is a fact from which no legislation will enable us to escape. The economic consequences of that geographic fact are insurmountable, and when we realise that and adapt our measures to that inescapable fact it will be better for us all. The Taoiseach, therefore, says it can create credit and that the Minister for Finance is right when he says so. The Minister for Finance is not right. It can try to create credit but, for the very reasons so cogently stated by the Taoiseach, it cannot do it by the classical methods employed by central banks in other countries because the conditions are not here present. There is no use in going into all that again because Deputy McGilligan put it in a nutshell and the Taoiseach was constrained to get up and admit that Deputy McGilligan's contention was incontrovertible, but that it was not his fault. We are all in agreement that it is not the Taoiseach's fault. It is just the inescapable fact. The only body that can effectively operate to increase the credit base in this country is the Bank of England and the Taoiseach knows that. So long as the Bank of England continues to issue notes on the foot of its fiduciary powers, those notes are exchangeable for currency notes, and the central bank or Currency Commission are obliged to make notes to meet the British bank notes lodged with it. The more notes so produced, the wider the credit base becomes here, and the larger is the possible volume of credit money that can be created upon that base. That has all been stated by Deputy McGilligan and I do not think anyone has attempted to controvert it.

The only way by which this bank can create a credit does not fall within the classical powers conferred upon it within this Bill at all and the Government seems to be quite determined not to give the central bank the power requisite to create desirable credit for use by the community, that is, a power to direct the joint stock banks to make overdrafts available to the Government for limited periods out of the credit money which it is possible for these joint stock banks to create. Now, apparently the Taoiseach is quite clear that he is not going to make them do that. However, I think he is wrong. I know how reluctant the Ceann Comhairle is to permit any Deputy to cover any ground that has been covered already. Nevertheless, on the Committee Stage of this Bill, it is necessary continually to return to a point made which is challenged and an attempt made, it seems——

If it is relevant to the section under consideration.

I think it is relevant to Section 6. The only credit money that can be mobilised by this central bank, in the circumstances in which we find ourselves, is the surplus credit money available to the joint stock banks for which they are unable to obtain willing solvent borrowers in the ordinary course of their business. The Taoiseach knows as well as I do, and it is common knowledge in banking circles, that 10 or 11 per cent. of a cash ratio was deemed sufficient by the joint stock banks in Britain but the joint stock banks in this country require a cash ratio of 20 or 30 per cent. or more. There is credit that might be properly built on between that 11 per cent. and the 20 per cent.

Is the Deputy sure that an 11 per cent. ratio would be the proper one here?

The older I grow, the fewer things I am sure of. There is only one thing in the world I am sure of, and that is that it is never safe to be sure of anything. That is wisdom which I am beginning, I hope, to share with the Taoiseach. There was a time when he used to be sure that he never was wrong but, to the astonishment of Deputies, he admitted the night before last that he had learned something in the last 20 years. I regard that as a very encouraging sign of the times. I am quite sure that a cash ratio lower than 22½ per cent.——

I thought the Deputy said he was never sure of anything.

I said there were very few things of which I am sure but I am sure that a ratio below 22½ per cent. is sufficient. It is on the difference between what would be a safe minimum cash base and the actual cash base at present being employed by the joint stock banks, that any volume of credit money which the central bank could control for the benefit of the community would have to be built.

Has the Deputy not already made that contention on this section?

Yes, and the preceptive mind of the Ceann Comhairle grasped my statement and has retained it but the same cannot be said for every other Deputy.

The Deputy should not repeat it.

Of course I should not repeat it, provided that in the meantime it has not been contradicted and that it does not become necessary for me to restate it.

By assertion, yes, but not the repetition of the argument.

I submit, Sir, that I must certainly controvert the position taken up by some persons here, firstly, that there is no credit which can be created —the Minister for Finance made the astonishing proposition that all credit could be created—and secondly, the Taoiseach's suggestion that the only credit is that which can be created under the classic powers contained in this Bill. My statement is that the only credit which can be created, and which in certain circumstances should be created, requires certain powers which should be inserted in this Bill. I am suggesting that at the present time the only person who can expand the credit base in this country is the Bank of England. I think the Taoiseach admits the bank is one of the persons who can do that. I am suggesting that a very much more restrictive power should be vested in the central bank in this country to create a credit base for the advantage of the community. Although I have advanced that proposition several times, and although Deputy McGilligan with characteristic clarity crystallised it last night, the best we have got out of the Taoiseach so far is that it is something worth thinking about. Now, that is the credit on which I want to hear the Government. I want to warn Deputies that it is the only credit with which we can achieve anything. If you let this opportunity pass this House is going to be sold a pup. It is going to be sold a Bill which professes to set up a central bank with certain alleged powers but you are taking from it the one power which could be used and you are leaving in ambiguity the one form of credit which we ourselves control and which in proper circumstances might be most advantageously used.

I warn the House that every vested interest concerned with money in this country is concerned to cover up this whole concept of bank credit in a veil of obscurity. They want to make it complicated and they want to suggest that anybody who advocates its use on behalf of the community is a crank, a crack-pot and a dafty. That is the recognised technique that has always been employed by such interests. Credit is like dynamite. It can be used in a most salutary way, if it is skilfully used. It can be used in a coal mine to dislodge coal in the mine and to make it available for consumption by the people. If it is unskilfully used in the coal mine by a person who does not understand the dangers attaching to its use, it can be used to bring the whole coal mine down on the heads of the miners who are working there. Credit can be used to dislodge turf from a bog for consumption by the people, and it can also be used, if it is not prudently handled, to bring down the whole State on the heads of the people who use it imprudently. We have got to recognise that. It may be that those who are concerned with money matters are very apprehensive that it will not be properly used by the elected representatives of the people. This is a matter that is complex enough without being made more so by propagandists. They do not want any responsible man in this country to believe that he is capable of understanding interim bank credits and the proper method of using them, but until I have been proved wrong—and nobody has proved me wrong yet—I am going to keep on this subject of bank credits. I do not want the help or the assistance of the dafties and the crack-pots. I do not want to have in my train the currency lunatics who flood this country and every other country. What I pray is that commonsense will prevail in Government circles in time, and that the Government will do now that thing which they are certain ultimately to be driven to do, and that, having made up their minds to do it, they will take their stand on that Rubicon and say: "Not an inch further, because to go beyond this is to bring down the coal mine on our heads, whereas by going this far we are making the coal mine yield up its riches far more quickly than if we stuck to the pick and shovel stage of credit usage." There is a danger that the Government, in a desire to be excessively conservative, will resent sensible credit representations, because if they do, the people in exasperation will eventually deliver themselves over to the hands of the dafties and the crack-pots.

Once these boys get going they can effect such a racket in any country that it may be generations before it recovers. I want the Government here to do the right thing, the radical thing, and that is to place themselves in an unassailable moral position, so that they can stand on the Rubicon and can fight the crack-pots from that Rubicon. They cannot fight them until they get to the Rubicon, because they are not in a moral position to do so. I hope I have not made a mistake in thinking the Government are too conservative in this respect. It may be that they want to reflect more deeply on the whole position and at a later stage to define it more clearly. I warn them that it would be a major misfortune for them to allow this Bill to go through all stages without more cogently clarifying the Government position on credit. If they do not they will start people, who have a newspaper, on the pseudo-religious racket that they operate in this country. They try to use the Papal Encyclicals for the purpose of demonstrating what should be done in a Christian community. If they can persuade the people that the Government is not prepared to take the radical and forward line in regard to credit policy there is great danger.

Deputy Dillon stated that credit can only be expanded in this country by the expansion of credit by the banks.

By the printing of notes by the Bank of England.

I am trying to get agreement on this between expressions from the Government Benches and my assertion that credit can be created only in two ways, by the making of advances by the banks to persons in this State, or by the export of goods to some other country and getting money in here. The actual extent of the creation of credit is also bound up in certain other things. I do not see how the mere printing of notes by the Bank of England can expand or create credit here. On the other hand, I feel that the type of monetary expansion going on in Great Britain which, within certain limits, is the printing of notes there, or the creation of credit to meet Government expenditure, tends to dilute the value of credit here, rather than enhance it in the way we generally expect the word "expansion" or the creation of credit would be understood. I think if the Bank of England was printing notes until the machinery was red hot we have no means of getting these notes except by exporting something for them. I should like to have it made a little clearer as to what the Deputy had in mind with regard to that and as to whether he considers that the mere expansion of the note issue in Great Britain is going to expand our credit. If the notes are tendered for Irish tender notes then Irish tender notes are certainly created but the mere expansion of our note issue does not expand credit. Our banks have a certain amount of cash in Great Britain, and they could get that cash transferred to Irish legal tender notes, but except they gave out these notes as advances they are not, as far as I know, expanding credit here. Deputy Dillon made another statement of a rather blunt kind. I wonder would he make that statement again with whatever extension he feels has to be made to it. As the statement stands up to the present it is that if the Bank of England prints notes, and prints more notes, that will have the effect of expanding our credit. I think that requires to be followed up. The only effect that I see we might experience, and that we are probably experiencing at present, is that currency expansion in Great Britain is diluting to some extent the value of our money here, and is tending to drive up prices. You have the position that monetary expansion in Great Britain from 1932 to 1941, taking currency and deposits, has gone up from £2,049,000,000 to £4,073,000,000. It has expanded by 100 per cent. Here the expansion during the same time has been something like 25 per cent. I have not had acceptance of my statement from the Government, and the only comment has been that introduced by Deputy Dillon, that the Bank of England expands our currency by printing notes. I do not see how that is so.

Deputy McGilligan pointed out that there is in our Currency Act of 1927 an obligation to exchange British notes for Irish notes. Therefore, if the volume of British legal tender notes increased, and that resulted in an increased pendulum of the notes of our currency authority, it is an obligation on our currency authority to print more notes, from which joint stock banks in this country could operate a credit structure larger than they would be able to operate had that expansion in our note issue not taken place. If I misinterpret what Deputy McGilligan said, I would be grateful if he explained.

I think that is right.

Deputy McGilligan agrees with me. I am so diffident about this that when Deputy Mulcahy challenges any allegation I make I want to see if I committed some lapse. However, when I find so clear a brain as Deputy McGilligan's coming to my aid I am consoled, and when I notice the Taoiseach in his silent seat then I am quietly assured.

Question put.
The Committee divided: Tá, 52; Níl, 34.

  • Aiken, Frank.
  • Allen, Denis.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Carty, Frank.
  • Cooney, Eamonn.
  • Crowley, Fred Hugh.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Humphreys, Francis.
  • Keane, John J.
  • Kelly, James P.
  • Killilea, Mark.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Lynch, James B.
  • McCann, John.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • MacEntee, Seán.
  • Meaney, Cornelius.
  • Moran, Michael.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mullen, Thomas.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • Rice, Brigid M.
  • Ryan, James.
  • Ryan, Robert.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Laurence J.
  • Ward, Conn.

Níl

  • Bennett, George C.
  • Brennan, Michael.
  • Brodrick, Seán.
  • Browne, Patrick.
  • Byrne, Alfred.
  • Byrne, Alfred (Junior).
  • Coburn, James.
  • Cogan, Patrick.
  • Corish, Richard.
  • Curran, Richard.
  • Davin, William.
  • Dillon, James M.
  • Doyle, Peadar S.
  • Fagan, Charles.
  • Giles, Patrick.
  • Hickey, James.
  • Keating, John.
  • Keyes, Michael.
  • Linehan, Timothy.
  • Lynch, Finian.
  • McFadden, Michael Og.
  • McGilligan, Patrick.
  • McGovern, Patrick.
  • McMenamin, Daniel.
  • Mulcahy, Richard.
  • Murphy, Timothy J.
  • Nally, Martin.
  • Norton, William.
  • O'Donovan, Timothy J.
  • Pattison, James P.
  • Reidy, James.
  • Reynolds, Mary.
  • Rogers, Patrick J.
  • Ryan, Jeremiah.
Tellers:—Tá: Deputies Smith and S. Brady; Níl: Deputies Keyes and Hickey.
Question declared carried.
SECTION 7.

I move amendment No. 15:—

In paragraph (e), page 5, line 49, to delete the word "ninety" and substitute the words "one hundred and twenty".

Paragraph (e) at present provides for bills to be rediscounted which mature, in the case of bills drawn for agricultural purposes, in not more than nine months, and in the case of all other bills not more than 90 days. It is considered that 90 days is too short in comparison with the nine months that are allowed for bills drawn for agricultural purposes. Hence it is proposed to raise the period to 120 days, to allow greater freedom for the central bank board.

It really means four months as against three months?

Does it not mean maturity in four months instead of three?

Why the difference? Why not six months?

It was thought that four months was a reasonable improvement on three. It gives greater latitude for other types of bills.

This all has reference to first-class commercial bills?

Yes. First-class commercial bills, in the ordinary course, will hardly ever be for longer than three months, probably. There might be some for four months, however, and it is for the purpose of giving a little greater latitude that this amendment is being suggested. First-class commercial bills, however, are usually for three months.

By way of guidance, can the Minister give us a definition of what a first-class commercial bill is likely to be?

I would rather leave that to the board.

I am sure the board would be delighted to have a definition from the Minister for their guidance.

I do not think they would.

Could the Minister give us any idea as to the number of four-months bills as compared with three-months bills, or if there are any five- or six-months bills?

I could not give the Deputy any idea at all as to the number that might be presented.

Can he say if there are any commercial bills requiring rediscounting in this country at all?

Yes, I would say that there are always some—not many, but there are always some.

Are there any bank statistics as to the volume?

I do not think so.

The question of the numbers of such bills might be debated on the section itself.

Yes. I was only putting the question in passing.

Does the Minister say that these bills are now dealt with by the joint stock banks?

Yes, some of them are. Some of them are commonly dealt with by the joint stock banks, but not to the extent that they used to be.

Is it the intention that the whole of that will now be transferred to this bank?

No, only some of them. Suppose the commercial banks are not able to discount their bills, or want some money: they will run around to the central bank in such a case.

The last figure that I have was for March, 1942, and it shows that the value of bills dealt with was £3,825,000 odd.

Even if they were to rediscount that, it is not such a large amount.

Well, £4,000,000 is a fairly large sum.

But it is not so very large.

Amendment put and agreed to.

I move amendment No. 16:—

In page 5, before paragraph (f), to insert a new paragraph as follows:—

"rediscount bills of exchange which are local authorities' bills."

This section confers a number of particular powers on the central bank, such as the buying or selling of coin or gold, etc., or any foreign currency, receiving deposits from any public authority or any associated bank, and particularly the discounting of bills of exchange which are, in the opinion of the board, first-class commercial bills. Now, the borrowing of money, as represented in the commercial bills in use in this country, is a trifle. Farmers and business firms obtain accommodation from the banks for the most part in the form of overdrafts, and there would be few commercial bills to discount. Accordingly, the power conferred on the bank to discount such bills will have no material effect on the volume of credit in the community. If, on the other hand, the central bank were authorised to rediscount bills of exchange of local authorities, I think it will be admitted that a considerable volume of credit could be made available for local authorities at very low interest rates. If, for instance, the Corporations of Dublin, Cork, Limerick and Galway could obtain money for housing, or for sanitation, for which some cities are in a very bad way at the moment, through the operation of the central bank in discounting bills, I think that such a facility would be widely availed of. I have knowledge of certain local authorities which, at the moment, would be anxious to avail of that opportunity. One of the things that the central bank could do, by rediscounting bills for the purposes of local authorities, would be to make money available for these bodies at a very low interest, and I am anxious to hear from the Minister why there is any hesitancy about doing so. Speaking from experience of local authorities. I can say that at the moment they are paying excessive rates of interest on their housing loans. At the moment, houses built by local authorities cannot be let to tenants at economic rents on account of these high interest charges.

In Cork, I should like to point out to the Minister, we have built 210 houses for over £100,000, for which we are paying interest at 5¼ per cent., and we found that when the land was purchased, the site developed, and the houses built, the cost of each house would work out at about £520. That means that on the rent of each house there is a charge of 10/4 or 10/5 per week before there is any question of meeting the corporation's cost of keeping the houses and collecting the rents, and so on, which is anything from 5/- to 6/-. Now, the people who inhabit these houses are paid wages ranging from the dole to £3 10/- a week, and we have something of a differential rent there. It is my opinion that this is an opportunity where the central bank could help considerably. After all, these houses were built, and the rents are being collected, on the security of the rates, and if the central bank would rediscount the bills of the local authority, we could then proceed with very good work on money at a cheap rate of interest. While the central bank is at liberty to rediscount other bills, I am at a loss to understand why they cannot discount bills of municipal authorities, and if this Central Bank Bill is not going to have power to do such things, then I think it is a waste of the time—and valuable time—of this House to be discussing it.

I certainly agree with Deputy Hickey that the raising of money to carry on housing and other work of a similar kind by local authorities has sometimes been costly, but at the same time his amendment would not achieve anything in the direction he desires, even if it were adopted and passed, because local authorities have no power to issue bills. Even if this amendment were accepted and put into the Bill, it would not alter the law, as it stands at present, that local authorities cannot raise money by the issue of bills.

They cannot?

They raise money by overdraft, by the issue of stock, or by mortgage loan. That is the law as it stands. Even if this amendment were inserted in the Bill, it would not alter the law which binds local authorities to raise money in certain permitted ways.

Could not the law be altered so as to conform to this new facility?

The fact that the law, in regard to the issue of loans, could be altered is another matter, but this proposal would not achieve that. Apart from that, loans of the type which the Deputy has in mind—loans raised by local authorities—are not self-liquidating, and hence we do not think it desirable that the central bank should have the power which the Deputy is seeking in his amendment. We are not proposing to give the central bank power to rediscount bills for the Exchequer. Since that is so, it would be certainly less desirable that it should have such a power in the case of local authorities. When this Bill is passed, I believe it will have an influence in the direction that the Deputy and I, and the whole House, desire, namely, to get cheap money for the kind of activities that he has referred to. I think that will be secured by the passage of this Bill. What the Deputy proposes could not, as I have said, be done under the law as it stands; but, even if the law did permit it, we do not think the central bank ought to have the power that the amendment seeks to give it.

I would ask the Minister to consider the fact that it was brought to the notice of the House last night with regard to the work done by local authorities in the winning and distribution of turf. I quite appreciate that, while it is desirable to get housing loans at a lower rate of interest than they can be got at present, it is hardly the type of work that could be financed by means of bills. The production of turf by local authorities is, however, a different matter. You have there a self-liquidating process which might very well be covered by a nine-months bill. We pointed out yesterday that up to the 31st December, 1941, local authorities were indebted, by means of overdrafts from the banks, to the extent of £932,147, on which they were paying 4 per cent. interest. After that had been mentioned a couple of times, the Taoiseach was shocked at the idea that 4 per cent. was being paid on that money.

He wanted to know what some of us would do about it. I suggested that we might make the banks advance that money at 2 per cent. An examination of the amount that the banks are paid for their consolidated note issue and for their money on deposit might disclose that it might not be fair to get them, under present circumstances, to issue that money at 2 per cent. I do not propose to give any judgment on that, but what I do say is that it would be a gold mine for the central bank if it could get 2 per cent. for issuing, over a period of six or nine months, a sum of £900,000 to the county councils for turf work. I do not see any reason in the world why a scheme like that would not be considered as a most appropriate thing since it would save the local authorities at least £10,000 on last year's turf scheme, and at the same time would bring in a handsome profit to the bank. I do not see why a scheme that offers opportunities of that kind should be turned down.

I, therefore, support Deputy Hickey's proposal very definitely, because there are certain things that local authorities are being called upon to do, at any rate in present circumstances, that are as it were self-liquidating, and that could easily be covered by the bill system. It would have the effect of cheapening the work of local authorities and would enable the central bank to earn money for its own use. The Minister said that local authorities have no power to do these things under the present law, but there is no reason why the law with regard to the position of local authorities should not be brought into harmony with this law. There is no reason either why, if there was any delay in introducing legislation to enable that to be done, an emergency Order to cover the legal position in the matter, during the period of the emergency, could not be made.

The Minister tried to meet Deputy Hickey's argument by calling attention to the fact that at the present time local authorities have no power to issue bills and, consequently, have no power to approach the banks for the purpose of having those bills discounted. He also endeavoured to meet the contention put forward by Deputy Hickey that if money were available and if bills could be discounted for housing, sanitation and activities of that kind by saying that it was not a desirable method of financing that type of municipal activity. The amendment does not deal with the purpose for which bills may be discounted, but with the purpose for which a local authority may require to discount bills.

Deputy Mulcahy referred to the turf production scheme of last year, and quoted it as one case in which a local authority might be used as a medium for financing that kind of activity. Cases do occur from time to time in which local authorities may need some money to finance activities rendered necessary by some unusual circumstance. In such cases, if the local authority has no money to credit, it must go to the bank—its treasurer— and seek an overdraft. If the amount sought is above that already authorised by the Minister it must, in addition, get Ministerial approval for the overdraft. In the case of local authorities which are financially solvent and are being administered on efficient lines— which have reached the new standard of efficiency that the authors of the county management scheme look forward to—what objection can there be to allowing them to issue bills and of having those bills discounted? It may be that under our present code of local government legislation the local authorities have no such power, but surely, since we are considering a Central Bank Bill, the banks might be authorised to rediscount bills from local authorities. Later, when we come to amend the law dealing with local government, it should not be difficult to provide in the new legislation a provision by which a local authority could, in fact, approach the banks to have bills discounted where those bills are required for the purpose of immediate or temporary financial accommodation. It is not an argument against the amendment to say that its passing would need an amendment of the local government code. I think the Minister could very usefully accept the amendment, leaving it to subsequent legislation to remedy the present disability from which local authorities suffer by reason of the fact that at present they have no authority to issue bills for rediscounting.

If there was any strong feeling that local authorities ought to have power to raise money in this way for specific purposes such as turf production, to which Deputy Mulcahy has referred, the local authorities might, in the past, have put that up to the Minister for Local Government, and, as Deputy Mulcahy has said, an emergency Order could, in present conditions, amend the law. That is entirely aside from the question of a central bank. The central bank is not intended to be interested in profits or to be primarily a profit-making institution, so that it would not necessarily be attracted because of the profit which might be in these bills to which Deputy Mulcahy referred.

They might be able to give this money at 1 per cent. if they could ignore the question of profit.

I suggest that it is not the type of work which the central bank would be set up for. We are supposed to be over-banked at present. There are plenty of banks in the country.

Plenty of banks and no money.

And plenty of money.

Plenty of money, but it is not available.

I did not say not available.

It has not been made available.

It has been made available, but the Deputy says it has been available at too great a cost. Certainly the money was available. All the money that was wanted was got from the banks. The question raised, I take it, was that it was got at too great a price. That is a question that can be taken up again with the banks. Strange to say, Deputy Mulcahy said 4 per cent. was paid on the overdrafts in all these cases. I happened to examine that figure and not one of the local authorities made a protest to me about it.

They were stunned.

No one made a protest to me about it.

At what stage could they have made a protest?

Any time—even now.

Then there would be no turf cut.

It is being made now.

It was not made by any local authority.

It has been made in the last couple of days.

Deputies have made it in the last couple of days.

The Minister knows well that the local authorities know that they cannot get it any cheaper.

They tried and from time to time I think they have got money cheaper.

Not cheaper than 4 per cent.

Not for turf. I suggest that it is not the type of activity the central bank ought to interest itself in.

The Minister said there was no protest from the local authorities?

Deputy Corish was continually protesting against the rates.

I should like to know what is the particular advantage of this method of financing which the Deputy sees.

I have in mind that we have as a result of getting loans from the banks created physical assets for the State. We want the central bank to discount bills so that we can go on with useful work.

That is not this proposition. What is the advantage in a bill of exchange as against an overdraft, from the financial point of view, for the local bodies?

The rate.

As to this rediscounting, first of all it has to be discounted by a bank.

Read paragraph (f). If this is put in, it will be carried back. It is fixing the rate at which rediscount will be given.

Fixing its own rate of rediscount. If it is a rediscount rate, it will have to be taken in relation to the primary discount rate.

We may get lost somewhere in the mechanism of this. The thing has not been sufficiently argued for one to come to the conclusion that this is a proper amendment. Quite clearly the amendment will be nugatory in the circumstances, because local authorities cannot issue bills of exchange. The answer made to that is that if this is thought to be a proper device, Deputy Hickey contends that local authorities could be given power to issue such bills. I do not think it is going to be very effective. There is no necessity for giving any big quotations in connection with this matter of rediscounting, but there is one phrase which stands out in the Banking Commission's report, viz., that a central bank does not intervene in order to finance, but to influence credit conditions. If this amendment were carried, it is something outside the ordinary practice.

In any event, I expect that what led to this amendment was the situation as it has been seen by those who are connected with local authorities. I do not think Deputy Hickey chose the best example when he talked of housing, because the loans which would be granted in connection with housing would not mature very rapidly. But take this matter of the turf. There is a situation where surely they should not be left without some resort against what happened. It was only a question of getting a little bit of a push to get the wheels going, and the whole thing was to be liquidated in a short time. It was as securely guaranteed as anything in connection with this State was guaranteed. Yet 4 per cent. was demanded. That they paid it without squeaming may be evidence that they were beaten down by the banks.

The Deputy does not know local authorities.

Possibly not. There is the old question of the collision between the irresistible and the immovable. The banks have been more or less immovable in regard to certain of these matters. It may be that the irresistible forces did not like to get their forces concentrated for this purpose. At any rate, there is something in the nature of a dilemma. Deputy Hickey took these two points of discounting and conditions of credit. Here is an obvious example where something should have been done, and where there ought to be some resort against a recurrence of what happened. The question is: what is it going to be? If this is not the proper method, what is the method to prevent what happened occurring again? In so far as we are going to tie ourselves to ordinary practice, bringing in a matter like this will be definitely a novelty. I do not think it is the proper way to go about it. But, generally speaking, one of the things that has caused a considerable amount of comment about credit has been this matter of financing turf development. The Minister said that we have many banks and we have any amount of money. Under these conditions the provision of credit should be cheap. It should be particularly cheap in regard to such a scheme as turf development. Yet these people were made pay 4 per cent. There ought to be some answer to that.

Would it not be natural that it would be taken up, as the Minister suggested, from the local government side? If it were necessary, or if it were agreed that there was an advantage in the power of drawing bills, then the matter might come under that and there might be an amendment to this Bill, rather than anticipating something that does not exist at present or which may not exist.

I should like to point out that the facilities given to local authorities for turf production were a striking case to prove that there is no competition between the banks in regard to the demands for the payment of an interest rate. These local authorities are not all dealing with the same bank, as the Minister knows well. Notwithstanding the fact that they are dealing with different banks, I daresay he knows that the real reason that the standard rate of 4 per cent. is demanded is because it is fixed by the standing committee of the joint stock banks. This has only been done after consultation with the Department of Local Government. I take it the Minister for Local Government has had to approve of the interest rate in every case before the local authority could proceed to use the money for turf development purposes. Is not that the position?

I do not think so. He has to approve of the overdraft.

The application for the overdraft must come before the Minister and receive his approval before the money becomes available?

If the Minister for Local Government authorised an overdraft from a certain bank at 4 per cent., and approval was given to the overdraft and the purpose for which it was to be used, was not that Governmental approval of 4 per cent. being charged for a temporary activity like turf production which liquidated itself once the turf was produced and sold?

Obviously, turf, particularly under present transport conditions, is not a commodity which can bear an interest charge of 4 per cent., and it is highly desirable to eliminate the interest charge if at all possible. It will not be possible to eliminate the interest charge by discounting and rediscounting the bills, but at all events there is some hope that, by enabling the central bank to rediscount bills for the local authorities, bills that might be created for the purpose of financing turf activities, you will be able to force down the charge of 4 per cent., and ultimately to get a new view on the accommodation which ought to be made available for local authorities engaged in temporary activities of that kind, particularly when the guarantee of the local authorities is a physical asset in the form of turf. Surely, with assets of that kind against a financial requirement of £1,000,000 over a large number of local authorities, there ought to be a much lesser rate than 4 per cent. This gives some hope that they will get a lesser rate than 4 per cent.

I do not think, with all the good-will in the world, that this is the way to get cheaper money for the useful activities of the local authorities.

Is it not a fact that the Minister told Deputy Mulcahy on a previous occasion that on Government short-term bills the interest rate was 2¾ per cent., that is bills discounted for a three-months' period?

It has been 2¾ per cent., and at times, I think, less.

And here is a five months' bill where the local authorities have to pay 4 per cent.

There were thousands of tons of turf cut early last year which have not yet been sold.

It was too good.

There were transport difficulties, as the Deputy is aware.

Amendment put.
The Committee divided: Tá, 13; Níl, 50.

  • Byrne, Alfred.
  • Byrne, Alfred (Junior).
  • Cogan, Patrick.
  • Corish, Richard.
  • Curran, Richard.
  • Davin, William.
  • Hickey, James.
  • Keating, John.
  • Keyes, Michael.
  • Linehan, Timothy.
  • Murphy, Timothy J.
  • Norton, William.
  • Pattison, James P.

Níl

  • Aiken, Frank.
  • Allen, Denis.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Carty, Frank.
  • Cooney, Eamonn.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • Rice, Brigid M.
  • Ryan, James.
  • Hogan, Daniel.
  • Humphreys, Francis.
  • Keane, John J.
  • Kelly, James P.
  • Killilea, Mark.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Lynch, James B.
  • McCann, John.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • MacEntee, Seán.
  • Meaney, Cornelius.
  • Moran, Michael.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mullen, Thomas.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Laurence J.
  • Ward, Conn.
Tellers:—Tá: Deputies Keyes and Hickey; Níl: Deputies Smith and S. Brady.
Amendment declared lost.

I move amendment No. 17:—

In line 51, page 5, to insert before the word "at" the words "or rates."

The purpose of the amendment is to allow the bank to publish different discount rates for the different classes of bills which may be rediscounted.

Amendment agreed to.

I move amendment No. 18:—

In paragraph (g), page 5, lines 56 and 57, to delete the words "and issued not less than two years before being bought by the bank."

Under the section as it stands, it shall be lawful for the bank to buy, hold or sell securities of or guaranteed by the State and issued not less than two years before being bought by the bank or securities of or guaranteed by the Government of any other country. I am seeking to delete the words: "and issued not less than two years before being bought by the bank." We have just been discussing the desirability of local authorities being able to get money for short-term purposes at a low rate of interest. The Minister did not seem to think that that would suit them, but we have had a position in which local authorities were paying as much as 4 per cent. for money for short-term purposes. We have been told by the Minister that, for short-term bank accommodation, he pays about 2¾ per cent. I think that it is wrong that rates of that kind should be paid for short-term loans. If the provision in this section regarding the two years be cut out, it will be possible for the Government, acting for itself or as guarantor of the position with regard to local authorities, to get short-term accommodation at a reasonable rate of interest. When we have regard to the Minister's statement, that the central bank does not want to make any profit, it ought to be possible to get that accommodation at a nominal rate of interest. If this amendment were accepted, the Government, in endeavouring to get interest rates generally in the country reduced to a reasonable figure, would have a weapon to use. They would not be interfering with the banks or compelling the banks to do anything, but they would be taking a definite line of action in financing themselves through the central bank, and that would have a powerful influence in getting the banks to come to a reasonable agreement as to the rates at which money would be lent to the State.

The Minister seemed to think that I was exaggerating the position with regard to borrowing in Great Britain. He said last night that 90 per cent. of the money that Great Britain was borrowing at present was costing 3 per cent. If the Minister meant the amount that had been borrowed for war purposes, then he was wrong. If he referred to that percentage of the national debt of Great Britain as costing 3 per cent., then he was also wrong. If the Minister refers to Hansard of 21st April last, he will find that war borrowing amounted to £5,687,000,000 and that only 37 per cent. of that was borrowed at 3 per cent. Including the National Savings Certificates, £452,000,000, £2,093,000,000, or 37 per cent. of the total amount, was borrowed at 3 per cent.

Has this matter any relation to the amendment?

I suggest that it is important that the Government should have machinery for getting short-term accommodation at a reasonable rate.

The amendment raises merely a question of time.

The section, as it stands, would prevent the central bank buying Government securities which were not two years old. By deleting the reference to time here, the central bank could buy Government securities fresh from the nest and, therefore, it would deal direct with the Government in buying those securities, and would not buy them off the market. It would eliminate the question of time and allow the Government to deal direct with the central bank for financial accommodation. I refer to rates because my whole purpose in suggesting that the law should read in this particular way is that the Government would be able to get short-term accommodation at much more reasonable terms than at present. It could use its power to sell long-term securities to the bank so as to influence the price at which they would sell the securities either to the banks or to the ordinary public.

I am referring to interest rates because it is all a matter of interest rates. The Minister stated last night that I was exaggerating or misrepresenting the position in Great Britain by taking all the rates at which they are getting money there. In connection with that, the Minister said that the British were paying 3 per cent. for at least 90 per cent. of their borrowing. On a borrowing of £5,687,000,000 between September, 1939, and the 31st March, 1942, 37 per cent., or a total of £2,093,000,000 was borrowed at 3 per cent.; £1,316,000,000 was borrowed at 2½ per cent. and a total of £2,336,000,000 was borrowed at 1? per cent. or less. So it is not correct that 90 per cent. of that borrowing is at 3 per cent. If the Minister refers to the whole of the national debt, he will find it set out on page 6 of the Financial Statement, 1942-43, issued in connection with the British Budget. If he takes the amount of the national debt that costs 2½ per cent., he will find that as much as 42.5 per cent. of the total British National Debt on the 31st March, 1942, is only costing 2½ per cent. Therefore, the 90 per cent. goes completely by the board.

I wish again to assert that this matter of rates of interest is one that all the wishing we can do will not affect, unless we equip ourselves with some kind of machinery. I suggest that a simple machinery—some of it need not be used—could be provided by amending sub-section (g), by taking out the two years' period and providing that, if necessary, the Government can borrow direct from the central bank or can guarantee loans from the central bank direct to local authorities.

Amendments Nos. 18 and 19 may be discussed together.

When I put down this amendment, I did not think it was also being tabled by such a clear-sighted supporter as Deputy Mulcahy. I found that there was no definite power in the Bill to enable the central bank to reduce the rates of interest below what the banks were prepared to charge, or to expand credit beyond the extent to which banks were prepared to expand it. It seemed that the deletion of these words, delaying the power of the bank to acquire and hold State securities, would give the central bank real power to compete with the joint stock banks, if necessary, in the matter of securing credit for the people and for national development.

Some time ago I put down a motion, which has been on the Order Paper for some months, asking that credit be made available for the development of agriculture, and that the Government should promote legislation taking power to issue for the benefit of the people money and credit on the security of the State. This particular section of the Bill, as it is proposed to amend it, will meet that demand. It will enable the central bank to provide money required by the State to finance agriculture and national development. Deputy Mulcahy has referred to the fact that the power of the central bank to acquire Government securities will enable the rates of interest to be reduced. If you want to reduce the price of any commodity in a shop, one way to do it is to go to some other rival business house and get the goods there at a cheaper rate. As the banks are one combined bank, it is not possible at the moment for the State to go to any rival institution for reduced rates or for credit. If the central bank is given power to complete with the banks, the Government will have a real means to force privately-owned financial institutions here to expand credit where it is necessary and to reduce the rates of interest.

The sub-section, as it now stands, proposes to give the bank power to buy any foreign security— British, German or Japanese—issued yesterday; but, for some reason I do not understand, it will not allow the banks to purchase Irish securities unless they are two years old. In replying, will the Minister please explain that?

That is the special point on which I wished the Minister to give us some information. The framework of this section is that it shall be lawful for the bank to do certain things. It is not that it shall be compulsory. As far as any other State in the world is concerned—even the smallest or worst paying one, even one that may be most objectionable and that may have been held up as a most odious comparison—there is no time limit, but, when it comes to this State, it has to be not less than two years, or, in the amendment by the Minister, not less than one year. That sub-section (6) is to be read with the next. Again, the bank is enabled—it is not made compulsory—to make loans to banks or other credit institutions on the security of such securities as the bank may be empowered to buy. The central bank in this country can make loans or advances on foot of Government guaranteed securities of any other State without time limit and the only one singled out for this time limit is our own. There seems to be a peculiar distinction in that. I do not say that it is done through any disregard of nationalism, but I think it requires explanation. Where the question of saleability arises, we assert here that we make an exception only in regard to our own country. It is left open to the bank to buy the securities of any other country, but only in regard to this country is a time limit required. I think there should be some explanation.

There is no Deputy who, I think, is prepared to see the point that is at issue or, I imagine, who sees it already, as much as Deputy McGilligan. One of the earliest remarks he made was on the question of making available for Governments a facile way for financing themselves, and he emphasised the danger. The central bank is not likely to be under any type of pressure from an outside State to take its bills. I cannot imagine an outside State exercising any pressure on the board of the bank to induce it to accept bills, to rediscount them. No pressure of any kind is likely to be exercised. It is quite different when you are presenting a bill from your own side. The assumption is that there might be possible pressure of an undesirable type to compel the central bank to provide this money in an easy way, in a way that might not make for the best interests of the community. It is all tied up with the question whether the central bank shall provide money directly for the Government—when the Government wants money, can it go directly to its own central bank and either directly get its own bills discounted or indirectly get them discounted through one of the commercial banks. The aim is to prevent that happening, as I understand the position. If it were permitted to happen, the dangers have been pointed out by the Deputy already.

I should like to say, in reply to Deputy Mulcahy, that I did exaggerate last night in saying 90 per cent. I should have said 75 per cent.

Will the Minister supply us with some figures bearing on the 75 per cent.?

I do not want to contest the Deputy's figures. I have had this matter investigated, and I got some figures. They are not exactly comparable to the Deputy's figures, but these are questions of fact.

I shall be obliged if the Minister will send me a copy of his figures.

I will give the figures to the Deputy now. The Deputy quoted the total national debt of Britain. I did not ask for those figures: I talked of the war period and I got the information that in 1941 the British Government borrowed £4,171,000,000. The total unfunded debt in 1942 comes to £6,237,000,000. These figures are taken from a statistical summary issued by the Bank of England in March last. About 25 per cent. was obtained from Treasury bills and bank deposits. As the Deputy mentioned last night, there are very low rates of interest there, but the balance of 75 per cent. was obtained at 3 per cent. We can get down to the figures, and I will not contest any official figures published in this abstract, or anywhere else. There is in some detail an indication how that money was raised. Between 1941 and 1942 there was an increase from £88.6 millions to £666,000,000 of savings bonds sold at 3 per cent. National savings certificates increased between 1941 and 1942 from £603,000,000 to £831,000,000, and they cost the British Government more than 3 per cent—I think the amount was £3 3s. 5d.

Compound or simple interest?

Simple interest. The Deputy can look at the statistical abstract and get details of the amounts between 1941 and 1942. The calculation I got made showed that of the amount borrowed in 1941-42, 75 per cent. was at 3 per cent., and 25 per cent. at a lower rate.

All that money was for purely destructive purposes. It is regrettable that some of it could not be applied to useful, constructive work.

There is a fundamental dissimilarity between the financial situation here and the situation in Great Britain and also between the terms of borrowing. As I said last night, they are at war in Britain and the banks are under the control of the Government.

And labourers are working 52 hours a week.

The labourers are working whatever hours the Government ask them to work, and they get no holidays. The financial position is under the control of the Government.

I am more concerned with what we should do in this country.

In spite of the great increase in the banks' resources their advances have been contracting and they are, therefore, left with money to invest. But they have not the choice as to where to invest it. They are told where to invest it and there is that fundamental difference between this country and Britain. The market is not a free market. No other borrowers are allowed in. The Government will decide whether an overdraft will be allowed by any bank. Would Deputy Hickey like to see such complete control over finance here and over the liberty of the individual here? We might have to have that if there were a war situation here. God keep it away from us.

If men, women and children were starving, I would say yes. We must consider the men, women and children first.

I propose to reduce the time limit from two years to one year. If you remove the time limit altogether, you leave the door open to inflationary tendencies that might be made use of for possible Government financing. That is a power that Governments might be tempted to use.

It is a question of inflation or starvation, is it not?

I do not believe that there is starvation in this country. If the local authorities are doing their duty as I believe generally they are, I do not think they would allow starvation.

The Minister is misinformed.

I do not believe there is starvation in this country. I hope no local authority in any part of this country would stand for that. They have all the powers necessary.

The discussion is going beyond the amendment.

What is the cause of emigration?

I must bring back the House to the amendments. Amendments Nos. 18 and 19 are being discussed together.

When the Government buys securities under the limited power proposed to be given here, it is not intended that that power should be used to finance the Government but primarily to influence credit conditions, primarily to see to it that credit would be made available. I hope the bank would be able to influence conditions so that credit would be made available at reasonable rates. We have not yet come to the position that we have failed to get money from the banks here for Government purposes whenever the Government asked for it. We have had to pay for it. We will always have to pay for it. Even if the central bank were established with the complete powers that I think Deputy Hickey would like it to have, you would have to pay something for it.

Something, that is right.

But any Government here has never arrived at the position that they failed to get money for essential State purposes.

The Minister is not convincing me that that is so. A price has had to be paid that should never have been paid for it. I know the conditions throughout the country and in the cities because of the shortage of money. I know men and women are hungry because of the shortage of money.

Not necessarily because of the shortage of money.

There is no use in having any pretence about it.

If the central bank had all the powers the Deputy would like to see it have, there would still be unemployment, in my opinion.

What is wrong is that you have not the control to do the things you want to do.

Take the United States of America. Had not the Government of the United States of America as complete control as any Government could want?

Had they?

Do not say that.

They had complete emergency powers when President Roosevelt took over control.

I am not convinced.

They had complete powers in the emergency, and they spent—I cannot give the figure— but millions and thousands of millions of dollars, trying to end unemployment, and they did not succeed.

Until President Roosevelt gets the power that we are anxious to have in this Bill, there will be bread queues in New York.

President Roosevelt took all the power he believed he required, and he did not succeed.

Did he use them?

If he did, he would not have the bread lines in New York and elsewhere.

That is one example. Others could be quoted. It is not entirely a question of money. There are other forces that operate, and until you have control of all these forces—which you cannot have—you will not have the heaven on earth that Deputy Hickey would wish to see here.

I do not want any heaven on earth. I want the Kingdom of God on earth, if we could have it. We should have it.

The central bank alone and power over money alone will not achieve that for the Deputy.

Will it help?

I am sure the Minister did not mean it, but he said there had been spent in America thousands of billions of dollars. Billions yes, but thousands of billions, no. A billion dollars in America is a thousand millions. However, that is a small point. What puzzles me about the Government attitude on this sub-section is that there is implied in the statements that they make that they can persuade the associated banks to take up loans that are floated by the State; but, when it comes to the question of a central bank, they say, "No". That is a distinction about which I think the House is entitled to some explanation. After all, what there is in the associated banks at the present moment is the savings of the people, the individual savings of individuals, and the accumulated savings of all those individuals.

I would like to know by what principle or by what new dispensation of thought we are taking the line that the State's property as such in that respect is entitled to better consideration than the savings of the pounds, shillings and pence of the people? As Deputy McGilligan has pointed out, this section says: "It shall be lawful." Is it lawful at the present moment for the Government to approach and to persuade the ordinary associated banks to take up either a percentage or the whole of any loan that may be floated?

If they have that power and if that power is exercised at any time or if it is open to be exercised, why is there this particular reticence in giving the central bank power to do that? It is said, of course, that it may be open to abuse. Presumably, it is implied in that that power has been abused in other countries. I quite agree but, while we have the other situation, that you can go to the custodians of the people's pounds, shillings and pence and, using all the persuasions, political or governmental, get them to subscribe to a loan, it has not been explained why we are so particular about the resources of the central bank in that respect. The Minister had down originally that the central bank is not entitled to take up any securities until they had been issued for a period of two years. Presumably, the intention there was that we should at least plumb the depths of the financial resources of the country in the first instance and then, if necessary, draw in those securities so as to make money available for a possible tightening of credits. Now it is proposed to cut down that period from two years to one. It would not be unlawful as matters stand, under the new dispensation, for the Government to assemble the banks and to ask them to underwrite a loan of, let us say, £10,000,000 and say to the banks: "After 12 months have elapsed, it will be lawful for the central bank to take up £5,000,000 of this loan, in fact to take up more of it than £5,000,000." On the basis of that undertaking or bargain, is there any additional strength lent to this section by saying that it is not lawful for you to allow the central bank to take up a loan in the first instance? These are matters on which I think the Ministry should give the House some further information.

With regard to the first point, I do not know what the Deputy is driving at at all. The difference between the central banks and the commercial banks is quite clear and definite. The Minister does not appoint the board of directors in the case of other banks and he has not the same means of influencing these banks directly or indirectly, as in the case of the central bank. The other banks are private and separate institutions. If the Government goes to them and asks them to underwrite a loan, to advance money, it is going to deal with them as independent bodies. If, on the other hand, it were to go to the central bank which is a State institution and not a private institution, the suggestion would be—and it has been proved to be a fact in other places—that undue pressure would be brought to bear on the directors which would cause them to put aside their own judgement as to what was right and proper from the point of view of the bank. The result, it would be said, would be that there would be occasions on which the central bank might be pressed beyond a point which is right and proper to advance moneys in a manner in which they would not advance such moneys if the bank were a private institution. That is the difference between a private and a public institution, the difference between a board which is completely independent of the Government and a board which has at least this dependence on the State; that it has been appointed by the Minister and that its members will ultimately have to be reappointed by State authority.

The Deputy also makes the point that there is not much difference between two years and one so far as dealing in securities is concerned or indeed that there is any necessity for having a period of a year at all because you might as well do the thing now as to arrange for its being done in a year's time. That is that you give notice, you go along to the banks and tell them that the Government wants money. The central bank will say to the private bank that the Government want this money. The private banks demur and do not like it, but the central bank says to them that it will be all right, that they can advance the money, and that the central bank will rediscount it in a year's time. There is no doubt that some process of that kind might be attempted, but I do not think that the banks would be so happy about it if they thought that the central bank was to a considerable extent dependent on the Government and that it might be compelled to do what the Minister wanted. They might feel that the central bank might not be able in advance to give any guarantee that this would be done. I see Deputy O'Sullivan shake his head about the apparent contradiction between the power of influencing in one direction and the power of influencing in another, but it is not so contradictory as it might appear on the surface because in one case there is the question of direct influence where there would be no third party concerned at all. In the other case you have to convince a third party that the influence might be exerted.

I do confess that to a certain extent I am affected by the argument which the Deputy put forward; it is a thing that occurred to myself in this connection. Is there a way out of it or is there any point at all in putting a time limit seeing that you might get round it? I do think there is a barrier, and the barrier really consists in the difficulty of getting the commercial banks to believe that the central bank authorities would be so subservient to the will of the Government that the Government could promise them in advance that in a year's time, if a bill were issued to finance the Government, it would be in fact rediscounted. I do not think the Government could make any such promise, and, therefore, I think that is an additional barrier. It may be said that it is not an effective barrier, but again you have the question of the extent to which the governing body of the bank is independent of Government influence.

Does the Taoiseach suggest that the period should be reduced from two years to one?

I have just suggested that one appears to be sufficient because of our yearly system of finance. There will always be a complete financial year between the original discounting of a loan and the rediscounting.

Having listened to the Taoiseach I am in a difficulty not merely as to the amendment but as to the position of the nine directors of the bank. I understood from all of the debate to which I have listened that one strong point the Taoiseach made was that once these men were appointed they were independent of Government control.

So they are.

Having listened to the Taoiseach, I find that according to one portion of his argument they are still to be quite as independent as judges. I thought that was the aim all through in the Bill but, in the next moment in the course of his argument, the Taoiseach suggested that they might be open to persuasion or influence—I do not know exactly what term he used—but they are certainly not independent.

I said that it would be suggested they were not.

I understood that much of the argument of the past few days was addressed to the point of whether they were independent of the Government or not and the Taoiseach took up the stand very definitely that they must be independent of the Government.

We got from him the view that their appointment depends on the Government but that, once appointed, they would act on their own judgment, independently of the Government, just like a judge. I gathered now, however, in order to refute the arguments of Deputy Cosgrave that they are amenable to Government pressure.

I did not say they would be but there is always the danger that that would be suggested.

I do not know what is the ground for this idea that is in the Taoiseach's mind, because I think it is a rather serious matter. He states that these men are appointed for five years and, consequently, knowing that they hold office only for five years, they will be amenable to Government pressure in a way that outsiders might not approve of. If that idea is in the Government's mind, I think it is highly objectionable.

I think these two amendments are equally obnoxious. I invite the House to look a little further down the Order Paper, to look at amendment No. 21. With great deference to my friend and colleague Deputy Cogan, that, in my opinion, is where the "dafties" start to function—in amendment No. 21.

We are not now discussing amendment No. 21.

But you are being led by the nose down to amendment No. 21, because the first proposal, as enshrined in Deputy Mulcahy's amendment, is that Government issues can be immediately acquired by the central bank. Amendment No. 21 proposes that, for the purpose of acquiring them, the central bank can print paper. Here is the evil I have been inveighing against since the debate started, and it arises out of a complete misunderstanding of the whole situation. Here is a responsible Deputy, meaning nothing but the best for the country, who wants to establish a Catholic printing press in the centre of it. That is what I want to warn the House against. There is all the difference in the world between prudent credit reform and setting up a printing press. We all know there is a certain section of our community fascinated by the experiments embarked upon in New Zealand. They started by suggesting that the Government should go to the central bank and get loans which were to be redeemed after a short period, and that these loans were to be financed by notes printed by the central bank.

The Deputy is making another Second Reading speech.

With all respect, I am not. Here is a proposal backed up by the Government that the central bank should be allowed to acquire hot Government securities. Let us strip this of verbiage. If the Government is going to print money, they might as well print the money and not go through the operation of printing the securities and giving them to the central bank and getting the central bank to print money. If we are going to print money, let us print it and have done with it. Let us get the printing press in here on the floor and every time there is a deficit one of us can go down and turn the handle, and that is the end of our troubles. If we have to set our faces against it, then let us take the necessary precautions to ensure that it will not happen. If we are going to print money let us print it with chins up and chests out, knowing where we are going, but let us not attempt to do it by some devious back-door method. The first step to printing money is to enable the central bank to buy hot Government securities. The next step is to tell the central bank that they can print money wherewith to purchase securities. I admit that the Government amendment does not go the whole hog but it is the first step on the road to the pigsty and inside that pigsty is the whole hog.

Amendment No. 21 is not a Government proposal.

The proposal to permit the central bank to buy red hot Government securities is the first step to the pigsty, inside which is the whole hog "raring" to come out.

There is nothing in amendments Nos. 18 or 19 relating to issue of bank notes.

It is the first step.

How long would the Deputy allow them to cool?

About five years. Deputy O'Sullivan showed up at once the obvious contradiction in the Taoiseach's tight-rope walking. Of course there is the danger to which the Taoiseach referred that pressure would be brought to bear on the central bank after 12 months had elapsed to take over from the joint stock banks Government securities on which they issued money. In fact, pressure might be brought to bear on the central bank to fund the loan created by Government Treasury bills held by the joint stock banks. I think, Deputy O'Sullivan notwithstanding, that there is great force in what the Taoiseach says. What is the use of our pretending with our experience of the last ten years that if men are appointed to public boards they had then become absolutely independent individuals, immune from Government pressure? That is the utmost nonsense. The Government nominees on the central bank will be subject to Government pressure and will be not only subject but will be subjected to Government pressure as certain as we are sitting here. The more obstacles we can put up between the printing of money by the Government and ourselves the better it will be for all, including the Government of the day, whoever that might be. There is no half-way house between Rome and Babylon. Let us put the printing press on the floor.

Would the Deputy please say in what section the printing press is mentioned or inferred?

I am discussing amendments Nos. 18 and 19 and nothing else.

And amendment No. 21.

No. I am warning you of what is coming after amendments Nos. 18 and 19 and I gather that a great many Deputies do not see it. I am going to keep on talking until they do see it.

The Chair desires to know to what section the Deputy refers.

Amendments Nos. 18 and 19. That is the handle. I agree with the Chair that until the wheel and the body are fixed it is hard to recognise. I am trying to put on the handle and to paint the background to make it manifest what is involved.

The Deputy seems to be getting away from the amendments.

I assure the Chair I am not.

If amendments Nos. 18 and 19 are carried and if these amendments or either of them are embedded in Section 7 as it stands, if Deputy Dillon reads paragraph (h) he will see that power is given to the central bank to do what the Deputy is protesting against. It may make advances on such securities as the bank is empowered to buy. If they are entitled to buy what the Deputy calls hot Government securities, they can advance against them, and that is what he is inveighing against. I suggest that he should read paragraph (h).

There is some foundation in that submission.

Is not that the reason I am arguing against giving this bank power to buy these hot Government securities? I urge the Government most strongly to withdraw their amendment. I think Deputy McGilligan's intervention lends point to the case I was making. If you give this bank the power mentioned in paragraph (h) of the section to make loans or advances to other banks or credit institutions on what I describe as hot Government securities——

On the securities on which the banks heretofore advanced.

Either on the Government amendment or Deputy Mulcahy's amendment, you are taking the first step to the printing press. I beg the Government to take up a sound radical line on credit reform so that it can resist the clamour of the printing press.

The Deputy suggested a printing press in another form. That is contrary to what the Deputy maintained previously.

Glory be to God; have I to start all over again? Evidently the Chair, with all respect, is the only person that I seem to be able to educate. I could expound this for a considerable time. However, we may have another chance. I have been trying to teach this for three days. Does the Taoiseach agree with me that the proposal to shorten the period during which Government securities are eligible for purchase by the central bank is a step towards the printing press? If he does, will he withdraw the Government amendment, resist Deputy Mulcahy's amendment, and consider on the Report Stage substituting five for one? Will he agree with me that at least that course would be a better and more enduring obstacle to the next stage envisaged in Deputy Cogan's amendment No. 21?

The Deputy is very interested in putting up obstacles, but I do not see why he was not so interested in putting up obstacles in the other direction which he himself advocated.

What other direction?

Deputy Dillon has spoken of the Taoiseach being contradictory in his attitude to the Bill, but I think that there is nothing more contradictory than the attitude of the Deputy to the Bill. For four or five days, he has been advocating an increase of credit by some process of compelling the associated banks to issue more credit in proportion to their assets. That would have exactly the same dangers as those which he foresees in this amendment. He has spoken of the dangers and other Deputies have talked of them also, but nobody ever seems to recognise the dangers which lie in permitting a small monopoly to have the extensive power they at present hold. Deputy Dillon on many occasions has been eloquent in denouncing monopolies. He has even urged that the milling industry should be completely nationalised. If you cannot trust the poor miller to convert wheat into flour, without robbing either the consumer or the producer of the wheat, I do not see how you can trust a small monopoly with the power of creating money out of paper and ink, which power, as everyone acknowledges, the banks have. I think, therefore, that this amendment is quite reasonable. It simply asks that the central bank shall have this right to secure credit at more reasonable rates of interest than the banks are prepared to afford. Deputy Mulcahy has made a very strong case in support of this amendment in connection with the rates of interest charged for turf production.

In order to save amendment No. 19, I am putting the question: That the words "not less than" stand part.

I object. I want a separate division on each of these amendments. I object to being constrained to vote for amendment No. 19 by implication if I vote against amendment No. 18.

The Deputy has not understood the Chair. In order to save amendment No. 19, the Chair is putting the question that the words "not less than" stand, omitting "two years", so that a question may be put on amendment No. 19.

I am much obliged, Sir.

Question put: "That the words ‘not less than' stand part."
The Committee divided: Tá, 54; Níl, 32.

  • Aiken, Frank.
  • Allen, Denis.
  • Bartley, Gerald.
  • Beegan, Patrick.
  • Boland, Gerald.
  • Bourke, Dan.
  • Brady, Brian.
  • Brady, Seán.
  • Breathnach, Cormac.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Carty, Frank.
  • Childers, Erskine H.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Hughes, James.
  • Humphreys, Francis.
  • Keane, John J.
  • Kelly, James P.
  • Kennedy, Michael J.
  • Killilea, Mark.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Lynch, James B.
  • McCann, John.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • Meaney, Cornelius.
  • Moran, Michael.
  • Morrissey, Michael.
  • Moylan, Seán.
  • Mullen, Thomas.
  • O Briain, Donnchadh.
  • O Ceallaigh, Seán T.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • Rice, Brigid M.
  • Ryan, James.
  • Ryan, Martin.
  • Ryan, Robert.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Walsh, Laurence J.
  • Walsh, Richard.
  • Ward, Conn.

Níl

  • Bennett, George C.
  • Brennan, Michael.
  • Brodrick, Seán.
  • Browne, Patrick.
  • Cogan, Patrick.
  • Corish, Richard.
  • Costello, John A.
  • Davin, William.
  • Doyle, Peadar S.
  • Giles, Patrick.
  • Hickey, James.
  • Keating, John.
  • Keyes, Michael.
  • Linehan, Timothy.
  • Lynch, Finian.
  • MacEoin, Seán.
  • McFadden, Michael Og.
  • McGilligan, Patrick.
  • McGovern, Patrick.
  • McMenamin, Daniel.
  • Mulcahy, Richard.
  • Murphy, Timothy J.
  • Nally, Martin.
  • Norton, William.
  • O'Donovan, Timothy J.
  • O'Higgins, Thomas F.
  • Pattison, James P.
  • Redmond, Bridget M.
  • Reidy, James.
  • Reynolds, Mary.
  • Rogers, Patrick J.
  • Ryan, Jeremiah.
Tellers:—Tá: Deputies Smith and Seán Brady; Níl, Deputies Doyle and Cogan.
Question declared carried.

I move amendment No. 19:—

In paragraph (g), line 56, page 5, to delete the words "two years" and substitute the words "one year".

Question put and declared carried.

I wish to be recorded as dissenting.

On behalf of Deputy Cosgrave, I beg to move amendment No. 20:—

Before paragraph (k), page 6, to insert two new paragraphs as follows:—

to inaugurate and equip a research department to study economic and financial data and to publish the results of such investigation;

to establish and maintain either directly or indirectly contact with the monetary authorities established in other countries.

I wonder whether the Minister has any objection to accepting this amendment, because, first of all, I saw with a great deal of amusement the ready acceptance on the part of the Taoiseach of a suggestion by Deputy Mulcahy that research was one of the principal objects that he had in mind in setting up this central bank, and he almost took a kind of fatherly interest in the suggestion as one that might come under the description of the higher learning. However, something more serious than that is meant by this amendment. I have listened here for a number of days now to the debates on this Bill—very patiently, I must say—and I have heard many views expressed, and have been trying to make up my mind about many things, recognising that I am quite as ignorant on this matter as even the Minister himself professes to be, and I think that if there were some method of having these things investigated independently by such a body as this, it would be most useful to the Government. Again and again, I think, the Taoiseach has indicated that one of the functions of this body, certainly, would be to investigate and advise.

I think I am correct in saying that that is the attitude taken up by the Taoiseach. Now, anybody who has been listening to the debates here, on this extremely important matter, will have noticed the extraordinarily different views and different currents of opinion that there are on the matter, and the fact that the Government Party appear to be as unanimous as they are on such a complicated measure would suggest that it was the machine rather than the brains of the Party that was brought to bear on the matter. I gather from the smile of the Tánaiste that that is precisely what happened because, as I say, otherwise it is hard to understand such unanimity on such a complicated matter, a matter which it is extremely difficult for even the most informed person to follow.

Now, I see the danger, on the one hand, of too great power being given to the central bank and, therefore, I have a great deal of sympathy with much of the attitude of the Government. On the other hand, I am somewhat afraid that in allowing that to influence us, we may not be able to make advances of the kind required in present circumstances, because I do recognise that, in this matter at all events, great changes are taking place, and though I fully sympathise with the attitude as to the danger involved in giving our people, who, if I may say so without any offence, have not any real experience of money matters, and in view of the appeal that might be made to many sections of the community by the easy creation of money—and I share fully the uneasiness of the Government in that respect—I also recognise that there is the danger that we may lag behind in the changing circumstances of the world so far as credit and money are concerned. I do not think we can either safely open the way to too easy credit on the one hand, or safely lag behind the world on the other hand. I am between that Scylla and Charybdis, and find it extremely difficult to choose.

In these circumstances, I think it would be advisable if the Government were to give an indication or direction to the central bank to keep these things in mind because, otherwise, we may find ourselves very much in the back-wash, and I think that that is the view that has influenced a number of people in this debate. I recognise the danger on the one hand, but there are dangers on both sides, and I am sure the Minister will have very little difficulty in accepting this amendment.

I share, to a considerable extent, the views put forward by Deputy O'Sullivan, but I am quite satisfied that a research bureau will be set up and that it is not necessary to give any direction. A research bureau, certainly on financial matters, will be set up, and aside from that, I hope there will develop close co-operation between the board of the central bank and the Government of the day, that the Government will consult the bank in financial matters and that it will have at its disposal all the financial data and information that the Government could require. I am satisfied that a research department to study financial data will be set up. With regard to the second part of the amendment —

"to establish and maintain either directly or indirectly contact with the monetary authorities established in other countries"—

that is already in operation under the Currency Commission. It maintains direct contact with monetary authorities, bodies similar to itself, and central banks in all places where it is likely to get information of value. I am satisfied that if the bank finds it necessary further to develop that contact with monetary authorities in other countries it will do so. If I thought there was any doubt about the setting up of a research department of that kind, I certainly would consider accepting the amendment, but I have no doubt that it will be done.

On this Bill, we have had several instances where the Government undertake to give a general direction to the bank. In regard to some of the matters, a large number of Deputies think the bank will have no power to act on the suggestions made. Here, in regard to one im portant purpose of the Bill, a suggestion is being made by the Opposition. The Taoiseach invited suggestions. I was very nervous when he did invite suggestions from the Opposition, and said that they would get full consideration and, possibly, acceptance. I have never known the Taoiseach to accept any amendment put forward from this side, even, apparently, when he agrees with it. He has passed on that tradition to his second in command. If it is found desirable to issue an instruction of this kind formally to the bank on a thing that it can do, and on a thing that the Minister for Finance hopes it will do, surely it is better to put it in the Bill. It deserves a much better place in the Bill than some of the very vague things which many believe the bank cannot do. I am not surprised at this.

Surely it is absurd to refuse to accept the amendment. It is permissive in character, and unless the Minister wants to be cantankerous, or because it is that Deputy Cosgrave's name happens to be to the amendment, there can be no conceivable reason for rejecting it. What harm can it do to put it in?

The only argument against it is that the Minister agrees with it.

The amendment, as I have said, is permissive in character. It simply says that it shall be lawful for the bank to do the things set out.

The Bank of International Settlements acts as a kind of centre for information of all kinds relating to currency and financial matters. As Deputy Dillon must have noticed, we are taking power in the Bill for this new central bank to link up with the Bank of International Settlements.

But that may go up the spout in the morning.

If it does, then some other institution of a similar character will be set up in its place. It has done good work. It is provided in paragraph (d) of Section 7 that, among other things, it shall be lawful for the bank —

"with the consent of the Minister, to acquire, hold, or dispose of shares in any international bank formed wholly or mainly by banks which are the principal currency authority in their respective countries."

In regard to what Deputy O'Sullivan has said, I am not objecting to a bureau being set up. I am satisfied that it will be set up, and if I thought otherwise I would put this in the Bill.

I understood that was the Minister's view — that it would be set up — until he quoted the second portion of the amendment, in which he conclusively proved that there was no necessity to set it up.

That there was no necessity to put this in.

Because the Minister said all they had to do was to go to the Bank of International Settlements and ask it for information.

We will have our own bureau here, I hope.

Therefore, the reference to the Bank of International Settlements has got nothing to do with the amendment.

Either there is a bureau to be set up here or there is not.

Will the Deputy read the second part of his amendment:—

to establish and maintain either directly or indirectly contact with the monetary authorities established in other countries?

May I point out that the Minister's words were that the Bank of International Settlements had the information, and that the bank could go to it for the information?

The implication being that there is no necessity for an investigation here because the results are already available. That is in complete opposition to the line that the Minister took up at first.

The only reason I can see for the Minister's refusal to accept the amendment is that he agrees with it, and that it happens to be moved from this side of the House. The Minister agrees thoroughly with us and, therefore, will not put the amendment in.

Why will the Minister not accept the amendment?

Because I do not think it is necessary.

It will do no harm. The Taoiseach was getting lachrymose at an early stage in our discussion, telling us how he loved us all, how he wanted everybody to put forth their ideas, and saying that, unless there was some grave and valid objection, he would welcome them and put them into the Bill. Here is a proposal which commands the ready and cordial approval of the Government, and yet they will not put it into the Bill. For civility's sake, could not the Minister accept it?

One half of it is already in the Bill.

I would ask the Minister to accept the amendment for another reason, namely, that it will strengthen his hands. After all, Parliament as a whole has a responsibility and an interest in this particular matter. We ought, I think, make it a definite part of the law that it will be lawful for the central bank to establish contact with the monetary authorities in other countries and set up a research department to study economic and financial data and publish the results of such investigation.

If the amendment is inserted in the Bill, members of the public and members of the Oireachtas will be in a stronger position, in the first place, to see that it is set up, and in the second place to ask what is going on and require information on various aspects of things that will be communicated to the House. They will not be in that strong position if that is not set down definitely in the Act. The Minister has referred to the Bank of International Settlements. The type of study and research that we want here ought to have a bearing on our financial and economic situation.

That will not be got in Geneva. It cannot.

That is the point I was about to make, that we have to look at things much nearer home. It is, apparently, a fact that in monetary matters, over the last ten years, there has been a revolution struggling to be born. Its birth is being very greatly assisted by the position brought about by the war. If the ideas that have tried to make themselves effective during the last ten years are going to be applied in the future on the monetary side, and particularly on the social and economic side, then we are in a state of very definite revolution.

It is important that not only the Oireachtas but the public generally should be kept systematically and authoritatively advised on various things which are happening by the monetary authorities on these matters and that the facts of the situation, the tendencies, and the judgment of responsible bodies here should be brought definitely and systematically before the people, if public opinion is to be formed, if public stability of mind is to be arranged for, and if we are to face problems which will arise in future in a disciplined, effective and informed way. Therefore I ask the Minister to accept the amendment in order to strengthen the Oireachtas and, by strengthening the Oireachtas in the matter, give the members of the Oireachtas an interest in seeing that not only is this work solidly and effectively done, but that the results are made public.

I do not want to appear cantankerous or as merely refusing to accept an amendment, as Deputy Dillon said, because the name of the Leader of the Opposition is to it. I do not take that attitude at all. The name of the Leader of the Opposition to the amendment does, to my mind, add weight to the argument and to the amendment. Despite what people may think, I realise that the Leader of the Opposition has an important function here. I do not want to have it suggested that it is mere cussedness on my part. I am anxious to have a research board on financial matters. But I do not want to have a research board making a study of the economics of this country attached to the central bank which might be called upon in this House, for God only knows what kind of opinion and the Minister held up to criticism as a result of the information that that body might be asked to produce. I think if we set up a research board dealing with financial matters, and financial matters even in a very wide sense, that that should satisfy everyone. When I said to the House that I was satisfied that such a board would be set up, I thought that ought to satisfy the Leader of the Opposition and his friends on the opposite side. If it does not, I am prepared to accept the amendment in principle. As I say, I have doubts in my mind; I do not think it is wise to put it into the Bill that they should study all matters relating to the economics of this country. However, I will look into it again and I accept it in principle.

I referred to the Bank of International Settlements because we are asked in the same amendment to establish and maintain, either directly or indirectly, contact with the monetary authorities established in other countries. I am told that the Currency Commission has already established that contact directly and indirectly with all the monetary authorities which are likely to have information at their disposal of value to the commission, and that will be carried on, developed and widened, I hope, in scope, if necessary and, if possible, by the board of the central bank.

Will the Minister bring in an amendment?

Yes. I want to refer to one other matter, referred to by Deputy O'Sullivan, as to speakers on this side of the House. It is quite true that this subject raises extraordinary differences of opinion everywhere. No two men see exactly alike in any aspect of it. The Government have been discussing this matter of a Central Bank Bill over a long period and at countless meetings have discussed the type of central bank we should have here. We have had to make up our minds. Unlike other Deputies not belonging to the Government Party, we have had to come down off the fence, take our decisions, make our stand, and pin ourselves to a Bill, and we have done that. Others can differ within their Party and do differ. It is obvious that there is a very grave difference of opinion in the main Opposition Party. Nobody can say that that is not reasonable. The Government took their decision. The Party discussed this Bill and took their decision, and they stand by the Government. It would not be correct to say that every member of the Government is satisfied that every section in this Bill is as he would like to have it. As Minister for Finance, I could not say that every section in it is as I would like to have it. It is the Bill of the Government. The Government decided to have this Bill. We have taken our decision and we will have to stand by it, and the Party have done the same. We cannot be taunted with not having taken a decision. We cannot be taunted with not having views on the matter. We have taken our decision and accepted our responsibilities, and we stand over them, and the Party abide by them and stand loyally, as Deputy O'Sullivan remarked, by the Government in the decision they came to to pass this Bill as it stands as their contribution to the solution of the problem.

Is amendment No. 20 being withdrawn?

On the understanding that the Minister will bring in some kind of amendment.

Amendment No. 20, by leave, withdrawn.
Amendment No. 21 not moved.

I move amendment No. 22:—

Before paragraph (k) to insert a new paragraph as follows:—

"discharge all the functions, powers and duties that are vested by law including this Act in each of the associated banks."

This amendment seeks to give the central bank power to discharge all the functions, powers and duties vested by law, including this Act, in each of the associated banks. As I understand it, the main function of the central bank is to afford leadership and direction to the associated banks. You cannot afford leadership or direction to others unless you have the knowledge and experience which they have. It is said: "He who by the plough would thrive, must himself either hold the reins or drive". A farmer employing a man on his farm would be unable to give proper direction to that man unless the farmer himself had some practical experience of agricultural work. Deputy Davin asked if it would be possible for him to make a deposit in this central bank, and the Minister replied that the central bank had no power to receive a deposit. Similarly, it has no power to make an advance, no matter how small, to the most solvent citizen of the country. Its powers, therefore, are extremely limited. Its power of coping with any organised opposition on the part of the associated banks would be extremely limited. The board of the central bank may say to the associated banks, as Deputy Dillon suggested: "You ought to expand credit to the extent of the 10 per cent. ratio" and they might make any other suggestion which they might think desirable; but the associated banks would reply: "This cannot be done, as it is not in accordance with banking practice," and as the board of the central bank will not be engaged in ordinary banking practice, they would have no power to assert their authority over the other banks. Of course there are many other aspects of this question, but I rely mainly on those I mentioned.

Even where central banks in different countries have transacted ordinary commercial business, in recent years they have done their best to get out of it, to drop ordinary commercial business, and to devote their time and abilities to directing the central bank for the purpose for which central banks in modern times have been set up.

The Bank of England is one example; there are others. If the central bank were to enter into competition with the commercial banks, it might get into the position of having its funds tied up, so that when a moment of crisis arrives it would be entirely unable to perform the duty which a central bank is normally set up to perform — to come to the assistance of the ordinary banking system, particularly in times of crisis. That is the main function of a central bank, and for that purpose it is necessary that it should keep its resources as liquid as possible. It cannot do that if it enters into competition with the commercial banks, and has to make profits and do the ordinary type of business that commercial banks do. Again, the central bank depends very largely for the success of its functions on the friendly co-operation of the ordinary commercial banks. If it is to be a competitor with them for ordinary business, it cannot get their co-operation, and its main function may fail. It ought to be essentially a bank kept there for the public good, not for private interest or private gain but for the public good, and for the safeguarding of the currency and credit of the State. If it is to do that job, it cannot usefully act as a commercial institution.

I have listened with interest to the Minister's remark that the function of the central bank is to be there in the interests of the public good. I am at a loss to understand why the people of this country can deposit their savings in the Post Office Savings Bank, but cannot do that in regard to the central bank.

First of all, the Deputy understands that there is a limit to the amount that the Post Office Savings Bank can take at present.

I understood that that limit had been removed.

If that is so, that is also to the benefit of the commercial banks?

The commercial banks can take any amount.

If there is a limit on the amount which can be put into the Post Office Savings Bank, that is to the interests of the commercial banks?

Not necessarily.

If the people of the nation have money to deposit, I think the natural thing for them to do is to put it into the central bank set up by the State, rather than into the commercial banks.

There will be one office in the capital, and no branches anywhere in the country.

The central bank has not the right to take deposits, and it has not the right or the power to control the rate or volume of credit.

That is another question.

It has not any of the functions asked for here; hence the weakness of the Bill.

As far as the point raised by the Minister is concerned, that the discharge of those functions would create rivalry between the central banks and the associated banks, I do not think there is any intention in that respect, because it is not my suggestion, at any rate, that the central bank should engage in extensive competition with the associated banks, but it should have the power to engage in the ordinary functions of banking in order to study banking practice and gain practical experience.

Am I to understand that any individual citizen cannot put money into the Post Office Savings Bank in excess of a certain amount?

Amendment put and declared lost.
Question put: "That Section 7, as amended, stand part of the Bill."

I should like to ask a question, although there may be nothing in the point. The Government amendment, No. 15, was to delete the word "ninety" and substitute the words "one hundred and twenty". We often hear those referred to as three and four months' bills; those would be 93 and 124 days. Is there anything in that point, because you have also nine months?

There are always days of grace. We will make it the same as the three or four months.

I indicated on Section 6 the ways in which, to my mind, it appeared that credit could be expanded in the country, subject to anything that might be added under Section 7, and, on Section 7, I should like to say that, having heard the discussion here, I do not see that credit can be expanded in this country with the powers we have up to the present except on the initiative of one of the commercial banks making an advance, or on the results of something being sold from this country abroad, or any other transaction that would bring money into the country, in the same way as a farmer, having sold some cattle in the British market, would get a cheque on the British bank, which, passing through the banking machinery here, would become deposits for him or credit for him in our banking system here. If there are any other ways by which credit can be expanded in this country, under the powers we have, including Section 7, I should be grateful to hear of them.

Question put and agreed to.
SECTION 8.

I move amendment No. 23:—

In sub-section (2), page 6, line 22. to add at the end of the sub-section the words "and the central fund shall receive thereon an annual dividend at a rate not greater than 1 per cent.".

The section proposes that the capital which has already been paid into the Currency Commission by the shareholding banks to the extent of £24,000 will be refunded to them, and that capital ultimately to the extent of £40,000 will be made available by the State for the bank. I should like to ask, first, what is the necessity for this bank having any capital at all? If the idea of the bank having capital is in any way a necessary idea, what is the necessity for that idea? In the second place, why should it require more than a pound, and particularly why should it require £40,000? To my mind, £40,000 is unnecessarily being put into the bank to form capital for the bank, and therefore I do not think that £40,000 should earn, say, the dividend which was earned in the past by the capital subscribed by the shareholding banks. I understand that in the past the shareholding banks, on their paid-up capital of £24,000, earned a dividend of 5 per cent. per annum. It suggests itself to me that it is the intention that this £40,000, being paid in as capital to the central bank, will earn a dividend of, say, 5 per cent. I suggest that the figure for capital is not necessary there at all. If the Minister insists on putting it there, then it ought not to earn more than a nominal dividend.

The £40,000 was put in to pay back the banks.

But £24,000 will pay back the banks.

Twenty-four thousand pounds was the total amount they subscribed. This sum was put in partly to pay back the banks. I do not know that the amendment of the Deputy would achieve anything. After providing for depreciation and putting aside the amounts necessary for reserves, all the surplus funds of the bank may go into the Exchequer.

The Minister has the same difficulty with regard to me that I have with regard to him. I do not see the purpose of placing a sum there as capital.

That was one way of getting the money to pay back the banks.

When the central bank takes over the Currency Commission, they will take over considerable assets. What is the extent of those assets?

The annual report which, I think, the Deputy has sets out those fully.

In which of these accounts is money available from which that sum of £24,000 might be paid without getting in additional money? According to the balance sheet for the period ending 31st March, 1941, there is a general reserve of £305,817 and a surplus income account of £263,294. These two items will fall into the hands of the central bank and out of them the £24,000 capital might easily be paid.

The other method is the more regular way — raising that sum as capital and paying back our capital indebtedness, leaving a small margin of capital for expansion.

Then, this was done in a routine kind of way.

It was definitely done for the purpose of meeting that capital liability.

The old, traditional way of doing it.

You have to pay your capital debts.

The old traditional way.

I hope the old tradition of paying one's debts will remain.

I hope the fiction of money will soon be exploded.

I do not know what the Minister means by saying that this provision is necessary for the payment of debts or what Deputy Hickey means by the "fiction of money". In the general reserve and in what is called the surplus-income account, there are sums of £305,000 and £263,000 respectively. I take it that these sums will pass into the possession of the central bank. I see no reason why the shareholding banks should not be paid their £24,000 out of these sums or why it is necessary to transfer an additional £16,000 as capital—a sort of ornamental foundation stone for the bank. The Minister provides that £40,000 shall be the capital of the bank and he puts a little bit of gold inscription on that foundation stone by saying that, annually, a sum of 5 per cent. on that is to be paid over to the Exchequer.

No dividend will be paid on that money. After provision for reserves and other liabilities, the surplus funds of the bank will, probably, go into the Exchequer.

So that my amendment is not necessary?

The idea of the £40,000 capital is just a bit of ornamentation?

It is to ensure continuity of accountancy.

A foundation stone with a little gilt.

Amendment, by leave, withdrawn.
Sections 9 to 12 agreed to.
Amendment No. 24 not moved.
Sections 13 and 14 agreed to.
SECTION 15.

On behalf of Deputy Norton, I move amendment No. 25:—

Before Section 15, but in Part II, to insert a new section as follows:—

Section 3 of the Currency (Amendment) Act, 1930 (No. 30 of 1930), is hereby amended in the following respect, that is to say:

(a) by the deletion in sub-section (1) of the words "the Commission shall unanimously request the Minister" and the insertion therein of the words "the Minister shall decide",

(b) by the deletion in sub-section (1) of the words "in accordance with such request", and the words "specified in such request",

(c) by the deletion in sub-section (2) of the words "upon the unanimous request of the Commission" and the words "in accordance with such request", and

(d) by the deletion of sub-section (3),

and the said Section 3 shall be construed and have effect accordingly."

Amendments Nos. 65 and 67 may be discussed with this amendment. Amendment No. 46 is covered by amendment No. 25. If Deputy Mulcahy wishes, it could be brought up on Report Stage.

I propose to meet this amendment to some extent by providing that, instead of a unanimous vote, a vote of six members — that is to say, two-thirds of the board — should suffice for the purpose of taking action under Section 3 of the 1930 Act. I think it is desirable that the central bank board should agree in any changes to be made regarding the assets to be held in the legal tender note fund.

The main purpose of the board will be the safeguarding of the integrity of the monetary unit, and it is only proper that they should be concerned in any change made in the assets against which currency notes may be issued. The board will be more in touch with monetary affairs and matters affecting them than will the Minister for Finance. Action under Section 3 of the 1930 Act would be initiated more properly by the central bank than by the Minister. The Minister should be advised before any such action is taken. It would be an important step to take, with certain reactions on the monetary affairs of the country, and the Minister ought not of his own volition take such a step. He ought to rely on the board's advice and not take a decision of such an important character on his own initiative.

Section 3 of the Currency (Amendment) Act of 1930 authorises the Minister, in certain circumstances, to declare that some particular form of assets shall be added to the list in Sections 61 and 62 of the Currency Act, 1927. It will be remembered that the Currency Act of 1927 limited to gold and sterling the securities which the Government might accept for the issue of legal tender notes. Before the Minister could use the powers conferred upon him by the Currency (Amendment) Act, of 1930, he must first receive an unanimous request from the members of the Currency Commission to extend the list of securities. He can only act in accordance with the terms of such request if that request is extended to him unanimously. That restriction meant that, whatever purpose it was intended to serve by the Currency (Amendment) Act, 1930, that purpose really could never be served unless the Currency Commission unanimously requested the Minister to add certain types of securities as securities which might be accepted for the issue of legal tender notes.

In this Bill, the restriction as to unanimity is carried on and the Minister is not now empowered to add a new set of securities unless he is unanimously requested to do so by the board. If the existing joint stock banks think it undesirable that notes should be issued against anything but gold and sterling, then any of the banking directors who would be directors of the new central bank could object to any unanimous request being transmitted to the Minister. If there is any objection to the request being made unanimously, the Minister becomes quite powerless and has no function in the matter. A very good case could be made for the Minister to act by authorising the board to accept certain types or forms of assets for the purpose of the list of assets contained in Sections 61 and 62 of the Currency Act, 1927.

In the course of his Second Reading speech on this Bill, Deputy Cosgrave gave us an insight into the reasons why his Government was responsible for introducing the Currency (Amendment) Act, 1930. At that time there was what amounted to a financial crisis in Britain. According to column 233, Volume 86 of the Official Debates, Deputy Cosgrave said that "the Act of 1930 was passed at a time when there was considerable shaking of confidence in the British pound." The British had gone off the gold standard. So, even in the peace of 1930, Deputy Cosgrave's Government, with all the advice available to them, felt there was a considerable shaking of confidence in the British pound and that, consequently, it was necessary to introduce the Currency (Amendment) Act of that year, in order that forms of assets other than gold and sterling might be accepted as security for the issue of legal tender notes. If that were true and seemed to be a wise precaution in 1930, how much more so is it in the turbulent days of war in 1942? If we think it desirable to anchor the issue of legal tender notes to some other type of asset, surely the Minister for Finance in the Government of the day should not be powerless to act in the substitution of forms of assets other than gold and sterling, at a time when confidence in British sterling may be even more shaken.

The Bill perpetuates the unanimity clause of Section 3 of the 1930 Act, and does not permit the Minister to decide what type of Irish securities may be accepted as cover for the issue of legal tender notes. I do not know why the Minister should insist on unanimity in that matter. In any case, the question of substitution of Irish assets involves the entire national policy, and the Minister responsible to the people through this House should be the person to take that decision. It should not be left to the unanimous decision of bank directors, who may be reluctant to break with the previous tradition of complete reliance on gold and sterling.

Will the Deputy suggest what he would do if he had not unanimity?

My amendment suggests that the Minister shall decide what assets may be accepted.

That he take the initiative without being approached at all?

That is my proposal. I take it, of course, in respect of this section, that there will be the same kind of co-operation as the Taoiseach and the Minister plead would be a feature of the central bank's activities.

If that be so, why not let the board of the central bank take the initiative? They are the people immediately concerned, though I am not saying the Government would not be concerned also.

There is a Ministerial amendment, No. 65, to which, perhaps, the Taoiseach has not adverted.

That amendment refers to a two-thirds majority.

What does the Deputy think of that?

My suggestion is that the backing for the issue of legal tender notes — in other words, what are acceptable Government securities, securities that ought to be accepted by the central bank as a guarantee for the issue of legal tender notes — should be a matter for decision by the Government and ought not to be left to the initiation of the directors of the central bank. Even with the two-thirds majority, the proposal to substitute another type of asset can be frustrated. My view is that the Government ought to say: "In the circumstances in which we find ourselves, and having regard to the advice which we are getting from people technically equipped to give it, we have come to the conclusion that certain types of assets of Irish origin ought to be accepted as the backing for legal tender notes," and there ought not to be reliance on the policy of backing Irish legal tender notes by British pound notes, the value of which may have considerably sagged.

It is quite clear that amendment No. 65, in the name of the Minister for Finance, is intended to go a certain distance to meet the Deputy, and I think it represents the full extent in that direction that the Minister is likely to go. With regard to whether the initiation should come from the board of the bank or the Minister, that is the old difficulty of the Deputy's viewpoint and our own. We have interposed this body, with a large amount of independence; even though it might be suggested that the fact that they are appointed by the Minister indicates a certain connection between them and the Government, they will have an independent judgment on the situation. If this close co-operation between the Ministry and the board does take place, and if there is a good reason for it, there ought to be no difficulty in the Minister getting done what he thinks ought to be done, provided it commends itself to an independent jury, as it were. It is more in accord with the general principles of this Bill that it should be in this form than as the Deputy suggests.

At the moment, anyhow, we shall have to oppose the Deputy's amendment and hold out to him the promise there is of going a certain distance, changing unanimity to a two-thirds majority — six out of nine. Another question could be raised — that is, coming again to the Oireachtas. That comes up in the same connection. It is a matter on which there may be a difference of opinion, but that has not been raised at this stage. I do not think we can meet the Deputy to the extent he wants us to, but we are going to meet him to the extent indicated in amendment No. 65.

In this amendment the question of coming again to the Oireachtas is raised. The deletion of sub-section (3) of Section 3 of the Currency Act forms portion of the amendment and I was anxious to hear from Deputy Norton, even if the rest of the amendment were accepted, what his reasons were for wiping out sub-section (3). It seems to me it is vitally necessary that sub-section should remain. I cannot understand why Deputy Norton put that into the amendment. There seems to be no reason why the Order should not be held up until it would be passed by both Houses.

I am seeking to throw the responsibility on the Minister, who is always answerable to the House.

I do not understand that line of argument. If it is a question of throwing the responsibility on the Minister, it would be as well that the House should discuss the matter before it would become effective rather than criticise the Minister afterwards when the harm would be done.

There are two amendments and they have to be considered in the light of the altered circumstances in connection with our note issue. There were two branches to our note issue prior to the introduction of this measure, the legal tender note issue backed entirely by sterling or British securities, and the consolidated note issue which could be issued on the basis of liquid sound advances by the banks. It was intended that should be a domestic issue. It is rather difficult to discuss either this amendment or amendment No. 65 without bearing in mind certain considerations. The main alteration as between this Bill and the Currency Act of 1926 is that we are now exclusively on foreign securities. That is a decision to which I do enter a very strong objection.

It is quite true that from the year 1928 the consolidated note issue, although it was statutorily intended that it should be backed by a domestic issue, was dealt with in a certain fashion by the Currency Commission. The Currency Commission had British Government securities lodged in pledge for the issue; that is, they were collateral security for the issue, the banks still drawing the interest on them and being nominal owners, but pledged in so far as the security of the £5,000,000 odd and the balance to make up the £6,000,000 of the old note issue was concerned. It escaped my recollection, when speaking on this before, why the banks agreed to pledge British securities. Having thought the matter over, I recollected that there was an objection on the part of the banks to have their accounts examined so as to show what were liquid sound advances. They regarded that inquisition—if I might so exaggerate the term by applying it to them—as being an infringement of secrecy. The maintenance of secrecy regarding all their transactions with the public is a popular belief, and I believe it is faithfully carried out by the banks. I see no reason for maintaining that particular objection to having domestic liquid sound advances as the basis of the security upon which a portion of our issue should be made. In the altered circumstances, the Minister, in his Second Reading speech, said there was provision in special circumstances for a note issue backed by our own securities, and that was this particular method. I am not disposed to agree with the amendment that is down in the name of Deputy Norton, on this understanding, that a portion of the note issue in future will also be on some of our domestic assets. On that basis, assuming that that is so, I would be opposed to this amendment. If it were not so, I would like to reconsider my attitude with regard to this amendment.

Why is the Deputy sure it will be so?

I have an amendment down dealing with it and it is not yet decided but, as the Bill stands now, assuming my amendment is not going to be accepted and that there is no working system devised to meet the situation which would allow of a note issue on the basis of domestic assets, then I would reconsider my attitude with regard to that amendment, but this Currency (Amendment) Act of 1930 was brought in at a time when there was something approaching a financial crisis not only in Great Britain but in many other countries. Deputies may have forgotten that on the occasion of the British Government deciding to leave the gold standard 27 stock exchanges in the world closed down for a period of a few days, perhaps a couple of weeks. It was an international affair. It was not merely a national affair affecting the British Government alone. It was affected 27 other countries. That was a major financial crisis at the time. There is an added security given to the people of this country in the framework of this Section 3 of the Currency (Amendment) Act of 1930. It was that the Currency Commission had to unanimously decide a certain matter. There is nothing impossible in that.

I would object even more strongly to amendment No. 65 as it is drawn than I would to Deputy Norton's because, taking it at its worst, what it means is that the six Government nominees can decide a thing as against the three banking directors. The banking directors may be right. After all, the balance of the responsibility in connection with currency and banking would appear to me to be reposed in the three banking directors. They, surely, would not move in a matter of that sort without consultation with the other banks. As I have said, the balance of the responsibility in connection with the finances of this country is with the associated banks in that connection. It is of the most vital importance that whatever securities would be selected would be first-class securities, that the assets that would be decided as those on which a new note issue would be based would be such as would be above reproach, and that no exception would be taken or ought to be taken by any member of the commission in respect of the selection of assets in a case of that sort. What is it that they are going to decide? They are obviously faced with the responsibility of pinning the people's confidence, the security and the stability of the finances of the State, upon whatever is decided as the asset upon which a note issue is to be taken. What is the objection to requiring the decision on a matter so far-reaching as that to be the unanimous decision of the body which is, leaving out all questions of politics, a body which is expected to have reposed in it the confidence of the people of the country? You shake that confidence and you damage and lessen it if you say that a matter of that sort is to be decided on a vote.

But could not one member then upset that decision?

Certainly, but do you think the other member is going to do that on his own responsibility? Is it likely that one member, no matter who he is—if he is a banker, if that is what the Deputy has in mind—merely from a voluntary objection to some proposal would come along and object to, let us say, national loan? He would not.

May I ask the Leader of the Opposition what is the net question these men are supposed to be deciding unanimously with each other?

"If and whenever the commission decide to add any particular security, or class of securities, currencies, balances, or other form of assets to the forms in which legal tender notes can be issued." That is the issue. A matter of that sort, to my mind, does not fall within the category of those things upon which division should be taken in the Currency Commission or anywhere else.

Suppose there was a division?

Supposing there was, that man, if it is a single individual, ought to be dealt with by other means. For instance, if it were my responsibility, supposing he were a banker, I would call in the Banks Standing Committee and ask them were they taking responsibility for him in a matter of that sort.

He is not there as a nominee of the Banks Standing Committee.

No; but, remember, he is there as their nominee, having been selected from the panel of those selected by the banks, and if he is doing something which the banks as a body would disagree with. I say they would have unquestionably the right to ask that an alteration should be made in that particular case. I do not think a situation of that sort is likely to arise.

Supposing, in fact, that person, whom we might regard as a orank, managed to get approval for his attitude from the banks, who said: "No; let us stick to sterling and gold"—what then?

In the first place you have to consider a question of this sort in the special circumstances in which the gold and the sterling assets do not fit the bill, do not suit it. Is it conceivable that one man, crank that he may be, should be able to upset the decision? Let us take the greatest crank amongst all the directors. He has to go through two particular channels before he is put on the board. In the first place the bank has to elect him. In the second place the Minister has to select him. Is it likely in a case of that sort that a crank would be selected?

He may be one of those who want to keep things as they are.

There are many square pegs in round holes, even in Ireland.

Remember you are dealing with a time of crisis. This Act was brought in to deal with that situation and in a time of crisis is it likely that one man on the tug-of-war team is going to push rather than pull in a situation of that sort? I do not think it is likely. Assuming that that is so, is it the contention then that there is only one crank in nine and, if it is, why look for six out of nine? The thing, to my mind, is shaken by any proposal of that sort. It is lessened in its strength and puts up, one might almost say, for competition how a matter of that kind is going to be decided. That was never the intention when this Act was passed. This Act was passed to deal with a serious situation.

As I said, the consideration of these two amendments is based upon the assumption that we have not yet decided the question that the note issue in the future is to be entirely backed by British assets. I do not approve of that and to that extent I have to claim the indulgence of the Leas-Cheann Comhairle for introducing that aspect of the matter. But this particular Act, the Currency (Amendment) Act of 1930, was brought in at a time when it was in the minds of the Government and of the Currency Commission that it would be necessary to add to the list of securities for legal tender note issue in this country domestic assets.

I find myself in agreement with the Leader of the Opposition here. I think Deputy Norton makes a mistake in desiring to abolish the more stringent character of the provisions of the Currency (Amendment) Act, 1930, and I think the Government makes it even worse by seeking to meet him in making this matter a majority decision. I agree entirely with the Leader of the Opposition that this is not the class of matter about which a majority decision should be taken. As the Taoiseach has repeatedly said, in passing this Central Bank Bill, we, the people, do not divest ourselves of our legislative authority. If we find that the provisions of the Bill, taken together with those of the Currency Acts, give rise to any abuse at any particular stage, we can proceed to amend them. But if we begin by making fundamental changes, possibly by majority decisions of this body, I think we may get ourselves into serious trouble and we may seriously imperil the detachment and the objectivity with which a central bank board may be expected to approach the problems with which they would be ordinarily called to deal. To change the basis or the backing of the currency is a very grave thing if you admit that backing of the currency has any significance at all. Upon my word, at the present time it is very hard to preserve the illusion that it has, because every time you look at the weekly reports of the fiduciary issue of the Bank of England, you are almost driven to conclude that backing for currency has become almost a figment of good men's minds and imaginations.

Old men's minds.

Well, the backing of the currency is part of the system as we know it. If we want to abolish that, that is one thing, but if we are going to keep that—and I do think that we would be well advised to keep it, for the present, in any case—the greatest mistake we could make would be to keep the thing illusory. If we are to keep it let us keep it right. Do not let us make war upon it because then it becomes more dangerous than to have no backing at all. If we are going to have a backing, let us have a backing and let us make the rules relating to a change of that backing extremely rigid and difficult to alter. If we do not like that let us do away with the fiduciary issue altogether, fix a limit to currency merely by order of this House and abandon all idea of a backing altogether. Holding the view that I do, I find myself a little surprised at the emphasis laid by the Opposition on the necessity for employing what are called domestic liquid loan advances as a backing for the currency.

I was in America shortly before the bank crisis, and in 48 hours 35 per cent. of the liquid loan advances in every joint stock bank in America vanished. On Monday all those banks could have satisfied a bank examiner that the loans were good liquid loans. On Wednesday the security was gone and the loans were frozen. In many cases they became perfectly worthless. Not only had the collateral become worthless but the borrower had become insolvent. As we all know, in 1931 the great crash took place and the banks folded up. People who thought that all these liquid loans constituted a backing for the currency in the old classic sense found that the currency had become valueless overnight. Remember the particular liquid loans to which I refer in the American banks were largely loans advanced to the most solvent men in the country, small men but conservative, hard-working, industrious small men, who had saved up a bit, who were able to put up a good collateral and were using a little more than their own capital in the development of their business. That is the best kind of loan a joint stock bank could have, loans given to men with a reputation for industry and honesty. Yet 35 per cent. of these securities vanished in 48 hours.

Let us assume you back your currency with coffee berries. Coffee berries may be a very good backing for a currency when coffee is scarce, but when the Brazilians start burning coffee on the quays it is not a backing any longer. I think if you want a backing for currency, you have got to go as near as you can to something that will maintain a stable permanent value. That is why they chose gold. So long as gold retained that characteristic it was an ideal backing, but when gold became the plaything of the playboys on the Rand, it became manifest to every rational man that it was ceasing to have any value as a backing for currency. When every thug and highwayman who robbed the Boers could swell or diminish the backing of the currencies of the world at his own sweet will and, not infrequently, in accordance with the demands of his current mistress, it became clear that gold as a backing for currency was no longer the ideal thing it was in the good old days.

Would the Deputy relate this to the amendment?

What we are talking about is the backing for our currency.

I do not think so.

If I may say so, it would be well for the House if the Leas-Cheann Comhairle would recall what we are discussing. We are discussing the backing of the currency.

The amendment refers to Section 3 of the Currency Act.

The amendment proposes —and it is associated with amendment No. 65 by special request of the Taoiseach—to widen very considerably the powers of the board of the central bank to alter the backing for currency. In the course of the discussion, the Leader of the Opposition said that his mind would be greatly influenced in its attitude towards amendment No. 25 if liquid loan securities of domestic issue were accepted as a proper backing for our currency. I am arguing that they do not constitute a stable backing for the currency. I have already suggested that perhaps there is no such thing in the world now as a commodity or an instrument which will serve as a stable backing, but we should confine ourselves as much as we can to commodities or instruments that approximate, as near as is humanly possible, to that ideal. I do not think that domestic liquid loans are of that character. I may be asked what securities are of a stable character, and I think I am constrained to reply that there is not anything. That is what makes me adopt, when I apply my mind to the question of what is going to happen post-war, when a revaluation of the currency takes place——

I think the Deputy is not now dealing with the amendment.

It is a matter that vitally affects us because the moment it takes place, this board under amendment No. 65 must make up its mind as to what representation it should make to the Government of the day as to what is a stable backing for our currency. I beg the House to remember that this Bill is not a Bill designed to meet the difficulties of to-day. This Bill is a Central Bank Bill which will operate in this country for the next 50 years. It is for that space of time we are making provision now.

The Deputy is dealing with the Bill generally.

I am dealing with the backing for currency. This amendment deals with that specific question. The Leader of the Opposition advocates one particular type of backing for currency and I am trying to point out, in fact, that that type of backing does not commend itself to me. I ask the Minister for Finance to tell us what he thinks is the staple quality which will serve as a suitable backing for our currency. I think post-war that the monetary authorities are going to advocate some form of international agreement. I think they are quite right in having a situation, arising out of which the £., the franc, and the dollar, would be linked in some form of mutual relation, with an annexe agreement as to altering conditions on certain matters of this kind. I think you are going to be forced into that position, because they cannot find very stable backing for any currency and that is a question these people will have to determine here. Are we to ask that our currency be integrated in that scheme in interlocking balance or will we attach ourselves to sterling? When that time comes we will probably reply that we do not want to be linked with the dollar, with the franc or with sterling on a constant basis, but that we want to be linked with sterling, its rise and fall, vis-a-vis with the dollar, franc and sterling. These are the kind of questions that this body will have to consider, and on which it will have to tender advice to the Government. When that time comes people would be much easier in mind if there was an unanimous recommendation of this body. Bear in mind that if we do not get an unanimous recommendation from this body, no majority recommendation will discharge us, as the elected representatives of the people, from our responsibility to take a decision in Dáil Eireann, because the future comfort, standard of living and prosperity of our people may depend on the decision.

If we have an unanimous resolution from nine chosen persons, who are represented as being the best monetary authority in the State, that is enough for any legislative assembly. Therefore, I am with the Leader of the Opposition entirely in my opposition to Deputy Norton's amendment, and to amendment No. 65, which is designed by the Government to meet this position, but I cannot agree with him in the view he expressed that he wants to see a new backing for our currency. I do not think sterling is the ideal balance for good or ill, but I think the Taoiseach was perfectly right in saying that in face of the situation and the unforeseeable future the sterling link is necessary for our people. Apart from the fiduciary issue it stipulates for British securities or currency at our back, and there I entirely agree with the Leader of the Opposition but on the other point I cannot agree with him.

Perhaps I should have given a longer history of the reasons for the introduction of the Currency Act of 1930. Up to 1930 legal tender notes had British backing, that is British securities or, in other words, cash in London. What was the situation that then confronted not only this country but many others? In the first place there was a tightening of money, and in the second place British securities were at a discount, so that if any of the shareholding banks or, as they are now called, the associated banks, had not got credit in London they had to part with securities at a discount. That presented them with a loss and in order to get currency the Act was introduced to enable the Currency Commission of the time unanimously to decide that alternative security would be accepted for the issue of legal tender notes, and that that would be only for a proportion of legal tender notes. That was an easing of the situation at that time. Is there any particular reason for departing from that method of dealing with it? We are making an alteration in the securities that were to back legal tender notes and telling the Currency Commission to decide the matter unanimously. The Minister then had to come before the House, put down a resolution and get sanction for it. That was a straight, open, and above-board method of having the matter decided by the principal institution in the country. It was responsible in a time of crisis for taking a decision. The amendment would introduce something of a rather bureaucratic method, and a decision could be taken by a Minister. I presume we would have a question in the House, suspicions would be aroused and one knows very well in a case of that sort, how dangerous rumours are.

In so far as what Deputy Dillon said, it is quite true that there was a major catastrophe in America some ten or 11 years ago, and that many banks closed. The banking system there is altogether different from what it is here. In America it was framed to meet an expanding country, both from the industrial point of view and also population. Unfortunately for America it spread beyond the needs of the times. What is the situation here? There are advances in this country totalling, I suppose, up to £40,000,000 or £50,000,000. What is the fiduciary issue in connection with the consolidated note issue? Approximately £6,000,000 —that is one-ninth. Collateral here and collateral in America are slightly different, because this is a much more conservative country, talking in the banking sense. Both our banking system and our citizens who keep money in banks, are much more conservative-minded than in America. The liquid sound advances with bankers here at present are those which would be backed by collateral securities of a different type from those in America. Collateral securities here would consist of British war loan, national loan or something of that sort, and the normal value would be approximately 50 per cent. of the advances. We have had experience of a series of banks having note issues for a period of 100 years, and in all that time there was only one failure. Within the last six years there has not been a single failure. As I mentioned last night, there is a fiduciary issue in the North of Ireland of approximately £5,000,000 in banks operating there. It will be admitted, I think, by either the sponsors or the critics of this measure that the basis of the measure is British credit, and if the British system is such as to approve of a fiduciary issue in the North of which the Irish banks have something in the neighbourhood of £5,000,000, there does not appear to me to be any really sound objection to our having a backing of domestic assets for £6,000,000 of our note issue.

I understood the Committee to be discussing amendment No. 25.

And amendment No. 65.

The Taoiseach intervened and said——

Amendments Nos. 65 and 67 might possibly be covered in this discussion.

The Taoiseach said he was going——

If the Deputy will allow me, amendment No. 25 raises the question whether in certain matters there should be a unanimous decision of the board, or whether the decision should lie with the Minister. It is not clear to me how British credit or liquid sound advances are relevant. The issue is to whom the power should be given—to a unanimous board or to the Minister.

Amendments Nos. 25, 65 and 67 all deal with Section 3 of the Currency (Amendment) Act, 1930, and that Act is concerned with matters other than the unanimous decision of the board.

But do not these amendments deal with a specific section of that Act? Surely they do not cover the whole Statute.

With Section 3, which is the really operative one. It says:

"If and whenever the commission shall unanimously request the Minister to add any particular security, or class of securities, currency, balance, or other forms of assets, to the forms in which the legal tender note fund... may be held under the Principal Act, the Minister may make an Order declaring..."

The form in which they shall be held?

That is the really important matter in it. The other thing is accidental.

And this amendment proposes the deletion of all Section 3?

One of the amendments alters it. The deletion of sub-section (3), which is paragraph (d) of this amendment, is something for which, in the circumstances I have described, I could not stand.

On a point of order, are we now discussing the relation between amendments Nos. 65 and 67?

Amendment No. 67 may not be moved as it is governed by the decision on No. 25.

I asked the Deputy who moved this amendment, when amendment No. 65 was pointed out to me, if he were prepared to withdraw it, as it would appear that the Minister for Finance was going a certain distance to meet him, and I just want to know now, from the point of view of what discussion we are to have, whether amendment No. 65 is under discussion now, because I was about to say that, so far as the Government are concerned, we are against this amendment, and that what we had to say in favour of amendment No. 65 would be said when we came to it. If, on the other hand, amendment No. 65 is under discussion now, we would be compelled to say what we have to say in favour of it.

The Committee may discuss amendment No. 65 separately and on its own.

The issue in this amendment is not "unanimously" or "a two-thirds majority"; the issue is one of putting the obligation on the Minister. When we come to amendment No. 65, we can discuss unanimity versus a two-thirds majority.

Very good. Amendment 65 will be discussed when reached.

With regard to responsibility, the responsibility, in the first instance, is on the Minister, because it is only a question of who shall initiate. If he says that responsibility for initiation shall come from the Minister, it is a different matter. The position as it stands is that the initiative should come from the board unanimously, that the Minister then can make an order, which order must be approved by both Houses before it becomes operative. That is the position, as I understand the sub-section.

Has the order to be approved by both Houses, or does it become operative unless repealed?

Yes, it must be approved before becoming operative. There are certainly enough safeguards there. The Minister will have the responsibility and some people would say that that ought to be quite sufficient, as he is responsible to the House. Others will hold, as Deputy Cosgrave holds, that it is a matter which should get the approval of both Houses before becoming operative. The Minister, at any rate, is prepared to meet the Deputy a part of the way in regard to unanimity. One point has been brought to my notice in regard to Deputy Cosgrave's remarks. In speaking of this section of the Currency Act, he seemed to suggest that the Act was passed after the British had gone off the gold standard. The information I have is that the British did not go off the gold standard until September, 1931, while the Act was passed in 1930, so that his recollection on that point must be somewhat amiss. As I said, responsibility is not taken off the Minister and, in fact, the responsibility would still remain with Parliament almost, but the initiation, the first step to show that the need for doing this arises, as it stands here, has to come by unanimous vote of the board. When we come to deal with amendment No. 65, we can point out why it is undesirable to have it as rigid as that, but we are definitely against the Deputy's amendment.

One argument used against democratic government and used, not infrequently, with some force, is that in times of crisis it works rather sluggishly and that in order to get certain things done, which ought to be done speedily, it is necessary to go through certain processes. The necessary slothfulness in getting through these processes inevitably begets enemies for democracy and causes people to say: "If we had a different system of government, we would be able to do these things speedily". I am, generally speaking, in favour, and particularly in times of crisis, of giving a certain amount of responsibility to the Government, to any government, so long as they are answerable to Parliament and responsible to the people through Parliament. If this world would go slow, would mark time, in other words, and if the tempo of things were not regulated at the speed at which it is regulated to-day, well and good. In the merry days of peace, if we wanted to change our backing for legal tender notes, we might be able to afford to come to this House with an amendment, have it debated at considerable length and then go to the Seanad and discuss the whole thing with that kind of gentlemanly leisure which belongs to the last century, but we are living in a time of crisis, and, even though peace may come to the world, there will still be a period of financial tension, a period of economic dislocation, a period in which what may happen in New York will have its repercussions in London and, similarly, you will get the ricochetting of these repercussions here.

In circumstances of that kind I think it is a mistake, a legislative mistake and a national mistake, for the Government, in the first place, to tie itself up, as the Bill first proposed to do, to acting only on the unanimous recommendation of the nine directors of the board, and, in the second place, to tie itself up to acting only on the recommendation of six out of nine, or possibly six out of eight, as may be the case if one is in bad health. If the directors actually request the Government to make a change by the substitution of domestic assets for sterling or other backing, and in the backing of legal tender note issue in this country at present we can eliminate any but English securities. The present position is that legal tender notes, apart from the consolidated bank notes, are issuable only on Bank of England securities, and that position will continue unless, under the Bill, nine directors unanimously request the Minister to take in some of the domestic assets as a backing for legal tender notes, or unless, as Deputy Dillon says, we amend the law, perhaps when the necessity is upon us.

If the necessity arises.

Yes, if the necessity arises. Deputy Cosgrave, however, was afraid, 12 months before Britain went off the gold standard, that the British pound was sagging badly.

And 12 months after the Kredit Anstalt.

I do not want to have to go back and make reference to the kind of banking racket that forced the British Labour Government off the gold standard. Some gentleman at that time said that the pound was not going to go the financial way of the mark, but when the general election was fought in the course of a month, the very people who said that the pound was not going to go the way of the mark were telling the people of the advantages of going off the gold standard because of the advantageous position that they got in foreign markets, and Britain and the Government, which then won the subsequent election, never since went back on the gold standard. They are still off the gold standard and they do not want to go back to it.

The Deputy might leave it at that.

Yes, Sir, I was going to leave it there, had it not been for Deputy Dillon's suggestion. I was making the point, however, that the present position is that we have got a backing for our legal tender notes through British securities. If a bank here wants to issue a pound note, it simply buys an English pound note and deposits that note with the Currency Commission, which then gives a permit to issue an Irish note. It does not want a British pound note, but it lends the British Government one pound and, on the promise that the British Government may one day repay that, that pound is lodged in the Currency Commission here and you get a permit to issue an Irish pound note. That is the scheme here, and that is the scheme that is going to be adopted under this Bill unless the Minister is advised unanimously by his nine directors to alter the position and allow some other kind of backing for legal tender notes, or unless, under his own amendment, he is requested by six of the nine directors to make the necessary change, in which case he has power to do so. I do not know why the Minister wants to tie himself up with that unanimity or with six out of nine. I think that in this time of crisis, when the need for speedy action is more important than it ever was before, and when such grave issues are involved, it ought not to be left to six out of nine people to decide, in a time of crisis, or even in a time of peace, what may be accepted as security for the issue of Irish legal tender notes. Take the present position. Deputy Dillon has spoken on the question of whether it is possible to maintain any stability for the issue of notes, and, of course, he is one of an enormous mass of people who are asking themselves the same question: can you give any stability to a national note issue?

A Deputy

We are doing it.

We are doing it, but the stability we are giving is that we are backing its issue by the debts which another country owes. Irish pound notes are being issued to-day because we are packing into the Currency Commission, not tangible assets, but British bills, British promises to pay. These are the backing for Irish notes to-day, and you might as well have nothing.

Would the Deputy not like to have a nice number of them?

Apart from what an individual may want to do here or there, if you look at it from a national point of view, it is a serious matter Suppose that Britain loses the war.

No matter what happens, the Irish banks will be all right.

Let us suppose that it happens.

The Deputy need not worry about the central bank. That will be the least of his worries.

But if Britain loses the war.

I know that Britain is going to win the war.

If the Deputy's cheering would be any help, she ought to win it.

Suggestions by way of prophecy are hardly-relevant on this question of unanimity.

Take this position, as something that might easily happen before this war is over. An Irish bank, before it can get £5,000,000 worth of legal tender notes has to get £5,000,000 worth of British securities and deposit them with the Currency Commission, and then get £5,000,000 worth of legal tender notes. The security for the £5,000,000 worth of Irish legal tender notes is the £5,000,000 worth of British securities, and the Currency Commission will issue £5,000,000 worth of Irish notes in return for the £5,000,000 worth of British securities. Suppose, however, that the £5,000,000 worth of British securities sag badly and that their value shrinks to 50 per cent. of what it was at the time they were deposited with the Currency Commission: what is the extent of the backing then for the £5,000,000?

What relation has that to unanimity?

A very vital one, Sir.

It may be vital, but is it relevant?

I submit that it is relevant for this reason: that I am wanting the Minister for Finance to take responsibility for directing the board of the central bank to accept certain types of security as a backing for legal tender note issue. I am urging him to do that because it is too vital a function to have it decided either by the unanimous decision of the directorate or by a two-thirds majority of the directorate, and I am endeavouring to tell him that unless he intervenes by taking the power himself, we will continue to operate the system under which we can only issue Irish notes by depositing British notes with the Currency Commission for British debts or script, the result of which is that the Minister will be powerless, in a time of crisis, to insist upon the Currency Commission accepting some substitute form of backing for our legal tender note issue. I think the Minister is unwise to tie himself up either with the unanimous decision or a two-thirds majority decision. For my part, I would sooner make the Minister entirely responsible. He, at least, will be a member of the Government. He will be responsible to the whole Government; he will know that he is responsible before the entire nation; he will know that he is a Minister of a Government which came to the House and asked for authority to do this; and, on balance, I would prefer to trust the Minister and to put him in a position like that, with the responsibility of deciding a matter like that, rather than have the issue decided behind the closed doors of the directorate of the central bank. I think that, on balance, it is better to put that responsibility on the Minister, and I think there is a greater safeguard in doing that than in putting the responsibility on nine directors or on six of the nine directors of the central bank, over which this House will really have no control once these directors are appointed by the Government.

Is not this whole business of Irish security related to the sterling link?

Is it involved in this amendment?

Yes, it is related to Section 3 of the Currency Act of 1930. You have got to determine the nature of the decisions that have to be taken and the way in which they will be taken. We are making the case that this decision is of so grave a character that someone ought to deal with it in a certain way. Is not this the sterling link?

Not quite.

Very nearly.

You could have a considerable variation here and still have the sterling link.

The fact is that we did choose British securities and sterling for the backing of our currency. The great desideratum is to ensure that the Irish currency pound note will always be exchangeable at our office in London for the British pound note, and to guarantee that the office in London carries a sufficiency of English currency or readily negotiable securities to enable it to give effect to our undertaking. The plan of giving British Government securities or sterling, pound for pound, guarantees to the foreigner that we will give effect to our undertaking. I cannot understand why Deputy Norton seems to think that the provision in the Currency Act in any way restricts the authority of this House, or of the Minister for Finance, because while the procedure envisaged by the Currency Act remains unamended it will always be open to the Minister to come to the House and say that he wants to amend the law. We can, if we want to, abolish the sterling link and alter the procedure as to how the substitution of one class of proposal for another is to be promoted. We are not limiting our own power. We could not, by legislation, prevent the Minister from coming in here with any proposal, no matter how radically it affected the currency. This Parliament, within the Constitution, can do anything and everything it wants to do. Therefore, we are not limiting our powers to do anything we may want to do in the future. We are merely saying that, in the foreseeable future, it is a wise thing to provide this somewhat elaborate machinery because the issues to be determined are so grave. This Parliament could, in two hours, pass legislation to enable it to do anything it wanted to do. We could, for instance, abolish the central bank and vest in the Minister all the powers of the board of directors of the bank. We could give him authority to do anything we liked in regard to the currency or, indeed, in regard to anything else. If we were to declare a state of emergency then, as far as I am aware, even the Constitution itself goes up the spout. It has gone up the spout at the moment. We can give the Minister for Finance any powers we like. All that we are doing is this: we are saying that in the foreseeable contingencies that may arise we prefer to retain this elaborate procedure so that there may be due reflection and proper care taken before there is any change made in the backing of our currency, always reserving to ourselves the right to abolish all restraints and all precautions even if we thought well of it to abolish the central bank itself.

Amendment No. 46 which appears in my name reads:—

Before Section 36, but in Part IV, to insert a new section as follows:—

Section 3, sub-section (3) of the Currency (Amendment) Act, 1930 (No. 24 of 1930) is hereby repealed.

The Leas-Cheann Comhairle said that this amendment came into the picture at this stage, even if it were only to be relegated to the Report Stage in the event of Deputy Norton's amendment being passed. My interest in amending this section of the Currency Act of 1930 is not because of any special emergency appearing on the horizon, but in view of the fact that the consolidated note issue is being wiped out of existence and that in time nothing is going to be left except the legal tender note. The law is that the legal tender note is to be backed 100 per cent. by sterling. In my opinion the facts, in ordinary circumstances, do not warrant that. I am seeking to amend Section 3 of the Currency Act of 1930 so that we might have a situation by which the board of the bank, by submitting a majority recommendation to the Minister, would enable alternative backing to be arranged for part of our note issue. In the circumstances I do not think it would be necessary that the action of the Minister, following on a recommendation of the board as a whole, need come up for review before the Oireachtas. What Deputy Dillon has said would seem to bear me out on that—that it could be undesirable, in particular circumstances when taking action like that, to have the circumstances generally reviewed. In touching on this matter before, I directed attention to certain passages in the Report of the original Banking Commission. On page 28 of the Final Report, summarising the recommendations, we have this section:—

"(3) Immediate provision for, and issue of, an Irish paper pound sterling which shall be legal tender and which shall be maintained at a parity of value with that of Great Britain by holding behind it a reserve of 100 per cent. of the amount of such notes outstanding, carried primarily in British Government securities of varying maturities, but including also in the total such sum in current bank and other cash balances or in gold or both, as may be determined upon by qualified persons hereinafter to be designated, the object in view being the maintenance of immediate convertibility of outstanding legal tender paper at all times on demand into British sterling."

The reason why legal tender note was to be backed 100 per cent. by British sterling was to have it all convertible, at all times, on demand into British sterling. What is going to bring about a situation in which we are going to have a demand to have the whole of that turned right away into British sterling? So far from that being considered a possible likelihood then or now, let me turn to the first Interim Report of the Banking Commission which sat in 1926. We find there, on page 32, the members discussing the bank note which is now the consolidated bank note and the legal tender note.

They contemplate the possibility that in volume they may be about 50-50 and that the consolidated bank notes, being in certain ways cheaper to issue, might exceed the legal tender notes and that that might undermine the strength of our sterling link. Therefore they make the recommendation:—

"...if at the end of any half year the legal tender issue shall have fallen below four million pounds, the Currency Commission may reduce the bank note issue so that it shall not be more than one million pounds in excess of the legal tender issue".

The Deputy might relate his argument to this amendment.

The Deputy's amendment merely purports to delete sub-section (3) of Section 3.

The effect of deleting sub-section (3) would be that, if the board unanimously decided that a certain type of security besides British securities should be used as backing for portion of our note issue and the Minister gave effect to that by an order, it would not be necessary to discuss it here, and we would not have a scare created as the result of a discussion, that we were undermining the strength of our legal tender note issue and of our parity connection with sterling.

A very tenuous connection.

At any rate, I want to say that my interest in Deputy Norton's amendment, which I disagree with, and my approach to the amendment of this Act, as indicated by my own amendment, is that, if we are going to retain the unanimous recommendation of the board and Minister's action on that, then I want to cut out the reference to the Oireachtas. But, if the Minister is going to change it to a majority of the board, then I do not think the Oireachtas should be taken out. However, that is a matter for——

Later discussion.

You do not think it should be taken out in that case?

I think it is better to have the unanimous decision left in and to leave it to the technical people, examining a technical question, and the Minister with his responsibility. If the Minister's action on a technical question like that is to be challenged, the initiative might come from the Oireachtas or by some member of the Oireachtas challenging the Minister's action, rather than that the Minister should have to come and explain to the Oireachtas that he was doing a certain thing. But I believe it is essential that we should have some kind of machinery and I am assuming that there will be some acceptance of the amendment that Deputy Cosgrave has put down to see that a definite part of our note issue will be backed by home securities, if you like. I take it that that will be passed. Nevertheless, with the consolidated note issue being wiped out, some machinery is necessary and, unlike the practice in the past, it will have to provide a backing other than sterling for portion of our legal tender note issue. But I do suggest to Deputy Dillon that it is fantastic to think that our legal tender note issue, which is to be our only note issue after a particular time, should be so backed by sterling securities that it could be turned in its entirety into British sterling at any particular time. It is a fantastic outlook on our own internal monetary requirements that the whole of the note issue, that is, the legal tender note issue, the old notes, and the consolidated notes that we have at present should, by statute, require to be backed 100 per cent. by sterling. I think it is fantastic to think that it should be so even to maintain the strongest parity link with sterling.

Does not parity arise later?

The trouble about parity is that this is a Bill to maintain absolutely and rigidly parity with sterling——

An amendment has been tabled on that matter.

——and that when on an amendment of this kind we are discussing backing our note issue with anything else but British securities, the cry is raised: "You are undermining the parity link."

It is a parity and unanimity Bill.

When we have a technical body of that kind and the Minister acting on the advice of a body like that, it is well to get unanimity from these people and, in my opinion, where so many misconceptions and misrepresentations of proposed action are likely to arise, it is well to let the question be raised from the House rather than putting the Minister in the position of explaining to the House that he was taking a particular decision of a technical kind.

Amendment put and declared negatived.

Amendment No. 26 not moved.

I move amendment No. 27:—

In sub-section (1), to delete all words from the word "determine" in line 51 to the end of the sub-section, line 53.

This amendment would leave the section to read:

"The governor shall be appointed by the President on the advice of the Government and shall receive such remuneration and allowances and be subject to such conditions of service as the board shall from time to time determine."

It would stop there. The amendment proposes to delete what follows:

"but the remuneration, allowances, or conditions of service of a governor shall not be altered during his term of office without his consent."

The original Constitution of this State provided that Ministers of State would be paid such salaries as the Oireachtas determined, and that they should not be reduced during their term of office. If I am not mistaken, that has not been carried into the present Constitution, and Ministerial salaries are subject to reduction by the Oireachtas. I may be mistaken in that, but I do not think I am. Assuming I am mistaken, we are in this case putting the governor of the bank on a level with Ministers of State. I do not see any necessity for including these particular conditions. It is unlikely that any effort will be made or any decision taken to reduce the salary of the governor during his term of office. But to place him in a position of superiority over the general run of citizens, other than judges, is a very unusual step to take. It might reasonably happen that the circumstances of the times might necessitate a reduction in large salaries, and so on, and to say that you are precluded by reason of an Act of Parliament from doing that, and further putting it that a contract of this sort was entered into, is, to my mind, an unusual step to take in a matter of this sort. There may be special reasons for the inclusion in the terms of appointment of the governor that his allowances and conditions of service shall not be altered during his term of office without his consent. It is possible, although not probable, that conditions might change, and that certain allowances which might be made would not be necessary in future. To say that you are precluded from reviewing them in special circumstances is an unusual step to take in a matter of this kind. Accordingly I move the amendment.

I think the intention in inserting that was to give them a position of greater independence. Certainly, I do not think that there is anything in the Constitution with regard to Ministers; it is left to the law to settle what shall be the remuneration of Ministers, and so on. In the case of judges, however, I think there is some such provision. I am not quite sure about it. The purpose of it in cases like that is to make sure that the power of the purse, so to speak, will not be used as a weapon to coerce the opinion of an officer whom it is desired to keep in an independent position. I do not want to say that I am disagreeing very much with what the Deputy has said in favour of his amendment. I have a very open mind on it, because there are times when it is rather unfair that certain officers should be set above the rest of the community, and, on the other hand, when there is a desire to reduce salaries, it may be necessary in the common interest that certain people should be absolutely excluded by the terms of their appointment from that reduction. A great deal could be said for the amendment, but again you have sometimes to pay a certain price for independence. It is a question really as to whether it is desirable to put this officer in an independent position, so that he might not be coerced by the possible threat of a reduction in his salary or anything of that sort; it is a question of whether or not he should be given a greater degree of independence. But there is the other point of view. In general, except for that point of view, it is undesirable that officers who are in the public service should be put in a very special position. I do not know what view the Minister will take of it finally, but I must say I have considerable sympathy with the point of view expressed by the Leader of the Opposition.

I am prepared to reconsider it.

Very good.

Amendment, by leave, withdrawn.

I move amendment No. 28:—

In sub-section (4) (a), page 10, line 14, to add at the end of the paragraph the words "or as Uachtarán".

This is a bright idea which speaks for itself.

The President is precluded, I think, by the terms of his office from being anything else.

It could not happen, because the President could not hold any other post.

This is to secure, in regard to the governor, that he shall during his term of office as governor, be disqualified "from being nominated or elected". Now, concentrate on the word "nominated", without going any further. Unless you put in the amendment which I am suggesting here, there is nothing in the conditions of the appointment and election of the President which, if the governor of the bank wanted to go up for the Presidency, would prevent his getting himself nominated.

I was looking at the other side of the picture. I was looking at it from the point of view of an existing President, so to speak, becoming a governor of the bank. The Deputy's point is that the governor should not be allowed to be nominated as a candidate for the Presidency.

The section says:—

The following provisions shall apply and have effect in relation to every governor, that is to say:—

(a) he shall, during his term of office, be disqualified from being nominated or elected and from sitting or receiving payment as a member of Dáil Eireann or of Seanad Eireann.

That prevents the governor from being nominated as a member of Dáil Eireann or as a member of Seanad Eireann.

It prevents him from being nominated to become a member of either House.

He cannot be nominated nor can he be elected.

During his term of office.

Under the section as it stands, there is nothing to prevent the governor of the bank, if a vacancy occurs, from being at least nominated as President. Under what the Taoiseach says, if he is actually elected, he ceases to be governor, but my amendment would prevent the governor from being nominated, he could not even become a candidate. He would have to resign his governorship in order to stand for the Dáil or Seanad. Is it the intention that he could stand for the Presidency and retain his governorship until he saw whether he became President or not?

I think the Deputy has made his case for that.

I knew it was a bright idea.

Amendment put and agreed to.
Section 15, as amended, put and agreed to.
Sections 16, 17 and 18 put and agreed to.
SECTION 19.
Amendment No. 29 not moved.

I move amendment No. 30:—

In sub-section (4), page 11, to add at the end of the sub-section the following proviso:—"provided that no remuneration shall be payable to a service director who is entitled to receive full-time remuneration from public funds as a member of the Civil Service".

This section provides that the directors of the central bank shall be appointed by the Minister at a certain salary. The Bill also provides for the appointment of two civil servants, who will be paid the same fees, I take it, as the other bank directors. This amendment proposes that no remuneration shall be payable to a civil servant acting as a director of the bank who is already receiving his full salary from the public funds. I do not at all agree with the practice which has grown up in recent years of appointing highly-paid civil servants to the boards of various companies, particularly monopolies, and giving them additional remuneration as directors of those companies. I think that civil servants who are whole-time employees of the State should fill those positions without any extra payment.

Have a heart. What about trade unionism?

I have, probably, a bigger heart than Deputy Walsh has. If a civil servant in receipt of a salary of £1,200 or £1,500 a year is appointed by the Minister to act as director of the central bank, I believe he is sufficiently remunerated by his official salary and should not be put on the same level as regards other remuneration as the other directors of the bank. He cannot be fulfilling his duty as a highly-paid civil servant and at the same time be acting as director of the bank. It would not be too much to ask such a civil servant to do that work without additional remuneration. It is not a question of being penurious in the matter. I think we have come to the stage when this thing should stop. Some people working in the State are very poorly paid and I do not think that a civil servant receiving £1,200 or £1,400 a year should be unwilling to do the work of a bank director without additional remuneration.

And pro rata down the line.

I think that the practice is bad, of putting highly-paid civil servants on boards of directors. However, if they are to be appointed to such positions, they should be paid their civil service salary and no more.

I do not agree with the Deputy, and I cannot accept his amendment. The civil servant who would be appointed to this board would be a man of wide experience and of very special qualifications. Like practically all the other senior men in the civil service, he would have devoted not eight hours a day or ten hours a day to his work in the service, but a great deal more. These men are not paid for overtime. They work very long hours, especially in these times of emergency. Nobody works harder. I think that Deputies know that.

Would you include in that category the people who produce food for the nation?

Many of them. The man who would be called upon to step in and accept responsibilities of the type which would be imposed upon him by membership of this board would deserve special consideration, and I am sure that he would earn and deserve any extra remuneration that might go with the post.

In addition to his already established salary and bonus?

The civil servants appointed are to be paid the directors' salaries on top of their own salaries?

Yes; and they would earn them. The Deputy suggested that civil servants appointed to this position could not fulfil their duties as civil servants while attending to this other work. I suggest that they could. Men occupying high office in the Civil Service, when called upon to take on other responsibilities, have not always willingly accepted them. It means that very onerous responsibilities are placed upon their shoulders. Sometimes these additional responsibilities have been accepted reluctantly, because of the heavy duties already attaching to their office in the Civil Service. When they are asked by the Government of the day to carry this additional load, I think they deserve whatever extra remuneration attaches to the post.

I am inclined to think that a dangerous line is being adopted by the Minister. The civil servant who is held to be fitted for this responsible office may be already carrying out responsible duties on behalf of the State for which he is being paid an equitable salary. If the Minister feels that it is desirable he should be taken from his existing duties to discharge the onerous duties of director of this institution, surely somebody will have to do his work as civil servant while he is engaged on his bank duties.

The Minister may shake his head, but the civil servant cannot be in two places at the same time. He is, presumably, being paid a salary commensurate with the responsibilities of his office before he takes on the duties of bank director. If he has a whole-time job at present, he cannot be, like Boyle Roche's bird, in two places at the same time. What will happen will be that his understrappers will carry on his work in the Department. Why not remunerate them and let them have the additional salary? If the work in the Civil Service is carried on in the absence of this official, the people who will do the work will, under present conditions, get nothing, while he will carry two salaries, one as civil servant and the other as bank director. The work will be done in his absence by people under him in the Department without any consideration. I think that the equitable thing would be, in the absence of a civil servant on this responsible duty —it is, in my opinion, undesirable that civil servants should be appointed to these positions if it could be avoided, but you may require a man of special training—that the money should be transferred on down to the men who carry on the work which he was doing before he went into the bank. Then, you would not have men grumbling and grousing because they have to do work for which their chief receives payment. If this money is to be spent, it should be spread over those who do the work.

That is not suggested in the amendment.

There would be no use in my proposing that in an amendment because the Minister would carry his proposal by his majority here in any event.

I do not think that that observation is quite fair because nothing gives me greater displeasure than having to walk into the Lobby with members on the other side. There are times, however, when one must do it. In this case, if the facts were as stated by Deputy Keyes, there would be something to be said for the amendment, but are they? A civil servant would, in the normal course, be an absolutely unsuitable person for this board. You must find a civil servant with special qualifications and, if possible, with a certain experience. If he has got these qualifications and that experience, he is an acquisition to the board. If he has not, this is merely an emolument so far as he is concerned. I would not say that many civil servants are so qualified or so experienced in this regard that they would be an acquisition to the board. In my experience of the higher rank of civil servants, the fact that they are away from their office for a certain number of hours in the day or a certain number of days in the week does not mean that they will not have to do the work which they would have done if they had been there. It means that they must work overtime. In some offices, there is practically no limit to the number of hours such a man has to devote to his work. The work is very strenuous. If it were possible to do as Deputy Keyes suggests—spread the money over—it would be very desirable, but I do not think it is. My experience when I had any responsibility in connection with the Civil Service suggests that, in this case, it would be a grave mistake not to give to civil servants appointed to the board the same remuneration as is paid to the other directors.

Let us examine the case from that angle only. You have a number of directors sitting on the board. Assuming there is one nominee of the Minister amongst them, I would not say that he would consult the Minister with regard to decisions which would be taken there. I should say that the Minister would have enough to do without hearing of the details of the business transacted by a board of that sort. It is the civil servant's own responsibility, but, from the service that he could render, he is entitled to the normal remuneration given to any one of the others.

I suggest he get the same remuneration as a director; or if he is getting not less than £1,500 a year as a civil servant, that is sufficient.

That is the point I took in Deputy Hickey's argument— that he objected to the man getting one salary as a civil servant and another as a director, that he had no objection to his getting whatever salary was fixed for a director of the bank provided he got only the one salary.

There is no compulsion on the Minister to appoint a civil servant on the board. He looks upon the whole community and picks out some people to do the work in the best possible way. If amongst those from whom he will have to choose, one or two happen to be civil servants, why should he put them in a different position? The Minister says to himself: "I am prepared to let this man do this particular work, provided he does not neglect his other work." He must satisfy himself that, by appointing a civil servant, he is not preventing that man from doing, to the full amount, the work he is supposed to be doing. The higher civil servants do give very many more hours in the day than the average person gives to his work, but the Minister must expect only what is reasonable: he is not supposed to overburden the man, and if he tries to do that he will not get the best work.

I would not expect that.

If he finds a civil servant particularly fitted for this work, and prepared to give to it time that would otherwise be leisure time, he may appoint him. I am assuming the Minister would not appoint him if it would mean the man would have to neglect his own particular work. Because of his special knowledge of the duties to be carried out, the man may have sufficient time to do the work, and it is not unreasonable that he should be rewarded accordingly. Otherwise human nature would operate, and the man would not take the same interest in it. He would think of the other civil servants who, having done their immediate work, could play golf or amuse themselves in one way or another, while he was expected to give his spare time in doing this voluntary work.

I understand the Deputy's point, and the angle from which he produces it. If the man is precluded by his new office from carrying out the work he was supposed to do originally, there would be a case for it. If he is doing this extra work without detriment to his previous work, and if he is a suitable person, I do not see how the Minister can avoid giving him the extra remuneration and expect the work to be done properly.

That is a double salary.

It is double work. If he had to neglect the other work, or get somebody to take it over, or if it resulted in the Minister of his Department having to get somebody else to do the work, there would be some case to be made, as the other person would be entitled to get the remuneration for the extra work, but that does not operate.

The Taoiseach does not seem to think there would be much responsibility in the new job. Instead of going golfing, the man can do this extra job.

A lot depends on the experience the man has. A new person, without the background of knowledge, would not be able to appreciate the nature of the problems and take decisions that require judgment. If I were appointed to that board, for instance, I would not like to be about to do anything else, as I would have to give long study to a variety of problems and it would take up a considerable amount of time. If there is in the Civil Service at present somebody who has the best experience and knowledge for the task, and with a background already prepared, the problems with which he would have to deal would not be entirely new to him. I do not say that there may not be a problem of a new type occasionally, which may require a good deal of thought and research, but the Minister appointing him must make up his mind on that.

I agree with Deputy Keyes that, if it were necessary to do what he suggests has to be done, and that the work which he was doing formerly had to be so neglected that somebody else had to do it, it would be extremely difficult to get good work done by a civil servant who does not get the remuneration an outsider would get. This all points out that we should be very slow to appoint members of the public service on this board unless there is an exceptionally good reason. Wherever it is done, or has been done, it will be found that the person appointed has some special qualifications, perhaps through previous experience and training, and that he was appointed only when it was found that that specialised knowledge was not available from members of the community outside.

As far as this Government is concerned—and I am sure it would apply to the previous Government—there has been no desire to put members of the Civil Service into positions of this kind unless the conditions showed that they had some special knowledge which particularly suited them for the job. If they have that knowledge and are appointed, they should be paid.

No one will accuse members on this side of the House of standing for unfair conditions for civil servants. Quite recently, the Minister reminded us that we forced the people to face a general election some years ago because it was alleged we were standing for the payment of higher salaries to the higher civil servants. We believe that a civil servant of any grade should be paid a reasonable rate of remuneration. That goes without saying. I wonder if the Taoiseach read the return supplied to the House recently, in reply to a question addressed from these benches; the return gave the number of civil servants appointed by the Government as directors of State-subsidised companies.

I think he will find there that a number of senior civil servants, receiving salaries of £1,500 a year and bonus, are directors on more than one board, and they are in receipt of fees as directors on those boards. We contend that a civil servant who is in receipt of a salary of £1,500 a year and bonus is, in a poor country like this where you cannot afford more than 33/- a week for a turf-worker, well paid. It was stated at one time by certain members of the Ministry that no man, no matter what position he might occupy, was worth more than £1,000 a year. Of course, that has since been exploded. I say that £1,500 a year and bonus is a decent salary for any civil servant, or any other person, and if senior civil servants receiving such a large salary are to be appointed to the boards of State-subsidised companies, the fees that would come to them on such boards should be paid into the revenue. That is the case that we make from this side of the House, and I think it is not an unfair case to make.

It will take a good deal of explaining, so far as I am concerned, to prove that a senior civil servant in receipt of £1,500 a year, with bonus, who is a member of two or three State-subsidised boards in this country, can devote all the time to the Civil Service side of his work that he should devote. If he cannot devote sufficient time to that side of his work, the work will be falling on somebody else in the Department, as was indicated by Deputy Keyes. We here stand for fair conditions in employment, and we freely admit that the higher-paid civil servants are men who do good work and plenty of overtime. At the same time, we contend that a salary of £1,500 a year, with bonus, is a decent salary, and if civil servants, as in this case, are to be appointed members of the board of a central bank, any fees they receive should be paid into the revenue.

The other members of the board of this bank, the non-banking directors and whoever will be appointed to represent the joint stock banks, will have other incomes, or means from other sources. The joint stock bank directors are generally directors of several public companies. I can quote instances to prove—I do not think it is necessary to prove it to the Minister for Finance—that members of the Board of the Bank of Ireland are members of the boards of six or seven other companies and, as part-time directors of some of these boards, they receive high fees, perhaps up to £1,000 a year. Our point is that a senior civil servant in receipt of a salary of £1,500 a year and bonus is already being fairly treated and, if it is regarded as part of his duty, in the interests of the State, that he should be a member of the board of a central bank, then any fees he receives as a member of that board should be paid into the Exchequer. That is the case we are making.

The Deputy spoke, and I spoke, about the salaries that certain individuals in the State should have. I approached the whole question from a certain point of view and I found very quickly, when I began to examine it from the inside, and got information which I did not have on the outside, that the position was quite different to what I thought at one time. I inquired what were the salaries received by professional men and others in the city, persons who would be living under somewhat similar conditions to senior civil servants. When I discovered that the salaries which people were able to get in professional life outside were very much greater than the £1,000 a year which I had been talking about, I came to the conclusion that it would be most unfair to penalise one particular section of the community, namely, those who were public servants, by putting them in a special position. I came to the conclusion that if we were going to reduce the salaries we would have to do it in a much more general way than by starting with that section of the community and insisting on a reduction of their salaries. I looked at the academic and other records of those who were in the service of the State, and I took some examples from amongst the commercial or professional community and, judging by the academic record and the record of ability which public servants had shown, there was no reason why we should say they were not worth as much or, if they had taken another career, they would not be able to earn as much as outsiders were able to earn.

When any Minister comes to appoint a civil servant to these boards he has to ask himself is the work which that particular civil servant usually does going to be interfered with by the new appointment, is the man capable of doing his original work together with the extra work that would be imposed upon him; is he able to do the two jobs, the second job in the time that might ordinarily be devoted by him to recreation. If the Minister is satisfied that the civil servant meets those requirements, and if he is suitable from the point of view of merit, then the Minister has no reason to discriminate against that civil servant in favour of somebody from outside. The other people will have their private incomes, too. Someone suggested that there is a difference because one person is private and the other is, so to speak, public. Perhaps there is something in that, but it must be remembered that this is a job something over and above the work which normally would fall to the officer appointed. I recognise, in relation to the salaries of civil servants and professional men, that there is a much greater security within the Civil Service and there is a pension, and in estimating the salary a person has, both these facts should be taken into account, especially when you are making a comparison with people in commercial life or in the professions.

Making due allowance for all these things, it seems to me that, so long as we have the system as it is, the best interests of the State are served by the appointment of such a man. Having taken all the circumstances into account, and feeling that he is going to do this job better than anybody else, and that the other work he is doing is not going to suffer, it seems to me that the best interests of the State will be served by such an appointment. Of course, if his other work is going to suffer, then the person concerned has to make up his mind what he is going to do about it. I am assuming it is not going to suffer. The remuneration can be fixed according to the amount of responsibility and the time that will be necessary in order to do the work. That will be done with the outsider just as with the civil servant. The responsibility is on the Minister who appoints a civil servant to one of these jobs to see that the work the civil servant is doing in his other office is not neglected.

I move to report progress.

Progress reported, the Committee to sit again to-morrow.
The Dáil adjourned at 9.30 p.m. until 3 p.m. on Thursday, 28th May.
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