I understand that the Minister for Finance, by leave of the House, wishes to make a statement.
Exchequer Bonds Issue, 1948.
I wish to inform the House that within a few days a new National Loan will be issued for public subscription. This announcement will scarcely come as a surprise to Deputies, in view of the notice of intention to borrow by means of a public issue given in the Budget statement of my predecessor in 1946 and 1947.
Not since 1941, when the National Security Loan was issued, has it been necessary for the State to invite subscriptions to a public issue. The proceeds of that loan were exhausted by 1943, but it has been possible to meet the capital outlay and budget deficits in the interval out of the proceeds of Savings Certificates and temporary borrowings. The resumption of State expenditure on development works, especially electricity and housing, since 1946 renders it necessary, however, to undertake immediately a substantial borrowing operation so that the temporary borrowings may be repaid and further capital outlay provided for.
I am, therefore, issuing at par £12,000,000 of 3 per cent. Exchequer Bonds, repayable at the option of the State in 1965, and compulsorily repayable in 1970. The trend of interest rates has been upward in the last 18 months and having regard to their present level there will, I am sure, be general agreement that these terms are reasonable.
The credit of the State is high, and since 1939 there has been a comparatively small addition to the national debt. Inflationary pressures are, however, still serious and it is more than ever desirable that State expenditure proper to be met from borrowings should be financed out of private savings. This is a special reason for hoping that the public will invest largely in the new issue. I am not seeking subscriptions from outside the State. Provision is being made in the prospectus for the possibility of a further issue of these bonds at a later date.
A substantial Sinking Fund will be attached to the bonds, as to all previous loans. The initial Sinking Fund provision will be £120,000, and subsequent annual provision will be on an increasing scale as bonds are extinguished by purchase and cancellation. The Sinking Fund, which will be provided out of ordinary revenue, will be a substantial safeguard for investors against depreciation in the capital value of their holdings.
On behalf of the various funds under my control, I am applying, on the terms of the prospectus, for bonds to the amount of £4,000,000, but I will be pleased rather than disappointed if the public response is such that I cannot be allotted this amount.
I shall endeavour to secure that, as far as possible, applicants for amounts not exceeding £5,000 will receive allotments in full.
The 4 per cent. Exchequer Bonds issue in December, 1939, carried the right of conversion at par into any subsequent public loan that might be raised during the emergency or for six months thereafter. In accordance with that undertaking, holdings of 4 per cent. Exchequer Bonds 1950-60 may be exchanged in whole or in part at par for the 3 per cent. Exchequer Bonds now offered.
The prospectus of the new issue will appear in the daily papers on Thursday, the 11th March, and when the subscription lists open on the following day (Friday, the 12th March) copies of the prospectus and forms of application will be available at banks, post offices, and stockbroking offices.
The list of cash applications will close not later than Friday, the 19th March, which is also the final date for applications for conversion of 4 per cent. Exchequer Bonds.
This is the first occasion since 1923 on which a public issue is being made without being underwritten and, although the terms should in themselves be sufficiently attractive to induce a favourable response from the public, I would appeal for the active support of members of all Parties in the House in assuring the success of the issue.
We have not had time to consider fully the proposed issue of Exchequer Bonds but, at first sight, the terms appear very favourable to investors, showing both a reasonable return having regard to present market conditions and a reasonable safeguard against capital depreciation. So well have the finances of the State been managed in the past that, as the Minister said, its credit stands high and during the whole period of the war and the post-war emergencies there has been comparatively small addition to the national deft. The circumstances are therefore favourable and we can confidently wish the Minister success with his loan.