Dáil Éireann debate -
Wednesday, 2 Mar 1949

Vol. 114 No. 5

Local Loans Fund (Amendment) Bill, 1949—Second and Subsequent Stages.

Minister for Finance (Mr. McGilligan)

I move that the Bill be now read a Second Time. The object of this Bill is to make provision for further issues from the Local Loans Fund in respect of local loans. The Local Loans Fund Act, 1935, under which the fund was established, limited issues to an aggregate of £5,000,000, the idea being that when that limit was nearly reached Parliamentary authority would be sought for its extension by new legislation. The limit was raised to £11,000,000 by the Local Loans Fund (Amendment) Act, 1937, and to £17,000,000 by the Local Loans Fund (Amendment) Act, 1940.

In the period from the 1st May, 1935, when the fund was established, to the 31st January, 1949, loan issues from the fund amounted to £16,861,612, of which £12,026,114 was for housing loans, £3,064,531 for public health loans, £780,503 for a temporary advance under the Finance (Miscellaneous Provisions) Act, 1945, in connection with stock redemption operations, £595,936 for vocational education loans and £394,528 for loans for other services. Of the housing figure of £12,026,114 over a half or £6,279,959 was for rural housing under the Labourers' Cottages Acts, £4,742,896 was for urban housing under the Housing of the Working Classes Acts; loans for the purposes of the Small Dwellings Acquisition Acts accounted for £915,541 and the balance of £87,718 was in respect of Gaeltacht housing loans.

Sanctions of loans over the same period, including a carry-over from before 1st May, 1935, amounted to £22,888,033. As sanction is usually for all of the loan and as loans are ordinarily paid out in instalments, the aggregate of sanctions up to a given date is substantially more than the total issued up to that date. The statutory limit of £17,000,000 applies only to issues.

This limit is now almost reached and has to be extended. The Bill provides for an extension to £25,000,000. The additional £8,000,000 should do for some years, when fresh legislation will be required. It is desirable that the Bill should become law as early as possible.

Mr. Aiken

This Bill proposes to increase the amount of money available from the Local Loans Fund for issue to local authorities. The local authorities, undoubtedly, will want to draw very largely on the Local Loans Fund in future and all we can hope is that they will be enabled to draw largely from it this year when there is such great unemployment in order to get ahead with works of capital development. Unfortunately, the rate of development of works of a capital nature was strictly limited for a number of years during the war. Now that material is available and that we seem to have more men than we can employ at the present rate of development, it is urgently necessary that money should be provided to local authorities on reasonable terms in order to get ahead with development.

I do not know whether the Minister has considered a statement made last week by the Minister for Local Government in relation to this Local Loans Fund. He suggested that if the county councils wanted to get ahead with the restoration of roads and did not want to increase their rates they could approach their treasurers, their treasurers being the banks. Naturally, the banks would charge a very much higher rate of interest than even the present Minister for Finance is charging for loans out of this Local Loans Fund. Last year the Local Loans Fund was used to pay portion of the grant to local authorities.

Mr. McGilligan

For roads?

Mr. Aiken

According to the Minister's statement to-day, there was a Road Fund advance for £.69 millions.

Mr. McGilligan

When did I say that?

Mr. Aiken

In to-day's statement.

Mr. McGilligan

About this Bill?

Mr. Aiken

About the capital expenditure that occurred.

Mr. McGilligan

It is mainly for housing.

Mr. Aiken

Last year there was advanced out of this fund £.69 millions to the local authorities.

Mr. McGilligan

I should like to see that statement.

Mr. Aiken

"Road advances were made to the amount of £.69 millions."

Mr. McGilligan

Not out of the Local Loans Fund. I did not say that.

Mr. Aiken

It was made out of the Local Loans Fund into the Road Fund.

Mr. McGilligan

Surely the statement I made referred to the uses to which the loan was put last year—the £12,000,000 Exchequer bonds.

Mr. Aiken

Yes. Whether it went through the Local Loans Fund or directly into the Road Fund, £.69 millions were paid to the local authorities. Last week the Minister for Local Government stated that local authorities who did not want to increase the rates could not get an advance out of the Local Loans Fund, but that they could get it from their treasurers. The difference as between the county councils borrowing from the banks, their treasurers, and borrowing from the Local Loans Fund represents a couple of per cent. or near it. If the local authorities proceed in that fashion it is going to put an additional burden on them this year when a number of them are already assuming very heavy burdens for the improvement and restoration of roads. When the Minister says to-day that he wants to get money for the loan from the public in order to avoid inflation, surely he must see that, if the local authorities are going to borrow from the banks, their treasurers, that is going to add to the amount of money in circulation in the country.

An Ceann Comhairle

Will the Deputy say whether this Bill alters the purpose of the Local Loans Fund?

Mr. Aiken

It does not. It is going to give the Minister for Finance power in regard to another £8,000,000, and I think that, with your concurrence, it is proper for me to discuss that.

An Ceann Comhairle

I think the Minister said that should be from another fund.

Mr. Aiken

He did not offer to do that with the Local Loans Fund.

Mr. McGilligan

It never has been done.

An Ceann Comhairle

This Bill does not alter the purpose of the Local Loans Fund.

Mr. Aiken

I agree. When the Minister is replying, I should like him to say why he does not propose to alter the rate of interest for loans out of the Local Loans Fund. He will remember that a large amount of the support that was got for the various Parties now comprising the Coalition Government was got on the understanding that, if they were given the power to control the affairs of this country, the rate of interest, instead of being the exorbitant one of 2½ per cent. which the Fianna Fáil Government was charging, would be nil. But, instead of the Coalition Government reducing the cost of money and the interest charges on local loans from 2½ per cent. to nil, and giving the local authorities all the money they wanted, it has pushed up the rate of interest to 3¼ per cent., and is very choosey about the issues out of the Local Loans Fund to local authorities.

It would be a good thing for the country if, at this stage, the Minister would explain why he has changed his mind in that regard. I have always thought that he was slightly crazy in some of the things that he said in the old days, but a lot of people believed him and a lot of support was got for the Coalition Parties on the policy that they propounded. The Minister obviously has changed his mind very drastically. I should like to hear from him why he has done so. I should also like to put him this question: would it not be less inflationary in the present state of affairs to give money out of the Local Loans Fund to the local authorities rather than to send them to their treasurers, the banks? I think the Minister will agree with me that every bank loan increases the amount of money in circulation within the country. He himself very properly pointed out in his statement to-day that he prefers to get a new loan from the general public, because in that way he will be decreasing the inflationary pressure.

I should also like to ask the Minister to explain why he has not used a larger amount of various State funds for investment here rather than abroad. He used to sneer very often at the waste paper that Fianna Fáil was buying when it made investments in British Government securities, but he himself, in reply to a question last July, told me that instead of decreasing the amount so invested he had increased it by £3,750,000. It would be interesting if the Minister would explain the steps of his education in that regard, and explain thoroughly to the people why he changed his mind on it. A discussion of that kind would be of some use to the country. It might prevent a number of crack-pots getting votes for their ideas, as occurred in the last general election.

I want again to stress the fact that a number of the borrowers out of this Local Loans Fund are the county councils and other local authorities, and that this year they are facing very hard days: that their grant for road improvement was cut down from £4,600,000, to £2,200,000, and that everything that possibly can be done to ease their burdens should be done. I would like the Minister to say why, in this financial year, he could not give them loans out of the Local Loans Fund rather than to send them to their treasurers, the banks, who will charge them a very much higher rate of interest.

Mr. M. O'Reilly

If it is the case that more money will be available to local authorities this year I am very glad to hear it. I am sure the Minister is aware, or ought to be, that in the last two or three months there has been considerable unemployment and, consequently, a considerable amount of emigration from the country. That emigration has been due, in the first place, to lack of employment, and in quite a number of cases to the want of housing facilities. I believe that what the Minister has announced is a very good thing. I believe it will help to increase house building and will thereby provide necessary employment. It is true that the local bodies saw the difficulties as we all saw them—that since we are passing through a period of inflation, the rents of these houses will have to be abnormally high. For that reason I consider that it was a mistake to increase the interest on these loans. On the contrary, I believe the Minister should have made an effort to reduce it. It would, to some extent, help to reduce the rents that have to be imposed on these houses. The main reason why I am glad of this new move is that I hope it will stamp out this abnormal emigration and the enormous amount of unemployment we have in the rural areas. Hardly a day, an evening or a night goes by but some unfortunate people are coming to me looking for work. There is not a bus leaves County Meath that does not carry numbers of young people on their way to Great Britain. Some go to the United States but most of them go to Great Britain. If that is not stopped in some way or another there is not much use in building houses. There will be nobody there to build houses and when we come to all this development that is proposed we shall have nobody to employ. I think this is a wise move on the part of the Minister. It may be a little late. Honestly and candidly I believe that it is somewhat late.

Mr. McGilligan

What does the Deputy mean by too late?

Mr. M. O'Reilly

I mean that those who would both do the work and occupy the houses will have gone.

Mr. McGilligan

We have not reached the limit of the money. There is no question of the money keeping back this development.

Mr. M. O'Reilly

There is the question, of course, of the high rate of interest that is charged and the difficulties—wherever they come from—of the local bodies to build. If the local bodies had been encouraged sufficiently the people would not have had to emigrate and would have gone into the houses. Therefore, I am very glad that steps like this are being taken. It is an indication and an encouragement to the people that there is some hope in remaining for a little time longer and trying to see what luck will bring.

Mr. Bartley

I want to ask the Minister to say in his reply if money will be available to local authorities for the implementation of the Small Dwellings Acquisition Act. Has he any information as to the extent of the new amount of the loan which will affect the operation of that Act? I want to know what effect the new moneys made available will have on the administration of the Small Dwellings Acquisition Act. That is the Act by which the local authorities gave loans to the people on the security of a holding for the erection of houses. The present position is that you can get a grant from the local authority. Some counties, perhaps because they did not wish to raise money on the high rate of interest, have not adopted the Small Dwellings Acquisition Act or, having adopted it, they have raised a certain amount of money, have spent the money and let the matter drop. I want to know if it would give new impetus to county councils to readopt, where they have already dropped it, the Small Dwellings Acquisition Act for the purpose of giving people loans to supplement the housing grants.

Mr. McGilligan

There is no change with regard to the Small Dwellings Acquisition Act. That money has been provided before and money will be provided again. The operation of that will all depend on the Local Government Department, but the provision of money is now being made and the limit has been raised. So far as this particular estimate is concerned, no change has been made at all. I gave the figure as being something short of £1,000,000 already authorised in connection with the Small Dwellings Acquisition Act.

I do not know what Deputy O'Reilly is driving at. Up to this the limit that was provided by the standing legislation was £17,000,000 and is an extensive limit. There have been moneys made available to local authorities in connection with housing. Twelve million pounds have been approved for housing. There are more houses being built at the moment than ever before. There is more money in circulation in the country, and I would call this a type of economic development scheme. Existing advances to the local authorities from outside for capital developments, loans and smaller matters are running at the moment at about £3,500,000 higher than they were in the last financial year. Three and a half million pounds more made available must have an effect on the problem of unemployment. If I take off £1,000,000, which in the year we are comparing with was appropriated to Aerlinte, and most of which was for the purchase of machines, the amount of money provided this year is about £4,500,000 higher than the previous year. That must have its effect on unemployment.

Mr. M. O'Reilly

Do you not know the figure?

Mr. McGilligan

Yes, I do. I am explaining it to the people who complain of money. There is at least £4,500,000 more being provided.

Mr. M. O'Reilly

The money must have been held up somewhere.

Mr. McGilligan

It has certainly not been held up by me. It has gone out of my hands.

Mr. M. O'Reilly

That is a good thing to know.

Mr. McGilligan

It is a great thing to know that money is there and has been made available. It is not being held up by any Governmental agency. There is some local agency holding it up.

The question of roads has, of course, to be dragged into this debate. The ex-Minister, Deputy Aiken, is quite concerned about the moneys for roads being cut down. When he was in the Government he agreed, as he said in a communication to the local authorities, with reluctance, to extend the road grants for one year. He viewed with astonishment the brazen proposal to make these funds available for a second time. He reluctantly agreed but, at his request, his colleague in the Department of Local Government warned the county councils that this was only a yearly grant.

Mr. Killilea

All the county councils asked for this year was another yearly grant.

Mr. McGilligan

But the astonishment and reluctance, of course, are not his responsibility now.

Mr. Aiken

It was not an absolute refusal. Four million six hundred thousand pounds were provided.

Mr. McGilligan

There was a certain amount of money agreed, and that money has been spent on the reconstruction of the roads. The roads got all the money that was supposed to be required for the reconstruction scheme and this year more money than was normal has been provided. There was all this nonsense about getting a lot of people to fill the Park with fuel and now we cannot get rid of it. Am I to provide money to put on to the roads when the money has already been provided and continue that for ever more? Is this to be regarded as an annual burden? No one can say that road-making is an industry. It does give employment but it is uneconomic type of work. We prefer to divert money from that to all these other schemes. The question is to provide money or not to provide money for the roads. With the greatest of ease I can agree to money being provided—it does not cost me anything.

Mr. Killilea

I wonder what other industry in this country employs more labour than road work.

Mr. McGilligan

I am not going to call it an industry.

Mr. Killilea

I am not calling it an industry. I asked what industry employs more people than road making.

Mr. McGilligan

On that argument we could be through with all business and put everybody on the roads.

Mr. Killilea

I am not arguing. You can twist things over there but you cannot twist them that way.

Mr. McGilligan

I am only putting it that road work may be valuable for the purpose of providing employment in bad days but, compared with development work, road work must take the second place.

I do not know that there is any other point I have to answer. When the Deputy produces to me an exact quotation from the Dáil debate in which I said moneys should be advanced to the Local Loans Fund at low interest rate, I will answer.

Mr. Killilea

A lot of things were said by way of election promises.

Mr. McGilligan

The Deputy talked about paper assets and Deputy Lemass was kind enough to adopt a phrase about paper claims. It is a correct phrase and in the days when I was talking I was correct in saying that these were wasting assets. I spoke, I think, in 1945 and the comment was raised that I was causing a scare in the country. I said our assets would go down in value and I was told that was a shocking thing to say. All I said was that they had gone down in value, and everybody now accepts that they have gone down by half. I spoke in those days about the inadvisability of investing money abroad. I still have the view that it is better to invest money at home. I think the fall in the value of foreign held assets—the diminution—has stopped. It is not proceeding at such a rate. Money invested in England has depreciated, moneys invested there pre-war have depreciated considerably, and that was the insane policy that was referred to.

Question agreed to.

Agreed to take the remaining stages to-day.

Bill put through Committee without amendment, reported, received for final consideration and passed.