I move for leave to introduce a Bill entitled an Act to apply certain sums out of the Central Fund to the service of the years ending on the thirty-first day of March one thousand nine hundred and forty-nine and one thousand nine hundred and fifty and to provide for the establishment of an American Loan Counterpart Fund.
Committee on Finance. - Central Fund Bill, 1949—First and Subsequent Stages.
Minister for Finance (Mr. McGilligan)
Leave granted.
Agreed: That the Second and Remaining Stages be taken now.
I move:—
That the Bill be now read a Second Time.
Can the Minister explain in any more detail than he did on the introduction of the Vote on Account this provision for the counterpart fund? Can the Minister explain Section 4?
I have said anything I wanted to say on that. I mentioned it when I was speaking on the Vote on Account.
Is it proposed to discuss it now or on the Committee Stage?
I think we can take it now. The proposal in Section 4 is to set up a counterpart fund which will be at the disposal of the Minister for Finance. This is a somewhat new idea introduced into the handling of the Marshall loans, as they are called. When I was speaking in the House last December I told the Minister for Agriculture that if he had encouraged the production of wheat instead of oats he would have saved $5,000,000 which were spent on the purchase of American wheat because of the Minister's success in getting wheat production here reduced by about 60,000 acres. I said that the reduction of the acreage under wheat and the increase in the production of oats created two problems for the people. One problem was the marketing of the surplus oats held by the farmers, and the other was that we would have to repay the American loan over the next 50 years. The Minister for Agriculture was quite indignant at my assertion. He said that it was, in fact, a "monstrous libel," and in column 1767 of Volume 113 of Dáil Debates, the Minister for Agriculture said:—
"I am going to give a further demonstration to the House of the truth of certain statements made by Deputies opposite. Deputy Aiken said that we had to import wheat and that we shall be paying for it for 50 years. The Deputy knows that that is not true. He knows that for every dollar of Marshall aid money we bespeak, a corresponding amount of sterling is put into the Central Bank and can be withdrawn at a moment's notice to discharge the debt.
Mr. Aiken: It is a debt.
Mr. Dillon: The money is there in the bank and it is a monstrous libel on this country to say that this debt will be a-paying for 50 years when our currency is deposited in the Central Bank to pay the debt whenever the person to whom it is due is ready to take it."
Now, the Minister for Finance may very well pass that off as the Minister for Agriculture passed off statements made by responsible people as "silly-billy" talk on the part of the Minister for Agriculture; he might even call it cracked-Jamesy talk. But the fact is that the spokesmen for the Government last December said that the money was going into the Central Bank, that it was going to remain there in sterling and that it could be paid out overnight to anybody who asked for it. The Minister's present proposition is that it should be taken out of the Central Bank; that we should empower him to take it out of the Central Bank to spend it or invest it in any of the ways in which Post Office Savings Bank funds can be invested. That seems to be a new idea. Last December the Government were prepared to leave this fund in the Central Bank and let that body invest it in the normal way. When the Central Bank invests its assets in the currency fund it gets interest on them in the normal way. As a matter of fact, the State benefits to a considerable extent because of the profits made by the Central Bank upon its investments. But, instead of leaving it to the Central Bank to invest, the Minister now proposes to take powers to invest this money in whatever type of securities he selects upon the list on which he is empowered to invest Post Office savings funds. Is it a fact that the Minister suddenly conceived this idea when he failed to get the full amount of the recent loan from the public? Up till then we had no hint that the Minister would not allow the funds to be invested by the Central Bank. The Minister, talking just now on the Vote on Account, was concerned because of the great amount of the bill of loan expenditure in the country on various capital debts of one kind or another.
In his recent appeal for money to the public, he stated that this was an inflationary situation and he wanted to get money from the saving public. The Minister knows himself that if he is spending money, whether borrowed or otherwise, on non-productive expenditure of various kinds in an inflationary situation, he is going to add to the inflationary pressure. I wish the Minister would make up his mind as to whether there is an inflationary situation or not. Certainly when he spoke in appealing for investment in the recent national loan, he talked about the danger of inflation and about the inflationary pressures that existed, but in framing his Budget last year he did not seem to be very anxious to avoid adding to the inflationary pressure if, by doing so, he could avoid political difficulties for himself. Undoubtedly in an inflationary situation, either the borrowing or creation of money for expenditure on current consumption is adding to inflation and that is what the Minister did in his Budget last year. Not only did he borrow money to pay for the bread we ate, but during the year he also borrowed money for a number of other things that should have been met out of current revenue. Not only did he borrow money to spend on current consumption, but he actually realised the capital assets of the State. One such realisation was the sum of £466,000 which he took out of the Post Office Savings. The law allowed him to do that, but that law, which was passed in 1930 or 1931, was never operated except once by a previous Cumann na nGaedheal Minister. I think the last time it was operated was in 1931.
I should like the Minister, in concluding the debate, to give us some idea as to his outlook on a proper financial approach to the present situation. I asked him the other day a question as to what the Government meant by saying to the European Economic Committee in Paris that this country had followed orthodox financial principles in the past in regard to the Budget and intended to stick by them in future.
I asked the Minister what were the orthodox principles referred to and he gave me the dictionary definition of "orthodox", that they were generally accepted principles. When I tried to get some further information by way of supplementary questions I did not succeed in extracting it. I asked him by whom were they to be accepted as orthodox, who are the experts who will accept as correct financial procedure the spending of borrowed money or the spending of created money in an inflationary situation for current consumption. There is no one except a crackpot with the same crazy ideas as the Minister for Finance who would think that the cure for all our ills is to print money, or who would put forward the suggestion that the Minister for Finance should do what he actually did in this financial year in what he called an inflationary situation—borrow money and spend it for the bread subsidy. He borrowed money to spend on a lot of other things which I think he should have met out of current revenue in an inflationary situation.
The Minister is going to sell us this idea of taking this £24,000,000 or thereabouts—I think that is about the present accumulation in the Central Bank—and using it at his sweet will for investment. He will have $89,000,000——
Does the Deputy believe there is £24,000,000 in the Central Bank at the moment?
The Minister borrowed $89,000,000.
It takes a long time to come.
That represents about £22,000,000.
Do you mean in the account at the moment?
That is what is borrowed from America.
I am talking about what is in the account.
I do not know what is in the account.
There is nothing like $24,000,000 in it.
The money was borrowed.
Mr. de Valera
It would have been much better if, in introducing the Bill, the Minister had told us how much was in the Central Bank.
There might be £2,000,000 at this moment.
I find it difficult to credit that——
I find it difficult to find any more in the account.
——in view of the fact that the Minister has borrowed $89,000,000. At $4 to the £ that is roughly £22,000,000.
If you are trying to convince me——
I am not trying to convince you at all. I have asked the Minister to give us some more information. I can only make my calculations from published facts. One published fact is that the American authorities or the Export-Import Bank have put $89,000,000 at the Minister's disposal. It may be more than that, but that was the last figure I saw. I know the Minister told us he was going, for every dollar he got in America, to put into the Central Bank an equivalent amount of sterling. As a matter of fact, the quotation I gave from the Minister for Agriculture showed quite clearly that that is what he understood was being done.
Mr. de Valera
The best thing is to get from the Minister the actual amount.
$8,000,000.
Mr. de Valera
What is the meaning then of all these other statements that have been published?
What happens is that a line of credit is opened and you have got to get goods ordered on that line of credit. When goods come over here, they are sold and we collect from the people to whom they are sold. Then we are in possession. There is a long, roundabout course to be followed.
Anyway, at some time or another——
There will be a lot of money in that fund.
——the $89,000,000 that the Minister borrowed from the United States will appear in the Central Bank. He will take that $89,000,000 and it is going to be put into a counterpart fund over which he will have control and can invest without coming back to the Dáil.
I suppose I could in certain circumstances.
There is no doubt about it. The Minister has set out the securities in which he is asking the Dáil to authorise its investment. If we pass this Bill, the Minister at his own sweet will can invest the moneys. Section 4 (5) of the Bill states:—
"The Minister for Finance may from time to time, as he thinks fit, invest money for the time being to the credit of the fund in any manner in which moneys of the Post Office Savings Bank are, for the time being, authorised by law to be invested and may realise any such investment."
The Minister without coming back to the Dáil for any further authority can invest these moneys in new loans issued by the Government, or old Government stock, or in the stock of local authorities and may realise these at any time he likes.
Then there is this scheme that is floating round and which is not very clear yet, the scheme that the Minister for Agriculture propounded in order to save the Government on a recent Vote when he said that he was going to spend £50,000,000 on land drainage and reclamation. I believe, and have always been a believer in land drainage and reclamation and the improvement of the soil. Many Fianna Fáil Ministers for Finance gave more than lip-service to that particular principle. They recognised, however, that land reclamation could in many cases be regarded more as a social service than as an actual investment, that there are certain places in the country where farms are very small, where life is hard, and that from a strict accountancy point of view you could not say that the capital sunk in drainage and reclamation would be profitable from the point of view of showing a monetary profit on the sum invested, but that from the social point of view the land so improved might add to the comfort of the small families in the congested districts and might actually bring the small uneconomic holder some way towards the economic level. We were quite prepared to say that, even though it could not be justified 100 per cent. from the point of view of financial investment, it was a good social investment and that from the point of view of a social service it should be met out of current revenue. We did tax and proposed to tax last year to the tune of £500,000 in order that the Farm Improvements Scheme might go ahead.
The Minister for Agriculture is proposing to make a start on what we would like to refer to as his £50,000,000 scheme next year. It may do a lot of good work. I hope that it will not be as expensive per acre as some of the experimental drainage schemes last year. Some of them, I understand, cost over £100 per acre. According to the reply he gave us, the average was £46 18s. 0d. per acre. You can buy very good land in this country for £20 an acre. If the £50,000,000 is going to be spent on draining callow and bog lands and other lands like that at a cost of £46, or even up to £120 an acre, I do not think an investment of that kind would be a very profitable Exchequer investment. I do not know whether the Minister for Finance intends that the Minister for Agriculture should pay him interest on the loan.
Take, for instance, the £22,000,000 that he has bororwed to date from the Export Bank. He deprives the Central Bank of that money. That is not invested by the Central Bank. The Minister takes it and invests it in Government funds, or in a Government loan, to reclaim land that will not be worth £5 per acre at a cost of £120. I do not think it would be a very good security for the repayment of the Marshall aid. It is certainly going away from what the Minister for Agriculture said last December, that for every dollar we get we had an equivalent in sterling in the Central Bank which should be repaid. It is quite a different proposition to try to get it out of the callow land which has been drained at a cost of £120, and which might not be worth £5. There is no doubt that it would be a very good social service to improve a lot of the poor lands in the congested districts. But, if we are going to do that in an inflationary situation such as the Minister for Finance says exists, I think it should be met out of current revenue and not out of borrowed money.
I think it would be a good thing if before every Budget we had a system of discussing at some length the financial situation of the country to find out how much money should be raised by borrowing and how much by taxation. That is a calculation which could be made if the Minister for Finance would give us the facts of the economic and financial situation which are at his disposal normally. If there still exists, as the Minister says there exists, an inflationary situation, it is a wrong policy from the point of view of any financial expert whom I would regard as an expert to spend borrowed money for current consumption. When the Minister for Finance brings forward his Budget this year, if the inflationary situation still exists, I hope he is not going to budget for borrowing more money for current consumption during the next financial year. The Minister realised a lot of capital assets during the past year that he cannot realise again. It is not every year that he can sell Constellations, nor is it every year that he can draw £466,000 of a surplus from the Post Office Savings Bank. If he is going to have expenditure for current consumption I trust that he will face up to his responsibilities and collect the money from the people to do it. It is a very poor investment for the people of this country if he is going to save them one year from taxation at the expense of adding to the inflationary pressures. It may be politically easy for him to do it, but he is going to create more difficulty for the country.
I do not want to reply in any detail to-night to the number of things that the Minister for Finance referred to in his Vote on Account. He complained very bitterly that under the Fianna Fáil Government we had been examining a number of schemes for the capital improvement of this State. He did not, as I say, tell the whole truth of what was in the files. He will find from those files that the Government was anxious to have a series of public works to meet a depression so that if there were unemployment and the men could not be put to work in the normal way on ordinary production, there should be a scheme of capital works of a public nature that would take up the slack. I make no apology at all for the fact that the Government was anxious to have prepared plans for the erection of a series of public buildings, Government buildings, a national library in which we could house the great treasures that are in The National Library at the present time dumped away where nobody can get at them, and so forth. It was intended that the plans should be ready so that they could be put into operation whenever there was a slack in the building trade. There was also the proposition that we should build in the Park instead of in this area. The proposition of building in this area was thoroughly examined and finally turned down by the Government. The idea was that we should build in the Park instead. As Minister for Finance at that time I was anxious that if the Government encroached on the Phoenix Park an equivalent area of land should be made available to the citizens of Dublin who were thereby deprived of that area of the Park. I made the suggestion that we should see what we could do towards getting the valley of the Liffey out to Chapelizod so that that could be added to the Park and the public would have the right of access to the river. I make no apology at all for that, nor do I for the fact that our Government was trying to have a scheme of public works which could be put into operation to take up a slack in employment in the building industry.
The Minister also spoke here to-night about our crazy idea of spending £2,000,000 on the erection of offices for Government Departments in the Castle. Two million pounds sounds very big. That was also part of the scheme of public works which it was intended should be proceeded with in a slack time in the building trade. I am going to put this question to the Minister one of these days. What premises has he bought recently in order to house Government Departments? I think that if he compares the amount of money he paid for very small accommodation with the proposition that we should spend £2,000,000 in order to house 3,000 or 4,000 civil servants it will not sound such a bad business. The other day I understand that the Minister for Finance or the Department of Public Works said in answer to a question that they had paid £15,000 for premises not 150 yards away from this House. The Minister for Finance himself is quite well aware that only a few years ago that property changed hands at £3,500 and yet he paid £15,000 for it. He knows that it only changed hands at £3,500 because it was his political Party who sold it.
I think there was an understanding here that the division would take place at a quarter to 12.
Mr. de Valera
Twelve o'clock, I think.
The Minister can, of course, refer to Government files. We have not the same access to these at the present time but I want to say that I make no apology to him for trying to solve the problem of housing our civil servants so that they would be under proper supervision and would not be stuck in holes and corners all over the city. It is probable that we could get, by the sale of a number of private houses that the Government Departments are occupying at the present time, the money to build one or two proper office buildings to house large number of civil servants. It would have been impossible to do the work that the Department of Industry and Commerce and the Department of Supplies did during the war if we had not had the good fortune to build the offices in Kildare Street.
They were not intended for that purpose.
It happened to have been built in 1937 when we could get material for Government offices.
It was not intended for that purpose. It was planned for the Electricity Supply Board.
Mr. de Valera
I should like to speak for a moment. I want to be clear about this. There is a credit for some $80,000,000. I take it that is correct. You can draw up to some $80,000,000.
$89,000,000.
Mr. de Valera
With that credit certain goods that our people want can be bought. The dollars will be given so that they can purchase these goods which they require. They pay you for the dollars and the money is put in the Central Bank. Is that correct?
Yes, that is correct.
Mr. de Valera
You cannot make use of it there because it is frozen. In order to utilise it you need to put it into another fund. There are investments of various kinds indicated in the Bill. Are you taking the power to utilise the moneys in the fund for financing drainage schemes? I just want to know are we right in assuming that in taking this power you will have power to enable you to utilise it for the drainage scheme.
You say "drainage schemes" first and then "the drainage scheme". For the latter there will have to be the sanction of legislation or an Estimate.
Mr. de Valera
But that money will be available for it?
Not until I take a further step.
Mr. de Valera
As long as that money is at your disposal you would not have to borrow it and if supply is asked for from the Dáil this money will be there to meet it.
For the repayment of the American Loan I know that our credit is sufficiently good to meet our obligations ultimately even if the money which is put into the Central Bank is used. I know that we have not reached the stage when we could not meet a debt of that sort but it would be good finance to make definite provision for it. By putting it into the fund for safe investments it would be realisable quickly and you could meet your engagements at any moment. If you sink it in drainage and expend it on this drainage scheme obviously the money would not be in form for the repayment of your loan. What we want to know is if you mean this. It would be much better for the Dáil to know what is in your mind regarding it and what is in the mind of the Government, whether it is intended that the money should be utilised to provide the cash necessary for the carrying on of the drainage scheme. We might have differences of opinion from the national point of view but we are anxious to know what is the intention. We want to know if the intention is to put it in ordinary stocks and have a good realisable asset against it, or whether you are going to sink it in drainage.
Would the Deputy indicate whether he thinks it would be wise to invest the money in foreign securities?
Mr. de Valera
At this moment I am asking for information. I said that we might, when we had the information, differ as to the advisability of a certain course or not, but the Dáil is entitled to know, the country is entitled to know, what is the Minister's intention, and then let us differ according to our information, but I am in the dark.
The reason I asked the question is that the Deputy refers to pouring the money down the drain.
Mr. de Valera
I simply said "sink it in drainage," and you cannot say that you have an asset there that can be realised in money form.
You are quibbling now.
Mr. de Valera
Will the Deputy let me make my own speech? I am asking a question. I am asking information from the Minister for Finance. We are in charge of the nation's business and we are entitled to know from the Minister for Finance what he is going to do with the money, whether he wants an asset which will be realisable or an asset which will not be realisable. I think the Minister should tell us.
I want to ask a question of the Minister for External Affairs. I wanted to speak, but it is too late. He asked across the House whether we are urging that it should be invested in foreign investments. The Minister for Finance has taken that power, and he said on the introduction of the Vote on Account that he had taken the right to invest it in English securities.
I followed the lines laid down for the investment of Post Office Savings Bank money.
That is the answer to the Minister for External Affairs' question
The question of the Minister for External Affairs as to the wisdom of investing in foreign securities was a proper one to put. To Deputy de Valera I would say, that if the choice were left to me as to the investment of these moneys in English investments so as to be able to meet a demand on the fund at any time, I would not so invest. The purpose of this section is to get these moneys out of the account and eventually into the Exchequer. I should like to have the fund utilised in the way Exchequer moneys are. I could use these moneys for the Electricity (Supply) Acts or for any purpose authorised by Estimate, but we have as yet no Estimate for the drainage scheme promoted by the Minister for Agriculture. I hope that some of these moneys will go into that scheme. The situation we are faced with is that we have got money from America. When 1952 comes, but not until then, we have got to provide for the payment of interest; and when 1956 comes, but not before that, we have got to begin to repay capital. Before these dates we have got to make our financial plans accordingly. One way would be to exact from the taxpayer whatever would be required to meet the interest on the sum and the repayment of capital. Such provision is made in the case of the 3 per cent. Exchequer Bonds by way of the sinking fund arrangement. Alternatively, it would be easy to arrange for the investment of these moneys in various schemes which create sufficient assets to ensure a direct return to the Exchequer, say, in 1956. A third way would be to assist increased production in the country, enabling the taxpayer more easily to bear interest charge and capital repayment. The question for the House eventually will be whether this money should be sterilised by being put into the Central Bank and left there, letting the Central Bank invest it, say, in English securities. I would not at all urge that that should be done. As an alternative, it may be suitably invested in an existing development, the controlling body of which makes interest payments with its capital amortisation obligations which might be put in gear with the obligations associated with this fund. Otherwise, the fund may be used for development and possibly for the payment of interest and capital repayment by resort to the general taxpayer. General productivity does make assets even though these do not provide for a direct return to the Exchequer.
Mr. de Valera
The Dáil will have an opportunity to deal with it.
The moment this Bill is passed it will be open to me to invest that money in electrical development.
Mr. de Valera
You have simply got a handy loan.
Take this situation. If next year schemes for capital development required that I should seek another £10,000,000 loan from the public and if I had at that time £10,000,000 in this fund, would anyone suggest that I should sterilise the £10,000,000 in the fund and raise the equivalent from the public?
Mr. de Valera
I would not.
The Deputy realises that the account of the fund should be laid before the Dáil each year.
Question put and agreed to.
Agreed to take Committee Stage now.
Sections 1 to 3, inclusive, agreed to.
SECTION 4.
I should like to raise a point in connection with sub-section (5) of this section. In the ordinary way, this sub-section meant that if the Minister wants money for capital purposes he comes to the House and indicates that he is raising a loan for specific purposes.
No, I do not.
For capital purposes.
That is it—capital purposes.
The Minister, under sub-section (5), when introducing this Bill, more or less quibbled that he had not control over this money. In introducing the Vote on Account he referred to it. He said that he has absolute and sole control over the use to which that money would be put.
Where did I say it?
The Minister said it in the introduction.
On the Vote on Account?
Yes.
I certainly said I wanted it, but at the moment it goes into an account.
In column 1331 of the Official Report of Tuesday, 22nd March, 1949, there appears the following paragraph:—
"The Minister for Finance may from time to time, as he thinks fit..."
That is the section.
Yes, but you are introducing another section in order to give you power over this money in the same way as you have power over the Post Office moneys. That is what you stated.
That would be the effect of this clause.
It is because the Minister has not that power at the moment that he is introducing this section to give him the very same power as he has in relation to the Post Office funds. First of all, this is a loan from a foreign country. It has been the practice in this House, right from the inception of this State, never to put the Government, as such, with its ordinary State loans, in the hands of another Government—apart from the manner in which individuals invested them. Will this not ultimately put the American money into State loans? The Minister may say he wants to raise £10,000,000. He can fill it all from this money, every penny of it.
He is putting it into capital development.
No country, as I understand it, issues Government securities to another Government.
We are not doing that.
This is what it will mean.
No.
We have been given very little time to consider this new principle in the matter of State finance. Apart from what Deputy Aiken and Deputy de Valera say, this is quite a new position. I think we ought to be given an undertaking by the Government that there will be Dáil control as to how this money is going to be utilised. Nobody objects to its being used for capital reproductive purposes. Naturally, that is the proper thing. We should, however, leave it in a position where it is not a Government issue subscribed to by another Government.
Sections 4, 5 and Title agreed to.
Bill reported without amendment.
Question—"That the Bill be received for final consideration"—put, and agreed to.
Question—"That the Bill do now pass"—put.
Mr. de Valera
We are not opposing it.
Question agreed to.
This is a Money Bill.
The Dáil adjourned at 11.55 p.m., until 3 p.m. on Wednesday, 30th March, 1949.