As to the question of urgency which Deputy Davin has raised, the forms in connection with this operation were issued on 8th June and must be returned by 7th July. That is the reason why it is urgent.
Committee on Finance. - Government Loans (Conversion) Bill, 1951—Committee and Final Stages.
Sections 1 and 2 agreed to.
SECTION 3.
Question proposed: "That Section 3 stand part of the Bill."
Is this the section——
Did I understand the Minister to say that he desired to leave the matter over for discussion?
No; I suggested that if we wanted to discuss any particular point in the Bill we might do so on the Committee Stage.
Now?
Yes, if appropriate.
Would the point mentioned by me arise appropriately on Section 3?
I think it might, as Section 3 does prescribe "where the holder of stock applies for conversion of his holding", and on that section the whole question is as to whether we should make the application for conversion obligatory.
It is foolish of the Minister for Finance to be trying to score silly little points when I direct his attention to this matter. Of course, he knows that I know that in his Conversion Act the provision which I recommend was present. He knows that I know that in this Conversion Bill the same provision is absent. He knows that I know, and he knows that I know that he knows, that there are two well supported views amongst financial thinkers—one is that if a prospectus contains an assurance to the subscriber to a loan that on a certain given date he will receive cash, to do anything but give him cash is in some measure to abridge or depart from the undertaking contained in the prospectus. That is what I call the antediluvian view. It seems to me that what matters is that the undertaking given in the prospectus be honoured in the letter and in the spirit. But the public convenience should be consulted and the 1,000 holders of national loan should not be put to the trouble of correspondence with the Department of Finance simply to salve the antediluvian conscience of certain strict financial theorists who maintain that the value of the security is in some degree abridged unless this very specific undertaking is carried out to the letter.
In fact, what happens is that some citizen of this country or elsewhere owns £100 worth of stock, and unless he notifies through his bank manager or directly to the Department of Finance on the appropriate form that he wants conversion, he will get his £100 in cash back into his hands and will have to go through all the abracadabra of reinvestment. If the suggestion I made to the Minister for Finance were adopted, due notice would be given, by publication to all, that the redemption date was so and so. If they wanted cash, all they had to do was send a halfpenny postcard to ask the bank manager or stockbroker or anyone they cared to instruct, to send it in. If they did not want cash, by presenting their stock certificate they would get a stock certificate of similar amount of the conversion loan. Now, so far as I know, if they do want to convert, they must present their stock certificate; if they do want cash, they must present their stock certificate. All I want to do is to save the individual citizen and the Treasury the expense and annoyance of going through a lot of useless abracadabra, and I do not believe the provision I suggest will reduce the intrinsic value of any loan made by this or any succeeding Government by the millionth of a millionth of 1 per cent. of human confidence. I imagine the proviso has operated elsewhere. It has certainly operated in this country in respect of previous loans and I deprecate this unnecessary rigidity which it is sought to revive in this Bill. If it is to be here revived, it does suggest that on a previous conversion operation the Government of the country then in office in some measure departed from the strict spirit of rectitude—which I do not believe it did. I believe that it took a very sensible businesslike move in the right direction and I would deplore a reversion to the archaic and antediluvian procedure here envisaged.
Would the Minister tell us if it is certain that if the holder of a conversion loan does nothing, he gets his warrant automatically?
I do not know whether to regard it as a tribute to my sweet receptiveness that Deputy Dillon should consider me more susceptible to persuasion in regard to this matter than my predecessor was. The Bill as I am introducing it is the Bill which was submitted to the Government by my predecessor and approved, I assume, in the exercise of its collective function, by the Government as a whole for introduction here. I do not want to base the argument for the section as it stands merely on that fact. I think we should have regard to what Deputy Dillon has said himself. He said that the conditions upon which a loan is issued should be honoured in the letter and in the spirit. I am not so sure that the law would take very much account of the spirit in which a public undertaking is given, but it certainly would take into consideration the letter and the express terms in which a public undertaking is given. The undertaking which was associated with, I think, all the loans covered by this conversion operation is this, that the Government undertook to redeem the stock at par upon giving due notice after a certain date. That was the undertaking that was given and it is to honour that undertaking in the letter and, I think, in the spirit, too—if I may introduce the spiritual element in this context —that the section has been drafted in its present form. Redemption is not conversion and a conversion operation is certainly not redemption. When we talk about conversion what we really mean is that we are offering to the holders of existing stock an opportunity to make a fresh investment upon terms different to those attaching to their original investment. In these circumstances I think that my predecessor was wise and I think that it is in fact an improvement from the point of view of the stockholders and investors on the Act of 1935 for which I was responsible.
Are you not now declaring that the 1935 Act was illegal?
No, I am not declaring that the 1935 Act was illegal; I am not declaring anything of the sort. Deputy McGilligan should not endanger his reputation as a lawyer and as a debater by interjections of that sort. This has nothing to do with the legality of the 1935 Act; what it has to do with is the question whether, from the point of view of the general investor, Section 3 of the 1951 Bill is an improvement on Section 3 of the 1935 Act. As author of the 1935 Act, I am prepared to concede to Deputy McGilligan the credit of having improved upon my handiwork. That is a tribute which will, shall we say, enhance the reputation of Deputy McGilligan.
Deputy Sweetman raised a question to me which, for the moment, eludes me.
If a holder of stock does nothing, does he automatically get a warrant for the redemption money on the redemption date? If so, what is the point of sending out an application for redemption as well as an application for conversion?
The position will be that if he does not give an indication, we do not convert. If he fills in the request for redemption, we will know positively that he wants redemption and we will comply with his wishes in that regard. If he does not apply for conversion, I assume that we have to hold it upon our own terms until such time as he signifies that he wants to redeem the original stock.
If he does not apply for redemption?
If he does nothing?
Then he is in the position of any other person who fails to exercise an option.
What is that?
If he does not apply, what happens?
We shall assume for the time being that he is prepared to accept conversion but he will still have the right to ask for redemption until the end of a certain period.
If he does nothing at all?
If he does not apply what happens? Has he to be paid in cash?
He will as soon as we know to whom the cash is to be sent.
If he does not apply for redemption, then the cash is held in suspense until he signifies to whom it is to be paid.
Deputy Dillon's point not only relates to this Bill in its application to the four loans which have been made but relates to other loans that may fall for conversion later on. When we are passing general legislation would it not be prudent at this point to introduce a clause such as is in the 1935 Act in relation to the four loans? These four loans had a clause regarding redemption which, in the Minister's view, barred automatic conversion, but suppose that a new prospectus for a new loan is issued in different terms and the matter the Minister spoke of disappears, how will the Act be amended?
I am not going to deal with a hypothetical case. The position is that every loan which has been issued by the State contains a clause providing for redemption in the same terms. If at some future date a loan is issued which does not provide for redemption I will leave the person responsible for that loan to negotiate with the prospective investors and to tell them what he intends to do in the event of a conversion operation if he gets their money.
That raises the question. The Minister has said that every loan issued to date has a clause in the same terms——
Providing for redemption.
The Minister cannot say, however, that these loans will contain a clause in exactly the same terms. The question was whether, as we are passing legislation of a general type, it would not be wise to provide for redemption. In addition to that may I ask, if every loan hitherto issued contained terms which bind the present Minister to Section 3, how did he avoid bringing in Section 3 in 1935?
I am not here to consider what happened in 1935. The Dáil approved of the 1935 legislation, it has gone through and we are not going to have an inquest on it now. I suggest that the point Deputy McGilligan has raised is completely irrelevant, and I believe that the Dáil could better employ its time than in expecting me to chase all the hares which Deputy Dillon's fertile brain might engender.
As he cannot give a proper answer the Minister must get out of it somehow.
The real fact is that the Minister for Finance has not the faintest notion of what he is talking about. He puts up a brave bluff, tries to pick up some information as he goes and then spouts it out. He frequently mishears the information tendered to him and when he spouts that out he must go back on it, but there is no need for him to get into a fuss or pother about it. The position is that in 1935 Dáil Éireann enacted a conversion Act of limited application; in 1951 a Bill is submitted to Dáil Éireann which is designed to lay down machinery which is to apply generally in respect of the loans mentioned in this Bill and in respect of any future conversion operations which the Government or their successors may have in contemplation. In that situation I think it is reasonable to say to the Minister for Finance: did the 1935 proviso not function satisfactorily? If it did, would you not think it prudent to incorporate it into the permanent legislation which is being considered? There is no need for the Minister to hop about from foot to foot or to explode all over the place because I think that, on reflection, he will probably come to agree with me. He is a bit fussed and bothered now. I do not give a fiddle-de-dee. God forbid that I should ever be Minister for Finance, but if between here and the Seanad perhaps the Minister simmers down and has time to think this over he might consider the advisability of incorporating in permanent legislation the proposal I make.
The real difficulty about simmering down is that when Deputy Dillon is on his feet it is very difficult to take him seriously.
Question put and agreed to.
Section 4 put and agreed to.
SECTION 5.
Question proposed: "That Section 5 stand part of the Bill."
Under Section 5, which gives trustees power to apply for conversion, where is the power for them to hold the converted stock as a trustee stock?
That is a six-marker.
Does it arise under the general powers of the Government to declare a new loan to be a trustee loan?
Where stock is converted under this Bill, all should be subject to the same special charges as affected the converted stock in other claims.
I do not think that is the same thing. That is between one trust and another. I think it is under the general powers the Minister has in declaring a new loan.
Take sub-section (1) of Section 6:—
"A power or direction (whether created or given before or after the passing of this Act) to invest money in a Government loan in relation to which an offer of conversion has been made under this Act shall be construed and have effect as including a power or direction (as the case may be) to invest in the new loan, and no such power or direction shall be terminated by reason only of the conversion and redemption of the Government loan."
Does that cover the point?
I am not quite sure, but if the Minister will check up that it is there already.
Question agreed to.
Section 6 agreed to.
SECTION 7.
Question proposed: "That Section 7 stand part of the Bill."
I cannot, for the life of me, understand why the big Bank of Ireland is being placed, under the terms of this Bill, in such a privileged position, particularly under Section 7 of the Bill. I dare say the Minister will admit that the Bank of Ireland, as known, is in reality the Bank of England, which to-day is under the control of the Chancellor of the Exchequer of the British Socialist Government. I cannot understand why our new Minister for Finance can come up and ask for the special privileges against possible costly blunders which he is seeking in Section 7 of this Bill. Will the Minister, if he can—I do not want to press him if he cannot, but he should do it later on if he cannot do it now—give the House and the country the amount of the rake-off which will pass into the coffers of the Bank of Ireland as a result of the commission and the monopoly which has been handed to them under the terms of the Bill as well as under Section 7 of the Bill? Section 7 says:—
"This Act and the regulations made thereunder shall be a full and sufficient indemnity and discharge to the Bank of Ireland and the officers thereof for all things done by the said bank in pursuance of this Act or of any regulations made under this Act."
Could he give us, in the first instance, the approximate amount that would pass from the taxpayers' pockets to the Bank of Ireland for the commission they are getting under the terms of this Bill? I presume it would be impossible for him to give the approximate amount of the costly blunders that may be made by the Bank of Ireland in connection with their duties under the terms of this Bill. No other Minister could give us that. However, he is asking for too much when he is asking us to indemnify them under any regulations that may be made under this Bill. Is there any obligation on the Government of to-day or was there any obligation on the Government of last week or on the Government that was in existence when the present Minister was previously Minister for Finance to give this monopoly to the Bank of Ireland which is actually the Bank of England controlled by the British Socialist Government?
Am I expected to answer all those absurdities? The position is, of course, the Bank of Ireland have not a monopoly of the carrying through of this conversion operation.
Of course they have.
They have not. I suggest to the Deputy that he read the notice—I think it is available in the Library—giving notice to the holders of the loans which are included within the conversion operation.
Why give them this special protection under Section 7?
The Deputy will wait, or "simmer down" as I was told. The position is quite simple; the Bank of Ireland happen to be the Government bankers. They keep the register of the national loans, and it is through them that repayments of the loan will be made. It is to indemnify them for anything that they do under the Bill in regard to registers and in regard to repayments that Section 7 is included. They are acting as agents of the Minister in relation to the keeping of the register and the general conduct of the conversion, but every other bank and also stockbrokers will receive the same commission as the Bank of Ireland in relation to applications for repayments. So all this edifice which Deputy Davin reared so laboriously collapses; there is nothing in it.
Except when you come to pay for it.
Surely the Deputy is not at this stage of his life becoming concerned about pounds, shillings and pence. He has always been protesting that the money does not matter. I presume that it is not because he is now being converted over to the other view that he is going to prompt the Government not to indemnify these agents against what might be wrongfully-conceived proceedings taken by some person against the Bank of Ireland in respect of this conversion operation.
Can the Minister say what is the approximate cost to the taxpayers of the conversion, namely, the amount that will be paid to the Bank of Ireland and to the other banks?
I cannot say, because I do not know how many applications there will be.
If the bank pays the money to the wrong people are they indemnified?
I do not think so.
What are they indemnified against?
Against anything they do or fail to do.
Against anything they do in pursuance of the Act.
If they make a mistake, what then?
If they make a mistake, in the sense that they are negligent, then they will have to bear the cost of their mistake.
Is it not a fact that the citizen who may be involved in blunders will, himself, have to pay for any mistakes he makes, but that any mistakes the Bank of Ireland make the taxpayers will have to pay for them?
A question has been put which has not been answered: why do the Bank of Ireland specially require indemnity?
Because they are acting as agents for the Government in carrying through the conversion operation.
Section 7 agreed to.
SECTION 8.
Question proposed: "That Section 8 stand part of the Bill."
Is it correct that the bonus is not subject to income-tax in the case of any ordinary private individual; and, if so, is it not necessary to have an authorising provision here to that effect?
I do not think so. The bonus is not subject to tax in the case of an individual who does not habitually deal in stocks and shares.
And it is not necessary to have any authorising provision in the section to that end?
No. It is a capital repayment.
Is the bonus subject to the same trusts as are provided in Section 6 (3)?
No. The bonus would be paid to the person to whom the income is payable. It is not subject to the trust.
Even though the income is assigned?
I could not answer that question offhand. I assume that if a person has assigned the income he will have assigned the right of the bonus as well.
It is a point that has, in fact, arisen in one case. Will the Minister look into it?
Section put and agreed to.
Section 9 put and agreed to.
SECTION 10.
Question proposed: "That Section 10 stand part of the Bill."
On the section. In the conversion terms of every Government loan, Ministers have always provided that a commission is paid to bankers and stockbrokers. Here in our country, I do not think that that provision has ever been extended to solicitors. It was extended, I know, on the other side for the big war loan conversion, 1931, to solicitors. So far as the solicitors themselves are concerned, it is reasonably immaterial because if they are not paid by the Treasury, so to speak, they are paid by their clients.
However, it is a matter that affects clients, particularly in trust cases when trustees find it necessary to consult their solicitors about the investments. A point which would often weigh with trustees is whether, if they consulted their solicitors, the solicitors' charges would be paid by way of commission on a conversion. It might assist the Minister in his operations and it would prevent trustees from having to realise capital funds for the purpose of meeting any capital cost that might be involved.
The point which the Deputy is raising on this section would arise, more particularly, on Section 11. It is new to me.
I thought it would arise under the commission appropriate to the expenses under the Bill.
Under Section 11.
I beg the Minister's pardon.
The case has been opened. As I have said, the request has never been put to me before. I could not undertake to consider it in relation to this Bill and I am sure that I should have great difficulty in acceding to it. However, I shall look into it. I do not want to say more than that.
Fair enough.
Section put and agreed to.
Sections 11 and 12, and Title, put and agreed to.
Bill reported without amendment.
Question proposed: "That the Bill be received for final consideration."
I wish to raise a point in relation to Section 3. Will the Minister make available to the House any statistical information he may have with regard to previous conversion so that the House may know not so much how many people applied, as what amount was applied for and the division as between the amount converted and the amount redeemed in cash?
It does not really arise on Section 3. I think it would have arisen on Section 1.
This is the Report Stage.
The Deputy mentioned Section 3.
I do not care what the section is.
The Deputy desires, for the information of the House, some information as to, shall we say, the result of the 4 per cent. conversion operation in November, 1935, in conversion of the 5 per cent. First National Loan. The position was somewhat complicated by the fact that an offer for cash subscription was made at the same time as the conversion offer in order to provide the cash required to meet redemption. I think we can say without any exaggeration that the conversion operation itself was very successful, the amount of the stock issued for cash being only about £187,000 and the amount of the stock converted being £6,812,000. The total amount of 4 per cent. conversion stock issued was £7,000,000. Therefore, you could say that almost 97 per cent, of the stock so offered was converted.
Those are under the terms in which people were deemed to desire conversion and did not apply for cash?
That is true. Of course, the 4 per cent. conversion loan has always been a very sound stock and is sometimes very difficult to procure.
Question put and agreed to.
Question—"That the Bill do now pass"—put and agreed to.
Bill certified as a Money Bill in accordance with Article 22 of the Consituation.